ML20196B821
| ML20196B821 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1987 |
| From: | Geoffrey Edwards UNITED ILLUMINATING CO. |
| To: | |
| Shared Package | |
| ML20196B791 | List: |
| References | |
| NUDOCS 8806300381 | |
| Download: ML20196B821 (69) | |
Text
{{#Wiki_filter:__ . United illuminating 1987 Annual Report The Character i to Compete. ; The Ability to Succeed. l l l t
;"? *r?'MW , = r -r-r.v $ ,v g9'p. e_m M s - r,f- ;; pf ;, ,t t _
y{;,~,;q'=
& \ ?f[_' _
n' "k. , , ,';'A.- 56. Unued
,)lff[.j __
'3$
t _ y~ ,p p u -a - -- -
?f 9 _
;f.;
EQAY$5
/,f
^
ikk$$^ pg.. u i...
....-=--
- c. .. g
* " :> .-) .
-* f $. ff*
- y';:-);n 'J' ~, l, y; ; - -:-; m:-
Sf iO
. - &#h:
%@F y
iv - -d.-fli'j- w. f.; '
** ( ':d$5f:-
gd . ,
.Yh}'{;
%y Yhh 4
---,n
. . , ~
,f !!f '.. ..h -% ,04):
) .'. . - k:[ , [
yy
~
n- , bpi ,?. L;y,
.;v ;! alul%
_ wy .
%p Rii . - , , ~~ L : , ' l. f
& , .~ -- t ,.
l@f.fllL?' h,e r 1
,7 4 -
- p. : s s, ' k> -
s: [ 4{.0/ t'. m ,. .- w -t ./ <., _.;
);
w
. , . fhft. $ .,"c
\ Y j),$$m
^
6 ..i i,. - t -;. n - -
- ,1 x (~ n;n;., b
's * '
% ,-_ "j G L'
.i, n :n -
L) -, 8806300381 880623 l PDR ADOCK 05000443 g R @l@ )
^o~'
\
C0fftefits I l i 1 Rnancial Highlights 2 Shareewner Letter 12 Rnancial Record 14 Powered up for the future 19 inncvat!ng new stretegies . 21 Performing competittvely l 24 Nurturing key constituencies 1 36 UI Corporate Officers 38 Ten Year Summary of Selected Rnancial and Statistical Data 40 Management's Discussion and Analysis of Financial l Condition and Results of Operations 44 Consolidated Statement ofincome 4 45 Consolidated Statement of Sources of Funds for Gross Property Additions 45 Consolidated Statement of Retained Emmings 46 Consolidated Balance Sheet 48 Statement of Accounting Policies 49 Notes to Consoildeted Anancial Statements 63 Common Stock Data 64 Report ofIndepend+nt Certi6ed Public Accountants 65 UlService Area 66 UI Board of Directors Caer: Line CrewSupmhorAlToggart
Financial Highlights
.. 't '
1987. 1966 Operating Regermes (000) . . . . ... . .. ... . . . .. . . $497,623 $471,119 Net income 1000) . ... . .... .. . . .. . . . . $ 95,178 $101,550 Farnings per .. .. ... . .$ 5.99 $ 5.97 amo e mgS. hare .- w,ofeCommon Stock om, o.mana.es Disidends Declared per Share of Common Stock . . .. . . .. .. . . . . .$ 2.32 8 2.32 Utility Plant 1000# . . .. . . ... . . . . . . $1,883,018 $1.734,582 bales of Energy-KWH t000J . . . . .. . 5,125,019 4,912,933-Total Customers . . .. . . . . 303,794 298,484 Average Residential Use-MWH , .. . . . 6,562 6,356 Peak Load-hw . . . , , 1,039,600 985,710 Number of Employees , , 1,604 1,576 humber of Common Shareowners , , 28,157 29,888 l 1 k ,
s Letter to shareowners. Over the last few >vars much has been written about the rapidly changing character of the electric > utility industry. Most discussions have pointed toward increased competition coupled with government's growing interest in a panialloosening of some regulatory constraints. Though there is some question with respect to the latter occurrence, it is clear that the industry is being propelled toward a more market-
. driven environment, and into a period of even greater change.
Your Company correctly perceived the inevitability of this evolution well over a decade ago. A good deal of credit should be given to past UI managenent and its Board of Directors, who during the turbulent 1970s had the vision and fonitude to embark on an ambitious construction program to free the Company from a dangerous over reliance on one fuel, oil, and to achieve greater diversification and flexibility in our fuel mix so as to cope with an environment ofincreased uncenainty. UI now benefits from those actions, which have provided the Company with the physical resources to suppon present-day marketing strate-gies designed to help us thrive in the emerging competitive environment. With our macketing strategi s formulated and our strategic direction reshaped to take full advantage of emerging opponunities, United Illuminating has set its sights on becoming the best electric utility anywhere. The extent to which we succeed in achieving this ambitious goal rests largely on the quality of our man:gement and the Company's 1,600 emplo>ves. And that makes us very confident in our future, because at all levels our people are the equal of any in the industry. UI's management team has both the experience to know every nuance of our core business and the creative and innovative flair to make the Company a model within the industry and profitable for investors. UI's impressive 1987 resuhs are a testament to the abilities of this team, and the productivity and ingenuity of all UI employees who have supponed and enriched our programs and objectives. Last year marked the third successive year that Ul did not seek a general rate increase. Moreover. an average UI residemial customer using 500 kwh of electricity a month now pays 12 percent less for the l same amount of t'ectricity consumed than he did immediately following the 19M rate increase. These sa cings are directly attributable to the Company's strict company wide cost control measures, greater 2
h sety .e efficiencies, the economic success of our 1984 coal reconversion project at Bridgepon Harbor Station Unit 3, the record breaking generating performance of our New Ilaven Ilarbor Station plant and a decrease in the price of oil. At the same time we were keeping our rates stable, our 1987 earnings were reaching an all. time high at
. 55.99 per share. It should be noted, however, that due to delay in the operation of Seabrook, non-cash Allowance for Funds Used During Construction (AFUDC) continues to represent a large ponion of reponed earnings and returns.
Furthermore,in accordance with accounting changes adopted by the Financial Accounting Standards Board (FASB), UI will record in March 198s an after-tax loss of approximately 5177 million. This loss will reflect the effects of the 1984 cancellation of Seabrook Unit 2, the 1986 partial regulatory disallow-ance of Millstone Unit 3 costs and the effect of the Connecticut statutory cap on the recoverability of Seabrook Unit I costs, based on an assunrdJanuary 1,1989 commercial operation date for the unit. We have not yet decided whether this loss will be reponed as a restatement ofincome for the >vars 1984 1987 or as a charge against 1988 income. In any event, the loss, in and ofitself, will have no effect on UI's current cash flow or on its payment of dividends. As noted in the Financial Record section, UI also enjo>td considerable success in lowering the cost of capital by redeeming and refinancing some of our high cost securities. Because of this success, our annual preferred stock dividend and interest cash requirements will be reduced by $11.5 million, thus improving cash tiow. These redemptions and refinancings will also reduce refunding requirements for the 1988 through 1992 period by approximately $18s million. UI is moving with increasing speed into a market-driven operating environment; an environnwnt in which those who prosper w 11 be those who give their customers value added senice. We welcome this because we feel that we provide better value than our competitors and because we believe that a true market-based environment gives us greater opponunities to cement the Ex nd between Company and custonrrs. During the past > var we have intensified our commitment to sen ing the specialized needs of our cus-tonwrs. Our efforts have not gone unnoticed. A recent opinion survey of all classes of Ul customers gave l the Company's quality of service a sterling 96 percent favorable rating. We work hard to earn that respect and are committed to doing whatever we can to continually improve our customer senice. l l 3 l
k Southwestern Connecticut is currently experiencing widespread economic prosperity. In 1987 UI wit-nessed a net increase of 875 business customers in its sen ice territory alone, more than doubling the normal average. Overau, our electricity sales to au classes of customers were up 43 percent over the previous year. UI is doing a great deal to nunure sustained economic growth in its sen ice territory. As pan of our support for kxal businesses, we unveiled in 1987 a Business Retention and Expansion Program. A pilot program, undenaken in East Haven, proved a significant success and will sen e as a prototype for similar programs in most of the other 16 cities and towns we sen e. Based on East Haven results, the Business Retention and Expansion Program wiU greatly facilitate economic development in area townt by . strength-ening the bonds between municipal governments and the business communities. He same intensity with which we are interacting with our customers is being duplicated in our involve-ment with other key constituencies, including local, state and federal elected of6cials and regulators. Simply stated, UI believes that managing effective relationships with aU its constituencies is as important as managing our hardware. As part of UI's expanded public and governnental affairs effon, we began major initiatives in Washing. ton, D.C. this past year. The primarv purpose in doing so is to expedite the licensing of Seabrook at the earliest possible time. The plant is fuuy constructed and fueled. ne remaining hurdles to its commercial operation are essentially political in nature and the resolution of them is primarily cemered in Washington. The primary problem delaying commercial operation is the refusal of the Commonweahh of Alassachu-setts to panicipate in the off. site emergency response planning process, despite the fact that Se. brook is one of the best-constructed plants in the world and has passed au ofits safety related tests with dying colors. While Seabnok is located in New llampshire and has the full suppon of Governor.lohn Sununu, emergency re3ponse planning must cover a 10 mile zone around the plant. A ponion of that zone extends j into Alassachusetts and includes six towns in the state. Those towns, and the Commonweahh of Alassa-l chusetts, have refused to participate in emergency response planning to provide for the safety of their citizens. Until recently, their refusal has had the practical effect of preventing Seabnok from being 4
d licensed under regulations of the Nuclear Regulatory Commission (NRC). In effect, those regulations gave states like Alassachusetts the ability to block development of plants in other states and to impose one state's will not only on other states but to determine the future of electric supply for a ; jion. Recognizing that such a situation is not only contrary to national policy but also imperils national energy security, the NRC carly last year proposed to change its rules so as to permit licensing of plants to go fonvard when state and kical governments refuse to participate in the emergency response planning process. Legislation was introduced in Congress by a Alassachusetts Congressman which would have prevented the NRC from making such a rule change. We're pleased to tell >uu that UI was instrumental in mounting a broad. based coalition which defeated that kgislation last August by a resounding 101-vote margin in the U.S. Ilouse of Representatives. Alore-over, the NRC has since changed its regulations in a way which permits the licensing of Seabrook to go fonvard despite the refusal of Alassachusetts to participate in the emergency response planning process. Here are other favorable developments. The NRC has ruled that the emergency response plans which we submitted for the Alassachusetts towns are adequate for issuing a low. power license and has removed a previously imposed stay, removing a significant obstacle for issuance of the low. power license. Without UI's strong lead ship many of these victories would not have occurred. Our region desperately needs Seabrook. New England is already experiencing the early stages of what could be a severe electric capacity shortage. On two separate occasions during intense heat waves this past summer, region. wide voltage reductions had to be implemented to keep the system operating effectively. His winter, new peak capacity records have abo put tremendous strains on the system. By the early 1990s, the thriving New England economy could be seriously jeopardized if businesses find they cannot obtain the electricity needed to suppon expansion. The hard. fought victories in Washington, coupled with growing recognition of the regional need for Seabrook's capacity, help us to continue to feel optimistic that Seabrook will conw on line. We, along with
>uur Board of Directors, remain fully committed to Seabrook and are confident that it will be licensed and its costs fairly redected in rates.
5
c. el
, OnJanuary 28 of this > var, Public Senice Company of New Hampshire (PSNH), the' largest owner of Seabrook, filed for protection under Chapter 11 of the federal Bankruptcy Code. UI does not anticipate that this action will have a significant effect on the forward progress of Seabrook licensing. IGNH has stated that it plans to continue to make its share of payments to the project in order to protect this
= imponant asset as it seeks to reorganize.
1987 was a very gaxi year for United Illuminating. We will strive to make 1988 even better. Our strategic direction has been carefully mapped out, the systems and the people are in place to suppon that effon. To succeed in our competitive marketplace, we understand that both individual achievement and a strong sense of teamwork are necessary. For these to occur demands emplo>re involvement in all facets of the Campany's operation. Employees must be an integral pan not only of our day-to-day operations, but in our continuous commitment to improve the quality and value of our customer senice. UI's Performance i Plus process, instituted this past 3rar, encourages both individual and team pe'rformance and helps emplo>res focus their individual effons so as to maximize their contributUns to the Company's commit-ment to sene its customers. l Ul looks forward to meeting the challenges of competition and is committed to increasing the wonh ofits sbarcowners' investments. We seek to be the preferred provider of electricity and related senices in our senice territory- und we will settle for nothing less.
/
,,;.< , /,.' ";:<u.e s
- e. .- --
o.wge w. Es.wes. sr. mehwe J. sees Chairrnan of the Board of Directors Presiden and and Chief Executhe Of6cer Chief Opersiing Of6cer e
6 w , I
.. $ 9 s ,
%W ^
y 4 4 t ', ,
. I
) .
p e , l I \ \ ml',- ne u,o s cm s. Ge o Le 6 1 :*a es J-P 1 7 i.______.-._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ ~ _ _ - . _ _ , - -
~~
1 1 1 1 5
. . m .o e
~
x/ *
.1.%
I
- ~ d
. m yi
- -. 4+
- t. . ..,.
.g
- w. .n..b ,2 ..-c.... ,3 W
.g'
'l '~ . J ' ' _ v.
.y .i. k. . '~d L',hlA t.Qr~i44,.)ypg.ggsffcy'~g'[
;.- <. , , j . '.
. r . j ,. ; -
ffg.'g.e3j;. .Fj
~~
jdQ.y
- v ; v m.m. g;.. .psey. ;.cg.gg,, . j,g;r;
.. - e . .
- w:
, -).4
=..-
~- e. *
;,, y . ,
' 'y' ' -
,_. . ~~3 j.
rd .
- y. A h ' . ~. ,, .
' ., 1 I I:Il: .
4.m . i ;
?(. -). ._
g,. _e4 .
.. . .,. .,M~,J . .-
g::.....p t ...
. m. -
;;;:,'mm
. #~
n4. ,* ~ 3 n. b, m.v.: " uu :
, 'a ..
i
.i
' v.* >'=
f1 . .pq,; ykly 3
+
[, . y .
=
.,- - F . t -
u .. l j , b. b Y
- n. , .
a .
-;: 1. . ' .s
.1
. . . . .c
.;;e.: v y..,. ,g,
- .;4 -
'. e ,
, _f .)'/ .
. g. ,. : : .
n
.3 e . ,y e . . , -
i urs esecutn e management has designed the Company's shon- and long range strategies to maximize opponunities l l within an emerging market-driven business environment. Pictured with Chairman and Chief Executive 1 l Officer George W. Edwards are (frow /c[) Robert L. Hscus. Executive Vice President and Chief Fin.mcial Officer; Roland W. Comstock. Senior Vice President - Corporate Affairs; Richard J. Grossi. President and l Chief Operating Officer; and. James F. crow e. Senior Vice President - Marketing. l l 8
-o United illuminating has control ofits resources, the creativity to innovate for change, the character
, to compete, and the ability to succeed wellinto the future.
l l l l l l l 1 l l l l 9
ngg - - 'enrum5c _ m-- um ---
..g..e 2' ,, cps, . -
i,1 4
.,i, -... .
,l t '.g *
.) [ ,
- s k y p,, r , .g$ r, .+-
. , . i + g
. ;. . g, , -
C. e .* s, +
- - , , a '
g s e -
.$ .~ 1 p b ,,' g . . .
,E [' r # .*'g .e 8
,h,# , r,. -d
. ['
S '* * *b e -- 1 k .m
. s ,
- 1. R.~, s'.W New ilarn Harborst.uini * -~
1 . .* .. . ,
,m .
- _q
, ) . ya k
- 4
,4 k, j J. ~"
, ,s..
~ 't , ,, ,
I. talJori $, DQlf ff)$denf (R$hth$ ' -
, y *.
* > . s. , ; ~ .-
j',; ~ '. Antiff. , ,
.rM. '.m' a u
aJ> ,,'t , y+
. ?*y [. [
. <m . :,
* ' k' S *%~'s # $ '4
- y. ,
pJ p , 5
=*
[ . ^ ,. ~ p [ y e' * *( t * ... * * ?". ( l '. - ,
.., 9., ]
t . .c
}
. _'- 's ,l.
,,.. e a i g.i , ,,'4 - .*
se
- x. w w, a ,q- . ' . .. =.Sp s
~ , , , ,../ ,
"'q ,* y
-s, sE
- e s s *= ' %,
i_ p
'a s.
4 s.
, - - ' S
- 9
* , . Y , p .
..t ..'... . .
.s
[,[ r
'N t k L' [. '
- g , p,4,, (# se 5
~ '
6, e-1 & f' '
'i"',> *
, i Qf$fb;'W,e.}0r?.{,<'$lQyl'i$'
N l
%>&. 0*
S ,.
.f3 . m, rw g g yh gy -
,c m -
d,, -1.r,4- ..f,,..- n.4 w
; .,3,.,7.
. . q , , .. ,,
4
'- 5 D ';U yr'
/ .,s pu r%, W. c. -
3 - $ 4 i *- <- e n. .
. -c
- s
.'['ed.,(. ,'&
' / . ..
- f QT wwsx.ep%%,p%.
r* 5W.i%. d . 'h . < yi iye 4
. , .C.
*W. ,u
-l
,, J '
W W
, . .;m'kr%[4[""
3y e., '1
.- 3. >
'l'.h[E.Yl'. ta wm.7. b ...a.f(bb- 17- .*- /k'h d[5s
; f 1 ti -
N-
- w. . 'm .' ! ' d's .
- 6 , ,x 'xi_ s' ; '
. -g
- . a m.o f ,?
. c.-
>-r. w;w.w. ,
Y n ~ s': .-cc m. r % '. '; : mn- t
. s.
L-V'ipW;9:h'$C(y?'im&u+w. NW7h - e y!.m$ a v., . - M-T.ll~5T6
- - $QW=n?$y.M.D.+.t j,U?.?S .m.
'O0. ' h. , -
7w ,(n$$$WY+k&SN,N $Y; a., h.. m,'.'m..> 5 $W.$Y?* kh@f m M q?w p B # M m u w & Mww N w? $J ? N ?'~?' N
@s$ .a q N_ "'
^ - .
m_ 4 #.!%;f g>.,r?'s, t N. pv I.!E . w& f. g A,/*,y &n.s q q d s _w 2 :f Q. ~.ii h..
. rdL,.m, o.. ..,uu 6 ,.
A
>ggm.)Nh@s N E$
.e n b,. . .% :
N. . uaM_jup{:M._+ ug s
~
m .,,,rp<).w. t .J ., ,. . . t - ,v,. ;m.. .
,' W WW'%' [ugf -pf' @j@ g g,*<*tp.
'*3 W
.v. m/*sfl'f'$b %gD; g/'dg
.t g.2W [mtrg 4Y.w d "'f. :
pg,7 r;' 4--, T'
'" W 'Mft., peg p.g'.
.sv. .'
o .h
%%e e' .
, ~
d'
=
se p 4B ( A
,p, ,
% % y 4
\ 'b
*y 4';
Je
,i%' d' f n ,' r * ',*
p ,"#
., . y
*s y
g a it
. .~ 4 -,b',
i y, *,
; y,' w ';,
A*.,,,- _-,; ; .,9- -. sd ',., be W l o'
' a $_'.,R r
6
,i
- fv..
,h[, g. h ' h ', , ,g_' ' IO'
'..r...y-',',u.',s . ,,
e ,* , g .- b .
. s
's nt: .. . , , g J . -- . <;
1 g ,,.
* . ,$ s .#[ i ,; ,'g. . A ;i, ,
1 D l' '^.'/. A Y , xh~- r e-
' :.t. , ?,$.. ,.*f fg': _. h. . . . , , V 6:', 4% j+ 4
, 'eYa ' s . -5 * $,$
M~ .- hr. 2M.4> m MTK. , 4,64.ij ..rv . <A% l,ht
.',NdN;[.%g.1(hU{7dW.{ht
'$$NY, 'k?1*%Y$ e-
~
> ; 2w,.,.w a enn. ,.
s E *
- h , .
s , t 4, g a S t s 4
. * , .3v I
G; t' d M v 0
}'M -
9-I
o The Financial Reccrd: eamings, liquidity growth.1987 earnings were 55.99 per share, an all-time high. These earnings resulted from higher kilowatt-hour sales - 4.3 percent above 1986, improved operating efficiencies and financing cost reductions. His is in line with UI's strategy of maximizing liquidity through iinancing measures, cost containment and more aggressive marketing.
, In April, the state's Department of Public Utility Control approved an agreement we reached with the Depanment's Prosecutorial Division, the Division of Consumer Counsel, and the Office of the Attorney General to reduce 1987 non cash earnings in order to avoid equity returns in excess of those approved in our last rate case - and to do so without reducing revenues and cash flow.
In the period November 1986 through January 1988, UI significantly reduced its annual financing costs, thus improving the cash flow picture for both present and future. The Company redeemed 546 million of stock - 520 million of 16 percent preferred,526 million of 15.88 percent preference- and 540 million of 13 % percent debentures. Our wholly owned subsidiary, Bridgeport Electric Company, purchased and retired $200 million of 18 percent first mongage bonds. Funds for these redemptions and purchases and for 521.7 million of mandatory redemptions and maturi-ties were realized through sales of debentures and bonds and long term borrowings. Ul sold 5100 million l l of 12 percent debentures and Bridgeport Electric Company soki 5234 million of first mortgage bonds - 554 million at 9.44 percent and $180 million at 10.32 percent. UI also completed 568.5 million of tax-exempt borrowings: 525 million at 9 K percent, and 543.5 million at 10.75 percent. These refinancings 1 will reduce annual cash dividend and interest requirements by some s i1.5 million and thus improve cash flow They will also reduce refunding requirements for the 19881992 penod by approx. 518S million. Urs Energy Ma -1987 UI DectncRy Price pet Kmh Drvidends pef Common share t 4 00 13 3% 3g
- TM:
&;Y 3 .[ s **
y _ 6 85 gg 8 E 88ee i !!!i 12
a During the >rar, Ul provided service to approximately 305,000 residential, commercial, and industrial customers. The Company's current customer profile includes: 273,714 residential customers; 28,495 commercial customers; 365 industrial customers and 1,220 streetlighting accounts. Sales to residential customers were up by 4.7%, commercial customer sales increased 6.9% and industrial sa!es rose by 02% Only streetlighting sales dropped. reflecting UI's conversion in many instances to more efficient
. high. pressure sodium lights. Ostrail, our sales rose a dramatic 4.3% in 1987.
Internal cost containment measures and operating efficiencies in UI's generation and transmission and distribution systems contributed to the >rar's financial success. For the 5th3 rar in a row, our customers enjoyed an average system reliability of better than 99.93 percent. We continue to rank among the top ten utilities in the country in operational efficiency, and our New IIaven 1Iarbor Station has consistently been rated as one of the nation's most efficient oil. fired units. This kind of productivity, coupled with aggressive programs to market effectively, strengthens UI's overall financial structure now and for the future. Operating efficiencies also enable UI to keep rates low, and this in tum helps earnings. Our last rate increase was effected in December 1984; our average rate for 1987 - 9.6 cents per kilowatt hour -is more than 10 percent below the 1984 rate. The financial record for 1987, in short, is one of sustained growth forming a solid foundation for the l future. It reflects the underlying strength of UI's competitive purpose.. l l l l l l xwun saies ny ciais Retum on common couny tamings and cash rio. pe, smie, 1 .. l _ (.
/
s sw g 1 .. ., . V_
, , . i j b: ,
= -
r l [ r i 3 ! :' F L i - - - 3 5. I , huka i
. . .. I wL_L i i !!!! !!!!! !!!!!
13
l 1 Powered up f or the future. generating value. We used to think of ourselves as a utility that produced power. Today. we see ourselves as a sen ice company that must generate value for our customers in order to remain competitive. How we do it is what makes the difference. In 1987, we did it by managing our day-to day operations toward the goals of efficiency, reliability and
- cost-effectiveness...by being prepared for potential crises...by providing creative solutions to problems..
by applying new technologies and systems :o improve performance and sen ice both now and in the future, making it possible for us to kok to non rate actions to keep rates low.
' ~5Y ih h Y~ .; }:/ . l,[ .
4 6l; W
*? .
.. ~.3;,k m %.,?l.'er.W v- fR { %
e e~e.r.m f~. : , e. o. .n
.. , . _ . . ~ . .,43 i
gy ..- j. -
.;... . m 7..y f
( g l*.. J.^~. - ..
, ;3 v.- ;&,, M
<. i .4j
- h. . .: .
., , &.g y..
- %. j j s v;s q;,cw>. ;)
- . 8 v .i
- 9. .
. m , .
o .. .* ..
- ).
y;= ' gg [}: [}- sg :
}, .
m
. - e.
[ ,, M ' .1 l ig ~.* ;,
~
g ' f ?. q . 3
' / 'y .~.~'*
.' $ . ?$ . .j s
- ' 'N k. . 7 . % .f. g a' l
..M *'g
, - .y .s ;. . . . . . -
* . , ~ .* Y ?
1 , . ,.
.1-
.', ; q, ., r -
, Q, l
.s . . . .w .
4_# '
- . 3 * "M. -
, . gy ' ., . s a, ,
MMW' Q*76,,$ j L- ~. k3. h Q ,- k A'2M$[K;E,y.M S .- - _ l
- d ., s - 5 9 ' ,
..O
*4 A
. ~.#;g _ ,
s .
- n. . - r~p n .
1 *-
.t. .r t .
5 1 h&3"Cf-~:AL .. ... - _
,..p med ' ,J:D_M [.>^ {yl ,.ew
1 The > var saw the greatest generating efficiency and most productive generation performance in UI history. Our heat rate - the number of BTUs of heat energy needed to produce a kilowatt hour of electricity - topped our previous best, set in 1983, by 22 BTUs. This lower heat rate )- 866 for the >va: - shows greater efficiency in both the generating and delivery systems.
. System generation increased by some seven percent over 1986 to a net output of 6,198203 megawatt hours of electricity. Our system capacity factor also rose. This nwasures the actual generation load of the Company's various generating units against what they could have produced if they had run at full power for the entire year. In 1987, UI's capacity factor reached just over 60 percent, an impressive performance when matched against industry standards.
I {
- */5 ; /
b *!' ' l f . . L 5 i b l l
- E-l l
l
~
; m .*
1 15
O lt wasn't only as measured against our own standards that we realized the kind of efficiency and perfor-mance that translate into cost saving benefits for our customers. According to the annual rankings of Electric Light and Power Magazine, Ul, for the sixth straight 3rar, is among the most efficient electric utilities in the wuntry. Among the 100 largest investor owned utilities, our ranking n oved up from eleventh place a year ago to eighth place most recently. For the 5th consecutive >rar. Ul met its goal of achieving an annual systemwide reliability index of at least 99.98 percent. This means that systemwide, customers had electricity for vinually all 8760 hours in a year. Our achievement was lauded by the DPUC in a reimn prepared on the adequacy of the state's utilities' transmission and distribution systems. The repon stated that " ..it is evident that UI has consistently and conscientiously identified senice reliability as a prime corporate responsibility. Its organization and its people have placed great emphasis on its service responsibilities." Reliability is perhaps the primary measure of value in the eyes of our customers, but in our e>ts, reliability goes hand in-hand with price stability. A system that can only maintain senice at a cost that becomes punitive to the customer is a system that has faikxi to deliver value. Ul's aim is to develop strzegies- often in concen with our regulators - that assure reliability at stable rates for the long term. In addition to strategies for reliability, UI continues to work toward ensuring long term capacity, an increasingly critical issue for the New England region. Indeed, unless we can find ways to effectively manage demand and expand capacity, New England's economic vitality will be in serious jeopardy - as capacity fails to match economic growth, that growth cannot be fueled. Under present circumstances, the region is likely to stan feeling the effects of the energy crisis as soon as the 1990s UI is attacking this prob!cm on numerous fronts. 'Ihrough a well-defined construction program, we have developed an excellent and diversified fuel mix; given the eventual operation of Seabrook, we have adequate capacity to meet customer needs into the 21st century. In addition, because our long term health is tied to the entire nonheast, Ul has joirrd forces with others in the region to investigate all possible options that can guarantee continued economic prosperity. That means exploring both demand and supply side alternatives such as conservation. load management and small power production opponunities. For UI, the capacity issue typically comes to the fore in the heat of summer, when demand reaches its peak.1987 was no different, except that the peak set a new record: during the afternoon of August 17, we 16
Q established a peak of 1072.62 megawatts. We met the challenge fir < by calling on all generating resources to produce the maximum amount of electricity permissible. Second, we asked large industrial and com-mercial customers on special interruptible rates to cut their production; thanks to their cooperation, demand was reduced by over 30 megawatts. Although this resourcefulness enabled us to meet the peak demand challenge, a voltage reduction required by the New England Power Pool once again pointed up the need for additional capacity - such as that offered by Seabrook - to continue to fuel the region and its economy. The adaption of our New Haven Harbor Station plant to combined oil / gas capability and Bridgepon Harbor Station Unit 3 to alternative oil / coal capability provides funber evidence of UI's intelligent use of its facilities to ensure both long. range price stability and security of supply. nese dual fuel capabilities permit us to utilize the fuels ofleast cost in generating electricity, which results in substantial customer savings. Our goal is not solely to reduce our dependency on cal- down from 94 percent in the early part of 1985 to 37 percent today - but also to diversify the total energy mix. One obvious reason is to secure ourselves
- and our customers - from reliance on oil from foreign sources whose political vagaries have too often been felt in the battered budgets of American families and businesses.Just as imponant, diversi6 cation also secures us from complete reliance on any one source of fuel.
Meeting power demands from a variety of fuel supplies adds to our bargaining power with all our fuel suppliers and gives us dexibility in dealing with such fuel market conditions as shonages, embargoes and price fluctuations. It means we can save our customers money while at the same time ensuring security of the supply of power. Technology is also making a difference at Bridgepon Harbor Station. In March, we undenook a $4.5 million overhaul of the station's Unit 3. Substantial modi 6 cations to the turbine generator, boiler, and auxiliarv equipment were aimed at improving the ef6cieniy of the 375Mkilowatt coal oil fired unit. He overhaul was completed within budget and ahead of schedule and is expected to produce significant gains in cost effectiveness lxssening our dependence on foreign oil. Applying production by-products to other uses. Using coal to generate power efficiently and in an environmentally responsible way. Pitting new technologies against old 17
_ = yp- _ . a # l l'i s,_ _c- /
-1 men u . s n st .4, n , ~ n > - he , , a ! l 1 scr. n 1 1 und n: e.cn o u :n '
[>; _. 1 s- 1Is o ',r,r4 .t a ss -
*.r .;o- er s c> s 1 i
' t K? . '\ - ( :.11' ..!!; ( s t . _ . f ' ,i " t '-
'l .I N t
' \ k' ' ' ' '
s. 1-1- i t; ;.i ix . i' '
> 's !'t t u f*' '
'ni l'.i' I!'
t, r on s : t s ,4 .:isd', < :x- , fk _ i i < s is :if .i*i- ) t' 't'..
. !' II ' s n
- cm,J .c , <, .:,. B <
ia." ,, , c. s is
,4 y.
?l 9
" 3 m.s.
1 , e a$ e< ( E $ $ 1:. o L ' '
's..
inno,ating nr.w strategies in the customer relationship. Ul, like all utilities, now operates in a competitive arena. L!nlike most other utilities, however, we recogniwd early that the dust was thing in the arena. that it was filled with other energy su;> pliers, all ning for the sanx custonrrs: ours. Logeneration.1he growing interest oflarge consunwrs in producing their own electricity. Alternatis e energy sources.1he movenrnt toward deregulation These are sont of the competitors w e face tidiy. They bespeak a changing relationship between Ul and its custonrrs. It's no longer enough to let econom-ies of scale and regulatory protection determine our business lf we're going to keep our competitive edge. we must earn that edge in our relationship with our custonrrs - and we htcixi to do so 19
e In 1987, UI took bold action on this front - with a new organizational structure and a series of aggressive marketing, product development, and customer service steps. Above all, we adopted the attitude that under no circumstances would we let customers slip away from us. Instead, UI would demonstrate
. conclusively its commitment _ to innovate new strategies for any and all customer relationships. This ~
attitude, translated into action, is working. To formalize and focus this new strategic thrust, several corporate functions were consolidated under a general hlarketing umbrella, which together embrace the full range of activities that define a customer relationship. A Research and Forecasting Group defines our customers' energy needs. A Product Devel. opment Group identifies new technologies that could best satisfy those needs and develops strategies for making them marketable. And, a Pricing Group aUows for the implementation of marketing strategies through our rate structure. 3 The proof of the new structure's effectiveness was in its performance. Early in 1987, St Raphael's Hospital, one of UI's top 25 customers, announced plans to build its own electricity-generating plant. The loss of this customer would have been a blow in its own right; it also would have meant that all other customers within the territory would have had to absorb the loss of St. Raphael's sales. UI's Alarketing groups went to work. We provided the customer with a competitive arrangement that assures retention of St. Raphael's and provides UI access to a potential future cogenera-tion resource if needed. h!arketing new technology is one way to effect savings for customers and UI and enhance our product offering. Ul sold the Fusco Corporation on the idea of installing a cool storage system - one of the 1 newest of new energy technologies -in the second phase of its hlaritime Center, a large office complex 4 on New Haven's waterfront. De system produces ice at night, when UI has adequate capacity available to serve the air conditioning load. It will allow Fusco to move 550 kilowatts from daytime peak load hours to night time off peak hours, thus saving an estimated 40 percent of annual air conditioning energy costs. At the same time, the system will reduce UI's peak electric demand, lessening the need to construct new generating plants to meet the area's growing demand. Tailoring of rates also enhanced UI's competitive posture during 1967, and 200 commercial and industrial customers took advantage of the war's rate innovations. Special rate packages, especially our two kev load management rates,interruptible and time-of-use, give individual customers greater control over their energy use patterns and costs while reducing demand on Ul generators during high. consumption periods. hey let our customers grow without the need for UI to construct new plant. to
Initiatives like these succeed in large measure because they are targeted to specific customers or customer segments. Such targeting springs from the view that UI is in the business ofidentifying custonxt needs and satisfying these needs in an efficient and cost effective manner. This basic view pen ades our market-ing efforts. From marketers applying scientific research techniques to a v gorous Customer Senice group that interfaces daily with customers, UI people Icarn the market, generating ideas for products and
, services that will meet customer needs, consen e energy, lower costs and demand and enhance conve-nience and service. Here are some of the initiatives geared to varied segments during 1987:
Dial A-Watt, a meter reading system that allows customers to telephone in readings 24 hours a day, an advanced, computer-controlled telephone system at UI that enables Customer Inquiry to handle a greater volume of calls in shorter response time, wMe allowing management to track customer information; several load management and comervation in: tid, es; a demographic profile of low incorne and etc'ctly customers, leading to new marketing methods for bringing consen ation measures to these b:-useholds; a program by Ul's Southern Connecticut Ac: ion Team to provide energy conservation measures to an additional 50 eligible New Haven 2rea households - wall insulation, new furnaces, new insulation. caulking and the like; funded by a state grant of $315,000; installation of more than 1,500 high-pressure sodium lamps sold or leased to commercial, industrial and residential customers as part of the "Light the Night" outdoor security lighting program; co sponsorship, with Northeast Utilities, of"Co Energy '87" in Hanford. with 100 exhibitors taking part;
' Breakout,' a personal computer program for analyzing residential customer electric btl!s, and a Public Senices audit program for municipalities sen ed by Ul; both received 1987 Energy innovation awards from the state Office of Policy and Management; a Public Senice Energv Management program to facilitate the implementation of energy-efficient im-provements for municipal buildings served by Ul; this program also won a 1987 Energy Innovation award.
Such marketing initiatives - products, programs and services that go far beyond simply generating power
- vividly illastrate the strategic thrust of Ul's outreach to its customers. lust as imponant in enabling us to remain competitive is our approach to other key constituencies..
21
a m:-m. . ] W jd' %i g.L My, ; - *-. ,
'.'N.. %. , .'l..)h. ,1:'s.,,
4,, scansd-.
- b.M. . n.:-)Coastnation ofzu .
- y ,
.w. . . .
e-
;, u.n. - '~haecftbeManthe p ^
Center; 2fG J k"-
- A '.N .{ :NQ.) ;
.. n *- <#cewvptexin.- -
_-e rst. r2m - u. % ~. .4' K Gb Y,.", N .
*;-- , inCltedes Ibe ensia!!J!IOM of g ... # .L . , ..s > ., ^ +
. ~
, L ,,
ne-~'s !-wi aasi-w rr-mnd:tionmg system.
. v. V e .
*,' ' -l-
. q
*'E .
a )... . . A , j. ' ,'
,? - . ri
%ss. G 4 v. ..- -1 l :
1
.-a
'u% , l!' me j, ,
.t' ' **
- - ,* x_.;. w .=.= % -
4
.e r- . _. -- .
(y .3 [ hh
. =- - .}
- - - ~
.e,,g,-- w .*
- w. .
. .-.-.e- . -
; e.g e .
.-.J .. :,,,- -%,.
af. g*
. '.J'O . ; -J** , .,,'T % -
((.i.
# ~~~ !"==iU+%p.
{ >$ e.'- J' . c, s;;w*
.: -- ~ -- l -
e 3p
, ~ . . .
ep -. e 4 l ==
, ,.I t -===
, {y ~ -.~
.a g g
. F ,
1 - t ,,
*l
.__ . .:. *r- -= & -, 4 ,
e_ a T((
- w.y W- . .:q:,
- .,=~~Cx. :: :-2 -- a
- e. ,5 -
,3 ' .
, , , , ~,., u1pp .
Al 71 8 7 '* . ., dur*>-dm e*
- A 3 . _
=w ,,,;.6,9k %** ~- *. '
w
* * *~*.emeew rg*=, , ,
.,,,,p ."," ~- . #" >a#. s .f ,e
.s ,
,.1 .- e .,,,f* 'f **s, '*- , *e -
a sy h e5 *
.- [ *; e&
~
. . . A e Wi=e .
. y'c =m=+' . .. . us! M:,,
t 4 Pg o r' - & -
% ~~s,. ,9- e
.w o a1 Q ..: ,. MA N .
-Q l
- . ;,n - -J-
~ . L&.:-
-T ~~C
=~-
+ 2
.}
L ( *gy .
*,, , y[9 ~. "- ' N F N
~ dk.'
8 # 9 fg'4 9 3 c.dh - =_ ;'2
- :3 p.
.M e ,,
h, . p W nf [v
.t,^
l:. gDv g, . , + 9 y-
-e"n"* **.T i, t.
I L i t , '. j
- s. i. h. s ,'.-
s.
. Y#k** }*
. . ' .i?,,u, ' ,
'. ' Y-% '
f '**
) 'f,O ??*e 4* D S
- c. *: .gm.
.&,o> t%, %
.I ' <. .. 3.f .
. y,. i 4
. . g. -
- :,e .
.j.
tdI
;~-.~=,,g*~ [.. :. [
**-. y a--~-.
,,. . ~ , , , --: /.; 4 a"" i h. .
~
.~-a$~i; _ ~* U*.~.d "Lf s '. .
f Y' ?, k w - y
+, {4 Yo . '
w.
- m. .
*( 4 , ,tl .".
.. S'dh 8 e ; *g ) y
- c e'
. 5r *'
> v ,
. L ,
)
! 1 ; ..
t g: 't .
?' s ij J M1
o ,. " y v, 1
@m ;$giel$"z $ Y@$,,f, seed y _ p c- -
p
- 4. y s _,_ .
, nuc, s -~w""" "'
- p areis larges! * A '"'"
.,. a - ,,,,s -
> 4 .
h, J
. ,SP
*%es~r '
f- i
\ f_
}'
a E
- c -
I t t i Qd7.- f y
! >> b th n
"p .
,A hhhl~ hjg
~ .
g3P-es -
- =: .
m-m Ih d 3h 3 q+9 s.7.- 41 t
< w.
% p, ,, . 3,a .
y,
,s ,
S
- - 2 ** d
.c' e s $. -
j ,
)#[
, , .. .w__ ~ - ' " PW
- h s -
*p' *- '
m=
'i
~
y ^-~-
- LJ /,
N f: - i :.9y:
'f { ,C dfrn ll. ;,._; i. -; + ' !-
- f. p;5%. ;:? ?>:pg.-
~'
-^_ ~
..- : \ K:.:dr-T - 3y.:~. ~~
i pag., - -^-
~
.- . :. . . n
. gp _ --
~
r- .
~;g.
j2:h:$f'.'~I *; _; . ~ p ~43 i '~ ~ h;71 f9 .' J i i ! Y'
-* J );.
i i
Nurturing key constituencies. Ul is responsible to numerous and varied constituencies. As a utility, we are responsible to public agencies such as the Connecticut Department of Public Utility Control, the Federal Energy Regula. tory Commission and state and federal environmental authorities, to the state legislature and executive branches and, with the Seabrook initiative, to the Nuclear Regulatory Commission and Congre:s. As a corporate citizen, we have a responsibility to all of the communities we setve and to our state. As a publicly held company, we are responsibk to our shareowners and investors. UI has never shirked these responsibilities; but in 1987 we engaged with our constituencies more proactively- and more effectively
- than ever before.
~
'. . 1 A a . / . .
, i A
/
y - . r e'
\' . i;< <( .. e - 9 b
' r i? ,
, , , , , . .g.
F 8I Y' f ,' g \' e
.,,),
A
,e ,
O n,,. O 4
\
y . - 3 . t, y , l t
\
'e .
24
a 3
'l s iiii We seek a partnership with the agencies that regulate us. Our objective is to meet their mandates while y
< realizing our goals. In this way, we believe, UI can avoid rate. case entanglements that can threaten to . 3 strangle our entrepreneurial spirit and competitive capabilities. In March, we reached an agreement with the DPUC's Prosecutorial Division, the Division of Consumer Counsel and the state's Attorney General a that UI would reduce its projected 1987 earnings through non. rate actions. The agreement will produce ] -
= approximately $ 100 million in future savings to UI customers.
]
=
1 _ 8 G s, y f . e e 4 ,- M ' _. . , s . '- b ,
. . s. ~ 4 .
'.6 * '
., , p, 6 -
.' 4 .- q9
. n/a " R'y3. 9 x .M : -
Myg g i. -- Qw. . ylj',<
* + -
yt 4 r.,,.
, .g, ..- .c , , . .. - .
r p I-
'~ -
.i, . '
, ,- t
. ' _y[$'
% ,c . q I, # ' '* .
]
' 3 q
m **s { , , > ,. 1
. :- r;
;p.
t '.. ; ya _-
.f y
~
i' ' -
~ .
. . . , ; .e .
{ * - K- :, ~ ~
/ '
e Q . - f
'~-
os ap w.
.:. m ' , ,,
. r. - k: Y s G,bh.
,e
. .~ -
~'
f:
. .s '
.s 3 ., i. . s . s , $n. .. < m g*.
~
O ofg
.a.
. _"7 . ,., .;f*..
<. . ,g ' g $W s
y s'.: .
.z m , . , . , .27 .
ml f A. ' y g. 4.
..[' l
.y n 3
3(7u . .{. q 7 .
" ,f e .
.. .'.. : <- f ,.
- .. . ,. . :3., , , ,
...4
. . y .,
- m.
? st ,, 5> .. 4, .
,~
'N .4 .
[ "* o. u . i ..l .- L - b. - .f.[# k. ; a
/. a+ , .
- t. . u ,n, p .
. .. . v.,. 7
,e
- v. y e
' .g
* 'e . ' '~
L p e
,4'
- a+
.. p
- t. . . .
- a. . ,'ly.. . 4 f.
g 4 -
. a. w '
25 ;
l
~ . ..
um .- .. 4~ ^ '
. s ', ",. YE ~$$$QWe ~.
, 1,st g,%, . $%id;gG c.
. , sWu::w;g.. .. ---
u... .
~-
l -z y ~_ ~
, ~ . ,
e4. ~. . g
,, , s.
haa Jd.n:..s 3
.l i "; . .v, ., i; . . n .n n>fi ,__,,,,
l ( .u . :, w:.: . .. ;., , , . . , ,,, 1 ' o, , r;;!\ , v ,
~o~ ~
~ y ~~' $
I m,", L, .,! .
.. 1 e , , ., i:., . . e ,,
in .
- l \l, ,e.!? , \, . <
< - . .. :c., u. ,,, . . . .i ...
f,, j; A* I: ~ k J. e ' \;; , i 1 MllW.%M.a ..a ~m :.a A - OD l
.w
~
.. : I
,...y.; w g ..
~ ~,a.:;. .y ..
..m:.- .~
~ , - ;_ -
- 1.-.,,sa y~ e .
.,w-~ . - :. :~~ .
. . . ~.
,' 54 .
e, - 1- >R;,.c _
~
. ~.n
- $.'*
- 'O+.-r
%-Q;y; $'%;%d
.+ :- "
- 4. g.
'daq ' '
% ,s .j. . .w,;L
- w N,
-a. ~w'l
~m.,
s . .. r, ~
- a. .
+
On the national level, as described elsewhere in il s repon, Ul has moved to catalyze a high level deh. on energy polics and has initiated highly effective lobbyiag effons on Capitol 1lill and around the cotu.
'Ihese effons, aimed at legislators, regulators. fin inciers, and opinion-moulders seek io inform these imponant publics of the national nature of energy issues and to promote the viewpoint of Ul as a corporate citizen.
26
~~ -
..----n _-_. - - - - - - - -
hfh.Yk! ;e h q w '. - Q,~% vh;,% % g % g..M. ^'? d~ 4 " y'
-4
*dMQf.3;;,,,g,
' : : -u
*44 . -SwrQ ,-' .5. .
+
.3
~g m', _-
u g.;h m -' , r?J. <. .. 4 _--
? . .yp .q:n 3s ..y g.'
3'. -l v y -@EAEGES,5.#.M
- 1. v.a Cf .
[ g. 7.. % N Wy ( W i' __ ~ - u, . .
~ "
W- - I ~ -
..~
/ g.
--~~ ; _
., my.
,r. -
^. .y
- - - . . t, . ===m g . ._
- s. 'h ' T: .&.
-h
?
- a. .. . . . P'. s % 4
- t. .
; w
=s -, a ;;, y * - ..
a- .=-
. /
.r n% ,.' . . =
- ~
~; & ' ~.
- 3 i . gg .
$, ex y,A. , .'. . -W& . .g. 9. -
as 1,.<.. w M..T s _y m-- yw + s 7y y $gd -
'q. .mg m -
n.QSf. y_ ;~ :' . .: 6;q 'Qj 'A;.W'ea-
~ ' ~Gyl ~ %'q
. . . . ^
I~~.:..&;~ - .. _$ W~-< M'
- -. . 2 .... .
y m. ). L " ' -
~ . . - ... ,.. , , . ., .3 -
Q 5 *
,.. _Y ,
. .)
- _, _p e., .e
. r. -ONcaa E ..v-, s. . . . y. - -
4 ~ WN-% hr h,. .,N b 5.. .. :,. y. .?:f+itfm -.h?.:sI -
.a Lw ,, . ' % e m Wm.'.*a >. &:,s .V .-
.. . e .
9 4. . g - v
. v
. , , .. m. . a; .
c r>- . 7~ - g- - ~~, R w g ? -Q%; e.,. y22@,-[f . . -.-
. ,,w ...
.v Q %.u Lt . ,
' l -
~
,%e-mm-"~.7
,? m. ...- c - 8 .. . . , .
-r '. - o
._~- ,&,
- c. '
- 4:; '
?.o
%,. .*~~~.. -
r- , . , fq. _
'~
yl g4
~
.. +. .
43 . . - & 's . i. . m e. . . fy.~:. : & s Q. ~ k_ %%E , . .. . ..
,. f4. ; . ' --U ' x i -; . ~ -
' J$ngn # .*% 1 Q .;g L- m%.3 {F M- Q ,. g':'3-. -
Q.b;- . I
~~% -D% A % ym lb%4 w
- mw - a.,,.h :f N.h -,U ' t - n Co :t...;.;,_ 9 %. L: .. _ ..
=
} . i? 7. - .D ' - [ . .7 ( f4W ,(. pv.QMd@ . - -
.M %
-%,t c
% e. . * '
tY* _ v.c s a e
- f. h.4 , ,. :.
y: .~ s. 5 s. g
.:4 Tk ; .-
.[
~' --
% b *
- p. ,,, . T '*. . . . -
[, '
;c .
1 -
.m.
c.,
.9,. - ,. 9
,. 6 q.; . .
. :. .~ ., .
".- _- -t. .
. i
^
^
~l L *- '
.- l i..
J . k . kk k4 k . k 4 L k. k . . - 1 u .r, s Nimeti! these u c:c du ct :) rcLuta 4t i . a < i c ps u .m p , m sut i, .hthecciN bl.mc: s Le.the p ,.ada : k tm .i ( m mco 1 m :c..m J .\ u -( a ecermc -mn nec , ~ % oe o o :u se m m e m <m .i w cs s m :he n< one enc:c. m , u n J. , m 4 oyLa O h i 1.i . s, e ow ntot S:n,:I ' Lc. _ , : i 4 cs : c . .m s ; <m , U-s 27 > b _ _ _ _ _ _ _ . _
'*e
]flllhffl{.
~~~m._
s -- me-~
=; ; ; r)%-( . . a y.
1 3'l
). '4
[j'(V,;.;2; f't y"s
.\g b'
4 I
's A
. ~43 N
.; '! kW ^l ._ ' :. L _y . . * . . ;; ' , .
'x.-}' Gl .Y. J.h , . e T. 3 ; .; . .';; ... ; b L ..
,.ll :*.- :7
- 4 .. l .[..I.'*
- ;. g.'.t .. .
.. : ..,.< .. l ).: yfc ; - .. s ti ).:. _. :l.. :
< - . -L w4 .].? :.y+:hR .
. 9 ::.o'.-:g ;; ' _ ~ ,: ^..-. _. > _ ; . :. .
. . ,s ,.
- .;%. q: *,y..:.
-q.y, . . ;....s;,. 3 g ...';._. ;,,i .: . : . . ::* Q .: , ; .;-v;.,Q] r.c;.-
' .W. ,;w.>- ~ .
f.. .;; . . ,
- c. g.. .g;,y;r.&.. .. .s^,7.;- :. j _ f.
.a. .. . . < : y . .s.
a."'^ n 4-c,... c .. . . . ~ .
- ' .,4 e Q h ., .w, _.gs,l.l- py q : , - .'. _ ' \?gl'Q.
,. t't
, . ,, e . 4 g. . , ,h).y;, ~
.(*.. f,f; .y A;% . . .a.W _ 'A b & % * ),3., gl* l^f?Y :. pj ,, 1. . , f.
O., $ y;. .
';dh?h:t: . .' - .'
='3 g.
- ws). ,
^
. ; ) Q., '
.gf. ,
r?~ L- y.4 .- _&**:cQ g; y j. x3 .q-: wj .*~
+ #& .
A '- . j.. ay . %}; . d
? < slg. ,
f V
%g.u.q ww$.h ,, $$
- h ..
. ; ' . - Gil' Q{ k'. k'
?l;$ ,,,
Y 'S [' p.;. f.....
- t .
.; v,s4 -. .; i
...e 1 r ft ; 3 a.
g., 9,+i . :
).
~- m ..;6
~
_ :s
~ j,.?,j( - l %. .4 .
. a.
[ ".p ' ' ,j [ , " J '^= -{ } mi f. '((' .. ,- , . . . y: ._:. 3 9 ._ , .
+. : -
y, :. , > Q. ' ., ?}4 ..
- . < W_ * * ~ ,' .#,
W: .b 2 fla ,.!:. > f. ~ x v.Q: R .' % -h . " .i.L
5f. g,.)f ,Y ',.1 cs. O. l. . , f.; -'. D;L ? ;n ' *,, 4
- - f . -
K* v %Mj Q.s. ' 2h. ' >;. . W 'd My: . . '
- pf } jf' t; . .
.3 y ' ._.; ?* J . h; 4 4 - , . . M . - ;' ..w < .g ~h % e 9' 1.f ' ' , ); , y:n - s . g% , . 3 ; . A %:T , a. , . .n r . ~ *: - ' . . . W, W K~ 4 T .3 _.h [ N. . .' . : . . ?.' l .;& Q?f.N ) ' h* j k:' A"Q . &: ? -l%;. t.,e. j.i *l*;! '
- _* ,h;h 4 ' .
kkiYl@I, b k~ Nhb,65fkf(Qh[. $h,. .5- ,[ . [. . 5.I. .' . . '" (. ~ ' M.9'Ml5_ q. . . .l L ..;} .g gSt i ', }G( }',.~.Mw e ,gN - } laff , .,t . : 5 i - 1; .. - - cJL% . .k ' . . . . .\; .; / i g.[ :- ' r 7f ,. ~ - [lMtegy4f y. .g,
- j. g~' ihh ~ - ~. '
qq 3 . {~. Q.g7 l / % g i -. hg . th .. g %{ ,?f, .. , .. w93 - T, .o . A,,m - ,. :g y. .. ..g . 3 l f[ ~ 3, . . )k . .5 . ' ~ '
- u:'~ s .%. :. w :
, ~ 4f . - msg ny . ~ <.v; W ~ $.t ::.v~ ..gl - + j. ' p% .. y :. i.e . . 'i
- j. ;.b&'? '
". ; % % ?;u n~ .. ~g . O . ..-.' q . .f . }> t , n . y: - ..y ,( .- r p; eEV?. . ,og. ' N '% , . . . . , , ': h. i 4 '* ' : _ ' ' '? ' f ' +' .: ;. n_. A ,. 4 .9. I s - . , , , , , , . , *>R 3 ' a .'. . .- -* ' ;4 d. :. +. ::.nd.-' , .. - N . . R js,hq :cm m@:c; 5. n< 'E ' '.14 + a a.:;;:nn. M (. Q.. . .' f. ,,
- 1.g - ..' -
- v. e y A.j i:'.*
% . . y ?-.? ~' . .t. w$ew g ,>. . - .. -g;-;.;p:.% ~ A -y ._ n.tiv.~;.;:.4 g i: . .,~;r.,.,, .n, . -:,, , -)a.. , >c, , ~ M y %., , , ' 's . e :<.;. ..r
- . r . . .a x-:;. e
, . W Q :. Jq . 9. g, v% . _ . -{ ; . ,g![ % ~ f4.f.'": :.. g.r,1. y, . w. ,s.c.g 4- y :- . 3 l' k n .- ; h:Q '*.'[ Ih..f l.W,+ .};; ' . , .i Q. 1. . .";. & ? f,__ - ,, L.J. ; *4 I 8 ,; . [.y 'e$. .w ? .. r ~ , : _ . ;..,.+. y, _ ,_ .%, .. ..&u ~.- :ju ..g p. - % . .- , .s.. l[ " . Qp ?' ';,4,C..4.: ..> -Q.7 w ;'l^g .. s;q:=@4,4% - } ~. Q y.y,- '.;f,p.. k< .;' C % j , [v.. , . .. e , . . .y .. ~ .s .. . 'J M ,.Y d .i As vif ; -' ..,; j S .. n M 7.c k%@M :-L ./N3 g.9 Q: , 1:'.47 M.n .: , . ' . - n - tj. ?. : ., g ', +. ._ -4 Jg: . . e . .%:. p '. - . 2;. , y.g.v Y p' yf,u . ' . -: m, . s ; am.. .enenww ,m : :.~%.~ - .:.1 :x - '~. .W a , . 3 v. . : Y:w .
- a. n. . .we4QWu m.. .. m
. e Other effons included a broad spectrum of kwal interens, as UI emplo>tes volunteered their tinr, skill, and energy to a variety of projects. Whether it was: UI Chairman George Edwards chairing the 1987 New Ilaven and Middk sex County Savings Ibnd Drive . - and achieving a 90 percent increase in the number of UI employees who increased their savings and a 49 percent increase in the number of new Ul savers; or UI's CANDO recycling project, our sponsorship of the Walk Against Ilunger, the March of Dimes walkathon, the Shuben Performing Ans Center's public oper. house; or the UI emplo ve production of an instructor training video for the k> cal Red Cross - a video that won first place in a national competition; or individual employre involvement in fund. aising drives for public television, local hospitals, the American Cancer Society, and Big Brothers / Big Sisters - from New Ilaven to Bridgepor' and around southwestern Connecticut, Ul people were serving their communities. We also sent our community by working to ensure its future economic vitality. In the spring of 1987, UI joined with the town of East llaven and the East llaven Chamber of Commerce to launch a pilot economicevelopment puiect, the Business Retention and Expansion Program. The aim of the program is to strengthen cooperation between business and k> cal government so as to identify and nunute both new and existing k3 cal businesses. As facilitator, UI developed the program, convened the panicipants, organized the data bank, and kept the process moving throughout se year. A December 1987 repon e, the program shows significant progress in East Ilaven and a highly faserable remonse in the businen community. Ul will sponsor Business Retention and Expansion Programs in most of the municipalities we sen e. Ul is al.so working to recruit new businesses to our region. During 1987, we produced and distributed a l variety of printed materials, inviting and respondir';: to hundreds ofinquiries from individuals and com-panies interested in business properties. The > var saw a net increase of 875 businen customers in our senice territory - good news for the local economy, and good news for UI. i Certainly, southwestern Connecticut is now seeing an exciting economic resival From Bridgepon to New l Ilaven, revitalized downtowns, new conference centers, governnrnt offices, corporate headquarters, and an explosion in housing construction are expected to translate into sales growth for United Illuminating Efforts to encourage the revival are insurance for om future. 30 In serving our shareowners,1987 saw a more aggressive, more in depth approach to our investor rela-tions. We identified key analysts and managers and developed the systems to provide them the kind of information they need to make informed decisions about UI. As reponed in the Financial Record, during the year we were able to effect imponant bond and debenture sales; these financings enabled us to take care of our financing requirements for the > var while refunding hundreds of millions of dollars of high-cost securities. With investors, as with all our constituencies, the key to improved relations has been not just the candor of our dealings but the fact that we have taken the initiative in seeking to strengthen those relations. Lat has also been our posture vis a vis the media. We did more than cooperate; we actively sought press scrutiny and provided full and prompt responses about the Company and its many activities and concerns. We issued over 70 news releases and arranged briefings on matters ranging from the St. Raphael Hospital agreement to progress on Seabrook. We panicipated in editorial roundtable discussions and radio talk shows tnroughout the state. Positive editorials for our position on Seabrook appeared twice in the Hart./ord Courant and twice in the New Har en Register Chairman Edwards held an in depth meeting with the Wa//StrcetJournds editorial board, and UI generated anicles on a variety of energy issues appeared on the Op Ed pages of major regional publications. Our constituencies, as 1987 showed, are a valuable UI resource, worthy of nunuring. But our most important resource remains our people.. Performing competitn el). At the hean of UI is its workforce. In power gencration to provide the edge in value, in the implemen:ation of value added marketing strategies, in the execution of corporate responsibilities, it is the people of UI who define our competitive posture on a day-to-day basis. In 19S7, we took steps to ensure that U1 as a whole realized the full potential of employee skills and dedication. The Pet formance Plus process is aimed at creating an environment in which UI's people compete with other energy suppliers every day. h means that every action taken must contribute to both cost containment and high levels of service and reliability. It strives for continualimprovement. Performance Plus works through panicipative teams of workers. The teams question how everv task at Ul is accomplished. Ley analyze and evaluate the answers: is this task necessary? can this be done in a better way? more efficiently? more cost effectively? Le teams generate new solutions, focusing their skills and creativity on the processes individual workers know best. All emploges thus share in specific UI goals, and as those goals are realized, emplon es will share in the gains. 31
- a. %
n S
- i. -:: ,
. o:n , ;, u l '.' , ,, .. ,,.r.- , , , ,o ! !. s , \; . t I'* r ~ , E f ),' 19S7 also saw the intnxluction of a new Accident Prevention 1)rogram. The program specifies safety responsibilities for all levels of emplowes, provides appropriate safety training. and of ters incentives to individual employees for high safety performance. The imponance of safety was funber emphasi/ed by senior management's honoring of 60 former and current English Station emplovees who compiled a no-lost time safety record over a three war period 32 mi u gaTrr u *- g .g..,& <;Mca P' -"- ;g p. -'*. v.m . $* ..f 9..' __s i , * ~ QK " }*g. _ * , q, l ;.3 ;-g . . . .- .~..._ , - lp' ::;),; * . g '
- w. . . . dy,2d ,
;.: c u.. .m m ; t. r.. .r x;y - . , $, ~ \
- s. kj , kw g ; ..
.m g amuswf y W,. ! s s.3fy 3: = - r 4ky.w .e s. s~ .v.= ;f_ f qyg ' (, ' . e. . <<. ;,%~ fi . . . ffi d@* ' -h,M'.9. ,, i r l 7a .;:w$ EM W.-< . l f'Th,@,,, 'd dII@,k. .?j yf. 6:y%.: - 's; n %Qg}a . W...e( ,y ',m:n 4v 4 M '4 wp'Y.". y .; y.,'t e/g,A< ca N 4c' f..g . . ' - , 0%,$7,p. $'Y .t .- ,. y, q- em - s. w n .- Af . vy* m l Qg> ;f s'; ' = g: ;.3 ,;J-( , e, . .c
- l :
h,i6 Thb { mf
- .:!;,f l
; ; Og,l' . g 6* . ',' qk, , % 4 , F j QG$[jQ % jf.y _!; * - !<i 'N t-,**f- . ?if :dWJ . Wlrre, '." .< :.06.. .? . Le overall health of UI emplo>ves and their families is as imponant as job safety. A series of Ilealth and Wellness Fairs were held at company facilities throughout 1987, offering a variety of tests as well as heahh information provided by national and local heahh organizations. Le high caliber of Ul employees was vividly demonstrated on April 24, during the tragedy of the L' Ambiance Plaza construction project collapse in Bridgepon. UI crews assisted the project's electrical , I contractor and rescue teams during electrical emergencies and provided uninterrupted night lighting, as rescue effons continued around the clock. Ul also contributed $10,000 to the Emergency Fund estab-lished for the families of those who died in the accident. 33 . g: www. r rm n i* . , .. e:m . d; - : 1' . :e-M.0 ? i -Jc / 4 J -f ;( m Orgj l . 4 -
- e
't .? a,,o, :crait e n i +.ata, of ,
- s. ., . [;
'). , . far ,,rai,!c raw:g W- .. T$; , u vi ia a ' M. ,: ^' ~ , n:.l,-re. ..:J I :1;wtw RhI ~ $4y c.,<, ,,:,:, nc .16 r w e - < ,s:; . ,u o ;,a sw ., ,, ; >:t to 4 ri1. e c u r//s Plc c 6 s .,s i i i = ( t. I L .w. .
- +.;mw: w : in%n_amnnw .. . .
( l Labor management relations continued healthy during the vear, as members of Local 470-471 of the Utility Workers Union of America. AFL CIO. voted overwhelmingly to accept a two > var contract pro-posal The contract includes a 4 percent wage increase each > var and the replacenwnt of existing nrdical plans with the Blue Cross Blue Shield Century 2000 Plan. 34 1 " m-~- 'm_ . 3 g
- a. ,_ , g;.p;g s
, Q;j:w ' ' ' ^" .. - . , c - J**; .d:4 .m [. gig m . .s nimd%, , e .,1 o ;Q 7- . An .y *k , ., .s.- J. v.,);- y* I ~ l 3 ~ l t , 43* . .. ^$m $ l 4 sh;( ~ ' t ,v e f* <lg y :Js3 , t f,, y ? ', . c,lk j ti h-b' ,e, . .m , :. @C<n u }g . - $h 5 n; ,- f c y.)ki \l} 0 y .g% yM= p}_ ;g. ~r : y.1%\. b;R f i a c. ..e J v. flyTVlgh%d;y.n.; lla l .;'I\y ' g.y: - sg r%ct n O a ;k ?- y s h,*-N ' of kEk- . 'DNkkIkh I. d oggg q#;p u n$4qq%q ~M. , . ::.p : W s ggekgy ';:. e , ', E cy* Yb,.Vhf -.y-s ). LS.:u . S W . % g{;r. s n. 1.e. ~ w 4.;
- Nffhn . . .w h ns h.!w.Yy
- x' : . 08.
~- . ' D'M +$ '[jh2 g2MQG%QL ~ m, N, . i ~ $g;. .:h: M@p! 73s k, n z_ 's@M 4.y u n y y9. . u,. . ::. :,s .W .y ._ ; - ,;.M.wS,. n . m In their sense of responsibility, their attention to the safety of all and the well-being of each, and their determination to work smaner. Ul's iwple have shown that thev have the character to compete and the ability to succeed. In an exciting time for a competitive inJustry, the people of Ul are equipped to take t})is Uon y).Iny to new lleights of acconiplisliment anti new rewartiv 35 ----,-ww-w-. . ...,ww,,,-ern---,o-w,m _ - _ _ . - - - - - - - - - - - - - - - - - - , , - - - - - - - - 1 - ,,:,-.-- ~ . 3 ij;%~M - T' . . - - ~ 5p ~'y@g,j. , i . - ;-im m ' ~~* s-
- j_ 1
) ,, , .s
- -M}.py } '
s .2.. fy- .Ul* %j 1 \ - , 1 6 .... j
- y .Tt E b u, T .- a r. %. ,,
'v:, ;}: l l l ,t f l e .~ . - , _NQ l ' k &b f v +%:.9~.L. ff: ecl:,g, 9y , s'47" - . 4 y' W }^ . var: h$'Ql:;)!; . } g j) ' ' T8 l < q .4 'h - n- 4 ;, [. 3
- . m. -
R ij i ),h[l ' p. lw f Nhh .Q.V ' ' ' <:;- j '{i Uf. /\ k )e ' 9~. ' .hfl 4 hi- G f f ^ $p, 'Qi ,,;;g$ Mv$o;v:. Sfb rut h ,k $47%. muxc tw , w.0q; \ ' W ep . .; p* 7,;p a ,# , . x. -y , 71 - he ,- E.tQ/h ' ' T.g el$i'?,1 g$ y-Q 3;Q _f?p ; %[ :q;r,{p hs ;ip.. p- ,) j h[,h.:. - i;h .- M *:': * .- - A,N'(',
- y 5 %g,Srkih. G,,T f 4 e.A h;Q W.4,5Rw6.1 g'
- f. -
~ ' 1 i . R . ;W% UU , j5%g'4f>f 15H. ,,%p,i'.5fsyT. t OfSSAhhbfrlk&lh ' 'II9 J g ffT In their sense of responsibility, their attention to the safety of all and the well being of each. and their determination to work smarter. UI's people have shown that thev have the character to compete and the ability to succeed. In an exciting time for a competiti,e industry, the pmple of Ul are equipped to take l this Company to new heights of accomplishment and new rewards 35 l 1 UI Corporate Officers Rkhard J Gfostl Robed L. Fitcus James F. Crowe Roland W Comstoch l'rt .h rt a o l sct in t \'u t l'ro nh ' : .cd % r a ir \'h e l'its. h r N. - 1 , l '- th.a(> pere N t t- t his I ircui t W-r McLume t i 1, y . . r . s #' d h s Chanet W Coot. Jr David W Moskinton Leon A Morgan Albed Hafa') Nr r \ g4 { ',r . 3-- %r .. 7 Y.4 e } 'r j ,!, - % r. 7 \'h t ! '? L -' . h f - Yht l'f t
- t. , m Iv t opaan . s } ne t rJ :- rz. \!c. e se Albeft % MeftflCDben RGbert h Mde E. Joft MajhQashi Mart ws n '*< Crave n
\ .b i u . l >:t ;.h - '. . < 1 * \o !- < tinu l.i i: , I: Hafold J Muore Ji James L Benlamin Wilitam A Doce Mar, (Hen Mantee, \ [. 2
- i. l , s .s li l
In Ucmber IN. IhhatJ.l. Grossi was elected President and Chief Operating Otticer responsible for the Company's d.n to d.n operations in addinon. lohn F Croweal President and Chief Exe<utne oitker. l liloe Cross & lilne Shield of Connecucut. Inc.. and F Patrick AlcFadden, ir . Chairnun and Chief Executn e Ottk cr. New Ilaven hierchants llank, were electcJ to serve on the UI lioatJ of Ihrector s Geottrey Etherington 11 has declined renoniination to serve on the Ib.ird in 1%s Air Eths lington has l l l scrYed since l'hi blr Crossi has been nonlin.ited to till this Vacanc) 36 1 Financial Report I 1 l l l 37 .n , 'i N wes me,,uws c m 43 .. 1987 1986 1985 19S4 Kilowatt Hout Sales (000; Residential 1,780333 1,700J02 1,654,591 1,642,5M Commercial 2,046289 .1,914,889 1,810,192 1,729,027-Industrial 1,236,151 1232209 1 286,402 1,314,328 Other 62246 65,533 = 68,0M 71,998 Total 5,125,019 4,912,933 4,819249 4,757,917 Financial Resuits t000) Sales of elbetricity- Residential $ 188,740 $ 178,268 $ 190,880 $ 185209 Commercial 195,972 180,888 192.658 187,112 Industrial 100,354 99,939 118,637 124,118 Other 9,480 9,516 10367 10.6M Other operating revermes 3,077 2,508 2,394 2,367 Total cperating revenues 497,623 471,119 514,936 509,470 Operating expenses, excluding inwme tax expense 361,586 333,651 368260 400J73 Income tax expense (credit) 50,633 51,419 62,N7 44,371 Allowance for funds used during construction 81,419 78,N4 62,623 57242 Otherincome 26283 28290 29,755 19,083 Interest charges 97,928 90,833 77,402 - 52,351 Net income . 95,178 101,550 99,605 88,300 Preferred and preference stock dividends 11,953 18,% 9 20,339 16,883 Income applicable to common stock ' $ 83225 $ 82,581 5 79266 $ 71,417 Capitahration t000, long-term debt $ 7 % 226 $ 6802 15 $ 668,315 5 571,403 Preferred and preference stock Not subject to mandatory redemption 70,000 70,000 70,000 70,000 Subject ro mandatory redemption 40,000 63,000 %,000 99,000 Common stock equity _ 611,367 562,384 509,750 453,919 Total 5 1,517,593 $ 1,375,599 $ 1J44,065 $ 1,194322 - Common Stoch Number of shares outstanding at 3 ear-end 13,887,748 13,886,566 13,720,050 13,429,443 Average number of shares outstanding 13,887,654 13,827,431 13,623,093 15213.526 Eamings per share (a) $5,99 $5.97 $5.82 $5.40 Dividends declared per share $232 $2.32 $2.08 $230 Ikok value per share $44.02 $40.50 $37,15 $33.80
- i Shareowners-Total 28,157 29,888 35,426 38,848 in Connecticut 13265 14,008 15,606 16,774 In Company territory 8,301 ')2 82 10,056 13.539 Generat Peak load- kikwatis 1,072,620 985J10 1,019,980 998,910 Generating capabibty at year end - kilowatts (b) 1240,500 1239,530 1,197,150 1229,440 Number of customers 303.794 298,484 294,320 290,591 Kilowatt hours per residential customer 6,562 6,356 6265 6293 Number of emplo>res 1,6N 1,576 1,501 1.559 Total payroll (000) $ 57207 $ 52,782 5 49,150 $ 46,911 Total taxes (000) $ 67,002 $ 70,609 $ 83,618 $ 76284 Utility plant at year end (000) $ 1,8S3,018 $ 1,734,582 $ 1,555,881 $ 1,375,9M1 Gross proper:y additions (000) $ 154,672 $ 194,168 $ 179.528 $ 210378 Total assets at year-end (000) $ 1,891,543 $ 1,729,%7 5 1,655,00s $ 1,4s6,593 m tarn,ces per snare tiases on ene everage nomoer et share, outstanding.
ne t u n t Poe Com s2 k 38 1983 1982 1981 1980 1979 1978 1,637,581 1,593,854 1,6112 12 1,660,353 1,677,431 1,683J63 1,657,518 1,578,433 1,551228 1.568,638 1,565,380 1,541,127 1255,824 1,232,942 1Jl5,172 1,415,274 1,467, % 9 1,419297 71,085 69,935 70299 70,813 69,971 68,621 4,622,008 4,475,164 4,547,911 4,715,078 4,780,751 4,712,408 $ 166,350 $ 161237 $ IM,595 $ 133,763 $ IN,512 $ 82,316 163,45S 156,902 157,386 122,9N 94,400 72,361 107,724 106,788 117,624 98,303 75,316 54,994 9,771 9,652 9,613 7,697 6,330 5,463 2283 2,151 1,8N 1,455 lj20 1,181 449,586 436,730 451,022 3M,122 281.878 216J15 356380 353,070 386279 328253 238,605 183289 37,746 11,810 22,454 (387) 4,963 (lN) 52,407 40349 28,113 27,555 15,501 8268 13,981 8,595 9,N0 710 1,102 740 41,345 35,039 29,9N 30,055 25245 20,721 80,503 65,755 49,538 34,466 29,668 21.477 14,084 14.084 12351 92 % 5,744 4,75) $ 66,419 $ 51,671 $ 37,187 $ 25,170 $ 23,924 $ 16,726 $ 394,115 $ 373,015 $ 303,MS $ 295,581 5 251,976 $ 233,953 70,000 70,000 70,000 70,000 70,000 701XX) 65,000 65,0U0 65,000 45,000 15,000 - 40s,331 319,720 262,198 222,861 186J26 177,526 $ 937,446 $ 827,735 $ 700,846 $ 633,442 $ 523,302 $ 451,479 12,972344 10,693,005 9,154,578 7,660,132 6.090,448 6.047,018 11,708,570 9,579,312 8,775,667 7,061241 6.072,725 5,458,428 $5.67 $5.39 $424 $3.56 $ 3.94 $3.06 $3.08 $2.92 $2.76 $2.68 $2.62 $2.56 $31.48 $29.90 $28.64 $29.09 $ 30.59 $29.36 41,067 39213 37,868 36,447 34,554 35265 17,862 17,750 17,765 18.372 18,439 19 018 13,742 13,439 11,815 12.456 12,155 12,343 % 9,500 951,700 949,100 971.100 915J00 952.900 1235,850 1235,850 1281,050 1 2 99,360 1299.360 1,322,800 287J70 284,586 282,890 280,800 276,523 276289 6J36 6213 6,312 6,545 6.6M 6,739 1,569 1,517 1,514 1,4S1 1,460 1,424 5 44,114 5 40,310 $ 35,581 5 31,653 $ 28,405 $ 25 A94 5 66,k0 $ M,319 $ $4,510 $ 34,777 $ 32.424 5 23.180 $ 1274,477 $ 1.0h0,810 $ 922,734 5 830,034 5 7M,651 5 661,585 $ 197,412 $ 167,924 5 115,540 $ 98,413 $ 66,N 3 5 70.711 $ 1,179,409 $ 982,852 $ 836.508 $ 739,027 5 666,387 $ $75,110 39 m m ~a c , Financial Condition and Results of Operations Major influences on Financial Candition %e Company's primary financial concem is the achievement Le amount of the Company's imestment in Seabrook Unit 1 of commercial operation status for Seabrook Unit I and, more which can be induded in rates is currently limited to its share panicularly, obtaining a Connecticut Depanment of Public of the $4.7 billion cost "cap" established by Conne ticut legis-Utility Control IDPUC) rate decision that will permit a retum lation and regul ation. Ahhough cenain cost increases are ex-on, and recovery of, Uli investment in this unit. cepted from thn mst hmit and the Company has filed a coun Recovery of Construction Program investment appeal with respec, to the limit, any costs exceeding the estab. lished limit may be unrecoverable. Funhermore, the Compa. Le majo,ponion r of the Company's construction program ny's investment in the Seabrook unit is the subject of a DPUC consists of panicipation in the construcion of Seabrmk Unit 1 p'roceeding relative to an audit of the construction manage. in Seabrook, New Hampshire, a nudear unit in which the ment of the Seabrmk projea and, under Conneaicut law, a Company has a 17.5% ownership share. At December 31- phase in to rates of the investnwnc in Seabrook Unit 1 over a 1987, the Company had invested $932 million in the Seabrook period of time wiu be required. Other Conneaicui legislation unit (excluding nuclear fuel and including $355 million in al-requires the DPUC to determine the appropriate level ofgen. lowance for funds used during constructionL Thile construc-erating resen e capacity for a utility prosecuting a rate pro-tion of the unit is vinually complete and a 409 ear wnditional ceeding and to' exclude from the utility's rates the costs associ-operating license has been received from the Nuclear Regula. ated with any excess capacity. tory Commission (NRC), the inability to resolve issues related to the development of off site emergency response plans con-Liquidity and capitMmrr.es tinues to prevent the unit from achieving commercial opera. During 1987, internally generated funds, amounting to $35.7 tion status. Primarily as a resuh of the delay in resolving emer- miUion, represented 49% of construction expenditures for the pency response plan issues, Public Service Company of New year. Le balance of construaion expenditures for the year Hampshire (PSNII), which holds the largest ownership inter- was financed from a portion of the proceeds of several 1987 est in the Seabrook project, has had to seek protection under financings. Chapter 11 of the Bankruptcy Code; and the Company carm During 1987, the Company realized $325 million of net pro-predict at this time what impact these bankruptcy proceedings ceeds from long term financings at interest rates ranging from will have on the operating license proceedings for the unit. In 9VA to 125 Rese proceeds were used principaUy to refi-any event, as a result of the delay in resohing emergency re- nance IS% Mongage Bonds,13 %% Debentures and 16% sponse plan issues, the unit is not hkely to achieve commercial Preferred Stock as part of the Company's program of replac-
- i. operation before 1989, and the Company's share of the cost of ing high-cost securities issued in recent wars with k wer-cost this unit is expected to increase by approximately 59 million financings. Le remainder was used for' scheduled redemp-per rnonth in the interim.
tions of debentures and preferred stock and to support the he Company's 6nancial condition is induenced by both the Company's construction program. ne success of the Compa. j size and the cost of financing its accumulated investment in the ny's refinancing program for 1987 is esidenced by a reduction ! construction of Seabrook Unit 1. To the extent that this invest- of $6.7 million in annual interest expense and a funher reduc-rnent is not included in rate base, cash remvery applicable to tion of $32 million in annual disidends on preferred stock. the investment is limited to the income tax benefits of con
- Le Company has had a $160 million revohing credii agree.
, struction until such time as the plant is placed in operation and ment with a group of banks since September 1986. Bis bor. the im estment is redected in rates charged to customers. How-rowing capabihty was utilized at various times in 1987 to nret ever, from an earnings stardpoint, the cost of financing con-shon term cash requirements in amounts ranging up to $63 j struction balances is offset by a non-cash credit to aDowance million. On August 5,1987, all outstarding borrowings were for fu6ds used during construction-repaid with the proceeds of king term financings, and no bor. Connecticut law prohibits the inclusion of revenues associated rowings under this agreement have been outstanding since that with financing construaion work in progress (CWlPi in rates, date. This agreement, as anrnded in October 1987, extends to except in the case of Seabrmk Unit 1,where inclusion is lim- December 31,1989 and affords the banks en opponunity to ited to companies that haw experienced, or would experience, decline to lend funds if any one of several conditions is not i "rrgative cash Dow" without such revenues. In addition, a satis 6ed at the date of a requested borrowing. The conJitions cot, fin of the inclusion in rates of Seabrook Unit ! CWIP ( include the absence of any occurrence which has caused the revenues is that an amount equal to the CWlP revenues be Company's management to believe that fuu-power operation excluded from rates after the unit is in service for a period of of Seabrook Unit I will not be permitted or that comnwrcial i time equal to the time the CWIP revenues had been in raies. operation wiu not be achieved during 1959 Pursuant to this provision, the DPUC has allowed the Com. pany to coDect approximately $85 million in CWIP revenues ! associated with its investment in Seabrook Unit 1. eo i Le Company aho has an agreement, which has not been Operating revenues for 1987 increased by $26.5 million over utihzed to date, to sell to the banks involved in the revolving 1986, due to higher sales volume and higher fossa fuel and credit agreenrnt up to $40 million ofits accounts receivable. energy costs which were passed on to customers through the nis agreenrnt aho extenJs to December 31,1959, and sales fossa fuel adjustment clause (ITAC) in the Company's rates. of receivables are subject to satisfaction of the same corations Operating revenues for 1986 decreased by $44 milhon from es borrow ings under the revolving credit agrcement. 1985, despite a higher volume of kikm au hour sales, due to lower f ssa fuel and energy costs redected in billings to cus-Le Comgany has a sale and leaseback arrangement with a financial institution providtng for nuclear fuel financing up to t nrrs through the FFAC. 570 million for Seabrook Unit I and up to $10 miUon for Fuel and interchange energy expense in 1987 increased mer Millstone Unit 3. Under this arrangement, the Company is pay. 1986, due primardy to higher fossa fuel costs and higher kilo-ing rent for the Mul. stone Unit 3 fuel based on the direct msts watt hours sales, which more than offset the benefits of contin. to the lessor of the fuel, plus the lessor's financing costs. In uing operating efficiencies and increased nuclear generation. addition, a fuel reserve and supply agreenrnt, aho with the Fuel and interchange errrgv expense in 1986 decreased by same financial institution, provid-s for financing fossil fuel 28% from 1985, due primardy to the burning of coal at purchases up to an aggregate of $135 million,less the out. Bridgepon Harbor Unit 3 and kwer fuel oil prices standing nuclear fuellease obhgations At December 31,1987- Other operation and maintenance expense increased in 1987 approximately $68 million of nuclear fuel and $12 milhon of over 19% due principauy to higher insurance. pension and fossil fuel purchases, including coal, were being financed un- payroll costs. Other operation and maintenance expenses in-der these arrangements %e term of this agreement extends to creased in 1986 over 1955, due in pan to higher insurance August 31,1958. On Aptd 29,1987, the Company entered costs and increased expenditures associated with the sched-into a lease with the sant financial institution prmidtng for the ukd maintenance of three maior generating units. financing of the $2.9 miUion purchase price of real propertv ' Depreciation expense increased in 1987 over 1986, due pri-on which the Companv plans to construct a senice center marily to additional depreciation of $12.5 miUion for MiUsione f ' Unit 3 recorded as a resuh of stipulated earnings agreements. Ret u'ts of Operations Depreciation expense increased in 1986, due primarily to the Earnings for 1987 reached a record level of $5.99 per share, an addition to depreciable plant of the Ahlistone Unit 3 nuclear increase of 2 cents over 1986 This increase reticas improved generating unit, which was placed in commercial operation in operating effiaencies. higher kilowatt hour sales and a reduc. April 1986. tun in preferred stock dividends as a resuh of the Compan>'$ Amonization of canceDed nuclear proicas decreased in both program to redeem and refinance high-cost securiues These 1987 and 1956, redecting the completion in Mar h 1956 of the positis e earnings faaors were in large pan offset by addnional Ptigrim Unit 2 amonization, which comnrnced in 1953. depreciation and other non cash charges attributable to stipu-inmnr tax expense decreased in 19s7 from 19s6, due prinur. lated eamings agreements, which were designed to bring the dy to a decrease in the lederal income tax rate and the ias Company's rate of return on common stock equity to a level benefit associated with the write-off of debt issue expenses comparable to other electric utihties without impaaing the that more than offset the increases in taxable income due to Company's cash flow. Return on average common stock equitv ' higher sales mjume and improved operating efhaenacs In-for 1987 was 1(1%, and internaUv denJ payments, anmunted to $35.' generated funds, after divi- mme tax expense decreased in 19N, from 19M, due princi-7 mdhon, compared to pad3to reductions in ta (able income resuhing fro,m higher 5217 mdhon in 19A Earnings per share for 1986 increased *'"' # '*"J """'"' I"""E' Y "
- 15 cents from 1985 due primardy to an increase in ktkm att-hour sales and a greater anmuni of non cash albwance for The alkmvnce for quity funds used during mnstruaion de-funds used during construction due to increasal CW)P bal. creased in 1987 from 19% due to incorporating in the aUow-ances associned with Seahnuk Unit 1, oftsa in pan by higher ance calculation a k wer rate of return on mmmon equity, in msts associated with a schedukd refuehng and overhaul of the accorJance with the stipulated earnings agreenrnt. Allowance Connecticut Yankee nuclear unn. for equity funJs used during constructen mcreased substan.
nally in 19M,over 1985, due primarily to a higher CWIP bal. Kdowatt hour sales for 1957 and 19Ni were up l3"o and ance for Seahniok Unit 1 in 19N1 1.9"b, respectrvel3 , over comparable prior permJs. reflecting improved comnwrcial aaisity and higher resiJential use 41 Other income and deductions, excluding the aDowance for comnwrcial operation of Seabr ok Unit I wiu be cleared Le equity funds used during construaion, decreased in both 1987 most recent developments in these matters are the submission and 1956, due to redeced interest income resulting from lower by the Seabrook owners of a utility sponsored off-site enwr-average balances in temporary cash investments and the deple- gency response plan for the six Massachusetts communities tion of special deposits for construction as payments were within a ten-mile radius of the Seabrtok plant, and the adop-made for the Seabrook Unit 1 project. Le 1987 decrease also tion by the Nuclear Regulatory Commission of a rule change reflects deductions associated with increased public education which would allow fuu. power operation of a nuclear plant to on energy issues and governnrntal relations expenses and am- begin when there is a lack of state and local governnrnt partic-ortization of the premium paid to reacquire high-cost ipation in the development or implementation of off-site enwr-securities. gency response plans, pro ided that plans submitted by the Other interest charges for 1987 increased over 19S6, due pri, plant's owner > orovide reasonable assurance that public health marily to the write-off of expenses associated with 1987 long. and safety will not be endangered by operation of the plant. term debt issues his increase more than offset the effect on flowever, the Company expects that the off-site emergency net interest charges of an increase in the aDowance for bor. response plan issue wiu continue to be contested vigorously by rowed funds used during construction. The 1986 increase in opponents of Seabrook Unit 1; and the Company is unable to interest on long term debt over 1985 reflected primarily the predict what impact the recent commencenrnt of proceedings full year effect of a $100 miDion issue of First Mongage Bonds under the Bankruptcy Code by PSNil wiU have on the operat-in November 1985. ing license proceedings for the unit. A lengthy delay in achiev ing commercial operati;n wiU add substantiaUv to the hnal DhiderJs on preferred and preference stock decreased 57 cost of the unit and, if suf6ciently prolonged, could result in milhon in 1987 from 1986, due to redemptions of 15.88% cancellation of the unit. In the event cancellation of the unit Preference Stock and 16% Preferred Stock in November 1986 were to occur, it would have serious effects on the Company, and January 1987, respectively. This substantial reducion re- and the Company's financiahiability would be dependent ' suhed from the Company's program of refinancing high cost upon the rate trearnrnt afforded its investment in the unit by ' se:urities at lower rates. Dhidends on preferred and prefer the DPUC. ence stock for 1986 decreased from 1985, due to redemptions of preferred and preference stock in 1986. Le Companis 6nancial condition in 1958 will be adversely affected by changes in accounting rules adopted by the Finan-0 "" " cial Accounting Standards Board WASB)in 1986, including Le Company's financial condaion is most heavdy influenced principaD> changes concerning accounting for amounts of by the cost of carning its investment in the Seabrook Unit I plant investnrnt disalbwed arti for the recoverv of the cost of nudear unit, a negative influence which will continue until this abandoned plant without a return on investnwnt. Le Com-unit is placed in comnrreial operation %ereafter, the Com- pany presently estimates that, in the first quaner of 19ss. it pany's financial corxhtion will be dominated by the DPUC's will have to recognize a kas of at least 5177 milhon, ret of rate treatment of the Company's Seabrook investment. Both appbcable income taxes, consisting of at least $155 milhon on the occurrence and timing of comnrrcial operation of the unit account of the Seabrook Unit 1 "cap" hmitation, $10 milhon continue to be dependent on the accumplishment of necessary on account of the cancelled Seabrook Unit 2, and $12 miUion remaining steps that are largely hemnd the Company's control. for the panial disallowance of Mtustone Unit 3 costs. His kws especiaUy the timely and successful resolution of the current may be reponed by either restating financial statenrnts for difficuhies in securing apprmals of off site emergency re- prier fiscal gars or by recording the cumulatise etTect of the sponse plans. Le State of New Ilampshire has filed off site loss in 19S8 his loss estimate assunrs additiona! monthly enrrgency response plans with the Nuclear Regulatory Com- costs of 59 million for 1988 and aJanuary 1989 commercial mission, but the Governor of Massachusetts has announced operation date for Seabrook Unit 1. AJanuary 1989 in senice that he does not intend to do so, since he does not believe that date has been assunrJ for purposes of this estimate, since. plans can be developed that wtU adequarely protect public ahhough the Company is unable to predict when, or if, the heahh and safety if an accident were to oc curXhde project unit wiU be placed in senice, it currently beheves this is not managenrnt has stated us intennon to pursue all available hkely to happen before 1989 options to resolve the off site emergency response issue, the Company is unable to predict if and when all the obstacles to 42 -- w ., - Le Company will attempt to obtain a decision on the rate . - treatment of Seabnok Unit I by its commercial operation date. If the rate treatnwnt reduces the amount of Seabrook Unit I costs aUowed in rate base below the Company's share of = the legislated H.7 milhon "cap", a funher write-off agatnst income will be rcquired. %e Company presently expects to ., propose a rate treatment that will include a phase in plan for Seabrook t' nit I that is within the three to-ten > var phaein ~ [I *n . period prescribed by Connecticut law and comphes with the ff changes in accounting rules. His proposal wiu reflect the Company's strategic goal of keeping rates relatively stable in " -[ !<L ,, l real price terms. Depending on future regulatory treatment, changes in ac-counting rules regarding phase-in plans for large plant addi- IIIII I I I I ,I ' - - - ' - * - = - - = ~ tions may also have an adverse effea on the Company's cash flow and general financial condition.
- Although developnwnts with respxt to Seabrook Unit I can be expected to continue to dominate the Company's financing outkek ard plans the latter are also seasidve to many other
"*"****""' "'""'"~' factors, including conditions in the securities markets, eco- i= - nomic conditions, legislative developnrnts, the level of the Company's sales and its ability to obtain adequate and tinwly rate relief. - Inflation As a result ofinflation and increased environnwntal and regu- - latory requirements, the e>timated cost of replacing the Com-pany's productive capacity today would substantiaUy exceed the historical cost of such facthries reponed in the financial *
- statenrnts. Since the Company's rates for senice to its cus-
] tomers have been based in the past on the cost of prosiding g' l , such senice and have been resised from time to tirne to reDect ggggg ggggg increased costs of service, the Company believes that any , higher replacement costs it may experience in the future wiU =-- be recovered through the normal regulatory process. 43 '"'"""""***8C+=**a COGSolidated StatemOnt Of OR00mt r . , n. s..r. is.s . ... p v .ue,i pa hm ma. wits, 1987 1986 1985 Operating Revenues $497,623 $471,119 $514,936 Operating Expenses Operation Fuel and interchange energy- net 131,471 126,778 175,7M Capacity purchased- net 14,449 13AS4 10,014 Other %,N5 88,970 78275 Maintenance 31,855 31,124 29,927 Deprecation 37,160 22,112 18,128 Arnortization of deferred fossil fuel costs - 94 283 Amortization of cancelled nuclear projects 10A15 11260 14,082 Income taxes 50,633 51 A19 62,047 40,191 39,829 41,787 Other taxes Total 412219 385,070 430,307 Operating income 85,404 86,N9 84,629 Otherincome and Deductions Allowance for equity funds used during construction 54,933 57,393 46,083 Other- net 3,093 5,729 11.686 Total 58,026 63,122 57.769 income Before interest Charges 143A30 149,171 142,398 Interest Charges Interest on long term debt 88,700 88,610 72.0L Otherinterest 9228 2223 5,334 Allowance for borrowed funds used during construction (26.486) (20,651) (16,5401 Income tax benefits attributable to the allowance for borrowed funds _ (23,1%) (22,561) . (18,069) Net Interest Charges 48252 47,621 42.793 Net income 95,178 101,550 99,605 Dividends on Preferred and Preference Stock 11,953 18,% 9 20.339 income Applicable to Common Stock 5 83225 $ 82,581 $ 79266 Average Number of Common Shares Outstanding 13,888 13,827 13,623 Eamings per Share of Common Stock $5.99 $5.97 $5.82 Dividends per Share of Common Stock $2.32 $2.32 $2.0S The accon panpng $tatement of Accounting Por,cles and Piotes to Consohdated Ananciti Statements are mteg,al parts of the Anancial statements. i l
- l l
l 4 * ~~~~' Consolidated Statement of Sources of Funds for Gross Property Additions r.,i,,e == in d o- e n. sur. son ins Sources of Funds n mer o.ami 1987 1986 1985 Intemally Generated Net Income $ 95,178 $101,550 $ 99/45 Add (deduct) Depreciation and amortization 52,581 34,477 33kO2 Deferred income taxes 9,998 15,816 (2,737) Deferred investment tax credits- net 3,383 (907) 28,073 Deferred gain on sale ofland - 2.8N - Allowance for funds used during construction (81,419) (78.N4) (62,623) Funds provided from operations 79,721 75,756 95,920 Deduct dividends declared 44,047 51,050 48.681 Internally Generated Funds 35,674 M,706 47239 External Financing Securities sold Common stock 36 5,087 4,994 long term debt 328,500 61,500 100,513 Expenses ofissues 0.877) (420) (1,629) 324,659 66,167 103.878 increase in obligations under capital leases Nuclear Fuel 5,913 11,059 8.N4 Other 7,894 10.190 425 Increase (decrease) in notes payable '25.675) 25,675 04.mo) Total Funds from External Financing 312,791 113,091 78,947 Securities retired and redeerned, including premiums long term debt (251,727) (66,342) O/,67) Preferred and preference stock (25200) 0 5,860) Omu Net Funds from External Financing 35.8N __10.889 72280 other Sources (Uses) (Increase) decrease in working capital, excluding notes payable, current portion of k>ng term debt and special deposits 3,813 (17298) 0 9,475) Special deposits (1,018) 91,691 13.477 Deferral of fossil fuel costs (1,163) 5,024 3,333 Other changes in noncurrent balance sheet items 83 1.112 51 Other Sources (Uses) 1,715 80,529 12.614i Funds for Property Additions from Above Sources 73,253 116,124 116,905 Alkwance for funds used during construction 81,419 78,N4 62.623 Gross Property Additions $154.672 $194.16S $ 179.52S hote: Laternal haanc6pg and property additions for the years 1986 and 1985 have been restated to reflect the 6nclus6on of other cap #tal leases l Consolidated Statement of Retained Eamings l l s.,in.wm t one ,n. iss7 asu e asas aw ae. .e 0.n ., 1987 198G 1985 Balance January 1 $291222 $245,154 $ 194,25 ] Net income 95,178 101,550 99.N15 j Premium applicable to redemption of preferred and preference stock (22006 (2,hNil - Expenses associated with preferred and preference stock redeemed (922) { ],572 ) (211 l 383278 342 272 293Mi Deduct Cash Dividends Declared l Preferred and Preference Stock 11,953 18,969 20.339 Common Stock 32219 32.081 2h.142 i Total 44,172 51.050 awl Balance December 31 $3 39.106 $291222 $245.154 the accompanymg statement of Acco ntmg Pos.cies and isotes to con ohdated Financial statements a,e integral parts of the Anancial statements 45 t. ' * ~ ~ " ' ' " ' Consolidated Balance Sheet Nembee31,1987.1986 ead 198s Assets haws v Dean: 1987 198G 1955 Utility Plant at Original Cost in service $ 863,4% $ 840,035 $ 659243 less accumulated provision for depreciation 282,814 251,013 233,370 580,682 589,022 425,873 Construction work in progress 951,983 832,171 845,112 Nuclear fuel 67,539 62.376 51,528 Net Utilny Plant 1.6002 04 1,483,569 1,322,513 other Property and Investments 8,493 8.55] 8,599 Current Assets Cash and temporary cash investnrnts 24,470 22,806 20,lu) Special deposits 617 1,635 93,326 Accounts receivable Custonrrs, less alkrxance for doubtful accounts of $1,MO, $1,720 and $1,620 43,827 40,140 50,645 Other 7,603 5,496 12.064 Accrued utilny revenues 21292 19,397 20,310 Fuel. materials and supplies, at average cost 20258 13,623 15,515 Prepaynrnts 4,(Os 4,?02 2,037 Total 122.075 107.399 214.057 Deferred Debits Unamortized cancelled nuclear projects 63,630 93,939 95,6S2 Unamortind bond redemption costs 54,850 17,264 - Deferred inconx taxes 12288 9,669 5239 Other 10m3 9,576 8,918 Total 160,771 130.448 109.539 $ 1,891,543 $ 1.729 067 $ 1.655.00s The 4GCOmpanying $tatement Of Account.n; Pohoes and hotes to Consohdated Fmanoat $tatements are lategral pa ts of tne hnahual state met. O Capitalization and Liabilities h .,43.# o ans 1987 1986 1985 Capitalltation Common stock equity Common stock $ 277,968 $ 277,932 5 272,845 Capital stock expense (5,7071 (6,770) (8249) Retained earnings 339,106 291,222 245,154 611367 562,384 509,750 Preferred and preference stock Not subject to mandatory redemption 70,000 70,000 70,000 Subject to mandatory redemption 40,000 63,000 96,000 long term debt 767,559 661,54S 6M NS Total 1.488.926 1.356.932 1,340,398 Noncurrent Liabilities Obligations under capitalleases 94,870 81,063 59,814 Other 200 200 - Total 95,070 81263 59,814 Current Liabilities Current portion oflong term debt 28,667 18,667 3.667 Notes payable - 25,675 - Accounts payable 53,440 40,302 69,731 Dividends payable 10,994 11,862 13,025 Taxes accrued 22,581 24,756 22,345 Interest accra,,d 15,845 11,339 11250 Obligations under capitalleases 1293 1244 1,851 12,853 11,163 13,601 Other accrued liabilities Total 145.676 145,008 135.470 Deferred Cred;ts Customers' advances for construction 2,346 2,014 1,898 Accumulated deferred investment tax credits M,515 61,132 62,039 Dcferred income taxes 84,089 71,472 51225 Deferred gain on sale of utility plant 2,802 2,8M - Deferred fossil fuel costs 8,119 9282 4,lM Total 161,571 146,7M 119,326 Commitments and Contingencies - - - $1,891,543 $1.729,967 51 655.00S ine accompanymg Statement of Account.eg Polectes and Notes to Consobdated Fmawal Statements are mtegral parts of the thancial statements 47 Statement of Accounting Policies Accounting Records Depreciation The accounting records are maintained in accord ance with the Pr nisions for depreciation on utility plant for book purposes, uniform systems of accounts prescribed by the Federal Energy excluding costs associated with the reconvenion of BEC's Regulatory Commission (FERC) and the Connecticut Depan- plant to a dual-6ted capabihty, are wmputed on a straight-line ment of Public Utility Control (DPUC). The 6nancial state. basis, using estimated senice hves determined by independent nwnts of the Company and its whouy owned subsidiary, engineers One-half year's depreciation is taken in the > var of Bridgeron Electnc Company (BEC), are presented on a con- addnion and disposition of utility plant, except in the case of solidatedbasis. maior operating units on which depreciation commences in Utility Plant t month they are placed in senice and ceases in the month they are removed from senice. Depreciation associated with The cost of addaions to utility plant and the cost of renewals BEbs reconversion costs is computed on an annuity basis over and betterments are capitalized Cost consists oflabor, mate-the period that this plant is being leased to the Company by ' ~ rials, services and cenain indimet construction costs, including BEC. Le aggregate annual provisions for depreciation for the an aUowance for funds used during construction. Le cost of >vars 1955,1956 and 19S7 were equivalent to approximately current repairs and minor replacements ts charged to appro~ 199%,187%, and 169%, respectively, of the original cost of priate operating expense accounts. The original cost of utility depreciable propeny. Le increase in the 1%7 aggregate pro-plant retired or otherwise disposed of and the cost of removal vision reflects ; idditioinal $12.5 million of MJhtone Unit less salvage are charged to the accumulated provision for No. 3 depreciation recorded as a resuh of stipulated earnings depreaanon. agreements. See Note (C),"Rate Related Regulatory Allowance for Funds Used During construction Proceedings" In accordance with the applicable regulatory systems of ac- incorne taxes counts, the Company capitalizes an aUowance for funds used The Company has adopted the policy of fuU normalization during construnk>n (AFUDCI, which represents the approxi accounting for income tax berr6ts with respect to book-tax mate wst of debt and equity capital devoted to plant under timing differences applicable to post 1980 property addaions construction, In accordance with FERC prescribed account-and all investment tax credits used to reduce current federal ing, the ponion of the aDowance applicable to borrowed fund
- income taxes The major ponion of the credas generated resuh is presented in the Consolidated Statenrnt of Inconw as a from the Company's election to take investnent tax credits reduaion of interest charges, while the ponion of the auow- applicable to long term projeas on a progress-of construction ante applicable to equity funds is presenteJ as other income. basis.
Ahhough the allowance does not represent current cash in-cone,it has historicaUy been recoverable under the rate mak. Accrued Utility Resenues ing process over the senice hves of the related propenies. The Le estimated amount of unbry revenues tiess related ex-Company compounds semi-annuaUy the allowance applicable penses and applicable taxes) for senice rendered but not to maior construenon projeas. bilkd is accrued at the end of each accounung perk >d Prior to 1987, the Company accounted for the ponion of.he investments aDowance applicable to borrowed funds on a net-of tax basis The Company's investnrnt in the Connecticut Yankee Atomic for all wnstruction projeas because interest charges associ-Power Company joint venture, a nudear generaung company ated with construction projects were expenseu currently for n which the Company has a 9% stock interest,is acwunted tax purposes. I hvever, ef fective.lanuarv 1,1957, the Tax Re-for on an equity basis. form Act of 19X6 requires the capitahlation for tax purposes ofinterest charges awociated with construaion projects, ex- Foisii Fuei cost 5 cept for projects such as Seabrook Unit I that were begun The amount of fossil fuel costs that, pursuant to the fuel ad-pnot to March 1,19m Therefore,in 1987, AFUDC for Sea- justment clause in the Company's rates, cannot be refleaed brook Unit 1,which currently accounts for over 90% of the currendy in customers' btlh is deferred at the end of cath Company's AFUDC, was computed on a net of tax basis, and accounting period Since adoption of the deferred accounung AFUDC for au other proiccts was computed on a before-tax pnicedure in 1974, rate decisions by the DPUC and its prede. basis. cessors have conusiently made speci6c provision for amoniza-Le 1987 AFUDC raies were 1 n, on a before-tax basis and tion anJ rate making treatment of the Companv's exisung de-10 25% on a net of tax basis, compared to the 11% and fernd fowil fuel cost balances 10 75% net of tax rates in effen for ad projects in 1956 anJ Research and Development Costs 1955, respectively. Research and developnet costs, includtng environnrntal I studies, are capitahnd if related to specific construction prof cas and depreciated over the hves of the related assets Other research and dwelopnrnt costs are charged to expense as QCurRd 48 L - * *a** *"=a-sc+-a > Notesto Consolidated Financialh e.am m.. .=.c p.e.n c o m.. m. m e.n.ae. .m.u ineue.4, - tA) Capitalisation at December 31,1987 Coms.on Stock Equity (a). long term Debt (d) Common stock, no par value $ 277,968 Long term debenures: Shares authorized 17,500,000 15 %% 1988 Series, due December 6, shares outstanding at December 31: 1988 $ 20,000 1985 13,720.050 4.65% 1990 Series, due August 15, : 1986 13,886,566 1990 15,000 [ 1987 13,887,748 ' 1"a% 1991 Series, dueJuly 15, lo91 10.000 i Capital stock expense (5,707) 5 %% 1996 Series, due August 15,1996 15,000 5 Reained eamings(b) 339,106 6% 1997 Series, dueJune 15,1997 22,500 7% 1999 Series, dueJanuary 15,1999 15,000 Total common stock equity 611.367 10%% 2000 Series, dueJune 15,2000 30,000 Preferred and Preference Stock (c) 7%% 2002 Series, due October 1,2002 25,000 Authonzed: 8%% 2003 Series, due December 15, Cumulative preferred stock: 30,000 2003 $100 par value,1,350,000 shares 12% 2017 Series, due August 1,2017 $25 par value,2,400,000 shares ( ssued in August 1987) 100,000 Cumulatrve preference stock: $25 par value,5,000,000 shaies Sen.a ldebentures: 8%% maturing seriaUy as to $1,667 Outstanding at December 31,1987: principal amount on November 15 in Not subject to mandatory redemption: each of the >rars 1968 to 1997, Cumulative preferred stock, $100 par inclusive ($1,667 matured in 1987) 16,667 value: 11% maturing seriaDy as to $2,0to 435% Series A,50,000 shares 5,000 principal amount on November 15 in 4.72% Series B,75,000 shares 7,500 each of the >rars 1988 to 1919, 4 64% Series C,75,000 shares 7,500 5%% Series D,75,000 shares 7,500 WivW000 mWin 198h 24,000 16%% maturing serialh as to $5,000 7.60% Series E,125,000 shares 12,500 principal amount on November 21, 7.60% Series F, 150,000 shares 15,000 1988 and as to $20,000 principal Cumulative preferred stock, $25 par amount on November 21,1989 ($5,000 value, matured in 1987) 25.000 8.80% 1976 Series,600,000 shares 15,000 34S,16,, Total preferred stock not subject to mandatory redemption 70.000 b..8I ' " E'8' O M ' M " U #CI'A' Company: Subject to mandatory redemption: 9.44% Series B, maturing seriaUy as to Cumulative preferred stock, $100 par $10,800 principal amount on February value, 15 in each of the scars 1995 to 1999 54AU 9K% Series G. 60,000 shares, subject "Bridge"loan at 9.5063% placed in to mandatory redemption of 30,000 December 1987 pending the planned shares on April 15 in each of the sale of Series C, First Mongage Ibnds years 1988 and 1989, inclusive, at duringJanuary 1988 160,000 $100 per < hare, plus accrued Other. dividends (30,000 shares redeemed Ibuution Control Revenue Ibnds: in 1987) 6,a0 14 %% 1984 Series, due October 1, 19% 1984 Series,340,000 shares, 2009 $ 40,000 subject to mandatory redemption of 14 %% 1964 Series B, due December 1, 68,000 shares each > var beginning 2009 28,400 July 15,1990, at $100 per share, plus 7,5(U 9%% 1986 Series,dueJune 1,2016 accrued drvidends 34.000 9% 1987 Series, dueJuly 1,2012 Total preferred stock subject (issued in August 1987) 25,0to to mandatory redemption 40.000 10%% 1987 Series, due November 1, 2012 fissued in November 1987) 4 3,5(U 49 long4erm bank loans; 13.41%, due December 1989 5 50,000 12.9% ($20,000), and 13.1% ($20,000), maturing as to $15,000 in 1992, $15.000 in 1993 and $10,000 in 1994 40.000 796,567 Unamortized debt discount less premium at December 31,1987 041) Tatallong term debt 7 % .226 less current portion included in Current Liabilities 28.667 Totallong-term debt included in Capitalization 767,559 Total Capitalization $1.48sS26 (a) Cornrnon St<xk On October 21,1986, the Company's Automatic Dividend Reinvestment and Common Stock Purchase Plan iDRI4 was changed to a market share plan from an original h,st.e plan. On that date 290,507 shares representing the remainder of the 1,750,0m) shares originally reserved for the DRP were removed from reserve status. Common stock, no par value, authorized at December 31,1987, included 400.000 shares reserved for the Company's Empkyte Stock Ownership Plan (ESOP). Shares issued during 1987,1986 and 1985 and increases to the common stock account from the proceeds of these issues were as foUowv 1987 1990 1955 Shares Shares $*aus Amount (000# Amount (000, Amount 000 Balance, January 1 $277,932 13,887 $272,845 13,720 $267.851 13.429 Additions resuhing from: DRP - -* 4.847 159 4.994 291 ESOP 36 1** 240 8" - - 5277.% 8 13.88S 5277.932 13.887 $272.845 11.720 Balance. December 31 'During 1987 the Company purchased 158,474 shares to fulftu its obligations under DRE "Shares contributed to ESOP include additional purchases on the open market of 26.os t shares in 1986 and 9,407 shares in 1987. Expenses related to the new issuances were charged to capital stock expense. (h) EClJined EJr!!!!!g$ Sc$lriclho!! The indenture under which all of the Company's debentures ar"issued places limitations on the pavment of cash dnidera on the common stock of the Company and on the amounts that can be expended to purchase or redeem shares of common stak. l'nder the rnost restriaive provision of the indenture, retairxd eamings in the amount of $258 milhon were free from such hmitations at December 31,1987. (a Preferrea and Preference St<& '!he par value of each of the>e issues was credited to the appropriate stak account and expenses related to these iwoes were charged to capital stock expense. On.lanuary 15,1987, the Company redcemed all of the 800fm outstanding shares of its 16"o Preferred Stock.1981 Senes. at $27.75 per share, plus accrued dnidends. so On April 15,1987, the Company, in a scheduled redemption, redeemed 30,000 shares of its 9 %% Prefened Stock, Series G. at $100 per share, plus accrued dhidends. %e aggregate redemption requirements for preferred stock during each of the fn e years 19SS--1992 are: 1958--$3,000; 1989-$3,000; 199046,800,199156,800 and 1992 56,800. Preference stock is a form of stock that is junior to preferred stock but senior to common stock It is not subba to the eamings coverage requirenrnts or minimum capital and surplus requirements governing the issuance of prefened stock. Lere were no shares of pre,ference stock outstanding at Daember 31,1987. Shares of prefened stock have preferential dnidend and liquidation rights over shares of common s ock. Prefened shareholders are not entitled to general voting rights. Ilowever, if any preferred dividends are in anears for six or more quaners, or if sonr other event of default occurs, prefened shareholders are entitled to elect a majority of the Board of Dire tors, until all prefened dkidend arrears are paid and any event of default is teiminated. GbinTerm Dek On February 26,1987 BEC issued $54 million principal amount of its First Mongage Bonds, Series B, at an interest rate of 9.44% per annum, maturing ou r a 6ve.> ear period ending February 15,1999. The proceeds were used to repay a ponion of the Company's $63 milhon shon. term borrowings from a fiaancial institution, which had been loaned to BEC in December 19m hen it repurchased $46 million pnncipal amount ofits 18% First Mongage Bonds, Series A, paying a $17 million premium to the bondho!Jers. Lis $17 milhon premium was taken as a loss for income tax purposes in 1986 and is being amonized for book purposes. Since the $63 milhon in shon. term borrowings was a "bridge" loan to be repaid from the preceeds of the $54 milhon bond issue and the current inconr tax benefits, approximately $9 million of the $17 million preraium, the Company reclassified $54 million from shon. term debt to long. term debt at December 31,1986 Lesc transactions, which represent a reduaion in annual interest expense of approximately $ 1.5 million, were in accordance with the Company's objective to replace high cost securities issued in recent >vars with kwer. cost financings. On June 23,19S7, the Company filed a form S.3 Registration Statement under the Securities Aa of 1933 for the sale to the pubhc of a maximum of $150 milhon principal amount ofits Dsentures. On August 4,1987, $100 million principal amount of these Debentures were issued and sold to an underwriter as 12% Debentures,2017 Series, due August 1,2017. On Au2ust 6,1987, the Company financed a ponion of its ownership share of the cost of cenain pollution control facihties at Seabnok Unit I nuclear generating station by bornwing from the Industriallhelopnrnt Authority of the State of New Hamp. shire (NiilDA) the proceeds of the Authority's issuance of $25 millon of tax exempt 9%% Pollution Control Revenue Ik,nds. E net proceeds of approximately $122 milhon from the 12% Debentures,2017 Series issue and the August 6 borrowing from NiIIDA were used in part to repay $63 milhon in short. term borrcrvings and $18 milhon of fuel financing ohhgations. Le remainder, $41 million, was used for the redemptbn of the 13 %% Debentures,1990 Serie , on September 15,1957. Issue expenses, including debt docount, associated with these financings were charged against cunent inconr. On November 1,19s7, the Company redeemed at tnaturity all of the $ 10 million principal amount of its 4 %% Debenturn,1957 Series. On Nove.nber 5,1987, the Company compkned the financing of substantialh au of its ownership share of cenain poUution cont rol facihties at Seahnuk Unit I by bonowing the proceeds of N111DA's issuance of $43.5 million of tax exempt 10%% Pollunon Control Revenue ikindx The proceeds of this bornwing were used for general corporate purposes, including the repaynrnt of obligations incurred in conrrction with the Company's construction program and the redemption of maturing debentures. On December 9,1987, BEC bonowed $160 million undei terms of a shoroterm loan agreement with a financial institution his bornwing. together with a $33 million k>an from the Company, enibkd BEC to repurchase au of the ou,stanthng $154 million principal amount of its 18"o First Mongage Iknis, Series A, paying a $ 39 milbon premium to the bondholders OnJanuvv 14 198S, BEC issued anh!J $ 180 milhon principal amount of 10 32% First Mongage Ik,nds. Series C. which mature over e .hree. >rar period erthngJancary 15,1995. ne $ 39 miDion bond purchase premium was taken as a loss for inconr tax purposn in 1987, but wiu be amonized mer the hfe of the noe issue. Accordingly, since the 5160 milhon in shon. term bornwings is a "bndge" loan, repaid from the pmceco of the $180 milhon bond issue in 1988, the Company has redassified $160 milhon io king.ierm debt in 1987. Lis financing, which wiu reduce annual interest expense by $5.2 million, represents another significant step in the Compa. ny's program to reduce its costs and improve cash ikw See Note (Ei, "Compensating Balances anJ Shon. Term lbrmwings" he aggregate maturitin of long term debt during each of the five >rars 1988-1992 are: 196%$2sf,67; 19W--$73.667; 19%--$ 1 Sf67; 1991-513.667; 1992-518f67. sa (B) Accounting for Abandonments and Disallowances of Plant Costs and Phase in Pians In 1986 and 1987, the FAS13 issued Statenwnt of Financial (c) Accounting for Phase In flans Accounting Standards (SFAS) Na 90 "Regdaied Enterprises in order to ease the impaa on rates that may resuh from the - Accounting fx Abandonments and DisaUowances of Plant addition to rate base of the cost of major trw facilities, such (est> and SFAS No. 92,"hegulated Enterprises - Account- additions may be added to rates graduaDy via a phase in plan. ing for Phase In Plans , respeaively. Ecse statenrnts, which SFAS No 92 establishes criteria for the definition of a r%ase in will be effea;ve r , tn 19s8, anrnd SFAS No. 71, "Accounting for plan and requirn, among other things, that cons can be de-the Effeas of Cenain Types of Regulanon ,which gentams ferred under a phase in plan only if the rate regulators allow the accounting rules applicab!e to regulated industnes. reco.ery of these deferred costs within a ten year period of (ai Accounting for Abandonments tinr While the Company intends to submit a phase 'n plan f r the recovery ofits insestnrnt in Seabrouk Unit I which Under SFAS No. 71, prior to 1988, a utihty was not required c mplies with SFAS Na 92,it is unable to predia the regule to record a loss against inconx if recovery of its fuu invest.nent wry treatment which the plan will be afforded If the Com. in an abandoned punt had been aUowed by its r.>te regulatort i pany is n i aUowed to implement a phase in plan which com-Ilowever, SFAS Na w now requires that a loss be ecorded pues with SFAS No 92, the inability to defer phase-in costs of for any disaUowance of the investment in an abandoned plant, Seabniok Unit I would adversely affea she Companyi finan-induJing the disaUowcr.ce of an aUowed return on investment, regardless of the fact that regulators have provided for recov-cialc ndith erv of full investraent. De loss to be recorded for the absence (C) Rate Related Regulatory Proceedings of an aUowed return is measured by the difference between the In its rate decision on December 18,1984, the DUC pro-recoverable investment and the present value of such vided for a irt increase in annual revenues of approximatJv '"""**~ $23 million. His decision allowed a 16A rerun. on common (b) Accouming for DisaUowances of P' ant Costs stock equity, the recovery of the Companyiinvestnrnt in the canceted deabrook Unit 2 over a i:n > var perkxi, without re. Prior to anrndnunt in 1986, SFAS No 71 did not require that turn on the investment < >e Note t h,"Uaamonized CanceUed disaUowances of recovery of new plant investnrnts be written Nudear Proicos"uhe amonization of the Companyi re nain-off against inconw. Such disaUowanen could be anwnizeJ ing unamonized investment in the canceued Pdgrim Unit 2 mer the hves of the invntnrnts, provided future rn'enues wer a sixteen month perixi, the write off of ac, amulated d-attnbutable to the facihties w cre expected to be sufficient to ferred fossil fuel costs over a sixteen-month perkxi, and an permit recovery of the entire cost of the facilaies, including the increas- to !44 mdlion of annual rn enues on acmuni of con-internt charpe nonions of the carrying costs of the undepre, stnaak-k in progress tCWIPs associated wnh Seabrook ciated balances. Le curreni accounting rules as amenJed by Unit 1, refleaing the indusion in rate base of $183 milbn of SFAS Na 90 require that, for completed plants, au costs disal. the investment in this unit. As described in the folkwing par kved for rate making purpeso must be recognized as kwses ' graph, the amomi of annual CWIP rnenues in rates was re-against income as soon as the disabowance beconrs probable duced from 544. .ilbon to 512 mdlion, effeaive April 23, arxl can be reasonaoly estinuicd 1986, retleaing the inclusion in rate base of $4s milhon on With respea to disaUowances of new plant costs rnuhing account of the commercial operation of Mdistone Un;t 3. At from a cost "cap", SFAS No 90 requires that a loss be recog' December 31,1987, the Company had coUened apprmi-nized as soon as it beconrs probable that the totalinvestnrnt match 555 mdhon of CWIP revenues m the aggregate. UnJer in the plant wdl cumi the "cap". This loss is measured by the Connaticut law, a condnion of the indusion m rates of Sea-ddierence between the estimated total investnut and the cost brook Unit 1 CWIP revenues is that an anwunt equal to the cap CWlP rovnues wdi be exduded from ratn after the unit is in All kwsn that rnuh from the adopion of SFAS No 90 may be service for a peric<l of time equal to the time the CWlP rnv-reponed by either restating financial statements for prior fiscal nues had been in rate > During the perkx! that these rn enues >vars or y recordmg the cumulauve effea of the kwses in are excluded imm rares, the Company wdi record deferred 198& As described herein, the Company will record losses in carrying costs associated with the invntnrnt represented by the first quaner of 19ss in connection with recovery of its this exdusion on n> Consohdated Statenrnt of Inconc While investments in nudear plams, in panicular its substantial in- these costs can be expected to exceed in the aggregate $55 vernrnt in Seabrook Unit 1. Ris may result in the Companyi md%n and ahhough there is re assurance that the Company experiencing a net kiss for 19ss anJ may have a significant wd' r alkweJ t, recover them through rates, it is the Compa-dver>e impaa on the ratio of the Companyi eanangs to fixed nyi behef that t}rse costs wdl be recos cred over the remntning charges for 19ss, dependmg on whether the Comp sny decides hfe of the unn. to restate financial statenrnts far prior >vars or to rewrd the cumulanve etfcct c.f the kwscs in 1938. 52 ~ In decisions in May aal November 1986, the DPUC approved average of the electric utility industry, without affecting the the Company's proposal with respect to the rate-making and level of the Company's cash (kn. A condition of the agreement accounting treatment of the Company's 3.685% investment in was that if these nrasures proved to be insufficient to achieve the MiUstone Unit 3 nuclear generating unit, retroactive to the the rate of return prescribed in the stipulated agreement, fur. commercial operation date of April 23,1986. As a result; $130 - ther adjustments of this nature would be required. Accord-million of the Company's $148 million original imestment in ingly, on October 29,1987, the DPUC issued an order requir-the unit and $5 million of nuclear fuel were placed in rate base ing the Company to show cause why it should not be ordered with an egeal amount of Seabrook Unit 1 CWIP being re. to decrease non cash eamings by an additional $5.6 miUion, by moved from rate base, thus leaving rate base unchanged. Le . recording additional depreciation of $4.7 million and by writ-DPUC decision did not provide for recovery through rates of ing off against income debt issue expenses of $900,000 associ. the Company's operation, maintenance, decommissioning or &l with the $43.5 million borrowing from the NiilDA in other expenses related to Millstone Unit 3 for the period be- Lvember. The Company did not contest this show cause or. . tween its commercial operation date and the date of the deci- der and in the fourth quaner of 1987 recorded these eamings sion in the Company's next rate application. Howner, in this reductions which were prescribed in a second stipulated earn-interim period, the Company expects that these expenses will ings agreement among the panies to the earlier agreement, be substantiaUy offset by fuel cost savings due to operation of gogn,,,,7,,,, the unit. Le November 18,1986 decision also terminated the pending prudence investigation of Millstone Unit 3 and was Income tax expense consists of: 3 made effective retroactive to the commercial operation date of 1987 198G 1985 ' the unit. Since the Company has not been allowed to recover Operating expenses: its full investment in this unit, it will reduce its investment t Current $18.536 $13,950 $17.558 $130 miUion and recognize a loss against income of approxi-mately $ 12 million, net of related income tax effects, in the first D'IC"' quarter of 1988. See Note (B), "Accounting for Abandon. Inc me tax attributable ments and Disallowances of Plant Costs and Phase In Plans" t the allowance for borrowed funds 23,190 22,561 18,069 On October 1,1986, the DPUC issued a notice that it would Premium on BEC bond conduct a general review of financial and operational results of redemption 9,014 18.302 - the State's major public service companies, including UI. UI Accelerated depreciation 8,227 7,710 2,94S projected a rerum on equity, as calculated for rate-making pur- Construction overheads 1,378 2,3G4 3,200 poses, of over 18% for the par 1987 and offered several aher- (2,672) (i,888) Deferred fossil fuel costs 546 native ways of reducing its earnings to or below the aDowed Cancelled Pilgrim level of 16.4% without reducing rates and revenues. Le nuclear project (1,528) (277) DPUC, re,:ognizing Urs cash flow needs, accepted the con- Gain on sale of utility ~ cept of non-cash actions to reduce the equity return, and initi- plant (1,146) 29 - l ated a proceeding to examine the appropriateness of non rate Accelerated amonization (56) (56) (56) l adjustment actions such as accelerated depreciation of facilities Pension costs (1,612) (636) - and shoiter amonization periods for premium costs associated Amortization ofloss on with redemption of high-cost securities as a means oflowering reacquired BEC debt (770) - - UI's projected equity retum. Contributions in aid of As a result of this proceeding, on April 4,1987, the DPUC construction (900) - - l approved a stipulated earnings agreement among the Com. Investment tax credits ! pany, the DPUC's Prosecutorial Division, the Dnision of Con. (net of amonization) (1,091) 1907) 28,073 sumer Counsel (DCC) and the Connecticut Attomey General. Debt issue expenses (lJ97) - -
- . Under the terms of this agreement, the Company was ren red CanceUed Seabrook to continue its cash conservation practices while reducing its Unit 2 OJ95) 1,552 (2,42I) l' non cash eamings for 1987 by approximately $16 miDion Altemative minimum tax (10,670) - -
l through various accounting procedures. Such procedures in. Other net 140 (614) (296) cluded the recording of additional depreciation on its owner. Total deferred 32 m 7 37.469 44.4s9 l ship interest in Millstone Unit 3, the use oflower AFUDC
- I# "N l rates and the write-off against income ofissue expenses, in- .
cluding debt discount, associated with cenain 1987 long-term **"* *** ###"* f ""*"* l debt issuances. See Note ( A), "Capitalization". Le intent of c,; gg g g3g ( the agreement was to lower the Company s rate of retum on l common stock equity for 1987 to a level comparable with the Totalinmme tax expense $46.971 $49.420 $56.310 53 i l Accumulated deferred income. De amounts reported for federal income tax expense for the tax assets at December 31: 19E7 1986 1985 pars 1987,1986 and 1985 were less than the amounts com. Deferred fossilfuelcosts 5 4292 $ 4,838 $ 2,166 puted by applying the federal inconv tax statutory rates to IVnsion sosts 2,954 2,318 2,180 book income before federal income taxes. ne reasons for Debt issue expenses . 1,797 - - such differences are as foUows: Gain on sale of utility plant 1,117 1,146 - 1987 1986 1985 Contributions in aid of Net income $ 95,178 $101,550 $ 99.605 construction 900 - - Totalincome tax expense 46,971 49,420 56,310 Uncouectible accounts 750 882 829 Ixss state income tax expense 11,894 11,374 12.819 Other = 478 485 M Federalincome rsx expense 35.077 38'146 43,491 $12288 $ 9.669 $ 5239 Accumulated deferred income tat Book income before federal liabilities at December 31: income taxes . 130,255 139,596 143,096 Cancelled Seabrook Unit 2 $31,722 535,517 $33,%5 Federalincome tax statutory Unamortized bond rate 40 % 46 % 46 % redemption costs 26,546 9,013 - Federalincome taxes at Accelerated depreciation 22,5i3 14.326 6,616 statutory rate 52,102 M,214 65,824 Construction overheads 13,720 12,342 10,038 Iess tax effects of: Accelerated amonization 218 274 329 Allowance for equity funds CanceUed Pilgrim nuclear used during construction project - - 277 capitalized for tmok Altemative minimum tax purposes, not taxable carryforward (10.670) - - income 2.1.973 26,401 21,198 $84.089 $71.472 $51225 Amortization ofdeferred investment tax credits 1,091 90/ /50 Equity in earnings of subsidiary companie., book purposes, not taxable income 759 918 853 Tax depreciation e u greater than twk deprceiation applicable to pre-1981 property additions (505) (215) 1.095 Amortization of al!cwance for funds used during construction applicable
- to canceded nuclear projects (1259) (1,538) (1,895)
Additionalbook dep eciation applicable to Nillstone Unit 3 (4,995) - - Other items net (39) (305i 332 Federalinconr tax expense 5 35.077 5 38.046 $ 4i491 ' Effective federalincome tax rates 26.9"o 27 3 % 30.4"e ne cumulase net amount ofinconw tax timing differences for which deferred taxes h.we not been pnwided is approxi. mately $97 milhon, as of December 31,1987. nese timing differences have arisen principaUy from accelerated tax depre- ! ciation on pre 1981 property additions. Under current rate-I making practice, these ta3 es wiU be recovered through fut ure revenues. N l l Le 1975 Tax Reduction Act and succeeding amendments the Company may hre to record against inconx an after-tax proside that for 1985 up to 85%, and for 1986 up to 75% of loss that might be substantially greater than the estimated federal inconr taxes currently payable may be offset by invest. amount described at Note (L), "Commitments and Contin. ment tax credits. The total credits utthzed in 1985 were gencies". Due to the faa that this complex accounting stan. 528,823 and in 1956 53,558, of which 5157 was applied to dard has only recently been issued, the Company has noi yet prior period returns. Beginning in 1987, the Tax Reform Aa tren able to determine au of the impans that ihis standard of 19S6 (the 1966 Act) has established new limitations for may bas e on the Company's financial statements and financial determining the amount of federal inconr taxes currently pay- corxlition. able that may be offset by investmen tax credits. As discussed m compensating Balances and Short Term Borrowings more fully below, the Company dcrs not anticipate that invest-nrnt tax credits generated during 1987 will exceed these in September 1966, the Company arranged a 5160 milhon limitations. revolving credit agreenrnt with a group of banks his agree-ment, which extends to December 31,1989, replaced a 566 Ir vestnrnt credits of approximately $5,400, carried forward at million agreement which the Company haJ arranged in 1984. December 31,1985, were eliminated since, under the prosi. As of December 31,1987, the Company had no shon tenn sion3 of the 1986 Act 55200 of credits generated by the Com-borrowings outstanding under the agreement. pany's investment in nuclear fuel for Seabrook Unit I were lost because the nuclear fuel was not placed in senice prior to ne Company abo has an agreement, which has not been ' January 1,1987. Le remaining $200 was utihzed to reduce utilmi to date, to sell to the banks involved in the revolving the additional tax liabihiv resuhing from the adjustnrnts made credit agreenrnt up to 540 miUion ofits accounts receivable. ~ by the Internal Revenue Senice on the Company's federal in. Le tennination date of this agreement is December 31,1989. come tax return for 1979. On December 9,1987, BEC borrowed 5160 million under a he 1986 Act repealed the regular investment tax credit for short. term loan agreement, dated December 2,1987, with a propenv placed in senice after December 31,1985, except for financial institution. This amount has be n classified as long-cenain transition propeny, defined as property for which con. term debt. See Note ( A Hd), %ng Term Debt" struction pursuant to a written ontract was binding on De- Information with resp ect to shon-term borrowings is as cember 31,1985. Investment tax credits generated from the foUows: Company's transition properties, primarily \liUstone Uni' i 1987 1956 1985 and Seabrook Unit 1, amounted to $3,558 for 1986. Be, e this amount was utilized in 1986, there was no investnrnt tax aunmm agrqate credit carryforward at December 31,1986. Since it is antici- P'I*'IP 'I d""""' f pated that minimalinvestnrnt tax credits may have been gen-shon tenn bouwing utstanding at any crated from these transition properties in 1987, no investment m nth-end 560,000 525,675 545.0m tax crechts were utihzed in 1987 and there are no carryfor, wards at December 31,1987. Average agrqate shon-term borrowings out-He 1986 Act also provided for a new, nxire comprehensive standing during the corporate ahernative minimum tax ( AAIT) for >vars beginning sear
- 27,848 1,491 38.841 after 1956. To the extent that the AAIT exceeds the federal gxsighted average interest income tax computed at statutory rates, the excess must be rate
- 7.5 % 7 S 't, 100'%
paid in addition to the regular tax liabihty. Le excess paid in Principal amounts eut-any year can be carried fonvard indefinitely and of6et against standing at 3rar.end 5 - 525.675 5 - so much of any future > var's regular tax liabihty as exceeds that Annuahzed interest rate > var's tentative AAIT. The Company's AAIT habihty in excess on principal amounts ofits regular tax liability for 1987 is $10,670, which is cur- outstanding at > var-end - 80% - rentiv being deferred on the Consohdated Statenrnt of income. Average shon term borrowinn represent the sum of dail3 hornminp outstanding, weighted for ihe number of davs out. In l')ecember 1987, the FASB issued SI AS No. %, ' Account-standing and dnided by the number of days in the period The
- ing for Income Taxes", which replaces and substantially re- weighted average interest rate is determined by dividing inter.
l vises the presious rules on accounting for inconr taxes. The est exp,:nse by the amoent of average borrowinp Commu-l revised rules, which must be adopted by the first quaner of nrnt fees of $800,5607, and 5498 paid during 1987,1% and 1989, place limitations on the creation of deferred tax assets. j9s5, respeaively, are excluded from the calculation of the ne deferred tax benefits accruing to the Company in connec- we ghted average interest rate. There were no shon.ierm ter-tion with charges against incant aristng out of comphance rowing outstarang at December 31,1987. with SFAS No. 90 may exceed these limitationx As a resuh, i 65 1 - (F) Supplementary income Statement Information he amount of maintenance, advenising costs, and the provi- he plan's irrevoceble trust fund consists principaUy of equity
- sions for depreciation and amonization, other than set forth in and fixed-inco.ne securities within the following targeted pon.
' the Consolidated Statement of Income, are not significant, and folio mix: there are no royalties. Percentage of Tota! Fund Taxes, other than income taxes charged to costs and expenses, ef hW, Asset category Minimum Maximum 1987 1986 1985 Equity Securities 45 65-Fixed income Securities 35 - 55 ' State gross camings $22,999 - $21,845 $25,226 l local real estare and per. Le components of net pension costs were as follows: sonal propeny 16,199 17,866 16,538 19s7 isso Other, principally payroU 4.024 4,038 3,935 Senice cost of benefits earned dur- $43222 $43.749 $45.699 $ 2,833 $ 1,892 ing the period Charged to: Intertst cost on projected benefit Tax expense $40,191 $39,829 $41,787 obligation 8,018 7,221 i Other accounts 3,031 3,920 3,912 Actual return on plan assets (5,229) P,848) Net amonization and deferral (4,367) (1.108) $43222 $43.749 $45.699 Net pension cost $ 1255 $ 157 - (G) Pension Plan and Retirement Benefits Assumptions used to determine pen-In December 1985, FASB issued SFAS No. 87, a new standard sion costs were: of accounting for pension costs. Le principal objective of Discount rate 7.50 % 8.75 % SFAS No. 87 is to reaffirm accrual accounting by providing a Average wage increase 5.50 % 5.50 % standardized method for measuring net periodic pension cost Expected long term rate of plan - that is intended to improve comparrbility and understandabij. assets 8.00 % 8.00 % icy by recognizing the compensation cost of emplog'es' pen. Le funded status and amounts rec-sions over their approximate senice periods. Ahhough com. ognized in the balance sheet at I)e-pliance was not required until 1987, the Company adopted cember 31 were as folknvs: SFAS No. 87 in Demmber 1986. In accoidance with this stan. Actuarial present value of benefit dard, au 1986 interim periods were restated. obligations: Vested benefit obligation 5 60.135 5 63.M 8 he Company,s pens. ion plan, which is based on final average pay, covers substantially aU of its employees and its entire cost Accumulated benefit obligation 5 67.189 $ 71.114 is borne by the Company. Le pension cost for the > var 1985 Reconciliation of Accrued Pension was $2,897, excluding $3207 of additional retirement benefits Liability: provided under a voluntary early retirement progran.. For Projected benefit obligation $107,458 $107,890 1985, pension costs and funding contributions were deter. less: Plan assets (fair value) 113.0n0 110.000 mined by the Entry Age Normal Cost method with Frozen Projected benefit obligation greater Initial Liability. (less) than plan assets (5.542) (2.110) In 1986, pension cost decreased to $157 reflecting the adop. Unrecognized gain (lossi from past tion of SFAS No. 87. If the Company had delayed the adop. experience i8.427i (14223) tion of this new standard until 1987,its 1986 pension cost Unrecognized net asset tobligation) at date ofinitial application 19.720 20.829 would have been $2,023. Le principal reasons for this decline were adoption of the Proicaed Unit Credit Method for deter- Accrued pension lizbihty at mining service cost, use of shon&tcrm matket rates for inter- December 31 5 5.751 5 4.4 % est assumption purposes and use of shoner hves for amonizing prior senice costs; aU as prescribed by the new standard. In addition to providing pension benef.ts. the Company-pnnides eenain health care and hfe insurance benefits for ac-For 1986 funding purposes, the Company changed .ns method- tiw and retind emplo>res. Substantially aU of the Compant's ology to the Entry Age Normal Lost and changed its twthod emplo>tes beconw chgible for these benefits when thev reach of plan asset valuation. Lese changes resulted in the pension retirement age while working for the Company. Lew and fund being m erfunded for income ax purposes, thereby re' sim lar benefits for anive emplonvs are prmilled through in-ducing the Company s 1986 funding contnbution from ap-surance companies and llealth Maintenance Organizations proumately $3,000 to zero. Due to the changes adopted in w- premiums and membership fees are based on the bene-1986 and the experience of the plan and the fund in 1987, n % i&J h anu pd dwid na-furding contribution will be required for 198 n - - ~ _ - ,, . _ . _ _ _ . . _ . . _ - _ . - , _ _ _ . - _ _ _ - . _ _ . Company recognizes the cost of pnwiding those benefits to tional costs would be consistent with the DPUC's resen ation. retired arxl active emplo>res by expensing the annual insur. See Note t L), "Commitments and Contingencies - Prudence ance premiums, which were 53,929,54,609 and 55,282 for the Raiews-Changes in Accounting Rules" years 1985,1986 and 1987, respectively. At December 31. di Foet rinancing obligations 1987, the Company was providing these benefits for 1,57 e, active emplo>res and approximately 501 retirees or their bene. On November 30,1987, the Company's fuel resen e and sup. ficiaries. The cost of prosiding these benefits for retirees is not ply agreenrnt was extended to August 31,1988, and was separable from the cost of prosiding benefits for active amended to include the purchase of natural gas for use at the emploms. ' New llaven llarbor Station. The agreement prosides for the financing of up to $135 miUion in fossil fuel purchases, less the (HJ Joint!) Owned Plant amount of the Company's outstanding lease obligations for lhe Company's 93.7% ownership share of the New Ilaven nuclear fuel. At December 31,1987, approximately $ 12 mil-I farbor Station generating unit represented $132 millio- 'f lion of fossil fuel, consisting of 53 million of oil and 59 million utility plant in senice and $40 million of accumulatcJ of coal, was being financed under this agreement. sion for depreciation at December 31,1987. lhe C /s in September 1986, the Company amended its sale and lease-ownership share of Mtustone Unit 3, which was placeu in sen - back agreement covering nuclear feel for Seabrook Unit 1, ice in April 1956 is 3.685%, represented at December 31, increasing the aggregate amount of nuclear fuel purchases 1987 by $150 miHion in plant in senice and $20 million in which may be financed under the agreement from Sw million accumulated prosision for depreciation. The Company's share ta 570 million. At December 31,1987, SM million of Sea-of the operating costs is included in the appropriate expense brook Unit I nuclear fuel was being financed under ihis captions in the Consolidated Statement of Income. See Note agreement. (L),"Commitments and Contingencies- Changes in Ac-counting Rules" In August 1986, the Company also entered into a sale and leaseback agreement which provides for the financing of up to lhe Company also has a 17.5% ownership share in Seabrook 510 million ofits ownership share in the nuclear fuel for Mtil-Unit 1, a nuclear generating unit under construction. See Note stone Unit 3. At December 31,1987, the amount of fuel being (la, "Commitments and Contingencies" - f nanced under this agreement was approximately 54 million. il) Unamortized Cancelled Nuclear Projects The Company is paving rent for the fuel based on th Aect in 1981, Boston Edison Company canceUed plans for the con-c sts t t se f the fuel, plus tWwi 6nancus 2ts. strudion of its Pilgrim Unit 2, a proposed nuclear generating (K) L eases unit in which the Company had a 3.3% ownership interest-In addnion to the nuclear fuel leases described in Note @. the due to escalating costs and continuing regulatory uncenainties-Company has entered into other lease arrangeme ts for the In its August 22,1983 rate decision, the DPUC allowed recov. use of data processing and of6ce equipnrnt, vehicles, and of-cry and amortizaton over a two-> var period of the Company's Oce space U.onr of which are capital leasest lhe gross amount 514.7 miUion in construaion costs associated with this unit. In of aswis recorded under capital leases and the related obliga. its December 18,1984 rate decision, the DPUC allowed re- tions of dww leases as of December 31,1987 are recorded on covery and amonization of the nmaining unamortized balance the balance sheet. Future minimum lease payments under capi-of 54.9 million over a sixteen-month perid Amonization was tal leases are estimated to be tin thousarxist completed in March 1966. 1985 5 4.127 All construction on Seabnuk Unit 2 was terminated in April i939 3,955 1984, and the unn was canceded in that 3rar. On November 6. p>99 3,933 1986, the participants direced proica managenwnt to dispose 1991 3.626 of Unit 2 by surrendering its NRC construction permit and F)92 2.M 5 selling all propeny having a net salvage value. In its December After 199' 's.293 1984 rate decision, the DPUC allowed r"covery a W anmniza. tion of, but no return on, the Company's 5104 million invest- .I'"' 'I *I"I*"* P I I"# P'""*" i 46'85" ment in Seabrook Unit 2 over a tenwar period f lowever, the #* A"" * "I""""# * ** DPUC has resened the right to adjust the amonization Present value of minimum capital lease paynrnts 527.665 amount in the future to redect so eral variables, including cash flow needs, addnional costs, salvage value anJ a prudence W.' ' h" """ "O"' "d* P'" "" *'""" U"" d* * "
- cvaluation. As of December 31,1986, the Company had acco- W tlw anmniation of a kawd aut and the interest on the mulated an additional 511 miUion of Seabnek Unit 2 costs, #" #d""" '4""b U* **" P*d *"I '
representing principally costs that have been transferred from *' "#P"4 " Seahnok Unit 1, but UI belin es that recovery of these add,. Rental payments charged to operating expenses in 1935.1986 and 1987 anmunted to $10.184. 510,730 and sloMs. respeoively 57 Operating leases, which account for the largest pan of rental as weH as "Prudence Resiews" and "Changes in Acmunting and lease payments chaiged to operating expense, consist of a Rules", below. A funher kiss may be required as a resuh of the large number of smaU, relatively shon-term, renewable agree- DPUC's pending prudence audit proceeding. Additio..aUy,if nrnts for a wide variety of equipment. the trcessary remaining steps to achieve commercial operation of Seabrook Unit I are not successful and canceDation of the a) Commitrr.ents and Contingencies , g g ,g g The Company has entered into substantial commitments in Company that could jeopardize the Company's financiahia-connection with its continuing construction program, which is bility and business operations. presentl[ estimated at approximately 5312 mulion, including AFUDC and excluding nuclear fuel costs, for 1988 through b Mim Mem d N @d to M W against inc me in the first quaner of 1968, o7 approximately 1992. A maior item in the construction program is the Compa- . . . . $10 and $12 miUion, net of related income tax effects, assoco ny s 17.5% ownership share in Seabrook Unit 1, which .is vir-ated with the cancellation of Seabrook Unit 2 and the DPUC tuaUy complete. The company cannot predict the commercial disaDowance of Millstone Unit 3 costs, respectively. A funher operation date of the unit, smce the operating license for the loss may be required as a resuh of the DPUC's pending prud-unit wtU not permit comnwrcial operation until various cond". ' ence audit proceeding for Seabrook Unit 2. See "Prudence tions are nrt, the most dif6cuh of which is the devekipment of Reviews","Seabmok Unit 2" and "Millstone Unit 3", below. satisfactory off-site emergency response plans. Due to the de-lavs attributable to the regulatory process and the non.cmper- seabrook unit i ation of Massachusetts public officials in satisfying the condi. The economic viabihty of Seabrook Unit I was seriously jeop-tions of the operating license, the cost of the unit has exceeded , ardized in the Spring of 1984 by substantial increases in cost the 54.7 billion kgisiante "cap described below. Licensing est mates and by the attendant financial problems of Public requirements and delays, contmversies over the use of nuclear Senice Company of New f lampshire (PSNIit Events since power and inten entions and appeals in regulatory and envi-that time, including the implementation of financing plans by ronmental proceedings have dela>vd the in sen ice date and ~ the joint owners and the attainment of construction milestone increased the cost of Seabnek Unit I and have caused Pubhc events on or ahead of schedule and within project manage-Senice Company of New Ilampshire, which holds the largest ment's cost estimates. have aDowed constn crion of the unit to ownership share 05.6%) tn the Seabrook project, to com. be vinuaUy completed. While the risk of cancellation of the mence a proceeding under the Bankruptcy Code. Each month unit has been reduced bv these events. hoth the occurrence of delay in commercial operation increases the cost of the ~ and timing of operation of the unit continue to be dependent (empany s share of the unit by approximately 59 million, pri-on accomplishment of necessary remaining steps which are marily AFUDC. 'Ihe 5312 million estimate of construenon largely beyond the Company's control program costs for~ 198S through 1992 assunrs that this monthly increase will continue through 1988, but not bc>und. Project Financing Arrangements if and when commercial operation of Seabrook Unit 1 is On May 22.1957. PSNIi issued 5100 mtUion principal achieved, the Company's futur, 'nancial condition wiD be amount of unsecured Floating Rate Promisson Notes.due heavily influenced by the rate making trearnrnt accorJed its May 1,19M, to a group of private investors at an interest rate investment in the unit. Accordingly, the Company will attempt equal to the prime rate plus 9"o, increasing % monthly dur-to obtain a decision on the rate making treatnwnt by the unit's ing the term thereof. In a Current Repon on Form 8 K, dated comnrrcial operation date. However, Connecticut legislanon. June 10,1987 and fik.d with the Securities and Exchange descnbed in greater detail at "Connecticut Legislation and Commission ISECL PSNIi stated that it had intended to issue Regulatory Procculings" below, has established a "cap" on and seu 5150 milhon principal amount of the Notes, but that it recoverable costs of Seahnuk Unit I and requires the Con- was not possible o place more than 5100 miUion in said necticut DPUC to exclude from rates the cost of any excess Current Repon, PSNI1 stated that the proceeds of this shon-generating capacity owrrd by the Company. As a result of this term financing would satisfy its cash requirenrnts only until ! legislation and the penthng prudence auJn proceedings being December 1957, by which tint it woukf have to raise addo conducted by the DPUC, the Company dces not expect that it tional external funds to avoid proceedings under the Bank-wiD be permitted to recover its fuu investnwnt in Seabnek ruptcv CoJe. Unit I through rates and, in this event, the Company u 3 be In a Current Repon on Form 8 K. datedJuly 22.1987 and required to write down the value of its investnrnt for ad une fijed with the Securities and Exchange Commission. PSNI1 covered custs by recordmg hisses against income. The Com- stated that, as a resuh ofits financing dd6cuhies and the hcen- ! pany has estimated that the write off associated with the "cap" sing dif6cuhies being experienced by Seahnok Unit 1, and kgislation, net of applicable inconx tax effects, amounts to at due to an adverse decision by the New ilampshire Pubhc least $155 milhon which will be recorded against inconx in the Utihtv Commission (N1 IPUC) on June 29.1987 with respect fir 9 quaner of 19M. See Note tik "Accuunting for Abandon- to an apphcation by PSNIi for rate increases PSNII manage-nunts and Disallowances of Plant Costs and Phase in Plans", ment and its financial advisors had concluded that. absent a se change in PSNI Ps circumstances, financings in the amounts in a Current Reivn on Form 84, dated December 16,1987 projected to nret PSNil's cash needs during the r ext several and fded with the SEC, PSNII announced that a revised plan pars were no longer available. for restructuring its entire capital structure was twing On August 5,1987, DSNil announced a three-pan financial f nnulated plan to avoid proceedings under the Bankruptcy Code. The On January 26,1988, the New Ilampshire Supreme Coun, first pan of the plan involved a request to the N1IPUC for a which had accepted the question oflaw as io the cunstitution-15% emergeng rate increase, coupled with a request that the ality of New llampshire's CWIP statute, upheld the constitu. NilPUC funeard to the New llampshire Supreme Coun a tionality of the statute question oflaw as to the constitutionality of the New IlamP- On January 28,1988, PSNII comnrnced a proceeding urxler ~ shire statute which prohibits the inclusion of CWIP in a utili- Chapter 11 of the 13ankrupt9 Code. Under Chapter 11, ty's rate base. A second pan of the PSNH plan consisted of a PSNI I will continue its operations while seeking a financial debt restructuring proposal, including a voluntary exchange of reorganization. The Company is unah'e to predict at this time new securities for unain outstanding debt securities, to re- what impact these proceedings may have on PSNIl's paynrnt duce cash requirements for interest payments. The third pan ofits share of the continuing costs of Seabrook Unit I or on of the PSN1i financial plan was a severe cash conservation the licensing proceedings for Seabmok Unit 1, and therefore program, including work force reduaions, a deferral of all cannot predict what aaion it and le other joint owners of he construction and maintenance expenditures except where de- unit may take or what impact the bankruptcy proceedings will ferral would present unacceptable risks to service continuity- have on the Company's financial condition. ' and rejection of requests for new service received after Sep-tember 1,1987. PSNII stated that if no action were taken on A Verm nt panicipant in the Seabrook project, Vermont Elec-the first two pans of this financial plan a "steadv deterioration nieneration aCransminion LuperauwJnc Mupt in (itst...bility to function willlead quickly and inesitably to a which holds a 0.4"o ownership share, has failed to make con-bankrupto filing" stmai n funding paynrnts due sinceJanuary 1986. However, the deficieng in project construction funding on account of On September 18,1987, PSNIi fded a Registration Statenwnt Vt Coop's delinquencies has bwn arxl is being made up hv with the SEC in connection with the proposed debt restruc- advance payments by the Company and some of the other' turing pan of PSNil's financial plan. In this Registration State- panicipants or their affiliatex The Companyi share of ad. nwnt, PSNII stated that, "in order to reduce the possibility vance payments on account of these delinquencies anmunted that [PSNIIl-.will exhaust its supply of cash while the ex- m appmximmely $465 thousand at December 31,1937. change offers are perwhng, it is likely that [PSNI I)...will sus. perk] scheduled interest arxl principal payments on the securi. connecticut Legislation and Regulatory Proceedings ties involved in the exchange offers after October 1,1987, and Commencing in Aptd 1965, the Connecticut DPUC has pe-until the exchange offers become effective " On Oaober 13, rodically conducted reopened public hearings in the proced-1987, the 150ard of Direcors of PSNIi voted to make this ings in which it found. in Novemtwr and December 1984, that suspension effective, and a 537.5 million payment, due Octo- Seabnuk Unit I will become uscJ and useful for public sens her 15,1987, on a series of PSNil debentures was not made. ice and is economicallt viable.1he DPUC has not nyersed its Since this default was not cured within 30 days, under the 1984 finJings as a result of any of these hearings, including the terms of substantially all of PSNil's debt instruments, an in- most recent of such hearings which were concluded in Febru. voluntary bankruptcy petition could be filed against INNI1. an 19s8. On December 4.1987, the bokler of Warrants to purchase 1 c slation enacted by Connecticut in 1954 directed the shares of PSNII s Common Stock and cenain 17 %"o Deben-DPUC to establish a hmit on the cost of Seabnuk Unit I that
- tures filed suit alleging, among other things, that PSSII com-may be recovered through rates, which hmit will be subject to mitted f raud by allegedly failing to disclose cenain material facts, and seeking damages. On December 10,198 n a trustee di d b&M mi&Ms imm de nflation exceeding 10"o per war, incroses in the Company's for holders of PSNIl's 17 %% Debentures filed suit claiming wei hied average AFUDC rate after ikcember 31.1983 that the principal and interest on said Debentures were due above loco per war. cost increases directiv attributable to and payable since PSNII faikd to make the interest payment new NRC regulations, and costs due to unforeseeable arxl una-as scheduled. In.lanuan 1988, the imstees for two other voidable labor smppages On September 27.1984, the DPUC groups ofImklers of PSNil debt instruments fded suit follow-ssued an order hmiting the costs of Seabnuk Unit I that mas ing PSNI i s failure to make scheduled interest payments. On N- M dwd w bA Gmpant m itnhare of January 4 and 5,1988, the trustees for all three groups entend msts not in escess of 9 7 bilhon twhich figure includes 5200 into stipulation agreenrnts u ith PSNIi that in effea postpone any funber acion in these suits until hearings on the several niillion of irxlirca mnstruction com envionsh allocated to proceedings are bekUlhese hearings are presently scheduled bbM Unn hb'm m increase onh for the rewns rmad in the preceding sentence. Due to the dela in achieung to mmmence in early February 195s.
n rM - on of the unit. the u 7 bilhon cost "tap" 59 - __ - - _ = _ _ _ - _ _ _ __ _ _ _ _ _ _ _ has been exceeded. Each month of delay in the unit's in serv- On October 17,1986, the NRC issued a fuU 40-> var operating ice date increases the total cost of the unit to the Company by license for Seabrook Unit 1. This license is subjea to several approximately 59 million. On December 11,1984, the Com. conditions that must be satisfied to permit an orderly progres-pany fikd an appeal with the Connectimt Superior Coun sion from fuel loading, which was completed in Oaober 1986, chauenging leth the DPUC's order and the constitutionality to low power (5%) operation and testing and ftnaUy to full-of the 1984 legislation. In 1985, the Connecticut legislature power operation. 7he latter two steps are subject to the condi-amended the 1984 legislation to embody the tenns of the tions of the license, which include the satisfactory resolution of DPUC onler, and the Company int-nds to chauenge the con- off site emergency response plan issues. Tir,ely resolution of stitutionality of this amendment. the latter issues has been delagd and may be funher delayed r prevented by, among other thingt, the failure of governmen-In 1985, the Connecticut legislature enaaed a statute which tal emities to develop and file required off-site emergency re. provides that,if the DPUC determines that a regulatory or sp nse plans. The g vernmental entities in New Hampshire coun decision in another state may substantiaUy affea the con. have prepared such plans and the State of New Ilampshire has struction costs or the completion date of Seabnek Unit I, the filed them with the NRC for approval. liowever, the state DPUC must require that any construction costs of t' ur.it g vemment in Atassachusetts, which is responsible for the de-incurred by the Company after the date of the DPUC's deter-vel pmem f such plans, has not filed its plans and,in a state-mination not be recovered through rates, unless the unit is ment issued September 20,1986, the Governor of hlassachu-subsequentiv cumpleted and becomes used and useful. licuow- setts statd that he does not intend to do so, since he does not ing hearings held on October 7,1985 and November 6,1985, bebeve that it is possible to develop plans that would ade-the DPUC determined that neither the construction costs nor quately protea public health and safety if an accident were to the completion date of Unit I had lxen substantiauy affected C"T-by a 1985 Alassachusetts SupremeJudicial Coun decision which prevented the hiassachusetts hiunicipal Whoksale Project management has acknowledged that off-site enwr-Eleuric Company ( AINITEC) from issuing long-term debt to gency response plans are required before commercial opera. pay for Seabrook construction costs and resuhed in tion of Seabnok Unit I wiU be permitted and, on December Mh1WEC's issuance of more expensive shon term debt. The 18,19S6 requested that the NRC consider nducing the of ti-Conneaicut DCC has filed an appeal with the Connecticut cial enrrgency planning zone for Seabnek from a ten-mile to Superior coun challenging this DPUC determination. a one mile radius, thus eliminating the need tor such a plan for hlassachusetts. On April 22,1987. the Atomic Safety and Li. legislation enacted by Conneaicut in 1985 requires the censing Ibard ( ASLib of the NRC denied this request on the DPUC to phase in th'e cost of large dectric generating facihties gmund that the licensee had not presented adequate data to into a utihty's rates in approximately equal instaUments over a "arrant further consideration of the request for reduction of, period of not less than bears nor more than 10 wars from the e ten mile zone at this tinr. in-senice date of the facility if the inclusion of au costs would increase the utility's revenue requirements by more than 10%. On Alarch 25,1987, the ASLB issued an order authorizing 1his legislation will be applicable to the Company's Seabrook low power testing and operation of Seabnek Unit 1, subject Unit I costs if and when it is placed in sen ice. In addition, a to a minor change in a maintenance procedure. Ilowever, the effectiveness of this order was stawd by the NRC, pending its condition of the inclusion in rates of Seabrook Unit 1 CWIP revenues is that an amount equal to the CWIP revenues wiu resiew of the emergency response plan for :he six hiassachu. he excluded from rates after the unit is in senice for a period setts communities within the ten mile planning zone. which of time equal to the time the CWIP revenues had been in rates. was filed by the New llampshire Yankee Division of PSNII See also Note (C) "Rate Related Regulatorv Proceedings" (Ni m on April S.1987. On June 11,1987, the NRC deter-Other 1985 Connedicut legislation requires the DPUC to de- mined that the plan was inadequate and that the stay of the ASLB order should remain in etTect until the inadequacies termine the appropriate level of generating reserve capacity for a utibty prosecuting a rate proceedmg and to exclude from the were correaed. On September 21.1987, NilY filed a new utility's rates the costs associated with any excess capaciry. un% 4poneral plan for the hiassachusetts communities, to-gether with a request that low power testing and operation of Licensing Proceedings the unit be authorized On Oaober 1,1987, the Atomic Safety Regulatory proceedtngs with respect to the tranfer of responsi- and Licensing Appeal Board (ASLAlb of the NRC, acting on bilny for management of construction and for operation of an appeal from the ASLB order of Alarch 25,1987, returned Seabrook Unit I to New Ilampshire Yankee Electric Corpora- three issues to the A5 LB for funher action or proceedings. l tion, an entity which has been created for these express pur- leaving it to the AS13 to reconsider its order authorizing knt-poses, are pendmg before the Alassachusetts Department of power testing and operation in the event that the NRC should Public Utilities. Approval of this transfer by the NRC also wiU hft its stay of the order in response to N1IT"s September 21. be required 1987 request. On Oaober 20,1987. the stait of the NRC so recommended that the NRC lift its stay of the March 25,1987 Le Company is unable to predict at this time what effea, if order, concluding that the plan submitted by NIIY is a "bona any, the recent commencement by PSNH of proceedings un-fide utility plan" and compensates for the absence of participa- der the Bankruptcy Code will have on the operating license tion by the govemmental entities in Massachusetts. On No- proceedings. vember 25,1987, the NRC lifted the stay on the issuance of a nnancial consequences if seabrook unit i were cancelled low power license agreeing "in essential aspecs with the analy- .. sis of the NRC staff which suppons the motion to vacate the In addinon to resolution of the present financialproblems of stav." Le ASLIrs reconsideration ofits order authorizing low- PSNH desenbed above, the outcome of pending state and power testing and operation is pending. On January 7,1988, federal regulatory proceedings with respect to the develop-the Massachusetts Attorney General filed with the ASLAB a f "** ? cceptable govemmental off site emergency response request to reopen the record in this proceeding to add as a plans is of panicular signi6cance in assessing the nsk that Unit new issue whether the recent dismantling by the Massachusetts I will n t be placed in commercial operation. See Licensing communities of the early warning system located within their Pr ceedings" above. Le Company is unable to predict either boundaries has rendered the utility sponsored plan inadequate. the outcome of these proceedings or the nature or scope of any action which might be taken by the other Seabrook partici-He ASLB public hearings on che New llampshire emergency pants if the outcome is unfavorable. response plan commenced in October 1987 and are expnted " N I ** ' **"Ceued,it wou dl have a material adverse to be concluded in the first quaner of 1988. De Federal impact n the Company,s financial conu t tion and its ability to Emergency Management Agency (FEMA) has issued its re-rneet the long term needs of its custo a s, and the Company s sponse to the contentions of intervenors in this proceeding. fin ncial viability and business operations could be jeopard- %e response states that it is appropriate to consider further ized. At December 31,1987, the Company's investment in the adequacy of tlye plan for persons on or near the ocean Unit I amounted to approximately $932 million, including beaches in the victnity of the plant during an accident involv-AFUDC but excluding approximately SM million of nuclear ing a major release of radioactivity tn the summenime, that fuel. His investment exceeds the book value of the Company's evacuation alone may not be adequate in this regard, and that ~ utility plant in senice. Ahhough the Company would apply to FEMA cannot conclude that the plan is adequate in ;his re-the DPUC to amonize its investment over an appropriate pe-gard unul it is clear that the State of N,ew llampshire has rk>d of time and to recover the investment through rates, there considered the use of shchering for these persons and expla.tns would be no assurance as to v hether or to what extent the what use,if any,it miends to make of shehering. DPUC would grant such recoverv. As described herein. aU of I t On October 29,1987, the NRC unanimously adopted a licen- the investment that exceeds the Connecticut statutory cost sing rule change which allows full-power operation of a nu- "cap" will be recorded as a k>ss against income. Any prudence clear plant to begin where there is a lack of panicipation in the disaUowance of costs might also be required to be recorded as development and implenrntation of enrrgency response and a loss against income, ahhough it is the Company's position evaluation planning by state or local governments. His rule that only that ponion of any prudence disallowance that ex-change requires the plant's owners to demonstrate to the ceeds costs over and above the statutorv cost "cap" would be NRC's satisfaction that (1) the planning dc6ciency is whouy or unrecoverable and required to be so recorded as a loss against substantially the resuh of the non-panicipation of state and br income. Funber, if the Company were aDowed a recovery of kral governments. (2) plans prepared by the owners provide costs without a return on investment, it would be required to reasonable assurance that public heahh and safety is not en- reduce the valuation of its investment and record an additional dangered by operation of the plant, and 0) the owners have loss against current income. See Note iib, "Accounting for made a sustained, good faith effon to secure and retain the Abandonments and Disallowances of Plant Costs and Phase-In panicipation of the peninent state and br local governnrntal Plans" and "Connecticut Legislation and Regulatory Proceed-authorities, including the furnishing to them of copies of the ings", above, and "Prudence Resiews", below. Moreover, the plans. Le Commonweakh of Massachusetts, the State of New Coinpany's annualized revenues presently include $12 million York and several private panies have challenged this rule associated with the inclusion of 54S million of Unit I CWIP in change in coun proceedings and, ahhough the Seabrook own- the Company's rate base, which would also be in jeopardy in ers will anempt to demonstrate that the utihty-sponsored the event of cancellation of the unit. See Note tCL "Rate-emergency response plan which they have fikd for Massachu- Related Regulatory Proceedings". Consequently, ahhough the setts satisfies the requirements of the resised rule, there can be Company is unable to predict the cutcome of the regulatorv no assurance that the NRC's rule change will be upheld by the proceedings in which aU of these matters would be determined couns or that the owners' plan will satisfy its requirements. if Unit I were cancelkd. adverse decisions in these proceed. ings could jeopardize the Company's financiahiability and business operations. 61 I Cancellation of Unit I would remove all of the Company's adverse impact on the ratio of the Company's earnings to 6xed investment in the unit from the calculation of the limit on the charges for 1988. AU these losses may be reported by either aggregate amount of the Company's unsubordinated shon- restating financial statements for prior fiscal years or by repon-term and long-term borrowings prescribed by the Trust Inden- ing the cumulative effect of the losses in 1988. If, due to prud-ture under which au of the Company's Debentures are issued. ence audit and/or excess capacity disallowances, or any other %e Company's borrowing limit would be reduced thereby to reason, the Company is not aUowed to recover its share of the a level substantially below its ou' standing barrowing, preclud- Seabrook Unit I cost "cap", the Company will be required to ing funhEr unsubordinated borrowings by the Company and recognize a further loss against income as soon as the amount obligating it to reduce its outstaading borrowings to the new of the disallowance becomes probable and can be reasonably lower borrowing limit prior to May 1 of the succeeding year. estimated. At this time, the Company is unable to predict that In such an event, in order to preserve its tinancial viability and such a funher disaUowance is probable; however, if such a business operations, the Company would be compelled to at. disaUowance were to occur and it were to be substantial, rec-tempt to seu securities that are junior to the Company's De- ognition of the loss could have a material adverse effect on the bentures and to seek a waiver of the Trust Indenture borrow- Company's financial condition. ing limit from the holders of au outstanding series ofits Le FASB has also revised the accounting rules with regard to Debentures issued prior to the August 1987 issue ofits 12% the phase-in of the costs of a newly completed operating unit Debentures,2017 Series, due August 1,2017. Approvalof the into the rates Such revisions, wiu be applicable to a phase in holders of two thirds of the principal amount of all such De- of the Company's investment in Seabrook Unit 1. See also bentures would be required to obtain such a waiver. Re Com- Note (B),"Accounting for Abandonments and Disallowances pany is unable to predict whether it would be successful in of Plant Costs and Phase In Plans" eitherof theseendeavors. Seabrook Unit 2 Prudence Reviews In its December 1984 rate decision, the DPUC aDowed recov. On August 3,1987, the consultants retained by the NIIPUC ery and amortization of, but no retum on, the Company's $104 to audit the construction management of the Seabrook project million investment in the canceued Seabrook Unit 2 over a ten-by PSNil released a preliminary version of their repon, which pr period lhever, the DPUC has reserved the right to states that approximately 7% of the expenditures for the plant adjust the amonization amount in the future. See also Note (1), was spent imprudently- "Unamonized Cancelled Nuclear Plants" On September 15,1987, the DPUC released the results of an Le resuhs of an auda study released by the DPUC on Sep-audit study conducted by a consulting firm selected by the tember 15,1987 concluded that $76 million of Seabrook Unit DPUC to perform a comprehensive management audit of the 2 costs incurred by the Company between April 1981 and planning and construction of Seabrook Units 1 and 2. His April 1984 were "unneceurily incurred". See "Prudence Re. repon concluded that $165 million and $76 million of Units 1 views" above. and 2 costs, respectively, were imprudently incurred by the Since the Company has not been aDowed a retum on the Sea-Company. Le Company disagrees with this conclusion and brook Unit 2 investment that it is recovering throug!. rates, it intends to contest it vigorously in the DPUC proceeding, wiU be required to record a loss against income of approxi-which will involve public hearings commencing in mid 1988 mately $10 million, net of related income tax effects, in the first and may produce a DPUC decision during the Fall of 1958. quaner of 1988. And if, as a result of the DPUC's prudence Changes in Accounting Rules proceeding, the Company is not aUowed to recover its full Due to changes in accounting ruics adopted by the Financial investment in this unit, it will be required to record a funher Accounting Standards Board (FASB) and the Connecticut cost loss against income and may be obhged to refund to customers "cap" statute, the Company will be required in the 6rst some ponion of the amounts it will have recovered through quaner of 1988 to record a loss against income for Seabrook rates subsequent to December 1984. See Note (B), "Account-Unit I of at least $155 million, net of related income tax ef. ing for Abandonments and Disallowances of Plant Costs and fects, assuming additional monthly costs of $9 million for 1988 Phase In Plans" and aJanuary 1989 commercial operation date. AJanuary Mmstone Unit 3 1989 in service date has been assumed for purposes of this loss MiUst ne Unit 3,in which the Company has a 3 685% joint estimate, since, although the Company is unable to predict, wnership interest, was placed in commercial operation on when, or if, the unit wiu be placed in senice, it currently April 23,1986 De DPUC has approved inclusion in rate base bebeves this is not hkely to happen before 1989 Lis charge, f appt ximately $B0 miUion of the Company's $14s million together with the kwses against income which the Company riginal investment in this unit. See Note (C), "Rate Related will be required to record in conrection with Seabrook Unit 2 Regulatory Proceedings" and Millstone Unit 3, may resuh in the Company's experienc. ing a net loss for the year 1988 and may have a significant s2 (M) Quarterly Financial Data (Unaudited) Since the Company has not been allowed to recover its full Seleaed quarterly financial data for 1987 and 1986 are set investment in this unit, it will be required to reduce its invest- fonh below: ment to $130 million and recognize a loss against income of Eamings approximately $12 million, net of related income tax effects' Operating Operating Net of C m m the first quaner of 1988. See Note (B), "Accounting for Revenues income income Quarter stock (1) Abandonments and Disallowance of Plant Costs and Phase In Plans" 1987 = First $121,859 $24,953 $28,507 $1.83 other commitments and contingencies Second 120,023 19,147 23,465 1.48 On November 22,1985, the DPUC approved the issuance Lird 134,40< 27,819 28,997 ,1.88 and sale by Bridgepon Electric Company, a wholly owned Founh 121.332 13,485 14,299 .80(2) subsidiary of the Company, of approximately $100 million 1986(3) principal amount of 18% First Mortgage Bonds. Le sale of F rst $127,290 $21,635 $26,100 $1.53 the bonds was consummated and the Company received the Seennd 112,088 18,594 23,050 1.32 proceeds on the same date. On November 25,1985, the Con ~ nird 118,686 24,624 28,001 1.68 necticut DCC appealed to the Superior Coun of Connecticut Founh 113,055 21,196 24,399 1.45 from the DPUC's decision, alleging that the DPUC did not comply with statutory procedures in reaching its decision and (1) Based on weighted average number of shares outstanding that said decision violated the DPUC's regulations and its pre. each quaner. vious decisions. Lis appeal has not >ct been heard oy the r2) Earnings for the founh quaner reflect reduaiora in 1987 Superior Coun. Under Connecticut law, the additional bonds, income of approximately $5.6 million erising out of a stipu-all of which have been repurchased and retired by BEC, were lated earnings agreement, and depresal operating resuhs valid and binding obligations irrespective of the disposition of due to nuclear outages. this appeal. (3)he quarterly financial data for 1986 have been restated to Conneaicut Yankee Atomic Power Company (Connecticut reflect adjustments for the adoption in December 1986 of Yankee),in which the Company has a 9.5% common stock SFAS No. 87, a new accounting standard for pensions. ownership share, owns and operates a nuclear electric generat. ing station in lladdam Neck, Connecticut. Le Company is common stock Data obligated to furnish 9.5% of Connecticut Yankee's capital re-quirements, within specified limits. Connecticut Yankee has Ul's Common Stock is traded on the New York Stock Ex-been engaged in a construction program which is essential to change, where the high and low sale prices during 1987 and maintain its station as a dependable source oflow cost electric 1986 were as follows: power in New England. As a condition of the debt fmancing 1987 Sale Price 1986 Sale Price High Low High Low arrangements for this construction program, the lenders have required guarantees from the shareowners of Connecticut First Quarter 34 30 33 % 26 % Yankee. Accordingly. the Company has guaranteed payment of Second Quarter 32 % 24 35 % 27 % its share of a $25 million revolving credit agreement. Le %ird Quaner 27 % 21 % 36 % 30 % Company continues to guarantee its share of a $33 million Fourth Quarter 27 % 21 % 33 % 28 % long term debt issue of Conneaice Yankee. UI has paid quanerly dividends on its Common Stock since ne National Energy Board of Canada has approved a pro- 1900. The quant ./ dividends declared in 1986 and 1987 were posed ten year contract for the sale of seven billion kilowatt- at a rate of 58 cents per share. hours per > ear of firm energy by fir: fro-Qaebec to the ll>dro- The Trust Indenture under which all of the Company's De-Quebec Phase 11 panicirsnts, includmg the Company. The bentures are issued places limitations on the payment of cash Company has a 5.75% share in this phase of the project, disidends on the Common Stock of the Company and on the which was authorized by the Connecticut DPUC in April amounts that can be expended to purchase or redeem shares 1987. De Phase II agreements preside for expansion of the of Common Stock. Under the most restriaive provision of the capacity of the transmission intenie between New England Trust indenture, retained earnings in the amount of approxi-and Quebec from 690 megawatts to 2,000 megawatts in the mately $258 milhon were free from such limitations at Decem. early 1990's. On January 25,1988, Ul signed an agreement to ber 31,1987. sell the Company's interest in the second phase of the ll>dro- As ofJanuary 31,1988, there were 28,007 Common Stock Quebec interconnnection to New England Pbwer Company at shareowners of record. a price which includes UI's total investment, plus interest. Lis sale is subject to obtairdng necessary regulatory and other approvals. 43 . _ m _.. __ _ _ _ Report cf Independent Certifled Public Accountants To the Shareowners and Directors of The United illuminating Company We have examined the consolidated balance sheers of %e United Illuminating Company as of December 31,1987,1986 and 1985, and the related consolidated statements of income, retained earrungs and sources of funds for gross propeny additions for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. He Company is a 17.5% panicipant in the Seabrook Unit I nuclear project (the Unit). As mwe fully described in Note (L) in the "Notes to Consolidated Financial Statements" there are uncenainties relating to those events necessav for the Unit to achieve commercpl operations and to the extent of the recovery, in rates, of the Company's investment in the Urui. %e outcome of these uncenainties could have a material effect on the financial position and results of operations of the Company, aui it is uncenain whether such material effects would permit the realization of assets and liquidation of liabilities in the ordinary course of business operations. In our opinion, subject to the effects on the 1987,1986 and 1985 consolidated financial staternents of such adjustments, if any, as might have been required had the outcome of the uncenainties described in the preceding paragraph been known, the consolidated financial statements referred to above present fairly the financial position of Le United Illuminating Company as of December 31, 1987,1986 and 1985 and the results ofits operations and sources of funds for gross propeny additions for the years then ended in conformity with gerrrally accepted accounting principles applied on a consistent basis. Coopers & Lybrand New York, New York January 25,1988, except for Note (L) for which the date isJanuary 28,1988. 44 I e , e 9., ! :: : I! i n cti 11 Co .n s raa f la s at nel 1- i a citi fI r >n an i %2"stu"""""*"* ** "" """""" """ '"" '"""~""~ "'"" ' '"" """" \ ggi N D. i e i r %ck Exchange independent Certified Public Accountants ) { rtf r d Stak,1976 Series Coopers & LybranJ 19"o Depositarv Preferred Stock 1984 Series Co. Transfer and Dwidend Disbursing Agent: Dmoend Reinvestment Plan llic Un cd illuminating Company m) block si art svnt rs of record int I l irl oht.iul r1 Ilav 'onnecticut OME 194S Oi" M us?" 01'"UL "- United lliuminating () i . 'I'r ns er Trust Company v Ila T m5m ^^"" * "*t'"E D"t'; t ni n S 1r ftr 1 partnrnt Telephorr. (212 > 4A2740 I( i ngsvi lieli nthe idi r1{ pan si nn Shelton. CT on Wedr xlat April 27.1% beginning .it 10 00 a m. 65
- l i
s a Ve y . y + t g * , ) 1 4, 4 l yf. s . m s s N_; % - s l . . o e . ~ o l f Ut Board of Directors (Front) Geoffrey Etherington ll, President and Owner, Etherington Industries, Inc.; Geraldine W. Johnson, Fornrr Superintendent of Schools, City of Bridgepon, George W. Edaards, Jr., Chainnan of the Board arxl Chief Executive Officer; John D. Fassett, Former Chairman of the Board; wiiriam s. warner, Chairman, President and Chief Executive Officer, The Hydraulic Company. (Bach) Robert D. Russo, M.D., Chairman, Depanment of Radiology, St. Vincent's Medical Center; D. Allan Bromley Henry Ford 11 Professor and Director, A.W. Wright Nuclear Structure Laboratorv, Yale Univer-sity; John F. Croweak, President and Chief Executive Officer, Blue Cross & Blue Shield of Connecticut. Inc. ; Norwick R. Goodspeed, Chairman of the Board, People's Bank; r. Patrick McFadden, Jr., Chairman arxl Chief Executive Officer, New Haven Merchants Bank; J. Robert Gunther Chairman of the Ikurd, George Schmitt & Co.,Inc. Missing from photo: Leland W. Miles, President Eineritus University of Bridgeport. 66 001empse Street me. ne.o.. Co caca ossee l I iso Fedeia a. eave i Sdds*9ert. 1 Ceanecteut o66o4 1 m United Illuminating}}