ML20196B902
| ML20196B902 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1987 |
| From: | Leary G, Murray N MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML20196B791 | List: |
| References | |
| NUDOCS 8806300402 | |
| Download: ML20196B902 (49) | |
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> i 71e30NEC mission is clunging Atpresent allthepeople in the30NEC organization - the Board ofDirectorn the 30NECstafand the many ovpresentatites of3L\MEC member utilities including mana-gers commissioners and staf- are learning more about each others'needs in theprocess ne're deciding ubat role 30NEC shouldplay in thefuturrs ofits33 member utilities OterIbcpast 12)farx tN Inte accom- . plisixd u'ixit uv set out to do in 1976:
establish an independentpouer supplyfor the municipalutilities of3fassachusetts We Lute done this by exercising the strengths found injoint action and uorking coopera-tilcly toward common goals. 71r efectiteness of30NEC has been pro-ten, and ue now enjoy many benepts as a result. We areprm belieters in thepouers of joint action and are committed to uorking together Ibrough 30NEC to achtet e ourfuture 80als But because of recent and ongoing clunges in the electric utility industry, uv are reassess ing our mission, goals and objectit es to ensure they are consistent uith our clunging needs 30NEC uiR still be a public corporation, created by an act of the state Legislature in 1975, dedicated to sening thepouer nipf>ly forecasting planning and aciptisition needs ofAfassachusetts municipalutilities We usu continae to seek the most reliable and eco-nomic resoterces ainilable to our memberg including costafectit e demand management and consenntion programs Hourter, uv expect the neto30NEC Mission Statement uill rvject the changing nature afottr industry and the needfor nere kinds ofenergy senices Closer ties are being detvloped betueen 30NEC and its members so that nete needs of the membership and inditidual systems can be identsped and addressed 0"*' " " At de BM&mce neane, So,for note, our mission is to improte 30NEC so tixtt it continues to intv the cap- ,'#, "*'S"f'
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ability andflexibility to meet its members' city isindigwnsable in businen future needs We arv confulent uv uiUsucceed industry and the inme, it aho because ne beliete in the unity, cooperation satipes a desirefor comfon arut and commitment that vernain as thefounda- comentence, adding dutfinishing tion of this organization. touch to many agwcts ofourlites
Table of Contents 5 Repon from the Chalmian and President . .2 Energy Requirements . . .4 Demand blanagement .6
%e New Resources .10
%e hianagement Project . .12 Financial Standing. .14 hih1WEC and the Law .. . .18 Oveniew and Outlook . .. .20 Auditors' Repon . .22 Financial Statements . .23 Notes to Financial Statements . .26 Trustee and Paying Agents . 36 ne 5151WEC hiembership . . .37 130ard of Directora 38 1
ht31MIC Rewnues ($000,000s) hiember Rewnues($000,000s) Energy Growth w a.n m (GWIl') 500 500 N j
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1 From the Chairman and President , i 1 eople in New England are leaming mote about what it takes ) to provide reliable electric service. They are asking questions ! Pelectricity was always t about electricity they never had to ask before - because Increased awareness of the many issues surrounding the genera-l tion, transmission and distribution of electricity was stimulated by two regiona' Swer crises in the summer of 1987, when the c_ mand for l electricity came precariously close to surpassing the supply. l At MMWEC, broader recognition of the region's power supply I problems is welcome, since it will take the cooperative efforts of consumers, utilities, regulators and other public officials to arrive at acceptable, long term solutions. But recognition of the problem is just the first step. Now, we are working to bridge the gap between recognition and implementation of - the measures required to ensure an adequate, reliable and economic supply of electricity. MMWEC is now in full stride toward development of a balanced and integrated power supply plan. The plan involves extensive efforts to manage the demand for electricity, through load management and conservation programs, so that we're looking beyond buying or build-ing new resources to meet demand. At the same time, the MMWEC plan addresses the need to add to the power supply in order to meet a stunning increase in the demand for electricity. Energy use in MMWEC member communities increased 6.8 percent in 1987, a reflection of Massachusetts' vibrant economy. Sound financial health will be important in meeting these needs, and improvements in its financial condition have made MMWEC a more stable and competitive organization. As projected in last year's 2
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k.# ~'f . . 3.y,:h.f v.c report, AB1WEC regained its investment g;ade credit rating in 1987. We gj{ also issued $337.66 million in long term revenue bonds, which were m#. e used primarily to retire expensive, short tenn debt and to refund high-interest, long term bonds. The bond issue laid to rest major financial uncertainties stemming from hB1WEC's involvement in the Seabrook Station nuclear project. It also enabled hB1WEC to continue its phase in of project costs, which has significantly reduced financing requirements. hB1WEC also is deeply involved in a blanagement Project that includes a reassessment ofits mbers' needs and a fresh look at how AB1WEC can be more respc 1 e tt- inose needs. The project is provid-ing hB1WEC with new ideas and directions for the 1990s, many of which involve nev approaches to providing the variety of energy services that will be needed by the NB1WEC members in the future. AB1WEC will continue working in 1988 to ensure that its 33 mem-ber utilities remain strong and competitive. We will do this by helping our members meet their energy requirements - from lighting for a dance recital to energy for industry - with reliability, efficiency and economy. We have a firm grasp of the challenges involved and are developing solutions that make sense in today's highly competitive, ever-changing energy marketplace. S George E. Leary, Chainna f the Boarci Neil E. h1urray, Presicient ggg 4
Energy Requirements , E L t is now generauy accepted that Rates of growth in electric energy A New England is facing potentially requirements surpassed projections by far.
! serious shortages of electricity in New England used 5.3 percent more l the early 1990s. In 1987, there electricity in 1987 than it did in 1986, h were numemus signs of this prob- and 5131WEC member communities used
[ E lem as the region struggled to keep the 6.8 percent more. nese rates compare supply of electricity in step with a flourish- to projections of between 2 percent and ing economy. 3 percent. The New England Power Pool The 5151WEC members also estab-(NEPOOL), which is responsible for the lished new all time peaks in demand for dispatch and maintenance planning for electricity, as did New England. %e j ] vinually au of the region's power plants, Federal Reserve Bank of Boston joined . had to use emergency actions not needed others in voicing serious concern over l since 1971 to keep the demand for elec-tricity from exceeding supplies. These the region's power supply plight, which has raised questions about New England's
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included regionwide,5 percent soltage ability to attract and support business. : reductions on three occasions and emer- But the time for talking about the i gency appeals for consumers to conserve situation is past. Now, action is needed i [ electricity. At one point, New England to maintain the region's economic health j was one step away from blacking out by ensuring there are adequate supplies l customers to reduce demand. of electricity. i L Like rnost uorkers in the constnic-tion inuits, uooduorkers rey on v electn~cpouer took to shape arut fnish their uork. Frvon the dc> tt-g yours<fcarpenter to the builders ofshopping rnalh, thetrjobs open I d< pend on hatsng a reliable sup-py of electncty. e ' 4
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l Demand Managem nt , It is humEC's belief that cooperation m hMEC launched a is the key to solving this problem. Utilities, major study in 1987 consumers, regulators and other public that will pinpoint officials need to recognize and appreciate cost-effecthe load each others' concems and develop a plan yy management and con-that is in the best interests of all. senation opportunities in the service hBMIC's approach is to analyze all areas of each ABMIC member. He available altemathes and select the safest, study 11so will include infomiation on most erwironmentally acceptable, reliable how to implement such programs, based and cost-effecthe methods of meeting its on marketing programs needed to gain membert power supply requirements. customer acceptance. His imuhrs a thorough analysis of nis study is the comerstone of demand management and conservation ABNIC's effons to help its members opponunities as well as detailed studies manage the demand for electricity. It of potential additions to the power supply. imuhrs the analysis of more than 60 A lot of work has already been done demand management options, from peak in these areas, and we are acquiring the load control strategies to encouraging more sophisticated planning tools and energy-efficient construction. additional expenise needed to fully inte- ne ultimate goal is to offset the need grate demand management and power for new electric generating capacity. supply activities. Basically, it's an effon to use existing his, we believe, is the path to a safe, capacity more efficiently and wisely, result-reliable and economic supply of electric ing in benefits for both the customer and energy for the ABNIC members and the the utility. region as a whole. Members' Peak Load Growth (Megawatts) icoo soO W s 400 Surnrner a3 s4 as a6 . s7 E tr7nter 6
We also have initiated a tumkey load facturers' representatives. e management implementation project. A residential energy use sunty com-The project will offer a wide range of pleted in 1987 in A151WEC member as stance to members that choose to im- communities is prosiding extensim infor-plement load control programs, incl 6 ding mation on how and when consumers the bulk purchase of direct and indirect use electricity. A similar sunvy of die load control equipment, litstallation commercial and industrial sectos is under senices and assistance wiA marketing way in 1988. Suney results will be impor-I programs. tant in planning demand side progrants,
'Ihe undenaking of the Demand Side as well as in forecasting the demand for Capacity Assessment study, coupled with electricity.
many other initiatives in the areas of We are working closely with state demand management and conservation, ofIlcials to assist our members in devel-
- demonstrate MMWECs commitment to oping interruptible load agreements with meeting its members' energy require- their larger customers. Such agreements ments with efficiency and ecc'nomy. - a form of demand management - allow We haw sponsored sewral educational for senice interruptions during periods programs, including the American Public of peak demand.
Power Association's "Evaluating Load These and other programs will play Management Altematives" seminar. In an essential role, but there are also conjunction with the seminar, we organ- opponunities to be pursued on the sup-
.. ized a Load Management Trade Show ply side, that gave members the chance to compare equipment and talk with manu-b'
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Cornput<rsplay a eital nde in g bitsins and trulustry Thy step- - L port dady operations, tranfr eK%-7 e important inprnuttion instanta- %~ . n<vush arulhelpplan livfuturv. among nuiny othr utses 7hy a&> place a twty denunut on elsstric ..<*** . pouer suj>pliss nutkung liv sup[dy " of clatricity a cnticalfactor in Av
<ffi>ru to nunntain and cafund our bustness andindustnalhise
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The New Resources ., ndependent power producers, the tion of seabrook Station, construction of private dewlopers of cogenera- a new unit is one option that must be I new capacity for electric ut tion and other power plants, hase become an imponant source of kept open. In addition to these etTons, hiMWEC is planning to purchase additional capa-In the past year and a half, MMWEC city through contracts with other utilities. ha3 met with more than 50 such develop- Extension of existing contracts with the ers to discuss a wide range of project New Brunswick Electric Power Commis-proposals, from small tire buming and sion and Nonheast Utilities are two pos-wood fired plants, to larger natural gas sibilities, while panicipating in projects and coal-fired projects. to retum retired units to senice is another. We have signed a contract to purchase We also are negotiating a new natural 22.5 megawatts from a natural gas-fired gas supply contract that would enable us cogeneration plant in Springfield, MA that to increase the gas fired output from is planned for operation in 1990. We also MMWEC's existing Stony Brook power are studying the purchase of approx- plant and/or provide fuel for additional imately 100 megauntts of coal fired capacity at the Stony Brook site. generation from a group ofindependent On >rt another front, contracts are producers, whose projects vary in size being negotiated that could extend and combustion technology. MMWEC's access to inexpensive hylro-In evaluating the many proposals re- electric power from the New York Power cehrd, the challenge is to pick the projects and dewtopers with the highest likelihood of success. We have developed 1987 Composite Fuel Mix (%) standard contract terms and secunty pro- , visions to guide us in the selection pro- Sh"* cess, but each project is difTerent and " nydm requires detailed study and analysis. 80 MMWEC also has begun the search for a site to build a new power plant, 7o w {'M ;m- ..
't Construction of a natural gas fired com-
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With the demand for elec*ticity increas- ao ing at its present rate, and questions ,, remaining about the commercial opera- #" '""' 10 -
Authority from 1995 to 2001. But reality is having to plan for a And in suppon of new generating power supply without Seabrook, and technologies, the MSNEC Board of MMWEC has been very careful not to Directors has voted to inwestigate and foreclose any of its power supply options. suppon dewlopmer>t of a proposed Potential additions to the supply photomltaic generanng station in Massa- include a new unit, purchases from pri-chusetts, possibly at MM4EC's Stony vately-owned power facilities, and Brook Energy Center. contract purchases from other utilities. Two key power supply planning On the demand side, we have an array of assumptions have been commercial oper- demand management and conservation ation of Seabrook Unit No.1 and Phase possibilities. 11 of the II)dro-Quebec project. Both of Now, in conjunction with resiew of these projects are vitally needed to meet these options, we are developing the MSMEC's and the region's growing elec- complex computer modeb and acquiring tric energy requirements. the additional expenise needed to inte-Vhile there was significant progress grate the demand side and supply side in 1987 related to the finallicensing of options into our power supply plan. Indi-Seabrook, events early in 1988 haw in- vidual plans for each member, to tx jected new elements of uncenainty into complete in 1988, will recommena some the licensing process. of each for most communities. Supply and Demand (Megawatts) im Demand u~ New Resources 1000 _ we--m** W***1 [(T,p "'W [j.j g V, a
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' here have been dynamic members also feel that 5BMIC could be f 3 changes in the electric doing more, for example, by providing a utility indusuyin recent years. breader range of energy senices.
Increased competition, new Top and middle management, as wril regulatory mandates and an as the Board of Directors and represen-increased emphasis on demand manage- tatives of member sprems, have demted ment are but a few. many hours to this project. We have To address the need for change within initiated a member /stafflinkage AB1WEC to capitalize on these changes program, with staff assigned to dewtop in the industry, we commissioned an and maintain a better understanding of audit of hBMEC's management, decision- individual member needs, priorities and making and communications practices characteristics. In addition, each member early in 1987. of the board is reaching out to individual Initially, the audit was structured to member systems, maintaining contact on produce a repon with recommendations a regular basis to discuss boarri aethides for improvement. But what began as a and encourage participation in SBMIC traditional audit quickly evohrd into a affairs. project imuhing action, not just words It has always been a challenge to and proposals. We decided to begin the sene the needs of the diverse and inde-process of change, with the assistance of pendent municipal utilities that constitute our management consultant, in order to ABNEC's membership. But it's not a get a head stan on making ABMEC a challenge that SB1WEC or its members more effective and uluable organization ham shied away from because, quite for its members and employees. simply, there is too much to be gained. This process has inmhrd the con- Work on the hianagement Project will duct of a comprehensive member needs continue in 1988 as we position AB1WEC suney and the establishment of joint for new accomplishments and greater member / staff task forces to address a success in the future. variety of issues, needs and potential new senices. We are dewloping a new mission statement, goals and objecthes u hv& r tA futun is tomomern that reflect the changing needs of our nm13mror m3varspum nou, a,11 ting Ibere uith corl6dence and certainty requires carsfu, The end product will be a svil defined. pamning nmwbits.uuucyncut goal-oriented direction for 5151WEC that Pro /ec( .umtrcisplanning to is driven by member needs in the 1990s.
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One imponant sunty finding was that hersand, mph m the ABMIC member managers and commissioners strongly support the concept of SBM'EC and believe in work-ing together for mutual benefit. 'Ihe 12
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Financial Standing , 1 t s ahvap imponant to be in of 13 percent or higher. ne refunding will saw hiANEC members approximate-I s'ound financial condition, b a time when things in the electric utility industry are changing so rapidly, it's essential. ly $40 million over the life of the bonds. Proceeds of the issue also were used to retire $110 million in short term,14 Improvements in 51AMEC's financial percent debt issued in 1986 to cover condition during 1987 reflect the Seabrook project costs. In comuning this company's ability to adapt to changing debt from shon term to long term and circumstances while maintaining the high- lowering interest costs, a large measure est standards of financial management. of stability and strength retamed to the Resourcefulness, flexibility and a AihMEC financing program. commitment to enhancing the financhl Another imponant pan of hihMEC's strength and integrity of hihMEC and its comprehensim financial plan is the members: %ese were the ingredients for phase in of Seabrook project costs that success in 1987. began in 1986. %e phase-in imohrs in fact, they ham always been part of gradual, annual lacreases in interest bill- $151WEC's financial planning process, Ings to ABMEC's Seabrook panicipants. which also relles on a thorough imes- In 1988, about 88 percent of the tigation of altemathes and strategic plan- Interest accruing on bonds issued for ning to achlew desired long term goals. Seabrook is being billed to project par-Reinstatement of h15NECs imestment- ticipar'ts. He balance ofinterest on these grade credit rating last April helped bonds is being funded by MAMEC with contain interest costs on MhMECs largest bond funds. and most complex bond issue ever - a Because of delays in the operation of $337.66 million long-term revenue bond Seabrook, Seabrook project panicipants offering closed onJuly 1,1987. agreed to begin project interest billings A portion of the bond issue - $163.06 l'efore commercial operation of the plant million in tax exempt bonds with a net - an unprecedented acthity that reduces interest cost of 8.86 percent - was used hiAMEC's Seabrook financing require-to advance refund nearly $130 miPion in ments by more than $200 million. bonds previously issued at interest rates %e $139.4 million in 1987 bonds Seabrook Debt Service Phase-in (%) too 80 60 40
,, Debt Sen' ice Billed
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1 l l issued for Project No. 6, which represents Phase 11 will pay preliminary project costs a 6 percent ownership in Seabrook, were and the share of equity contributions issued as taxable bonds at a net interest required under the project's pemianent cost of 11.81 percent. This was SBMEC's financing plan for those members that II:st ever issue of taxable bonds, necessary choose to panicipate, due to provisions of the 1986 Tax Refomi 'Ihe retum to investment grade of Act and Massachusetts Gov. Michael S. MANEC's credit rating, among other fac-Dukakis' refusal of ABMEC's request to tors, has given MANEC the opponunity issue tax exempt bonds for the project. to acquire an equity interest in the Phase MANEC obtained allowances in the 11 project. Equity status would provide transition rules of the Tax Reform Act to SBNEC, on behalf of panicipating mem-issue tax exempt bonds for Project No. 6, ber systems, with stock ownership and but approval from the govemor was its concurrent rights in the corporations needed to meet the "public approval" that will build and own the Phase 11 pro-requirements of the act. ject facilities. Early in 1988, h3NEC was seeking In addition, due to continued delay authority from the Department of Public in the operation of Seabrook, ABNEC Utilities (DPU) to borrow up to $20.4 mil- filed a request in February 1988 for DPU lion to finance some of its members' costs authority to issue $98.5 million in bonds associated with the flydro-Quebec Phase to fund ongoing project costs in 1989 11 project. and 1990. If Seabrook is on line or can-Near term, preliminary project costs celled before then, ABNEC's financing have increased dramatically as a result of requirements will be significantly less. delays that have postponed implementa. Because of the highly controwrsial tion of permanent project financing. The nature ofits request for additional SBNEC financ ug for flydro-Quebec Seabrook financing, SBNEC is investigat-ing a number of attematives that are structured to protect its $874 million mnrrc hu immt n 66 & mon in foruis in its u. Inwstment and 11.59 percent ownership
.wur haorr, sus uson cf umh are ca.anultrw interest in the plant.
MMWEC Bonds Issued ($000,000s) while there is the potential for adwrse financial impacts stemming from the need wo for additional Seabrook funds, ABNEC u,o has successfully managed similar finan-cial challenges in the past and has demon-strated its ability to find practical and
. prudent solutions to difilculties posed by delays in Seabank's operation.
Tb assist member utilities in under-m , , - m m m m m m m m .,. c. c. standing and implementing ABNEC's i 15
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MMWEC c.nd th:Iaw . financial plan, hih!WEC staff maintains are being held for member utilities and contact with each member system to pro- their staffs to funher this effort. vide details on various aspects of the We are confident that the challenges plan and offer assistance. long-term finan- of 1988 can be owrcome by adhering to cial projections are reviewed with each the same financial management practices system as well as strategies for long term and principles that led to such great suc-financial stability. Seminars and workshops cess in 1987. on financial planning and management Long-term Financing Data (000s) Approximate Estimated e The cancellatkin of Pilgrim capability Bonds Bonds Additional Unit No. 2 induded in Nudear Project Description (MW) Issued outstanding Bonds" hhx No.1 (Mix 1) has reduced
$163,9N $ 8 Stony Brook Intermediate stony Brook Peaking Prokct 311.3 IMO
$177,000 85,000 61,575 3 M"n th the amount preMouMy issued.
T) man Project 22.7 9,400 7,595 - Pnxmis remaining after all Nudear hhx No. l' 20.3 180,200 174,760 . uni Ix 1 d g g Nudear Project No. 3 36 8 208.190 205,895 m Nudear Project No. 4 49.8 262,840 262,370 26,400 ujs n Nudcar Protect No. 5 12.6 77,465 77,375 6,900 for seabrook Unit No. I for its Nudear Project No. 6 69.0 - $17,600 65,200 financial planning purposes m 51WEC is continuing as an alternathe. to pursue changes in At the federallewl, we have been its enabling legista- imuhrd in campaigns to limit the impacts tion to allow bond of federal deficit reduction proposals on yy issues for load man- the ability of public power systems to agement and consermtion projects and issue tax exempt bonds. broaden representation on the hihfWEC Through its Promoting Legislative Board of Directors. Understanding and Suppon (PLUS) Pro-The hih1WEC filed bill that proposes gram, established in 1986, hihfWEC has these and other important changes to increased its members' awareness of and strengthen hih1WEC was not acted on in encouraged their panicipation in legisla-the 1987 session of the state Legislature, tive affairs. The PLUS Program has but it has been refiled for consideration prosided guidance and suppon for in 1988. 5151TEC's legislatim activities at a time A proposal by Gov. Dukakis to restruc- when lawmakers are reaching funher ture $15tWEC newr advanced beyond the and funher into electric utility issues. It committee level for the second consecu- also has provided a vehicle for hih1WEC tive year in 1937. hihtWEC has opposed to improve its communications and rela-the Dukakis bill an"1 offered its own bill tions with public officials. 18
5151WEC's defense of its Power Sales Tie llull Municipal Lighting Plant, the Agreements (PSAs) wus expanded in 1987 Vermont Department of Public Sewice to include proceedings before the U.S. (VDIS) and a group of ratepa)vrs in llankruptcy Coun in llangor,51E. Groton, hiA also have challenged the Vic Eastem Slaine Electric Coopera- niidity of Seabrook PSAs. tive Inc. (E51EC) - a panicipant in Mle llull complaint is being heard in 515NEC's Project No. 6, which repre- three phases by an American Arbitration sents a 6 percent ownership in Seabrook Association arbitrator, in August, the Station - filed for protection under arbitrator ruled in M5fWEC's famr in Chapter 11 of the Federal Bankmptcy phase one, upholding the authority of Code in August. In its petition, E5tEC is llull's utility officials to enter into con-asking the court to reject its contract with tracts with 515fWEC. Rulings on phases hiMWEC for Project No. 6. 5151TEC is two and three could be fonhcoming in vigorously opposing rejection of the con. 1988, tract in bankruptcy proceedings, which judges at the Superior Coun level were still in the preliminary stages early upheld the validity of the contracts in in 1988. both the VDPS and Groton cases, although Mie PSA is a contract through which both decisions were appealed to higher panicipants in power supply projects courts. A decision is pending from the agree to pay their share of MMWEC's Vermont Supreme Coun on the VDPS costs for the projects, regardless of pro- appeal. A decision on the Groton appeal lect status. Die PSAs are the backbone of to the Massachusetts Supreme Judicial MMWEC's financing program, providing Court is not expected before mid 1988. assu ances that MMTEC lx)nds will be repaid. i .- - =y RNl 5"VI C s b I J; a.a d; , v Blakhrig a stnntg triationshp ustb a . PiMac offickds is a yad slut eracom-
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r . Auditors' Report , E. To the Board of Directors of (- Atassachusetts 5tunicipal Wholesale Electric Company: ; = 5 We have examined the statements of financial position of Af assachusetts Municipal Who lesale Electric Company (a Massachusetts public corporation) , as of December ? !,1987 and 1986, and the related statements of operations and g changes in financ al position for the years then ended. Our examinations were - I p made in accordan e with generally accepted auditing standards and, accordingly, .. + { - included such tests of the accounting records and such other auditing procedures as we considered n:cessaty in the circumstances. - j in our opinion, tha financial statements referred to alxwe present fairly the .' j financial position of Afassachusetts Municipal Wholesale Electric Company { as of December 31,1987 and 1986, and the results ofits operations and the - g changes in its financial position for the years then ended, in confonnity with - t- generally accepted accounting principles applied on a consistent basis. ; V h Anhur Andersen & Co.
- Boston, Massachusetts -
March 4,1988 F-p - m-F' E-' E - ._p i
^
h ..
Statements of Financial Position ($000s) December 31, . 1987 1986
. ASSLTS '
Electric Plant -
' In service $ - 388,313 $ 3E454
- Accumulated Depreciation (Note 3) - (58,719) - (44,891).
329,594: 341,563
-1?nder Construction (Notes 2 and 6) 646,940 - 556,630.
Nuclear Fuel-net of amonization (Note 2) 39,708 35,243 Total Electric Plan't ' 1,016,242 933,436-T s Special Fnnds (Notes 2,4 and 10) 291,515' 294.2M
' Current Assets ..
. Cash and Temporary investments (Notes 2 and 10!i 11,987 9,838 Annunts Receivable - 8,267 4,625 Unbilled Revenues (Note 2) . 7,036 6,271 Imrntories (Note 2) -7,353 4,697 Prepaid Expenses 2,E 1,549 f
37,200 26,980 lotal Special Funds and Current Assets _ 328,715 . 321,274
- Deferred Charges Amounts Recoverable in the Future Under Terms of the l\mtr Sales Agreements (Notes 2 and 5) 127.725 121,747 Unamonized Detx Dixount and Expenses 41,374 40,724 Other 874 824 169,973 163.295
_$ 1,514,9 30 $1,418,005 11ABIIJTIES long-Term Detx (Note 4) Ilonds $1,459,950 $1,261,445 Notes - 2,650 1.459,950 -1,264,095 Bond Anticipation Notes Ibyable (Note 4) - 110,000 Other Current Liabilities Current Maturities oflong Term Debt ~1 3,840 10,906 Notes Payable (Note 4) 334 - Accounts Payable 31,692 25,204 Accrued Expenses 9,114 7,8&) 54,980 43,910 lbtal Notes l'ayable and Other Current l_ labilities 54,980 153,910 Commitments and Contingencies (Notes 6 and 9)
$1,514,930 ,51,418,005 The accompanying notes are an integral pan of these financial statements.
23
Statements of Operations ($000s) ,
3 ~
W Ibr the years ended December 31, - s1987 1986 o .. Revenues (Note 2)- .g ' $216,238 - $172,180 Interest income . 26,028 39,724 l Total Rewnues and Interest income - $242,266 ' $211,904 Operating and Senice Expenses: . _ l Fuel Used in Electric Generation f . $ 32,265 ' ,,5 26,956 :
'76,628 Purchased Ibwer , .72,390
- Odier Operating ~ 11,916 ;10,177 '~
Maintenance - ,
- 4,628 2,668 Depreciation (Note 3) 13,772 -12,000 Taxes Other 7han income : 2,707 ~ 2,449 141,916 126,640 Interest Ex}stise:
' Interest Charges ; 141,122 147,971
. Interest Charged to Prujects During _ .
Construction (Note 2) .. (72,748). (73,437) 68,374 74,534-- Tota! Operating Costs and Inte' rest Expents/ 210,290 201,174 loss on Cancelled Units - net (Note 5) , 310 -' 5,968 -
' Gain on Retirement of Debt --
-(218).
Cost of Advance Refunding (Note 4) 37,644 - _: ~ 37,954 5,750 (hcrease) Decrease in Amounts Returrable in the Future Under Terms of the Powrr Sales Agreements (Notes 2 and 5) - (5.978) 4,980
$242,266 $211,904 The accompanying notes are an integral part of these financial statements.
I 24
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. c. . ..... . . . . . . , ,;,.....,.,,... .. . . . , ,._ _
1 ( i Statements of Changes in FinanClal ; Position ($000s)
)
Ibr the years ended December 31, 1987 -1986 a j Sources of Funds: ~ 1 intemal Sources-
. Revenues and Interest income $ 242,266 ' $ 211,904 l
. Expenses.
~ (242,266) (211,904) ;
Charges Not imotving Funds-13,772 12,000 I Depreciation (Note 3) Amortization (Note 2)
- 9,553 8,M8 )
(Increase) Decreast; in' Amounts Recowrable - l in the Future Under Terms of the Power Sales ' . l
~
Agreements (Notes 2 and 5) (5.978) 4,980 l 17,347' 25,828
)
Evemal Sources- .
'Ik)nd Proceeds 337,660 --
]
Total Sources of Funds - 355,007 25,828 j j Uses of Funds: . . Additions to Plant and Constmction Work in Progress ~ 98,443 .122,465 ! Note Repapnents 2,650 2,891 j Ikand Redempdons 139,155 8,850- ! Increase in Debt Discount 8,394- 2,277 ] Other (6) (123) i 248,636 136.360 . Increase (Decrease) in Working Capital, . Including Notes Payable and Special Funds ' $ 106,371 . $ (110,532) Change in Working CarJ tal Consists of: Decrease in Special Funds- ,$ (2,779) $ (112,924) increase (Decrease) in Current Assets-Cash and'Rmpora y Investments 2,149 245 , Accounts Recchable 3,612 421 Unbilled Rewnues 765 (1,134) Inventories 2,656 193 I Prepaid Expenses 1,008 925 7,441 (112,276) Decrease in ik>nd Anticipation Notes Payable 110,000' 10,000 ) i (Increase) Decrease in Other Current Uabilities- j Current Maturities of long-Term Debt (2,934) (1,920) Notes Payable (3M) 769 ) Accounts Papble (6,488) (S,967) ) Accmed Expenses (1,314) (1,138) J 98,930 1,744
$ 106,371 $ (110,532)
'Ihe accompanying notes are an integral part of these financial statements.
t i I q l 25
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- y. n Notes to Financial Statements o .s -
h e ,;2 e ., ( 1) Massachusetts Municipal wholesale Electric Company (MMWEC) MMWEC is a political subdivision of the Commonwealth of Massachusetts, authorized to issue rewnue bonds secured by revenues deriwd from Power Sales Agreements with its members and other electric systems to finance the construction and ownership of electric power facilities. A Massachusetts municipal electric department, authorized by mabrity sute of the city's or town's goveming body, may become a member by applying for admission to MhtWEC and agreeing to comply with the terms and conditions of membership as outlined within the Mhm EC lly laws As of December 31,1987, thirty-three Massachusetts municipalities were members. PowerSupplySptern MAMEC obtains power supply capacity by acquiring interests in various generating units from investor-owned utilities and the operation ofits own electric generating facilities (Projects). See Note 6 for a discussion of MMWEC's construction program and commitments related to these facilities. In addi-tion, MMWEC contracts for power for resale to its members. Working Capital Adances MMWEC's lloard of Directors has authorized working capital advances of up to $2,000,000 from Project Construction Funds. At December 31,1987 and 1986, working capital advances amounted to zero and $500,000, respeciwly. These inter fund advances haw been eliminated for primary financial statement reporting pu poses. ( 2) Significant Accounting Policies MMWEC, as a gowmmental entity, complies with standards prescribed by the Govemmental Accounting Standards Board for the purpose of financial reporting. Interest Charged to Projects During Construction hBfWEC capitalizes interest as an element of the cost ofelearic plant and other propeny d uring th e perirst it is under construction. A corresponding amount is reflected as a reduaion of interest expense.
'lhe amount ofinter. st capitalized is basal on the cost of debt, including amortization of debt diwount and expertses, related to each Projea, net ofinvestment gains and los:,es and interest income derival from unexpended Project funds.
Nuclear Fuel Nuclear fuel includes fuel in use, in stock and in process for Millstone Unit No. 3 and fuel in stock and in process for Seabrook Unit No.1. Fuel in use for Millstone Unit No. 3 is included net of accumulated amonization of $3.525 million and $1.716 million through December 31,1987 and 1986, respenively. The co3t of nuclear fuel is amonized to Fuel Used in Elearic Generation based on the relationship of energy produced in the current period to total expected energy production for nuclear fuel in the reac-tor. A provision for fuel disposal costs is also included in Fuel Usal in Ekttric Generation based upon Department of Energy guidelines. Special Funds Procenis from the sales of revenue tunds or lund anticipation notes for Projeas are deposited with Tntstees to be invested until they are required for construction or debt service payments. As defined in MMWEC's General Bond Resolution, imestments are limited to direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the 1 aited States,lhieral govemment agency securities, new housing authority tunds issued by public agencies or raunicipali-ties, direct and general obligations of cenain states or cenain pohtical subdivisions, bank time deposits evidenced by cenificates of deposits issued by banks, and repurchase agreements with primary dealers secured by certain securities. Cenain special funds are more restricted as to which of the aforemen-tioned imestments can be purchased. (See Note 10.) 26
Notes to Financial Statements I I ( 2) Significant Accounting Policies,connmW Cash and Temponry Ernestments Cenain other funds are ttsed for powvr and fuel purchases as well as for working capital requirements of htA14EC.These funds are not govemed by the Generalik>nd Resolution. In addition to the imestment securities delineated in the Gener^1 Bond Resolution, ht314EC is authorized by ti e ik>ard of Direcors to purchase Canadian currency for cash and forwant settlement and to imrst in repurchase agreements with banks where A15tWEC has established accounts. (See Note 10.) Unbilled Rewnues 51514EC bills its members for costs incurred in prosiding senices and purchased power obtained on their behalf under temts of the Service Agreement and the Ibwer Purchase Agreements Revenues ce recorded in the accounts as the expenses are incurred. Amounts which are not y et billed are included in Unbilk d Rewnues on the Statements of Financial Ibsition. Inwntories Fuel oil inventory is accounted for by the awrage cmt method. Spare pans imentory is recorded at average cost. At December 31,1987 and 1986, fuel oil inventory was valued at $2.3 million and
$2.2 million, respectiwly, and spare pans imrntory amounted to $5.1 million and $2.5 million, respectively.
Amounts Recowrable in the Future Under Terms ol'the Poner Sales Agreements Under the terms of the Ibwer Sales Agreements with Project Panicipants, rewnues indude billings to Project Panicipants for debt principal and interest papnents in the period in which they are due. Ibr financial reponing purposes, A1A14EC recogni7es currently the depreciation and amonization expense of assets financed by bond principal. The ditTerences between current expenses and amounts billed currently under temis of the Ibwer Sales Agreements are deferred to the future periods in whic h these amounts will be recowred through rewnues. Other items deferred in thi manner include net costs associated with cancelled or abandoned cortstruction projeas. Rewnues Rewnues include clearic sales for resale provided from h1514EC's operating units and power purc hases; receipts from administratiw and gene ral senices panilsi to st514EC's senice panicipants; and billings of debt senice on cenain p ojects prior to commercial operation of the units within those projects. The details of revenues are as folkms: (In Thousand ) 1987 1986 Elearic sales for resale $156,378 $134,899 Senice 2,810 2.527 Preoperation debt senice 57,050 34,N4 (211 238 $172,18n ( 3) Depreciation Flectric plant in senice is depreciated using the straight hne method The aggregate annual pm-visions for depreciation for 1987 and 1986 averaged n of the original cost of depreciable propeny. ( 4) Debt IMurr SupplySprem Rewnue Rands To finance cortstruaion of ownership interests in electric generating projects,51514EC issues Ibwer Supply System Rewnue ikinds (Ik>nds). The ik>nds are secured by a pkdge of the revenues deriwd by 51514EC, under temis of ibwer Sales Agreements, from the ownership and operation of the 27 l
N tes to Financial Statem;nts
~i
( 4) Debt. connnust Poner SupplySptem Rewnue Bonds, connnual Prolects in its power supply system. Pursuant to the Ibwer Sales Agreements with the Project Pa rticipants, each Project Panicipant is obligated to pay its share of the actual costs relating to the generating units planned, under construction or in operatk>n. He Project Participants' obligations are not contingent upon the completion or operational status of the uni:s, MMWEC financings, other than obligations maturing within one year, require Massachasetts Depanment of Public l'tilities (DIU) appront. The Ibnds consis' of Serial and Temi lk>nds and aw comprised of the following issues, which, except for the 1987 Series B Bonds, are subject to opional redempion approximately ten years a.ter the issue date, at 103% of the principal amount, descending periodically thereafter to 100%. The 1987 Series B Bonds are subject to redempion beginning in 192 at 109% of the principal amount, descending perk)dically thereafter to 100%. Net Interest Licember 31, issue Cast 1987 19a3 (Dollars in Thousands) 1976 Series A 7.2% 4 64,485 $ 65.335 1977 Senes A 6.4% 168,375 1'0,7HO 1977 Series B 6.1% 83,500 83,500 1978 knes A 6n 65,500 65,500 199 kries A 7.0% 138,365 141,530 19NO 5eries A 10 ?% 87,180 88,T'5 1981 Series A 1/3% 100,000 100.000 1981 Series B 13 4% 82,880 100,0m 19825cr o /. 13 4% 65,655 115,0m 1982 Senes ? 10.2% 129,340 129,340 19M 5enes A 110% 95,000 95.0 0 1985 5eries A 13 5% - 61,% 0 1985 kries H 13 5% 53,200 53.200 1987 series A 89% 198,260 - 198' Scru-s H 11 8 % 139,400 - 1,471,140 1,269No tcw Current Matunues (11.190) (8.015)
*-ul P 7 trsurpiy system Rewnue Imis $1,459,950 $ 1,261,445 The aggregate annual principal pa>ments due on the ik>nds in the next five >vars are as follows:
1988 $11,190,000; 1989 $13,780,000; 1990 $16.270,000; 1991 - $17,280,000; and 1992 - $19,765,000. The 1987 Series A and B Ik>nds roult from a DPU authori7ation of a $1M,500,000 financing request filed in l'ebruary 1986 and approved inJanuary 1987. L 'tilizing this authorization ak>ng with pre-sious financing authority, MMWEC lssued the $337,660,000 ofik>nds onJuly 1,1987. The proceeds were used to extinguish $110 million of Ibnd Anticipation Notes, to advance refund cenain outstanding, high-interest ik>nds issued for Nuclear Projects Nos. 3,4 and 5 and to fund Nuclear Project No. 4 and Proj-ect No. 6 costs. In accordance with the Intemal Rewnue Oxle of 1986, cenain cf these Bonds required approval of the Govemor of Massachusetts to be issued on a tax exemp basis. On May 29,1987, the Govemor denied MMVIC's request for such approval making the 1987 Series B Bonds for Project No. 6 taxable. The $37.6 million Cost of Advance Refunding as shown on the Statement of Operations results from the deposit of $160 million into a trust account to retire $128 million in bonds and the elimination of approximately $5 milhon of unamonized debt discuunt and expenses. The advance refunding resuhed in the recognition of an accountir,g kiss of $37.6 malion for the war ended December 31,1987; howewr, MM4EC reduced its aggregate debt service payments by approximately $38.8 million over the 28 L -. _ _ _ _ _ _ _ _ _ _ .
Notes to Financial Statements l ( 4) Debt, wnnnual Poner SupplySptem Restnue Bonds, wnnnual next 31 years and will realize an economic gain (the difference between the present values of the old and new debt senice payments) of $21 million. In l'rbruary 1988, SBNIC filed a petition with the Alassachusetts Dit requesting additional financing authority totalling $98.5 million for Nuclear Projects Nos. 4 and 5 and Projen No. 6. hihMEC cannot detennine the timing or outcome of this filing. Net Restnue Asullable For Debt Sersice in accordance with the provisions of SBNIC's GeneralIk)nd Resolution, SBMEC cownants that it shall fix, revise and collect rates, tolls, rents and other fees and. c harges, sufficient to produce revenues to pay all operating and maintenance expenses and principal of, premium, if any, and the interest on the Bonds and to pay all other obligations against its revenue. Revenues, which include applicable interest eamings from imestments, are required to equal 1.10 times the annual debt service for each contact 3rar endingJune 30, after deduaion ofoperating and maintenance expenses and exciusive of deprecia-tion. Ibr the contract years ended June 30,1987 and 1986,5thMEC met the Ilond Resolution debt ser-sice coverage requirements for the applicable hihmEC Projects. ContrAt Year Taled June 30, 1987 19 % Debt semce Cowrage-Rewnues $10$,985,000 179,%81.0 0 Other Bilhnp 719,000 732,0LO Rewrw and Contingeng Fund Ihlhnp 7,382,0Ga 4.167,La o
'lio! 114,0 4 000 84,M. d Ikdua OFrautg and staintenance Expenses 32.kM6,000 .W46DO Avadd4e Rewnues Net of Expenws $ 81.200,000 MM34.9 0 Detx Scruce Requirement $ 73,818.000 $41W,Oto Gnvrage (11&t Requiredi 110% 110 %
Notes Papble hBMEC has a temi loan with a group of banks for the purpose of financing fuel oil for the Stony Brook Projects. As of December 31,1987 and 1986, hihmEC had outstanding balances of $2,650,000 and
$5fA2,000, respectively. Borrowings under the agreement are at 70% of the lead bank's prime rate, are secured by fuel oil inventory and are payable from revenues derhrd by SBMEC fro m fuel charges under the Ibwv: Sales Agreements for the Stony Brook Projects.
hihMEC increased its $8,000,000 remhing line of credit to $10 000,000 in December 1987. This line of credit is used to temporarily finance certain pmver purchases made by SBMEC for resale under power puuhaw wrn, Rorrowings are secured by the corresponding receivables. The balance outstanding at December 31,1987 was $334,000. No borrowings were outstanding on this line at year-end 1986.11orrowings under the hne were at a rate of 75% of the bank's prime rate through December 31, 1986. BeginningJanuary 1,1987, the rate became the bank's prime rate. In addition, a commitment fee of 3/8 of 1% per annum is charged on the unused portion of the line based upon the average daily prin-cipal amount of the loan outstanding. ( 5) Unit cancellations hBMEC's imtstment in Seabnuk station included equivalent panicipation in Units Nos. I and 2. Sc3 brook's joint owners have authorized the sale of all sah2geable components and equipment froir the cancelled Seabrook Unit No. 2 and the retum of the Unit No. 2 constmaion pemiit to the Nuclear 1 29
Notes to Financial Stateman8 . 1 ( 5) Unit Cancellations, amtmua Regtdatory Commission. hiAMEC's cumulathr net imestment in Seabrook Unit Na 2 of $101,949,000 and $90,684,000 as of December 31,1987 and 1986, respectively, has been deferTed as an Amount i Recoverable in the Future Under Tenns of the Ibwrr Sales Agreements. On Oaober 22,1981, the Boston Edison Company cancelled h'y, rim Unit No. 2 which is included in hiaNEC's Nuclear Siix No.1. htsN EC's net costs associated with the Unit, which aggregated $ 52,867,000 and $49,756,000 as of December 31,1987 and 1986, respecthcly, were deferred and will be recovend under the terms of the Ibwer Sales Agreements. ( 6) Constniction and Financing - A substantial ponion of StSNEC's constr"1 ion and financing program is attributable to its ownership interests in Stilhtone Unit Na 3 in Waterford, Connecticut and Seabrook Sta' ion in Seabrook, New llampshire. Millstone No. 3 l Shlistone Unit No. 3, ofwhich st\MEc has a 4.8% (55 megawatts) ownership interest, was declared commercially operable in April 1986. 51ANEC's share of the cost ukonstruction through its Nuclear hiix No. I and Nuclear Project Na 3 totaled $176 million, exclushr of nuclear fuel. ! Seabrook Station hiNNEC has an 11.6% ownersh,; Werest in the Seabrook project, which onginally consisted of two proposed nudear units of 1,150 megawatts each. Unit Na 2 has been cancelled. (See Note 5 Unit Cancellations for further details regarding Seabrmk Unit No. 2.) Unit Na 1 is completed and fuelloading has occurnd Seabrook Station was constructed by New llampshire Yankee (Nil Yankee) which is i currently a division of Public Senice Company of New Ilampshire (l'SN1I), the project's lead panicipant and lead owner holding a 35 6% share. 1he Seabrook nuclear station has experienced persistent and substantial cost increases and signifl-cant schedule delap, has been the source of continuing controwrsy and opposition from gowrnment officials. regulators, intentnors and others and has created financial problems for many of its joint owners, including $15NEC. Although problems relating to the Seabrmk Unit Na 1 coitstruction schedule, with the exception of emergeng response plaas, have been overcome and the unit is now essentially complete, significant problents and uncenaintles relating to Seabrook remain and are dis-cussed in the folkming paragraplis. Seabrook Unit No. I has recchrd an oprating license from the Nuclear Regulatory Commission (NRC). The operating license is subject to conditions which do not pemiit commercial operation until emergeng response plans are appnned by federal authorities. On March 25,1987, the NEC's Atomic Safety and ljcensing Board (ASLB), dealing with emergency planning and safety issues, recommended issuance of a license for low power (5%) testing. That deci. sion has been appeakd The issuance of a low power hcese has been stayed by the full NRC, which ruled on April 9,19o / that emergeng response plans re.t tv filed before such license may be issued. In October 1987, the NRC issued a rule change that alkn w owners of completed nuclear plants to obtain an operating license upon NRC approval of utility-sponsored emergency evacuation plaris in cases where states or kralities have refused to panicipate in fonnulataig such plans. As a result of this nding, NIi Yan-kee wdl seek to secure a low-pmtr and then a full-pou r operating license from the NRC upon approval of emergency response plans, which haw been submitted Ca November 25,1987, the NRC suted to drop its opposition to granting Seabrook a kiw powrr license because of earlier concents about its emergengwacuation plans.1he N RC action does not i mmc diately aut'iorize Seabrook to begin testing at 5% pmtr. Ikfore Seabrook can stan up, licensing boanis at the AC must resohr technical issues 30
Notes to FinanClal Statements l ( 6) Constrction and Financing, connnual Seabrook Station, connnual in uhing the steam generation and cooling sptems. In view of the active opposition to the Seabrook project of various Stassachusetts cilicials, including the Gevemor, there can be no assurance as to whether or when Seabrook Unit No. I will become operational. ISNil has been expenencing substantial difficulty in sustaining its financial oblig> .3 for its
- 35.6% share of the Seabrook project as a result of the continued delay in commercial operadon of Sea-brook Unit I and in its inability to secure cost recovery prior to commercial operation. In late 1987, PSN11 filed to obtain emergency rate relief that wuuld improw its financial condition. The $71 million request brought before New ilampshire's regulatory commission was viewed as a necessary measure if PSNil was to amid bankruptcy [iroceedings. PSNil was also seeking debtholder and regulatory approvals to implement a complex financial restructuring package, the ultimate purpose of which was to substan-tially reduce current interest costs. In addition, PSNIl challenged the constitutionality of New Ilamp-sh tre's anti CWIP law which prohibited ISNIi from charging customers for construction projects that are not yet in operation. OnJanuary 26,1988,the New Ilampshire Supreme Court unanimously upheld the state's anti-CWIP law that prohibits ISNII from getting rote increases for Seabrook related costs until the plant begins commercial operation.This decision effectively barred the New Ilampshire Public Utilities CommLssion'sapprovalofPSNIl'semer3 encyratereliefrequest.Onjanuary28,1988,PSNIIfiledforpro-tection from its creditors under Chapter 11 of the federal llankruptcy Act. ISN1 I has continued to make its Seabrook related payments. PSNil has taken the position (nat sue: payments fall into its ordinary course ofbusiness which are allowed d u ring bankruptcy proceedings unless or until famial objection of the payments is made to the presiding court. 5151WEC managemen: cannot predict the in pact of the IS:Ill bankruptcy filing on the start up of Seabrook Unit 1.
In January 1986,51MWEC began billing Project Participx rs a ponion of the interest accruing on
' bonds issued to fund hi3NEC's Seabrook sh re. Under this phase-in plan, Participants haw paid a por-t i on of the interest costs from their revenues prior to the commercial operation of the unit.
Under the terms of the Power Sales Agreement,5151WEC Project Participants are obligated to pay whether Seabrook reaches commercial operation er not. Information regarding 5151WEC's financing activities relating to the Seabrook project is presented in Note 4 - Debt. Details of other events aiTecting 515mEC and the Seabrook project in general are pre-sented in Note 9 -Commitments and Contingencies. The cost estimates and completion dates for Seabrook Unit No.1 listed on the following table are based on the latest inf ormation available from PSNIi /NII Yankee, adjusted by S15mEC to reflect various considerations for power supply and unancial planning purposes. Por these purposes, M51TEC is utiliz-ing a commercial operation date of Mwrer 1990 for Seabrook Unit No.1. Prqued ( Dollars in husandy st3NEC co ts to Total Capabihty December 31, FMinuted MSNEC Proint (MW) 1987 1986 ALSMIC Cost Nudear Mix No 1 1.9 $ 7,455 $ 6.il 5 $ 9.000 49 8 222,209 196,736 316,000 Nudear Proica N14 Nudear Projea M15 12.6 58,M6 51,163 87,000 Proint No. 6 p 391,810 33u.963 &)3.000 T(<al 133 3 $680,120 $585.577 $1.015MO l 31
m Notes to Financial Statem:nts e i
, l
( 7) Retirement Plan A151WEC established a new employee defined benefit pension plan in 1986 which is administered by an insurance company. Pension expenditu res for 1987 and 1986 amounted to $271,300 and $ 288,300, respectively. AIANEC makes annual contributions equal to the amounts recorded as pension expense.
' hxumulated plan benefits and plan net assets are as fouows: , January 1.
1987 1986. Muarial present value of accumulated plan benefits:
-Wsed $319,445 ' $229,300
-Nonwsted 131,925 124.400
$451,370 ' $353.00 Net assets available for benefits $711,534 $393.100 .
%e assumed awrage rate of retum used to determine the actuarial present value of accumulated plan benefits was 8.5% for 1987 and 1986.
( 8) Deferred Compensation Plan AIANEC offers its employees a deferred compensation plan created in accordance with Intemal Revenue Code Section 457.%e deferred compensation plan assets are administered by A15NEC and are not available to employees or their beneficiaries until termination, retirement, death or unforesee-able emergency. Under Sectlon 457, all assets in the plan remain the property of A151WEC subject only to
- t
. the claims of general creditors. Accumulated plan assets, which include investments at market value, accrued interest and cash as of December 31,1987 and 1986 amounted to $578,000 and $483,000, res-pectively. Plan assets are included in deferred charges with the related liability included in accrued expenses.
( 9) Commitments and Contingencies Power Purchases A1A1WEC has entered into a contract with the New Brunswick Electric lbwer Commission (NB EPC) fcr the purchase of 100 A1Wofcapacity from the Point Irpreau nuclear unit. %e contract became effec-tive in Februa ry 1983, the unit's in-sersice date, and uns effectim th rough October 1987, with options for extensions. A1AiWEC has exercised one option, extending the contract through October 1988. The con-tract payment provisions require AB1WEC to pay in all ewnts certain fixed, operating, maintenance and - other charges relating to the unit. %e 1988 fixed minimum payments as estimated by A1AMEC for its planning purposes amount to $30,000,000. ABMEC has entered into corresponding agreements with its members and other utilities to rescu the power. AufWEC entered into agreements for participation in the interconnection between New England utilities and the Hpiro-quebec electric system near Sherbrocke, Quebe' (Phase 1) which entered com-mercial operation in October 1986. New England Electric Transmission orporation and Vermont Elec-tricTransmission Companyconstructed the New England portion ofthe interconnection at a total cost of about $140 million, of which 3.65% or $5.1 million is A1A!WEC's share. A1A1WEC has also entered into similar agreements for the expansion of the 1Igfro-Quebec interconnection (Phase 11). Completion of Phase 11 is initially schedulal for October 1990 at a total estimated cost of 5%5 million, of which [ A1ANEC's share has 3rt to be determined. A1AMEC has corresponding agreements with its members ud other utilities to resell the power received owr these lines including recovery of 51AN'EC's share of the costs of the lines. 32 4 I.*
, m _ - _ _ _ _ _ _ _ _ _
Notes to Financial Statements ( 9) Commitments and Contingencies, miinued PonerSales Agreements InJanuary 1985, cenain residents of the Town of Groton brought suit against the Tbwn of Groton Municipal Light Depanment, the Town of Groton and MMWEC, challenging the validity of the Nuclear - Mix No.1, Nuclear Projeas Nos. 3,4 and 5 and Project No. 6 lbwer Sales Agreements. On February 4, 1987, the Massachuset's Superior Coun granted the defendants' motions for summary judgement and upheld the validityof Groton's Ibwer sales Agreements with MMWEC.ne decision has been appealed he Massachusetts Supreme Judicial Coun by the plaintifTs. In October 1985, the Vermont Depanment of Public Senice (VDPS), an agencyof the state separate from the Public Senice Board, brought an action against the Vermont Participants in MMWEC's Project No. 6 and MMWEC, challenging the validity of the Power Salea Agreements, on a rumber of grounds, of those Participants in Projea No. 6. Vermont Electric Cooperative (VEC), orignally named as a defendant, subsequently took the VDPS's view of the proceeding and became a named plaintifT. VEC,in additicn to its direct 0.41% ownership interest in the Seabrook project, is imuhrd in Seabrook through its 7.2% interest in MMWEC's Project No. 6 and has failed to make its monthly p4menis to MMWEC since Feb-ruary 1986, VEC's share of the Project No. 6 costs ($3.7 mitiion as of December 31,1987) is continuing to be paid with other available Project funds. He Village ofStowe,which is not a Panicipant in Project No. 6 but which has contracted with the Village of Morrisville for a ponion of Morrisville's Project No. 6 crability, entered the action as a plaintiff to assen the irwalidityofits agreement with Morrisville on the basis of the alleged irwalidity of Morrisville's Projea No. 6 Power Sales Agreement. Stowe sought but was denied an injuncion to permit it to withhoki its payments to Morrisville. After hearing cross-motions for summary judgment, the Vermont Superior Coun entered a final juJgment on November 26,1986, decla ring that the Vemiant Panicipants had statutory authority to enter into the Projea No. 6 lbwer Sales Agreements and that these agreements do not violate any provision ofVermont law. ne plaintiffs have
- appealed this judgment to the Vermont Supreme Cour;,dich heard arguments in April 1987. A decision of the coun is awaited.
In addition, in January 1986, MMWEC brought an action against the Village of Stowe in the United States District Court in Massachusetts seeking a declaration that its Stony Brook Intermediate Project Ibwer Sales Agreement with Stowe is valid and has brought an action against the State of Vennont and certain of the Vermont Participants in Vermont Superior Coun seeking a declaration of MMWEC's rights and obligations under its Stony Brook Intermediate Projea Ibwer Sales Agreements with them. By agreement of the parties, the proceedings have been inactive pending the decision of the Vermont Sup-reme Court. Washington Electric Cooperative (MC), a 2% Panicipant in m.XEC's Project No. 6, infomied M5mEC in February 1988 that, due to general financittl difiiculties, it will cease making its. monthly payments for that Project effectiveJanuary 1988. On August 31,1987, Erstem Maine Electric Cooperative (EMEC), a 3.6% Panicipant in MMWEC's Projea No. 6, filed for protection under Chapter 11 of the Faleral Bankruptcy Code. In its petition, EMEC is asking the coun to ceject its contract with MMWEC. On September 2,1987, the MMWEC Board of Direcors mted to vigorously oppose rejection of the contract in bankruotcy proceedings. EMEC noted that it cannot continue to make payments under the Ibwer Sales Agreement with MMWEC and remain viable without some significant form of relief. EMEC has not made such payments since May 1987. MMWEC has been working with EMEC, the U.S. Rural Electrifica-tion Administration and others in an attempt to resch e EMEC's financial difficulties. EMEC's share ofdie Project No. 6 costs amounted to $680,000 as of December 31,1987. %e EMEC and WEC shonfalls in payments are being made up with other available funds. In January 1986, the ilull Municipal Lighting Plant fiksi suit ? gainst MMWEC seeking a declaration 33
Notes to Financial Statements . ( 9) Commitments and Contingencies, anunual Poner Sales Agreements, wnnnual that its Power Sales Agreerr ents for Nuclear Mix No.1, Nuclear Projects Nos. 4 and 5 and Project No. 6 relating to Seabrook were invalid, an injunction against M5mEC collecting any amounts from llull ~ under the agreements and monetary damages. The suit challenges the validity of these Ibwer Sales Agreements on various grounds and alleges, among other things, various misrepresentations, breaches and imprudencies by M5mEC. On March 5,1986, the Massachusetts Superior Coun granted M5mEC's motions to stay the legal proceedings and compel arbitration of the suit and for c preliminary injunction requiring llull to pay its share of monthly power costs as required by the Ibwer Sales Agreements. On Mareh 21,1986, a single justice of the M.'ssachusetts Appeals Coun denied 1Iull's petition for relief from the orders of the Superior Court, and the matter is now in arbitration. On April 15,1987, the Massa. chusetts Supreme Judicial Court upheld the order reqC ring iIull to continue making payments pending the outcome of the arbitration. In August 1987, the arbitrator ruled that the contracts signed by liull's f' lignt board with M5mEC were valid. 'Ihe arbitrater has yet t'o rule on the other alleged breaches, It imprudencies and misrepresentations claimed'against M5mEC by llull. liall is currently making l payments, under protest, in accordance with the court order, which it appealed. Based on the opinions of Bond Counsel and other legal counsel, discussions with such counsel - f l~ and other considerations, management has no reason to beliew that the ultimate resolution of the actions described above will have a material, adwrse etTect on the financial position of M5mEC. Other Issces Legislation amending Chapter 775 of the Acts of 1975, the Act making MamEC a public corpora-tion and defining its powers and duties, was filed by the Massachusetts Govemor's office in 1986. The proposed legislation would have restructured the Board of Directors, expanded DPU authority owr MamEC, including approval of short-term debt over $20 million and certain contracts, permitted local referenda on cenain contracts with MAMEC and required majority approval of Project Panicipants before M5mEC could increase the financing for a Project. The proposed legislation was not enacted; howewr, similar bills were filed in 1987 which were also not enacted and must be refiled for placement on the 1988 legislative docket. M5mEC has opposed the Gcvemor's bill and ofTered its own proposal as an attemative. Since the 1986 filing by the Govemor's office, six c f M5mEC's members have given notice
. of their intention to withdraw from M5mEC. Thu members that gam notice subsequently rescinded
( their notices, three will become effectim in 1988 unicas extended or rescinded, and one withdrew. l. j Withdrawal from M5mEC membership does not affect the obligations of a Participant under the Ibwer Sales Agreements or other contracts. As a joint owner of the Millstone Unit No 3 nuclear unit, M5mEC is required to set aside funds for its eventual decommissioning. M5mEC's policy is to fund this reserve requirement over the licenseo life l of the unit (39 years) through monthlybillings to MamEC Participants in the unit. M5NEC's share of the l. ! total estimated reserve requirement is $9,310,000 of which $297,100 has been funded as of December 31,1987, and is included in other deferred charges and accrued liabilities. ! The federal Price Anderson Act limits liability for a nuclear incident. Uability insurance against this exposure is presently obtained through a combination of private insurance (presentlylimited to
$160,000,000) and a federal indemnity program which includes provision for self insurance byowners l (
l ofoperating nuclear facilities through assessments of up to $ 5,000,000 per licensed reactor owned in the l event of any nuclear incident in the United States, with a maximum of $10,000,000 per year per reactor owned The loint owners of a unit would be proponionatelyliable for the amount of any such assess-ment. As a result, MSMEC would be billed its ownership share of Millstone Unit No. 3 in the event of any l such assessment. The present limitation ofliability under the act is $700,000,000 wi ich increases as i l l 34
Notes to FinanClal Statements ( 9) Commitments and Contingencies, cominued Other issues, wnnnued assessments available under the federal program exceed that amount. Irgislation to increase liability limitations is being considered by Congress. Due to rising insurance premiums, MSNEC is not currently covered under directors and officers liability insurance or grad ual pollution liability insurance related to hBMEC's power plant. Management is not aware of any material claims made defing 1987 or outstanding as of December 31,1987. Additionalinfom1ation regarding commitments and cor 'mencies relative to MSMEC's debt and involvement in nuclear projects is discussed in Note 4-Debt ?n<l Note 6-Construction and Financing. (10) Inwstments and Deposits All baak deposits, which amounted to $18,000 at December 31,1987, are maintained at a single financial institution. He Federal Deposit Insurance Corporation currently insures up to $100,000 per depositor. SBMEC's uninsured deposits ranged from zero to $10,000,000 during 1987 due to seasonal cash flows, the timing of daily cash receipts and favorable earnings offered on these demand deposits. Investments are stated at cost adj usted for accretion (amortization) of the discount (premium). At December 31,1987, all securities underlying repurchase agreements, and all other investments, were held in MANEC's name by independent custodians consisting of the Construction Fund Trustees, Bond Fund Trustee or MAMEC's depository bank. All such repurchase agreements were with entities other than such custodians. Inwstments, including accrued interest, are detailed below: CatTying Market Amount value 1)pe <>f Inw tment (DotLtrs in lhouch) Repurchaw agreements 5 2 L953 $ 25.246 Other Inwstments . Treasury rxdes 82.923 83,192 lle. wry bilh 1,445 1,091 Ageng bonds 63, @) 62,H14 Ageng demunt noms 132,116 133.951 Total Odier Inwgments 29A98 281,448 laul imestments $3u4.451 $.%294 Due to seasonal cash flows during 1987, MAMEC, from time to time, inwsted in repurchase agreements with its depository bank that were collateralized bysecurities in MANEC's name held by the depository bank. MSNEC's practice is to monitor the market ndue of the underlying securities to ensure that the market udue equais or exceeds the amount invested. 35 s
Trustee and'Payliig Agents
. Bond Fund Trustee .
ContinentalHlinois Bank and ' Thist(bmpcmy ofChicago, Illinois Paying Agents ContinentalIllinoisBank Citibank, NA, Bank ofNew England, NA, and Trust Compa'sy of . New 1'ork, New lbrk Boston, Massachusetts Ch###8 ' ###" ## 1976 Series A Bonds 1976 Series A Bonds 1976 Series A Bonds 1977 Series A Bonds 1977. Series A Bonds 1977 Series A Bonds 1977 Series B Bonds 1977 Series B Bonds 1977 Series B Bonds 1978 Series A Bonds 1978 Series A Bonds 1979 Series A Bonds
" ""' " !" #'0"'
~ ' '
1979 Series A Bonds 1980 Series A Bonds 1980 Series A Bonds 1978 Series A Ibnds . 1981 Series A Ibnds 1981 Series A lbnds 1979 Series A Bonds 1981 Series B Bonds 1981 Series B Bonds 1980 Series A Bonds 1982 Series A Bonds 1982 Series A Bonds 1981 Series A Bonds 1983 Series B lbnds 1982 Series B Bonds 1981 Series B Bonds 1984 Series A Bonds 1982 Series A Bonds 1985 Series A Bonds 1982 Series B Ibnds 1985 Series B Bonds 1985 Series A Bond Anticipation Notes s 36 ( - _ - _ _ _ _ _ _ _ - _
The MMWEC Membership 1 I
$18 i 8 2(
W 14 15 25 30 2, 29 31 9 / 17 2 it 3 %- q3 8 i 32 r $9 2i g g16
- 1. Ashbumham 51unicipal Light Plant 18. Alerrimac 51unicipal Light Depanment
- 2. llelmont 51unicipal Light Depanment 19. 51iddleborough Gas & Dectric Depamnent
- 3. Bolyston 51unicipal Lighting Plant 20. Sliddleton 51unicipal Light Depanment
- 4. Chicopee 51unicipal Lighting Plant 21. North Attleborough Electric Depanment
- 5. Concord 51unicipal Light Depanment 22. Paxton Stunicipal Light Depanment
- 6. Damvrs Electric Depanment 23. Ibabody 51unicipal Light Plant
- 7. Georgetown 51unicipal Light Depanment 24. Princeton 51unicipal Light Depanment
- 8. Groton Electric Light Depanment 25. Reading 51unicipal Light Depanment
- 9. Ilingham 51unicipal Lighting Plant 26. Rowley 31unicipal Lighting Plant
- 10. IIolden 51unicipal Light Depanment 27. Shrewsbury Electric Light liant
- 11. Ilolyuke Gas & Dectric Depanment 28. South lladley Dectric Light Depanment
- 12. Iludson Light & lbwer Department 29. Sterling 51unicipal Bectric Light Depanment
- 13. Ilull 51unicipal Lighting Plant 30. Templeton 51unicipal Lighting Plant
- 14. Ipswich 51onicipal Light Department 31. Wakefield 51unicipal Light Depanment
- 15. Littleton Elearic Ught & Water Depanment 32. West Boyiston 51unicipal Lighting Plant
- 16. Stansfield 51unicipal Ekctric Depanment 33. Westfield Gas & Elearic Light Depanment
- 17. 51arblehead 51unicipal Light Depanment 1
37 a . _ _ _ _ _ _ _ _ - _ _ _ _ . _ _ -
'&_ [. . e 'e -
Board of Directors .
- MWEC is govemed by signed his positions early in 1988. Offlcers a nine member Board are elected annually in May by the Board of Directors. Seven of of Directors. (Wesolowski, who replaced the directors are Walter Gaebler 11 as MMWEC Treasurer yy MMWEC member eady in 1988, is not picturexi in this repon.)
commissioners or managers elected each Members of the Board of Directors year by the membership. Two directors are Leary; William J. Wallace, Wakefield are appointed for indefinite terms by the manager; Michael Madore, Damers super-Govemor of Massachusetts. One of these intendent; Caroline Stouffer, gubemator-appointed positions is presently open. ial appointee; FrederickJ. Nemergut, MMWEC's corporate officers are Reading commissioner; Ridiard E. Slattery, George E. Leary, chaimian; Thomas E. Littleton commissioner; John W. Dunfey, Mcliugh, acting general man.2ger and Middleborough manager; and Raymond assistant secretary; Maurice J. Ferriter, Esq., Bastarache, Middleton manager. (Bastar-general counsel and assistant secretary; ache replaced Murray early in 1988 and John M. Wesolowski, treasurer; and James is not pictured in this report.) Except for FuUer, assistant treasurer. ft>rmer MMWEC gubematorial appointees, members of President and director Neil Murray re- the board are elected annually in May. K_ '; j' i ,
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l A 4 Acknowledgements 51514EC wishes to thank the following businesses for their cooperation in allowing us to photograph their facilities: Cover photo: 13erMin>1Arnce 7hvitre, Adam.s Akusachusetts Photo page 5: WngbtArtbitectunilSiitluork Nortix mpton, Skusacbusetts Photo page 17: thmard Community ihvilth Center, l 1Valxxiv,3husachusetts lhe 1987 5th!4EC Annual Repon was pnxluced by the Public Affairs OfDce of the 51assachttsetts 51unicipal wholesale Elcaric Company. Copies of this report and supplemental financial information can be obtained, free of charge, by writing to the Public Affairs Office, A1.tssa-chusetts Stunicipal wholesale Electric Company,51omly Street, Post Office 130x 426, Ludlow,51A 010% All requests for information about N1A14EC should be direaed to this office. ' v,. l l 10 n
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Gary L. Hunt named ndw general manager The hihiWEC Board of Direcors on April 4 chose Gar'y L ' From 1980 to 1985, Hunt worked for the Illinois Com. Hunt, the executive in charge of utilities systems, municipal merce Commission, the state agency responsible for public finance and corporate senices for the City of Austin, TX, to be utility n gulation. From 1983 to 1985, he was the commission's hiA!TEC's new general manager. general manager and chief operating officer. A special task force conducted a five month, nationwide Hunt's experience in strategic planning and management, search with the assistance of an execudse and professional his ability to deal with chauenging financial situations, and his personnel search firm to fill hih1WEC's top management post. commitment to demand management and efficiency in the Of more than 100 people who applied for the job,17 can- electric utility industry helped win him the appointment. didates were fully qualified. Other factors in the board's decision induded Hunt's As Austin's assistant city manager sinceJanuary 1985, Hunt strong political and regulator) background and his experience was in charge of the city's municipal electric, wnter and w aste- in dealing with a troubled nudear unit. H unt was able to find a w ater utilities. He also supenised various city Financial Senices soludon to problems stemming from the Austin municipal Depanment functions and direced the work of the City Attor- utility's ownership in the South Texas nuclear project.
- ney's, Human Resources and Communicadons departments.
First Quarter Seabrook Station events There were sewral major events related to the Seabrook On Feb.10, the NRC's Atomic Safety and Licensing Board Stadon nuclear projea in the first quarter of 1988, including rejected an attempt byopponents to suspend heanngs on Sea-the flhng for protection under Chapter 11 of the Federal Bank- brook emergency response plans for New Hampshire because mptcy Code by the Public Senice Co. of New Hampshire of the bankruptcy filing. (PSNTI) on Jan. 28. In an imponant development for the project, the Federal hiA1WEC owns 11.59 percent of Seabrook Station. PSNH is Emergency hianagement Agency (FEhtA) on hiarch 14 with-the project's lead owner with a 35.6 percent interest. drew its major objections to the New Hampshire emergency The PSNH bankruptcy filing came two d.ys after the New plans. FEhtA now agrees that evacuating the area in the ewnt Hampshire Supreme Coun upheld a state law prohibiting of an accident at Seabrook would proside adequate protection PSNH from charging its customers for Seabrook costs before to the public, making construction of addidonal shelters the plant operates. PSNH had been seeking authority to place a unnecessary. ponion ofits Seabrook costs in the ratebase as pan of a debt NRC hearings on the New Hampshire plans, with the restructuring plan. With the approval of the bankruptcy court, exception of sheltertng issues, were dosed in February. PSNH has appealed the state coun decision to the U.S. Sup- Hearings on sheltering issues are scheduled for hiay 1988 l reme Court. with an NRC decision on the New Hampshire plans expected ! PSNH has continued paying its share of monthly Seabrook late this summer. I costs while in bankmptcy as in the usual course of business. In another imponant decision, the New Hampshire Sup- ! The New Hampshire Electric Cooperative (NHEC), a 2.17 reme Court has ruled that pole-mounted sirens to wam of an , percent project owner, nas not made its share of monthly pro- accident at Seabrook are permissible in New Hampshire. The I ject payments since December 1987. In addidon, the Vermont removal of sirens in New Hampshire and hiassachusetts has Electric Cooperatim (VEC), a 0.4 percent project owner, con- contributed to delays in the projea receising its low power l tinues in default of its project payments. The shonfall in pro license. l ject revenues created by the nonpayment of NHEC and VEC is As litigation of the siren issue continues in hiassachusetts l being funded by advances from other project owners, not and before the NRC, the project has developed an altematiw i including hiA!WEC. emergency nodfication system for Stassachusetts and is con-There is no step up prosision in the Seabrook Joint tending that the issue need not be fully htigated prior to Ownership Agreement, and StAITEC does not intend to in- issuance of a low power license. crease its payments to the project to cover ani shortfall created Before Seabrook can receive a fuu-power licertse, the NRC by the nonpayment of another owner. must approve emergency response plans for both hiassachu-Intenenors in Seabrook licensing proceedings before the setts and New Hampshire. Nudear Regulatory Commission (NRC) are attempting to make For financial planning ,m ises, PSNH is using a January the financial qualification of PSNH an issue in the proceed- 1990 commercia' - raur 1 e for Seabrook Unit No.1. ings. Under present NRC regulations, the financial qualifica- hiAfWECis usin, ce c- . .we projection of November tion of a project owner is not a matter open for resiew. 1990.* l l l
MMWEC seeks $98.5 milli' o n in Seabiook financing authority AB1TEC filed a petition on Feb. 23 with the state Depar't- sen'tly are being billed for approximately 88 percent of the ment of Public Utilities (DPU) requesting authority to issue annual debt senice (principal and interest costs) on the $875
$98.5 million in bonds to pay its Seabrook related costs in 1989 million in Seabrook bonds outstanding. These billings will and 1990. amount to about $92 million in 1988. The balance of debt ser.
After reviewing a broad range of altematives, the MMWEC vice costs, in addition to the ongoing, monthly project costs, Board of Directors voted unanimously on Feb. I to file the are being funded with the proceeds of presious bond issues. request. The need for additional Seabrook financing is a direct The $98.5 million bond issue proposed by MMWEC would resuh of k; gal delays in operation of the plant, which has been include $33.3 milhon in long-term, tax-exempt revenue bonds ready to operate since October 1986. and $65.2 miUion in long-term, taxable revenue bonds. The bulk of proceeds from the requested financing would Twenty-eight Massachusetts municipal utilities, including be used to fund MANEC's share of ongoing, monthly project 27 MMWEC members, and eight out of-state utilities are par-costs associated with licensing, testing, security and main- ticipating in the Seabrook project through MMWEC. tenance based on a November 1990 commercial operation Pending a decision on its DPU financing request, MANEC date. is continuing to explore other options related to its Seabrook The balance of financing proceeds would be used to fund ownership. All options are structured to preserve the financial a ponion of the interest on bonds issued for Seabrook, which integrity of the MMWEC organization would shelter ratepayers from additional Seabrook costs prior MMWEC has held numerous meetings with its Seabrook to operation of the plant. Panicipants, including a series of regional meetings in Feb-MAtWEC's Seabrook Panicipants and their consumers pre- ruary, to discuss its DPU petition and other options.
- Legal actions filed against Hydro-Quebec Phase H Vermont cooperatives financing request filed AB!WEC is pursuing legal action against the Washington OnJan.14, MMWEC filed a petition with the state Depan-(VT) Elearic Cooperative (WEC) and the Vermont Electric ment of Public Utihties (DPU) seeking authority to issue up o Cooperative (VEC) as a result of the coops' default under their $20.4 miUion in debt for the ifydro-Quebec Phase 11 project. A Seabrook contracts with humEC. decision on the petition was pending at the end of the first WEC and VEC have failed to make payments required quaner.
under contracts for M3NEC's Project No. 6, which represents Of the total amount requested, it is proposed that up to a 6 percent ownership in Seabrook Station. On March 16, $11.4 miUion be used to fund certain costs for those SBITEC MMWEC filed actions in Hampden County Supeaor Coun in members decidmg to panicipate in the project through MMWEC. Springfield, MA seeking cuch payments. Both coops have These costs include preliminary projea suppon costs and the petitioned to have the cases remowd to federal Distnct Coun initialcapitahzation costs associated mth AbtWEC's ownership on the basis of diversity of citizenship. No other action in the in the project on behalf of such member systems. cases had occurred as of March 31. The 59 million balance of the request is proposed for use in l VEC, wtiich has contracted to purchase fiw megawatts of funding canceDation costs should the project be cance!!ed. Seabrook's capacity from NBtWEC, has not paid its Project No. The principal purpose of the request is to shelter rate-6 bills since January 1986. WEC, which has contracted to payers in hB1TEC member systems from adverse rate impacts purchase 1.35 megawans, has not paid since December 1987. stemming from significantly incre xi costs under the Phase The 28 Massachusetts municipal utibties participating in 11 Preliminary Suppon Agreement. the Seabrook project through MANEC, as well as five other Initially projected not to exceed $22.5 million, total pre-l
- outof state utilities panicipating in Project No. 6, are continu. lirr.inary project costs couki exceed 5160 miUion by the end of l ing to meet their financial obligations to MMWEC. 1988. This is the result of delays in obtainmg the regulatory l The Eastem Maine Electric Cooperative (EMEC), also a approvals neeoed to implement the Fmal Phase 11 Suppon panicipant in Project No. 6, discontinued its Seabrook pay- Agreements.
ments to MMWEC in June 1987, and filed for protection under MMWEC has asked the DPU for authority to issue bonds or Chapter 11 of the Federal Bankruptcy Code in August. As a par- other forms ofindebtedness for the project Financing options i ticipant in the EMEC bankruptcy proceedmgs, MMWEC is potentially more economic than a bond issue, including estab-working to have EMEC's obligations under its Project No. 6 lishment of a line of credit, remain under imestigation.
- i contract enforced.
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1
1 MMWEC pursuing supply- - and demand-side resources ' MSNIC has been exploring a number of potential addi-tions to its members' power supplies, including contract purchases from existing plants and proposed independent E d power projects, as well as construction of a new unit. j Contract purchases in various stages of development in-jg dude a life of unit purchase of up to 30 megawaits from Cleary Unit No. 9, extension cf an existing 100 megawatt purchase
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from the Ibint lepreau Generating Station, the purchase of more than 100 megawatts from a mix of coal fired projects proposed by independent developers, and a purchase of up to 22.5 megaw atts from a proposed cogeneration plant in Spring-field, MA Sestral other purchases aho are under imestiption. ' In addition, MSNEC has undenaken a study of potential sites in Massachusetts for a new hBNIC generating unit. The study is expected to be complete by the end of 1988 and is one of the first steps in a process that could lead to construction of a new unit to help meet the ABNIC members' energy and capacity requirements in the mid 1990s. On the demand side, work is continuing on MSNEC's Demand Side Capacity Assessment (DSCA) study, which is designed to determine the most cost-effectiw load manage-ment and consen ation programs for each member system. Results of the DSCA scheduled for completion inJuly 1988, nill be u'-d to develop power supply plans for indisidual memb .,;-tems that willintegrate both demand and supply-side options.
- New board member, treasurer elected Raymond Bastarache, manager of the Middleton Munici-pal Light Department, was elected to the Board of Directors at a meeting of the MM4EC membership on Jan.19 Bastarache fills the seat vacated by Neil Murray, who retired as manager of the Holden Municipal Light Department in January. Murray has also resigned his position as
, ABNIC's president. Former Controller John M. Wesolowski was elected hBMEC's new treasurer at the Feb. I meeting of the Ibard of Directors. He also has been promoted to acting manager of
.4 hBMEC's Finance & Treasuty Division.
d Wesolowski, who joined MSNEC in 1979, replaces Walter Gaebler 11, who resigned from hB NEC in Februa ry to become 2 chief financial officer of the Sacramento (CA) Municipal Utility [ U District.
- 9
i Massachusetts Municipal Wholesale Electric Company j , Stdtements of Financial Position March 31,1988 and 1987
; (Unaudited) g ', (Dollars in 'Ihousands)
March 31, '
;7 ,
tis l 1988 1987 h ASSETS
! Eleanc Plant
' In Service. . . $ 388,627 $ 386,934 '
Accumulated Depreciadon. (62,158) (48,351) 326,469 338,583 Under Construcuon , 673,130 582,317
,, Nudear Fuel-net of amortization 40,415 36,483
!! Total Electric Plant. 1,MO,014 957,383 Spec'al Funds , 318,493 305,374 i
- Current Assets Cash and Temporary Imestments . 14,4H 11,976 i Accounts Recervable . 10,178 5,143 Unbilled Restnues . 7,736 7,534 ,
Inwntories . 7,949 7,237 Prepaid Expenses . 1,858 1,811 42,175 33,701 ) Total Special Funds and Current Assets . 360,668 339,075 : Deferred Charges Amounts Recowrable in t!.e Future Under Terms of the Ibser Sales Agreements 111,763 116,103
)
Unamortized Detx Discount and Expenses 40,996 39,857 Other . . . 888 945 153,647 156,905
$1,554,329 $1,453,363 l IJABIIJTIES i l
i long-Term Debt Bonds. $1,459,950 $1,261,445 Notes . - 1,928 ( l 1,459,950 1,263,373 ) Bond Andcipadon Notes Pa>2ble - 110,000 l l Other Current uabihdes : ! Current Maturides of long- , Term Debt . 13,118 10,906 l " 162
; ; Notes Payable 199 l
l j Accounts Payable 35,004 23,488
; Accrued Expenses 46,058 45,434 2' 94,379 79,990 l
l < lbtal Notes Payable and Other Current uabihdes . 94,379 189.990 l $1,554,329 -$1,453,363 1 4
M.DiSAOiUSETIS MUNICIPAL MiOIESAlE ELECIRIC COMPANY 8tatements of Operations March 31,1988 and 1987 (Unaudi:ed) (Dollars in 'Ihotuands)
'ntree Months Ended Twelve Months Ended March 31, March 31, 1988 1987 1988 1987 Revenues . . . . . . ... .. ... . . .
$ Ot,643 $ 50,695 $ 234,186 $ 175,440 Interest income . . . . . . . . . ... .. ... . . 5 726 7,056 24,699 37,165 Tbtal Revenues and Interest income . . . $ 74 369 $ $7,751 $ 258,885 $ 212.605 Operaung anc: Service Expenses Fuel Used in Deanc Generation . . . . .
$ 10,701 $ 6,606 $ 36,360 $ 22,423 Purchased Ibser . . . .. . .
21,$'r4 21,189 77,014 73,102 Other Operating . . .. . . . . . 3,524 2,751 12,690 11,195 Maintenance ... .. . ... 3,085 788 6,925 2.923 Depreciation . .... . . . 3,452 3,434 13,790 13,3N 7hxes Other than income . .. .. 685 700 2,691 2.757 43,021 35.468 149,470 125.7M Interest Expense Interest Charges. . 34,903 35,136 140,F89 145.727 Interest Charged to Projects During Construction . (19.551) (18.526) (73,773) (67,401) 15,352 16.610 67,116 78.326
'Ibtal Operating Costs and Interest Expense . 58,373 52,078 216,586 204.110 34 29 315 5,992 loss on Cancelled Units-net. .
(Gain) on Retirement of Detx . . . . (218) Cost of Advance Refunding . .
- - 37,644 -
34 29 37,959 5.774 Decrease in Amounts Recoserabh in the Future Under Terms of the Power Sales Agreements . 15,962 5.644 4,340 2.721
$ 74,369 $ 57,751 $ 258,885 5 212.605 Notes to Financial Statements
'Ihe accompanying unaudited financial statements should be read in conjunction with the MMWEC 1987 Annual Financial Statements.
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(> MMWEC Power Supply Program Join tly Owned Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . WJ.wpnan !isony Brook Stony Brook Unit Na 4 Intermedisse Peaking Unit Millstone Unit No. 3 Seabrook Unit No.1 location: Yarmouth, ME Ludhw, MA Ludhw,au Waterird, CT Seabrook, NH Ownen Central Maine MM4EC MM4EC Northeast L%r.nes Pubhc Senke Co. Ibmer Ca cdNJL Fuel: Na 6 Od No. 2 OFNmal Nu 2 Od Nudear Nudear Ra* Total Capacityt 619 MW 343 MW IN MW 1,150 MW 1,150 MW MMMEC Omscrshipi 217 MW 311.3 MTU) IN MW $52MW 1313 MW 0)Indudes shares Ex non member partxp Major Co rn tracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pt. Lepreau Unit 1 Niagara Riwr Project lipir& Quebec Refune Fuels Amociates location: New Brumsik, Canada Niagara Falls, NY Quelw, Canada LamTence, hM Ownen NB Electric Ibmer Ccxntn. New Mrk Pomer Audt Numerous NE tunes Refuse Pueb Awc. Fuel: Nudear HKirnelearic ifginckur6c Trash Total Capacityi 635 MW 2,400 MW 690 MW W 17 MW Contract Amount 100 MW Awrage of 62 MT 0) 25.15 MW for Phaw I (5) 11.5 MW Contract Term: 1hrough 1942' 1hrough 1995 Phaw I through IW/ 20 yean Phaw Il 195G2000 Canal Unit No. 2 Monnille/Middletown ,2, location Ekxtrne, Au hkunde, CT/ Mnkletomn, CT Onnen Montaup Eledric Ca Northeast LMties
- May imreaw in fum Fueli Na 6 Od Na 6 Od, Od/ Natural gas m g.B i h aw m 1000A N Total Capacityi 534 MW 760 MW(3 Stamde uruts) under Phase II~
492 MW(2 Middletoun uruts) Contract Amount 30 MT/$urnmer 'd8 MW divided anwng all (s) Wdi increase to 718 MW 50 MW/sinier Dw units under Phaw R Contract Term: Through 1995 Through 1992
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