Text

Commonwealth Energy Sys 1996 Annual Rept
	ML20204G410
Person / Time
Site:	Seabrook
Issue date:	12/31/1996
From:	Poist W; COMMONWEALTH ENERGY SYSTEM
To:	;
Shared Package
ML20204G407	List: ML20204G401; ML20204G410;
References
	NUDOCS 9903260142
	Download: ML20204G410 (43)
	v • d • e

{{#Wiki_filter:, _. _

u..l'. ';: J.l:.J '.

-'. ' ". _. ' '.,,..._.:.:...?\\i. .;}. l,,. -.l..... _ ',. '.,.. '_..._V' -.. ): ; > ( . ~... _-,. a. A '.'.. i ; ; : '... ; ..I ~ ~l ..:,; ) ;. $ '&... ..i '...':... _.._.T,e .l .'.l..,..y,.'. v ,h. M u:.y:'; *U [ ; ; c. s \\ n...:- ,.- ;.. [ 5,' '. [ _. *. ,'.3 g ' f*, l .....s t a, s.,, ..' ' { b4 '. ? .g. l .f. f. ~, '.. ;, __c c. ' . ':.' l .. _ f. l.... 1 N^ - l. .?l +., _ I' [e, '.-' ' -

j'.

' f..,.. ;...,... f-' '...'_'[._.'...;. .~.I ( ?. {;" ^ '. l:.

*h

'4 s '_=;*.;. -- -., 3..

_.. ; ;. y

.[ ;;~ <e '... .',y, f : - '. :' ~ ' ,h ~... ~.

f'i'.

' ' ** ^ ~ )... I' .e a.

fk}Q[,'l

'E u - :

i i 7

_[ f l ',kb ' ' ' ' j 'l-j ; ; ;._ ..l

'. -.f. '

.',9'- J '. b ..7 ~;L ..I. ,... '-[', - ll * -...- ' , 7,. ;....-, l. ', ' [ ,I f j'. [ - j.. "[ . : :. ~.. 'n - ' '

q :

_j' = ...e I. .,,[ 9' 'W v s ? '... ,l

wf-

~ ,.? ' l. '..'t. 's -,' ' !. O ' ' .2 y -.i..j Y..., ..,.y, c ';,. p ..'.j y..'. .' g.,._ ..'%4 . y ,.....,.. - [ 4 ...?. -l 1 2 t,.......- - ;,e ',' 8, s 6., g . 's.,. ( I.,,. g, .,,.. -. ~ a N., .. - 3 .a .y. l,,JW -: _ [- . _ / :. : l. :. _ }. ~. 7 .:. f :$ M. d yg{$ 3.. y.} ^ ~~ ' ' f.,. / ",.. m .'L ( L.' [, .h [gh 00.[..( hl$M p % R Y i d.- Q '..j " }M kj. c. lkO[M[F% d$)f((f(f{ ..f f.f..() j +. 9' 3.;. + u. . m .' - ~ -.. a '- J.)v}.. M :; &

. /: -

's ..x: m g....+g.UE.;. l,.... ; l; Q.

s. ;... '.

..y -.. _ ' \\ ". c. :.. J. _. ~. _.. _ >. y.

u +

> J _ :,..' q.y .: y s .3... g_ q

...: ~

y:

. a >. ; '. t

....w.. c 3.:q. g. y. 4, %., y ; ' i,* _q; f }: yy$;'.., l..:...; : ' J y * :.. 3...._. i kb j?;..:)Q. R. ;9:~ 9, % ' '... c. ..c.. 4 . >.. L.,. '. ' ' {, J =. ~. ' '. ' :.. c

- ' i, J

.,...: .~i...

.'. Wy, .1 ... 1,.,. ~ ..s.. m ....;;. :n.: +l v.3,.,. .3,. .y .y y:.. . _;, e, };';., e <:. ~.c, _q . ~. .e t ~ _

...,...~,

l ,0 W f' S 1 _-}Qhn eyo g gQgg&. -

' y.

p, ~;Q.. m k: _ [

n; Q ) ff}yW f.-..a.: :f i f~ ~ _ [

w.

7w w 5 n ;.:e p .n n. :, SIf \\ W. ', l..l.l....ff . w ? y; [f}B;.,. - c. VO'- o y>: _ 999. ;.. ;1f. - Q ]:p;c}.l;y'l'l a ... yp - / + ~. ' %..b :.?, la :. ^ b[u 4 'y 't.f y I ;. '_ 3

v. :

lh ".

.y yi

j

v.p v.4 7..'~: " f:

b ...n. o 4 ~ .._>.,.:: w, y..;:

f. g _

g; _ x.g l fy.. . /. ~ ;.. b :.py... L.: c ye . _.., :,~ y. . _. li. l- ['

'll l

~ ~ x 9..w .. ; ~ ; ; ",_...?'S.....L .. y

n;.

.g.: "...A.:

;L.

-3:,4$4. -..n M.

= +..

i 4: Q'll f l f I ' L l -) ~ : ; K: M;[f:l;ig.. ..? l.? (. %.:., $ 6. & ; _* ' : * ' V - Q% :. [ ).r....ka, ; 9 k:c ..,_ 4. , e.;; ,' f I~_..-_l~~~':

D 9903260142 990305 W. ? ; v.

~^_~7 ,.,; 3 - ; C ': 0 4: -' 'i PDR ADOCK 05000443 Y LEET I H. 1,."..~..' m. 3 I 4 J. :,. ~ 4... ~ ~ C~ '~~LMSe T O.L P PDR ... " ' t ' '.., - L - 1 0. < ' 11

l O O O i nc t ih i..

l9.,

e / _, r'lp. ':, '< \\;< " N,, y _..'., $$t:: Y:W'l -~..,,9 .g %M,e Qa e h u,s e 1.1 s \\ sQ ? M y...; i '- 5 q : vu O Gas Service Area c c a, E Electric Service Area M Gas and Electnc Service Area s Profile C ommonwealth Energy System is an ex holding company with investments in four operating public utility companies located in central, eastern and south-eastern Massachusetts. System electric operations are involved in the production and sale of electricity in 41 communities including New Bedford, Plymouth, Cambridge and the geographic area comprising Cape Cod. Gas operations serve 49 communities including New Bedford, Cambridge, Plymouth and Worcester. In addition to the utility companies, the System includes a steam distribution company, five real estate trusts, a company engaged in the operation of LNG facilities and tv,o new subsidiaries that are pursuing energy-related business opportunities. The System is a business trust organized in 1926 under the laws of Massachusetts. Subsidiaries of the System have common executive and financial management and receive technical assis-tance as well as f%ncial, data processing, accounting, legal and other services f.'am a services company subsidiary.

.... -..a.

7., 7 l

.y* _ _.,.

_a.

y.....,- -....,. ,.y. 7 W. . ~ ; L. ,,.:._, :_._. J ' '. ;. _ _: ;, _' '..' 9. [.- ' [",, _ ' [.. '. }.. ^ [l.' . ~.....,. }.. ). ' * .g. y: :. '.

flc

..., _.,'._p,,_..,. [' I.. : ',. !. l

l Q.

..; ? *l _. ' -[ -'r l, R,.

l. :.,' ', ' '.. 1 ; _ _

l l

r

, - : ;,... ; _.. ;..._. c.;_._. ; ;.. -

.- v l',

1 .?.

f'[

..',.?- N' , :. l :.. _,l -

.?

I" .'l...?L. ..}.}.. ' ' '._;,:_.. [.:.L ;e ~.. - ';: :'[.., '.L. ;f;.,.:.... ', -L:-.. :. 'l ' : ,._ T ; ;. .'..n .,1*. p' 23 ..y ~. - _ ;'..'! l.." - 3 ' ;. .i. ?l..":. _ ' ' f a 'l f. { _ y [ b.. ; $N,.,.'. ' ' ' ' ( f.; f,;. ':. '.. ; $.'.' l. '*..o g,,,g : .~..'y ' ?^k,.h ". : * ~ Y I.;,; l ' :' 0 ' T.. ;_; 3 -..':: j',::...;....,_. .c.T.O[ ^ . I

e-

... I' n' - t T. :

q..

l7.;a. + [... n."....: _ ;M _ ' ...l,....L z..a ...t..,.. ,c ... r;. _.. :. ' q

1. - )... :

1,. [:. ; ;} - q. :. .. n ..m 2 ; :._ ;. ': u- !:*.y[ 9 ....., ;e ' i: *. ' '" y; r ? " %.;[ ; e.: " ' ' f

k., '. :" -, ',..;.,.' y _ ";.

_,. '. ',. ' '.. ; ' '. h,.."7 ) <*,. g,.9 '. ' ' ', ^ '.A**'

h..

?

q,.

'.i:.. g... '. ' : :.. ' '.:. '. , -.. :...%:. v, '. '.:.g, ' /.., .'.y- ' ;v', { '.:*..'.. ;'q',!.. g t. 4 c. =;.- Y ","_ s. 7..- q,

_s;'
.......,_.,6.: ..

y-i.'.y. - ( ; ;. .:-O: y......('...

L. ':

.c

_u 2,

,.,.{.f.;?' -,, +.....; [ P_- .e' ,*[ 'I* 5 fg f [, a,*% /j Dp' g ~. l Y-V lf'svy _,&. k. w'* c. ~>> ' f' f, ', - ,/,s w r p,_,,,,, g y h.. b .Wl hY n lf f f ) f ?" I - . hfd *j +h Q,thg k {:&Y, ?' f*&}Qv. GG f CW $/ Yhf R )gW W lh h Ah V4 . y f,g - A,' e \\ fy x ~ Q' _,:,j.kh b: ..I

.L/

c "by h ~\\ q,,,,,,,Q ' . pg.:;. p , fs L g p 4 pf, /./

.yyp.,.o, #

\\ x ,.3 3 l que g [' W l } ;'1 ! l

r. '.f i

g 5 g. .s Q 9903260142 990305 ~1 PDR ADOCk 05000443 P PDH

) / Q Q N h be B Gas Service Area ca. c.a s,, E Elect oc Service Area E Gas and Electric Service Area p -. - e Profile C ommonwealth Energy System is an ex holding company with investments in four operating public utility companies located in central, eastern and south-eastern Massachusetts. System electric operations are involved in the production and sale of electricity in 41 communities including New Bedford, Plymouth, Cambridge and the geographic area comprising Cape Cod. Gas operations serve 49 communities including New Bedford, Cambridge, Plymouth and Worcester. In addition to the utility companies, the System includes a steam distribution company, five real estate trusts, a company engaged in the operation of LNG facilities and two new subsidiaries that are pursuing energy-related business opportunities. The System is a business trust organized in 1926 under the laws of Massachusetts. Subsidiaries of the System have common executive and financial management and receive technical assis-tance as well as financial, data processing, accounting, legal and other services from a services company subsidiary.

' l f, 4 -: Comycrative Highlights COMEnergy-Commonwealth Energy System and Subsidiary Companies ~ Three-Year ' ~ Cr wt e 1996 1995 1994

(%)L

Finemelal Date (in' millions)-

Operadng Revenue? $1,010.9 $929.3 - ' $977.6 t ' 2.5 ? ' Operating incomei ' $96.7 $94.5 $91.8, L 4.2 ' Net'Idcorhe' ' $59.2. $51M . $49.0 . 8.9 ~ Ccenenen Sleere Date ~ Earnings; $2.70 - $2.36 - $2.29. [7.4 ' Dividends' Paid ' ~$1.53 $1.50 $1.49 ~ 1.6 Dividend Yield - . 6.6% 6.7% 8.2% Ln/a ' Closing Mark'et Price Range .$25W$21% '$23 -$17% -. $22W$17% n/a Market Price at End ' f Year .$23% $22%- $18 n/a'- o ~ Average Shares Outstanding 21,529,676 21,311,836 20,827,362 .1.8 ' Book Value $19.31 $18.15 $17 24 5.7 -

Dividend Payout Ratio 56.7 63.6 64.9

-n/a Price / Earnings Ratio' ~ 8.7 9.5 7.9 ~n/a .'s acwrj [ { f Y 1 Bernings; Dividends Paid Return.en Average-.

- Per sleere Per Sleare Ceansmen Begelty'-

s T Common Share data has b'een restaied for prior periods to reflect a two-for-one stock split that became effective June 5,1996. 1

To @ur Shareholders e are pleased to report to you that COM/ Energy achieved our May 1997 record financial results for 1996. In this annual report we dividend Is the 200th will be explaining the details of those results in a question and consecutive quarterly dividend paid without a decrease, a record raised by shareholders and the investment community. of accomplishment stretching 50 years, What are the highlights of COM/ Energy's 1996 tearting lust after the financialperformance? cnd of World War II. In 1996: 1 COM/ Energy reached record year-end earnings of $2.70 per share. This is an increase of 14.4% over the $2.36 per share achieved in 1995, and marked the fifth consecutive year that earnings per common share increased. Return on common equity was 14.4%, compared to 13.3% last year, and ranks among the highest in the industry. M Value Une Peer Group Cash flow increased from $5.33 per share in 1995 to $5.78 pt ti tg gS 2 3 2 sl per share in 1996. This new mark exceeds the common dividend rate by nearly four times. COM/ Energy's market price closed 1996 at $23%, an increase of 5% over last year's close of $22%. This price appreciation coupled with the $1.53 paid in dividends during the year provided a total shareholder return of about 12% for the year. This compares very favorably to the weighted average of 1.5% achieved by our peer group of 91 electric utilities followed by Value Line, Inc. COM/ Energy's total return ranked in the top 20% of the peer group for the cumulative U five-year period. Total Return to The common equity component of total capitalization, exclu-sive of short-term debt, increased from 48% io 52%, while p gods Ended 1996 long-term debt decreased from 50% to 46%. 2

l s l 1 What is COM: Energy's payment history on common dividends? In March 1996, we increased our annual dividend to $1.54 from $1.50 per share, achieving a dividend payout ratio of 57%. Since 1990, the dividend has increased three times. Your Board of Trustees will continue, over time, to review the System's financial performance and other factors influencing the rate of dividends paid. Our May 1997 dividend is the 200th consecutive quarterly dividend paid without a decrease, a record of accomplishment stretching 50 years, starting just after the end of World War ll. 1 q Why did COM/ Energy split its shares in 1996? After a detailed review of the trading patterns of our shares and an analysis of the motivation behind investor trading decisions, a determination was made to split COM/ Energy shares, two-for-one. Over time, we feel this action will increase trading activity; broaden our shareholder base; improve market liquidity for our shares; put the share price in a range consistent with the rest of the industry; and, generate greater investor interest and a subsequent increase in share price. At the time of the split, COM/ Energy shares were among the highest-priced utility shares in the country. LWliam G. Poist. President and Chief Executive Officer How will COM/ Energy be affected financially by the restructuring of the electric industry? Efforts now underway to restructure the electric industry in Massachusetts could have a significant impact on the way our electric businesses recover their costs. In working with state officials on this issue, we have taken an active and aggressive role ;n making our views known and in helping to define the final plan. At this point (March 1997), we are encouraged by proposals made by the Massachusetts Attorney General, the Massachusetts Department of Public Utilities, and the Governor of Massachusetts 3

that recognize the rights of utilities to recover 100% of their proven " stranded" costs. A more detailed discussion of Massachusetts' j Cespite the fact that efforts to restructure the electric utility industry is included on page 11 of this annual report. earnings in 1996, j O the consolidaticn of l kl What are COM2nergy's plans for continued g riur utility operations is an important in addition to our continuing efforts to increase sales, reduce forward looking operating costs, meet and exceed customer expectations and build a dedicated and creative workforce, we have recently taken action to make the two important actions that we believe will improve our competitive necessary changes position and allow COM/ Energy to generate continued positive ) today that will financial results for many years to come. allow us to First, the System established two new unregulated companies: COM/ Energy Enterprises, Inc. and COM/ Energy Resources, Inc. seize opportunities The former is dedicated to pursuing business opportunities in the tomorrow. emerging unregulated energy-related markets that are now being created as a result of the restructuring of the gas and electric utility J industries and the emergence of new energy-related technologies. Its initial focus is the acquisition, development and/or manage-ment of electric, heating, and cooling systems for individual or groups of institutional, commercial and industrial customers. COM/ Energy Resources' initial charge is to develop and mar-ket a portfolio of natural gas supplies, including liquefied natural gas from our facility in Hopkinton. Mr. Leonard R. Devanna, vice president for strategic planning e*9 5 n 33g3 gf and new business development, was appointed president and chief operating officer of both companies. Len has held senior management positions with COM/ Energy for the past fifteen years. Additionally, we welcomed Mr. Robert A. Paul, senior vice president for corporate planning, in the first quarter of 1997. Bob joins the COM/ Energy Management Committee and will focus his attention on the development of a strategic vision and plans, as well as alliances for COM/ Energy in the new restructured arena. He comes to COM/ Energy with many years of experience, both in high technology and utility operations. Also in 1996, we finalized our planning for the consolidation of the management of our utility operations. This consolidation, which was announced in the first quarter of 1997, is eliminating duplication and promoting efficiency through the combination of

= =1= =

Consolidated certain customer service, administrative, and support functions. Not income These important effic:encies, over and above the gains we had awu wa 4

f 4 already achieved in controlling costs of our previously stand-alcne utility units, willlead to the elimination of approximately 15% of our 2,000 positions system-wide, creating an estimated 8% ($20 million) reduction in our annual operating costs. Despite the fact that we had record earnings in 1996, the con-solidation of our utility operations is an important forward-looking action to make the necessary changes today that will allow us to seize opportunities tomorrow. We are most hopeful that we can make these changes through attrition and a personnel reduction program to be offered during the second quarter of 1997. And, as a result of these efforts, we are confident that our customers will see only positive changes; safety, reliab::ity, and customer satis-faction will continue to be top prioritier. Both units will continue j to operate under their existing COM/ Gas and COM/ Electric names. jj(( la line with our consolidation efforts, Russell D. Wright, presi-dent and chief operating officer of our electric division since 1993, &ccepted the position of president and chief operating officer of our ] q gas division as well. Russ has been with the system for 27 years, 4,i l q including five years as our chief financial officer. S d h [ j Efforts to control operating costs are not new to COM/ Energy. ] h ] Since 1990, the company has reduced its workforce by 23%. [ h h j The consolidation of our gas and electric units will bring that @ d total to approximately 37%. p y f In another important change to our management team, { d {] Mr. John R. Williams, vice president of operations for the electric y

M division, has become vice president of corporate services and a Lj h h

= n a a member of both the System's Management Committee and the amminas Full time Board of Directors of our regulated affiliates. John has served Employees in a number of senior management positions in our gas, electric, and services companies since 1974. Mr. Kevin F. Roberts suc-ceeded John as vice president of electric operations. In closing, we are confident that our experience, skills, prep-aration and tradition of excellence will enable COM/ Energy to not only weather the storms of industry restructuring but to take advan-tage of a number of emerging opportunities to grow our business. We extend our thanks to you, our shareholders, for your con-fidence and continued support of Commonwealth Energy System. j Sincerely, WW /& William G. Poist President and Chief Executive Officer [ 5 \\ N

Utility Operations What were the utility operations' financial results for 1996? 1996 was an outstanding year with record net income for both electric and gas operations. Net income was more than $41 million for electric operations and almost $17 million for gas operations. Firm gas sales reached an all-time high and retail electric sales reached near record . ~ '.. levels. In addition, earnings were significantly increased through ~ ongoing aggressive cost control efforts and improved operating f,.. + procedures. We're continuing on that track in 1997, looking at h)q I % additional ways to reduce costs, increase sales, and position Q ( [, - f ourselves for further success in the upcoming years. ~ 3,- What are you doing specifically to lower operating costs? l ~*% During thu past several years we have embarked on an aggressive cost-cutting program in our electric, gas and service units. In 1996, we continued on that course by planning the consolidation of man- .r Russel/ D. Wright. agement and operation functions. This consolidation creates one President and Chiel Operating Otticer management team, and in 1997 we began merging like functions COM Gas and COM Electric and activities to eliminate duplication and create the most efficient and cost-effective operation possible. This move will cut annual operating expenses by approximately $20 million and will significantly enhance our position in the energy arena. As Bill Poist noted in his letter to you, we began this consoli-dation in a year of record earnings to improve our competitive posi-tion for the future. I believe this move should be viewed as a state-l f7 M ment of strength and forward thinking by the management of j. - ' f'. (. Commonwealth Energy System. .,[- In addition to our ongoing consolidation, we are continuously fine-o ?,.g ~ ' -. ~ h,' ' tuning our operations for maximum efficiency-saving money where f,0 _ Af#; possible and improving service for our customers. Some examples - N 9'S of our cost savings measures include i I'h Cutting the total value of our inventories through use of advanced ( computerized inventory control systems and innovative partner-l ships with suppliers. COM/ Electric's inventory is down almost K- ), .'m A 0 12% from December 1995. COM/ Gas is installing a new bar cod-ing system, further reducing stock requirements and dramatically In the mid-50s, Cambridge Electric's cus. reducing labor costs. tomer service operators were dependent on papenecords. Increasing the use of trenchless technologies at COM/ Gas with devices such as a miniature camera to inspect the inside walls of low pressure gas mains without interrupting service to customers; 6 t-----

..y .f ,7.".[.....,- -]. '%Q d g; '-. ' r,.+.,, r ,) ,' ' iy,." Mf y. 't Q 7;', ;. G.* Y, . r,..:.,' - -f,.*..., '.,:. $ ,e. 7_

.r.....'

5 ,a 1 5,..

n J(.

U ...i.. t; .. ;. 7 W' '.-.u -' ~; _ ~. ..' ~, _ t.,. ],. - t g ; p. _;y ., Z. ,1:,;r. g 4 ._.3 ..r::. ; ;,. '; ; ^ ' ') Y, < '. :^. Jl k ^ _,J,, '...,' '..); '. %, ;..

a..:..'..s[* ]
-;-...~.'s..

4-f. , 'e; ^ t. i. f:(:,, ;,4'%

m

't ^, - ' ,,1 .* -._e. Q :.- - ' $,,;-, 1 ,_.,:.._-. 4, ;. '.t -'S N': ._,,s.,..

.. ' 4..: ':~,-<
-.. e;g % _.,...

3 Y.... ;,:., .,A.. \\;., J.. }c r**'. n g ..,... ', '~J',',, v..'.. .,s, : r: , - *,g )'i.: !

,.,o :-..

.s ; [ ;.., },, . _ e .g y,e .g _..'to , (; _ l ' ;,...,...

i.;3

. 'J,. ' .f. ' ,. ) T. '... ',N. :. *- '.,.: ^. '.':. ^ - *r- ..y ' * -f.s1: ^ ' * ^. '. " .s. r ..:,V'_ ; h, f L. ; - ' ; %, 's, ';. - .d;.:.,. ,* ^ * ,'l f. L*: 's- _ :^ ,:: '.- i .g. .v-7, :. .. j. ' I, yl ? ..,7 .4. 'f.. ', s..,:.j,;. ',.n :h.\\'Y"'.

,* A f gff."L* 'f.

.\\ . -..:_..ys,,. A ..s,., ;. 2, _- '.'..:,, -. .s_ ...,.3.. . ' K,,.4 - *,. +b r , ),[ -*'s., .. ' L i,,. . _' g.L' * ? ' ty ...,',','..%.s i. ' '., *,. ;. r r _.,y. N;!: ,..p,-...,,, f.,,. >, 4 .+,..'m..: 'l R. ;;'[., ', '..' *".., ". _ -' ' .,. ~.'

.-l.,-

~...,.r'* ; l;.{g?.

_.f

' s,rd ., N1 V y.,.. ,,,s .j(:; : ).. ,...-..li..r....,7,: 3., .i g..., ...s.. .l f.,j g..r ; g .c. ,3 ,.g.....3,. ., ;,,,,,....,., 7 j. .t,.,...,.:.,. y;a p ,.. > r,,,,. . Y '5; ,4., ' I. l. ll .-l _._, ':l ,M';", "".k_~ .j_w

y,.,-),>

y.,:'.,_ ..:y c6-e.,, .n ..'.I' _? ,*,M. -] _,. '_..._ . _,...... ~... f^- ^ ' ", _.) 'Q,..>.l-_* [,.'. a.' ',}, }?' :. ' ':n ",

p. '

y. ,i,. r.. u .. p. ,...{,.. /.. 4 .'4 .A.'- . '" N ( * ' .., h ','.'9*: y,. ....i, e ',.7, f* >f ' ' "f

, ( I- ) ' * . -' '

.I.,.'.[..,,' ., j.. A.. l .j. ;,** > (. ~ ,..b;.p. 7' &c., -' i

.., r3 f:, er..

a.- .:.e -.s,.,;., r*7+q......., ~ .., : ;.. '. - i,'. ..'s ,,:*~- y.

t..: o. g, g

. '....,.. ~... - f h;l, .v. .;..,.c <-. ....,e l4..f.,' *: ; ; '. l.. .-.;... 3.. ,,y. s..; t.. _ ".,l ) {l ^.y. '.,q .l .~ l I;..ll 3... '.:.l:?,. ;.. ( l,M '< 2..,..... -,,..i,.I..~ ,g g e. } '.f. :..-.. l..,.., o,....... .,,a 9. 1...;. .{

.l,l;.

l .,s- .. g.. < - .n:..a.,.,.- e.....r. e .a a , e . s + '. -. t l; *, ' ? i u: ,.. n :::. .. ""..:.r : ; m. c... .y.. e.. . v v., :...".'.'.;,..' c ; ~.. :... .e r~. 1 l . ', '; ". l,,'.. _. i

l 6

' *. ' }.,' y:y.;;

s

.. s r

e. '..

c. 4-w*

f. ~

. ;~ r ' '. ; ',,[ i. v.- J. } ' N,,,. [ 'l l' ",.,. 'I, ' # /' : ' f U " ..t*. ',,.l_.d. -'u..L.'. '....y.

^ ' ' ' [, f. *.: '] ' _., ' '

',) ' Q.f ': %. '.p l.,y.* * ',Q .,'* Gu 3 s' ' -' ' '*:,, l :..? .; $

hM...

. $ ' -:. ? : N.. : j.l. :l l;. _...,,If.,.l.

L.,f :
f.llh,,, f.,,;y. ;h :.!. N:; \\:,,,,.I. 0( '. _.......h;..

.g.1,4 _ ;ch.,.

3 _ <. ;_ ; c n, _. ___,, - u,. -. 5; .,(.{ ~ I v v ~- u, ; ...q,,, N' f N '. l l 4, .l >',L t.,, '. . i .p - + N Y Y

g..~, *-h.'e g?g fjj i

' '~* -

Y

' : Y '.. '..' Y '. s N s ' I %. - Y

- ' k.' s '..' ' ' '

* - Y s s@L.. 3y g M&'if_ g Q' g ?'?-%., g5 0 ;f g': g g g g : g/ag%Qy p -.1 .c.',.. 4. [s < 'F.',,,.,J ,#c. hMN .S .., 6 F* .t, 2.. - - - t ' ' '. ' ~ ^ 'I_" l' 9 I k . *. ~. ', : l-m. V '%.s wp.gp.y. ;U:g.q:r.>.'7 n'^ q[;.': M:_+._L;. ;: y' Wp.D.,;ay -:f.W,,y'M.t qi,' ?[I,[ I S[',"c.y u 7., :.y.7.} { ;. l((g.. .L.p

4.. p;...'hc.T..,-,'.J,'

'....',.. [ (* ;'[ *. ~ - l,'j,, I ' [ ' [. 'g ' ' :',, '. '.. c. ', I (; ' s, .., q.I, .* !.. h.it s [ : ', '. '. M. '. - . g'.'--4' .s' '..- -

.,.., g*;+*~ *t,'..?.,

. '.,, ', *.] ". ~ [.. [ c'.' ' ,:s- . n (:, '.. ",i. [ $ 'k - L ,' - ".- -..:' -,.,'.~,~f.. + 4-.', ..4#- p . *..t , e M_ * .*9 . i :. c ch ', '. : ,l f ^.. ,l.. l ' r; ~' I "; ! -~ ' i:...... ,:. (! f .f..,. ^ v. ^" 1 ..:,,_,;;,*_. ;, ; j, y. :.. ,..r, ..c.,..f y ?,g i.:. '..,, g,.,, .,;f.p:,l

'..)

.-*'1 4 ., q.. j ;.. - ?...f-l[ -- h_.9..] ..,..?.,,y',.i._'.(_.. l.,.-- ..,\\. ..,J..,:. err 4, . i ... %l t '.,3 yp 3 'I',,

_ ' l, ll ' Y l _ l '( f; j \\ ' ' n..,,'. ' - ' ;* ',

s. : -'

n ?.,,y';. : _.i f. 0.*;. j '.R ,\\ l.' ?: .. ' ^ {;.;.l, '. ],,.fl.l* ' : : '.)',9 hf' I^ .; ^ i '.. :-

. ' E; y ",

.N'.' ' j~ 4. l..

) ;, l.,'.. _._ Q' J, (

p y ,,. y. j:dl: *.4 ( ~ y m f)" 5 '. ". c ? ,.y,...,,,,...'. '.. - 5; sl*hfw: y -' . ', Wh.$',:t '.':('E' _ :,: :j?'L"a,. ..{.? i ^ .b 'Q g, -,. n +. '; ....f.g >,,o : ym. y{l {*'%. . ;+ e s p',,"'. .,~.<o.3....4.*;',q,g..'.;~.~~.....,.,,.. t. o :.... .. 6 ^'. _ y.& ; y :.., :. '. ", '., _... 0..'.,,.; .., *.,k '.m- ._.'.'y. e. ,i w a. = 3 l.,,, O( ' :;7. n.. ::,. .q _ c'.w'., 'n '.. n ' R:. * ' ; _". .g as_ .. ~., .b n .e -'.'..*:s'j, L l. L :% '. * '.s_....,.'p.... ^ h ~' '

.,.^)?L '.'.:.

%'. '. :,.. m - s , r, .' [- ..s.;.Y~-

S
,jo 4.',

.f,f...,, :,v 7.'.2.' 3<- '.n -1.

e, ' "..* ' {,'%

'. ' Q ' ' ' w', ,.}. 'l ..'^? ...$

l. '.... li 4 *l['

'..,,(\\b

^'*

..,'Yj*Q:l, .. j h.;. ' : ".. ' ^ :; %:' n : ' 4 'Y; .EI 'f rf .. l r \\.*, ;. ' . :.., _,;.....,,'.\\ 7: i ' [ "_ ', _ '...' L, l

..[' l~,.,

l :. L. - _,.,l 's .3 :} _. 3

.'~,...l t

.......s.,.; ..] , l. N_.'#, kh'b ' * :',' f. ".* ;, E ; f l',.:. ' ",, - .t-f \\, ,.*~;,,, _,,....._ i; c,, '7- $Q,-)_Q ), f.,.. $ -.i.} ':l_ ' ' ' '. 'W.:,r. y. : _ t e;.; s.':y,... ;.. '* f .k'[,L

3:..... " -Q., :

m..- ".y n2 i,' ' ',' ' :.'. l j.'_ 'c , e l [jv..' f ;%'. ^, "-*.: s Y.

b i ',v

,f-. -l:.. t.*f.".y K '.t r * ".g,r . ')..:". '

gw.:t:- f.y,. b,,3,.

W M y ;6,. ' _:

. '.Q;'

.J m,

...__,_"',',y'..: -... - - a '. ' ~<: '.:. ,.. ' g n *:<._ '...'..,:...... ~... *.. y :.y _ . q.; : :: > C '- ..Y.. -* ;.: < ,. ~, .y..

~.. _ '% ;

~. t' ..... e ~,,.3, :.. \\_ ;, ',y *.. '.....l, . -,.s..

; ~;

. 9..a.. ;..c: ....., j..,... _

'A

-. '.j- ...,. y ,k.s.; ?:.,( ..,....:, j;- t s.. , ; ;D* o. q. ?,Q " _...;.. :-.'. : ..,......_..a....'...q..; .,. v..y J,,;. y 1 :... _- .f.'.,. ' :," ; f i.. ;.-. >. ,s...., ,c 7 _

,I

^ 4...

y., y - -..;

.r_.... 0 s,. . ;, s,. ... :'y.;. f. p.:g,,... .. /; .J ~ ;.. .. _....- x::iq.... :: %'e 'N' '.%i',%.h.y .+;J:* l .<4 p.U.. v..:'. :. s r,-.. - .! ;. ? ; ;. :.,.p." y~. '.7,. *," y....,Q. '. f 3....., ',.;., :3 ;, z.,:;. - =. ~. ~:% ._ s

y y s, y

y._.3t ',...._. n_ v. - s.. 3;;; :. ;. :,.- -.

,,;.. ;. ^.- w,,, :. - 'q.... _.; -, '-..N-.. u;4,',t .'g .s_-

l. ; l3

.",,,,,...;l'.(:.f,.'-..:,.._.,,*.'.>.'.:..'8

. '..,', ;,;'. (g i,p (. .. !: ' , { '. : '. ' q ;,,, ?.._._. ~ : l ( : 2*v ? p ,.,f4;, - n.:. "f' 4. _;\\. .y"- ~. + ,;,..) y .3 ' E , ^, 4 N'.,,f,, .!> ;l ? ; l '. ' \\

.' ~

b -:_,'

f

,...V:..; ,- i. ' ' ' * .:c. '* : .'-[ ,Y: ,., [.., y - l '. 'Y '. ' ' ' _ '. ' '- ,s. l* ' ' ',' _ ',. ' ~'b! 'W'

J.,

p.. ^ .4 l0 . ' &y '., ", *.; :]:. },

? ';: ,

, e l,;u-Q,. l 4 J r* # k ;-'y!., _ , }))lY [ ~, ' : f;',(:..; l ',.,. ' *( b[ 1.:.;,. -,, o.. -,,.-,;.' '.. _._. ... '.<. J.. ' ' p *_ ,'. g i .* i fq , *,. r ' f* -i'

..: j-w

,'c ,.;y. f.,y... ~ ', ).. 'L, .'.u. , ? )',Q' ' I j'? Yk :,'. lj f R,3 . ' I,.. i.,.., *.rc. r\\^.. A ^ ^ Y 'l Y ~.. .a I. e, * :.'- ',.'.r. .' l .,r. Y...l~. l.'.q[. j--,.,". ':s. - ';<*] s *: T.' C-' l' : ' ', ". ;[. 4 _.\\. '. j. 3.. :l '.. ?* r: 's t &.9 1$% : /.,Q,' %-

y.

~;;; !. ' l p: L ' J.',.',., i I. '. 3 ? '. Y gf b - .:..-w,...',e,.__ P-. i; ....s.- - -.. '., ".. .'.'? i'.. .; y hr 4 e ' -. % ;. ^; ' . g. 8 - g ,4-s - - 3 ,g hf .-l.... [ - h '... g ; . ',.,,. '.. :* -,,', '.,$ ' q. j{.'.',,' k. It" (f f Vj -[*2 " h I i... ,[

l

avi : .....,. : -.. v., . s

,.j.. _.

p.- <- 1....:.,.p....s,....e ; o; ;. ,..:,...;.g 1 .1 ,...,,.. p'(. r...g,.o gr, b .,...c

9.. :,. -,..,.

<, ;:.3.r. :;.

a..:*

..,y....;.. : :..a. ..:,,.....,_,a, : :. f.. 4 :;.. [g,p ..?,.s.,..-* s. ..'.:f'. r,$,.,.,,..'.J:..,, ?. 2 ....*?sf.,.,.,.v-,; 3 $/; ;.d, t ..*)... '. e,. *:..e:* .u'.

4 t..e

.y.. .., -..........g

t t;.

y .... p,'..

p

~.~c. :

k. _.' : : y.....:.-.'.g..

..;A', .-.,~, '.. ; L e :...... :...., ' - 9.... :,,. :

.;. s..v :.3n... _ -... : M..:...:.,-

'e s

u...'.' j,1 ^...:,f.'.;') &.,. h i' f;[& f, _f..?.. : { j f. '. ? :.. L, ?

l c .,.s. s ....,,7 ,,. I;l;f... L.' l. } : } '. ',.'.f..L.. < >. :.

& ( )....

c ' CW> f sy:y3y'g;&;:a..f.f%%(.gg...f 3.z.y ;.y';.v. .. 9' f , -{'

.f' ) j:Q.;G:y:

'.l Q.[ ~ }.;)% 3.: !Q' g.. f..... d .s. p

4...

.pn ^ f if y;,9 3,, Q.;;f .:. Qf: i l l_ ' lJf ,.., 7 (._ c ',;,,,. < 4., ~_ _. ; 1. ( ;.,':;Ql0f Q19:-._ ; ;.,....) ;.

lfs.

,, 4..; :....;. ?.',;;<. . ) {.,, ;., '. ;. ' _., .... : ; " y,. '.;} Q,~ -q..,,,.,..,r'.- .,1.- .i y-

,,.... !,[.av.

c.r~.';'....id;qy .9: y 7: -.:... q.:~, c - - a..... w >x ,. w: ; ..., s y....

u. :. >.....

...-.:......, - - a -.: -, /.,;p, v. . ~,.. g,n w. 9-, 9 w: : ; ; ..;c ,:.:.v j.. s s k (. %. y. .. y 9. p: c. m q.,_,. ?.;,.. : _._* ; (. ', f. :.,jQ: :y..,. s;y $ . - e y ~~. ".;. f y

(.... r..;;.

,. %.,. d.;; y, '".};",..",,t.* N:L%.),ew:.., >...:; ' y 3;, b, ' y< 5. ~...;;.. :, : /.'.: J * '. ' ' s -,q p _,, r a

p.. O.. <

c. a.. .,...... 1: .t c.

Q ' 0' :ll ' *

.,.: e. ' &,.:.A I J ;T,.:. ..~ s

,.,. ( l: :V;.;,; h.: n

.. ;.:.:. '. :)P; 'i j. t :f......... v 1. a,..., :.,.......,,;.. - - J.. '. '::? : :..;... ?.,j :. :, ~. ' (; A -.y; , 4 ._,.,m..v..,..:..e.: ;;.. -

. n.,,: .,. pyy, c...y. g. ~.., p.,; 4 a

.e ::.. ; .v, c v, ~,. .; ;....s. s_,.,.;.....,..... .:..._,+.,.; _. _.,,z...:.e.....,,.

: .,,. y ',.p..,,.c. Q3 N... :., ;... e <.. ' '......;,. - T.;.,c..,.. ( j.s':y;q;?

,'ff,; g~.. . 7.cy xg.,, ;.., .p .."': -v,J..,,.; n ......g... -c <(.'. /.......p. : ,. 7. '; 3 ,y 4 iq. . }, .[. pj,.[ f,. 9.,F,'.];f.ly:..l.l::::3 ) '. N q..i'%.g.'. f,. ,,,. y. :; ',_v. L..;,, _ _.. l, ):,;. '..;,', J;; .'. ' ' " f.: ~., :p :;,. - l;j,,: ;.. ):l. :. f,..*i :' :e _. s.. . l ;'l ' i ;:. q t 5. :: ^.,)., _. _. '..,. y. a .,. 'jA:3.~ ,,Q. }f., ;.f;.yy y., ', - . >,:).1 }.;b_, 4... ' ; f.. ;,: :.. '.i ' - W'. .;O.f '.^ ' . ',-' -...? .. [ [:.,;.:y ' '.*; 5:% 4.:..: ' ^ '::,; ; f. :,:y *.1. s.. ,. m.. - _c f,.Y, f g;:. 4.MG.* W:,.l.,% l.,. :_ _.y i. ; s;; - ',T '. 0:';l ';', - ^ N : y.). " y .. y. - [ '. {l. l p ;.,y.;; p.[. _... ;, ' j.; &.. l 'jl '.... '. N.,L ? ". '. '. j,..Y 1, ^ ;&sq,:([';,*.'y;[,: 'k'V Y: {D 'f,' 1 . 4:

, y j.* e. x: ..e._..p:,%. : O q > 5MV

.,s.., .. n...:. :*...-.. 3. g,.,.:.. ~

;y 7, :..::

. :3 ::. .. p;. ,p:: c ...,.:' r;; * * :.:,.. ..:., :,.. c; ; > ;.: ;,.;., v.,g,.. ,c..,. ... -.., : :.: q..:...;..~,. ,.7

<'a.

9., i i ...., -,,,'.'v,3 a. t s 4.....o;f'..I 'Q$..w. .,., 3.,.; f; 9 '..a'- -2~.., .,, ;1,,, ..,yo v.,,..,. ...,'....,..'-l Q.[Q-o. gg. ..).. . j;, '. _ ' ', *.. 3;} ._*u. 4 a., .....,.. ;[ g

1

.,.f ...g - ;f, '. h A

i

. ;[.g;.,.,, p. : y : :;;, r, ,;,;! ' + ,.,,. ( ;., - 1... y ','If,..'I.N. Q',,; /, d. [6;4 f, )., ;. .y ' ( ; .'d.,p

I..

...,,, '.e, " $, g. N':.:.gh. '"f..'I.. '.,Q,, p. ;., -.. ..,.g...,.... :. .,y, h, J I '. :. '.:,[' ' h.L ', ' [.i. [..'y: J......,.l :e. k '...,..l.[,'+t'-' . J'. ., s. .s. i, s .... u g. ..) a ,,3, 7.,, '.i.u','.~r; s *, '..$,,..l ;f. a. A* Il..=.-l .,.f.,*,.*.. -..!. '...

i.,..

v Y

_ J' *. *

[.. ? _.,.. ; 4,,'.-. ',.;'

t\\.*.,n. \\ % d. qf).

. n :.s ). .v L _.*,.,, '.q.}:. y.g c:, '.. p(s,Q'T.;n :.fa,. .pg - y s..gf, n . ).m..qy[3,. n.? ?ya., y,.,", 3 ; y k :%3 f., c,..-

-., g

,:. - g.7. ; y; : <.,... ; _,.O t, .f s t.. .f M,J .h.. .- a (,'::*\\ ' 3y ::, ;.; -....:.. [.,.' '. y. ; :,' ;, ', },, '.,y..., 3 .f;,_

','[. 5 ;' ( [..

,[.. ,.'.,., 'c'-'...e... _. ' ' - e,'. 'I -' } . : h.;.'M h ',{. 3

,:,.

ih

,. [.,,,',;*.* ' ({ *. '. ', ff .,'..,k.p:,'.',..I.,.,,.g.1 r-, ' '- t. , 5 *.j' .lf [; a,

) +

,4'.X ; ':'; -l ' f

','"a...~..: ; ' _

(_ '. '., g

= '..

.i- 'S.*'. :.,,,, _y'_'; .: '...g',"..r,-.;,..w;t s. L :,* *. 3. t ..s'.- Q;

y,.';..

.,y,, ' ' ^ p: - : 4 d%.;.p' ') ;,' ~ _-.';-> '" p,,. ' o.. - + - o_. f;, ),. . ' z.) [.. l1r _ '+ e.... n 1.- J v. ._. ; '.'_.,,',.] .,. ;. g 1 -jy.., ; p',. j*., 'y,; &,,g:.: ' '. y. .,; *. ',,, ^'f

,*(._,....'r

'_[ [' '. ', }a;. ,,,.*e,. ='[iP j [ jf;; '. ' 9... :. .}[.. .:j j -L f. G:;[,;.. _ c.s. } V 4\\.., ' .a.I'_ ..,,?,,, _ s ~ -l... /, r. l t 4 s ,i'I [ (*= f- ..,.. y ' g / (,. " i "-l-

, 9 '., C..; ',ff;. 7 ' v-;* f g'

. *m, 3.- ;,,.f'l ' :&,. :. :;.*.,',,..,*..,:e... s l.i t F:i - 'r.

,.#yl.,.

,,.7..;. -, ',.j, '.l. .j a - f, Q *., t' *. .f " .a. :.- (/ / y;.g., z.. ::.. u., y. ;p.:, _.p e.,y3_ y;y.: ;.~,:7g._ ; = ;e:. ;..._,?.._...g 3.:.:.n . = :.u. ,.y.m;.,.g.:c y _ m.., apJQ,,( g. %w,. ;mp ;3...y . ;.y s... ;:: ;. q;y,.

~f

.. c : >;. : zb.: *.:-., y. ; ; ;.-. -, R 'g;: gr m.. ,.t 'n.

c. y.,: ::....-'w:

g' ' xn ' : ; ' y &. :Q, s.,,. .c.- Q' ..,....... ;..:;:..,;.':. Q.; W :: i. ; : ' -) g'..f..*; :[:%4..T;Q,Ji ',T.: ' l L' '. i p' 2Tl" r* .w.' i

c. -'i,,;..-

';.w.:

p ' ? :

,, f,v ; .',,."+; . p;.,{.,..L ' ; ; ;,,;.[, :,; : W.. j,q..,.; 5le +.,,', ty fait;3,, g,.G, ?. j;

" ' q,,.;',.-l*',.,,i.,....:*'5.$

.9 7 j. .g. f.~ C j N.74 ('.o , i,.,'- t i. ;e ?. ::. '.. .s.. :f

g 4
,; Lf, ?. , f. ' :J ';, [;;.giz.;.. 5.f agl :: v.. :,..,. '.

'.K*,.-:,: y : n. .:7..g:.., ; _.R;q::g y. :: 4:]'.' ' * ' '.' '. s, ' Ll ?i '..,t *:*.* . 9. ;;

l.

.;,'L .. : ~.,.....:.. [:. ! 3:y 9 _ y, ^ Q ;; ', :..'. ;..: ...:,...g ;;% h.; '.~: c :' 9.r,;.p. ; '.:'Q:;':; }..; i '. ? i ;

]_ ~'L,. 'q r...'lt.!.i. :.g.. : ;, ;' ' ' ;. - 1:> :

a. ' f.',.'.'.%. '.:,

y.

n $ _;.',, ". h lll ).?iL*V4..N m::1a t c.,

y.;:,.

., p ?:. .A .-('\\

..- ',',; '. J.* ' % ' 4 Y: , < + -

(:;.,;; j . f;,

..e*.,

? ..,:...., :q, ;.,. e.", r! ; '.... ,l .;,6

.. t e i c.
, /., e.- ;

v.. j, e q. -., j y.... L,,,,,,N. ' e. -5 - S. .,,',e 3 O 3 ,,,,,. ? Q,..:. if;,.,. 7'.L't.:...,',,.,...y

f...x..'

' s. d s.- p.,.-.. - ,a ..w-.,.. ,.6 't.. ,..a,. 4;..",'.*.,,;. > 3 y, n,p '. ', *...., c,.. 3 ;..

f...... '..j, v.

i o. +- .f, .o .;g p a

,g;.

[i ). ( I s o;:' k - ,4. :-., .., - *,7..,.7..,,f..f,s. (, .H p , 3, p, .s.i..,

f. ; -

.;7. ;. f.s... y e., r- . 3. c... ..f, ....g; ; ;d;.,, e . q ' ' '.. n .q

s. 2.i.,,,

.s,...,.. _ ..V. r - < w ;ng.p .,.s. .~:r. .-,..,.a,.., ,,c

..y

,...., pn e n.r.k,'.,...

,. -:: >. ',;s'..,'-

e.h1d.

s;. >.'~

.,... :' : 2. u... ..i y._ ..,;.'.s~ .,w;.. J 'o i.,e..,s.. ;, :. -. -L. ',. :.: .:,a... - . x - l :..g..~:'. ,'u.=X, :t.* A.r. :* ;-..,:.... ~. ' a-

e...c. c

...;. v' ^ t .. +,. e.. .-g .:y L ,._;;,.:. ! :. ;. l -.. 9 ..:..c.: {. i,. ::,'.'. : . 4 :::,.. - ;. ;,1. s 7 v +. 3 - e, :

f. h:

l? .l . f:. . ".*. l'N; l.,...,.. '.? n e :9 :: " r, o, a..*. ;;,,...,.% ; ;...,q- '"'*'...:...<,.. '. : s,.y. :1,,.;,.. g.f.....;,, (., !}; ', j_::tS, : i,, < -, !:y..:., L. - y: : ~g". .n.' :~; ;. '.'

: ..Q;.. y y '_ L

~, ;.[ _o, .,,..e- . :.f; *,, - ^ u. y....s.,, % e. - f.:;. Cf,;' .g.j _, *.,. : : s.- ' as .,..s;- w....,'; 1 v. .Y. r'.i.;."- . i,,-. , ' '.;: i. ,c. ...,./.. y *.. i. f. '.: 3.O. ,0$..., .,.; r.~ ' ';-l,l '. - .w. o.

3. 4 q ; ) ;..-

..n&, :, .e' . ! ;a g :,n ;f7. Q;[W,J, u,M:,.,q. 4. g., .r:=.- **; % l..l , ' '.,.. L.:. ':.,, l'; - V.1, ,,;

s./ ^[! ;Y.::

- q; a* .m :, 'w n,, ?

y:. '.^ '. !..,

.. $.,. 'w,': : ,v i! s.*c

e

.s

.: p. (*r.:. l.

c._ 4,- 1;. c_'. , ;. v..g ..y y.. '; :w:y, y n n,._ c,

r,- ;... ;.,;
_.y

.3, j

y ;;. ;.;. p...

_, :. ;y.. ..,.,. 7,..? ;z, 7.y,.. _,,. ' ;, gg .. Y.: . '., - .. c . 4..,, ; - :.. * ':. ..,*.N....~,l;. 4.;.,,

A.c...,

4 ;,, y

',)A_..,

.n g...,.

c.. ', :' :-

,.,'.?'9', $ :. '.#.. 'f. i. ' : .s.s..'.'%'*."o .. Y; ..- ' < s. - ..'V>r-' ? :: r;>

?

.. c ;...%- .v. ,Q' ;.. . ^ a

.. ;g' c. _ ;: ;:., o v..,

'*\\...

e't.:. ;:., ;",

r. '

r y -,.,... ;' am. l' ~7 ' _,.. a ' if,~. ', %. m;..:?. .; y

;;..

'.,+ ~.%_.. ]...: t - :.

c Q,.' ;:-k; }f . ;lF... ;1, f;, - .3.+.c c . i.:., - :..: ?

l_l'k

,:,.N I'l f,. G ' ?' _ ', ' l'.) L ' ...l .', :\\ llll i, ::<l .'ll I"ljh {.0, ~,* l f' ; f;. ., *l 1, f..'~, l. l 4....... o. N:s..{ ,hb E ' lY. l. f. k.:...i.. l ?' 3... ,:j.- '- .. h,.

i.

N' t .l.* -,. ::- s .s....'i.1*..'3,'.'..:',,.,. 2 y". b '. ,.* y.s * * -... \\... g. ;..;: g'. ';'. b,g. y .. y,.. ;... <;.,..,... '...a.n. ; _;... -.; c v s.5,. .T,..,., F-. s. a. .c,.,, -i - (. ; p'. '.%. a. f.. ; '., i.. s,...'g-.. * *'g;..,..-o.... y.. 5 ;}S e .?

7...,...

8 .N ., 'r.!. 4 -. '-.. g.. ..r. .- t

e. p; ;p,. <.,

.j,.s j...;.. ...'m. .. ) c.- , }.?,..:.. ' ,s.,,:c.; .v.G. ,,2.r_

,:, ;.. r...R. y : ; _'.,. f a,.. ~.. ".*... ;. '. '. ' n *. ;; ;;.e,.?...l[..;..,.'..:.

)y,. e .-..:.. ; :. ; j : : ( g, 4,. -.- .. v._.h. L.. g\\.9.-.*.. ..., ; :..r -.. -Q : j-s ..,. ;. '.,. i : O + +., : .. ~.. ' + m...,' 'n. '. ~..y -.. a.;, J./. g-'..' u . :,a y~.g y ;.. 3:,.~ :R. ;. r.. .b :..;

... y:; ;.'..

.. y 'q;f. ;,.7 ;;. c. y ; 'w-e. n-pqy.' {. :'., i A.,,,:.s.;.'.;'..l. y ** 'g ; ; y _ j' 'Q' Gl.?,.-); - g)Q,7... '.yy,, .; : <^;.... _,... _. .. ~ -. .l:f. :9 ' ?, ;. ' '., _.

g(Y. o.%. :Qy9. $i.......

.v s j%: :i, ; : :' i,j, G Q,.,;... ' 1 l ;. ';.

l^ : * '. :.*.l', :2 f[

_.Q, t s.

_.. '. f' f {'.... :' '.)'.

[ ' '. '., L , ' ' : .; 'w,,,. _.

- l.,.;.; yy n; ;('. ' ',,,,..,,.: -

t ' : '. J ' A ' .. ) ._,,, _l;

,,..... l.

y',-( s,!

, _ ;, ;i

',1 : ' y - .... 37 ; ::., _,.;, _. ~ .l.u V,.,a,'. : ' : F** ;',.i

3... A :".T ~ f '.. g..;. *. bt g : ~ ~... ;.

.. (;; :),., ;; \\ '.n.;; :Wl}4;;:?p;. s l n: :. ' C .. 'y Q.!J. %.y .. ' - V.5 i .~. s.;_ i. h e*.: :. y ;.

.: <,:.. : :o 3. ;;. -

2. -.,. : : ;; y 7: a. ;g'.,.. e :,., ,y.~,.:......,.- .; ; ~. t . ; Q+... ..:' i -.:...- :. y!,' '. :.y.. y. :L. ; ; A..' _; ,t, :.. ',.... q:" ' ': e, q u .g s 4 5:} n

H.,;.,s;Q a,

) .s. '.,.,,'2,:... - ,y . c - .y ... ',.,U.' 3. g M. -,'l h ( g, 8 '.[., k f. 'l '.. ' f,....;.l{ ..I ..'l.'. ,ip 's _....;..g - - 'i ;> : ;f,f, M.., ',.....,. .,....y ,.,;... :.p.. **w- ' * ~4

...s u.: ;_.<'..".,:......

.? o- ' *,* q ~ :. v. e. ;i _ h :...,. _s:- ,...R'tq.hf',:,.,,,.3 [p.y' '.':;._f.:Q, p _3,.yy.. :* p - s ..... n . :.L ..x*

t..:.: *. b. j. i -

.y .:*? )l l. 4. '... [. _ f *;; ') ' ^~' l. ..,e. ,.a. <..y );.. ,,3 _,._ Q',3.. :,., [:nL .:.. ' ' " s,,;~.. _. <. :; ~ : .l:. p,' J *.

.L '. 3 k.r.

d '... A - T ', f '. G.' . _ ;l ) ;. '...., 'e..'.'<

,;,,v v.,f.. _ _,.(-: ., - Q f

i ?; l :j..

..., ; y, '.,'.".. : : fl..~.. k Y,.,, - q y.) :

7.;..,. ;,.,y _.:,; ; ~.,.y

.;..

y :; _.. -

v..,,y; j. -

m ., h. h..nl'. c

k. l~ &J.

... _... ;.: 4; [ h.;. ? '. ........ '. ( :, - +.c...~. g9+. -... ..q ...A.,'*.:..- ...g... . J.. - ___7.., >s.,. w: n y.:.y... - v.,.:

p... ~. p...; i. -.

y . ~ ,<s.... .e. v ". +.. -s [n :.;.:;.:( ( Wyif M._,}.).f, :... r _. j.;.c f Q ff. f.g. '/ ' q gl;f;j. . ;;y m.. m. .? ) : n [ :;.l f: bl L.[.,...;jy, j. x . n..,. :,,.. m. m...~. ~.,... a.. : n..; y.c.....

u.

.... i:. - , i .v,.....,c....;,..,..: n. .m . ~. .. Q...:....y..-- ..,a,.:,.. ,: s. l:,.L, :s :;, : %. ;: ; ; ' '.,,:<. ;.: _.:._,_;.',......n.s rt.V y;l:n v,>p' M.gNg e*-

" p

. ;..g a.s.;)a..*.,,..,... t .y ....,{ ..,,.,v.,. ,) J Q ;. n: ;. .. ;; \\ .:.'. ;'. :. :: f ::'. ;:

s.

. +:*- ; . c.. : g..'...;*

e..; _ _, ' _,, r; ;; ; ;.

w g.g.. z.g, .a y_ v y,.. ; ; t, ~.. a .;[; y .y

p y: ,. s

...,,;......c,:..),..g y% ;... '... l..., ',. y. 'x pgg ; . p,p gp.Q) W..* .:y -,

. n i., -: .g.,., ;._ q ';. : _ _ ;7.. : ;_

u-p .:l. - ;.L':.g .' ;f [_. ..l \\~ ' ll.y;'.. ; ;;.;;: - l;q (_. a. W; '.., };. '. :' ^.'%.!4;..'.I*:) s v. p:. ...... *An :.,. {.9.,.[W N.. :.. %. ? '.. '...-.. s' 4.m, 3- ..,; w. y 8,' :.r," ,......p :::L;,...:;;,1lx s. :: '..' R..... Q e y?.::

L,f,...

u' w.; a .n. * W 4 .. ?. :. f.. .y. +a.c

* '....,:,..:,......q (..... g ;9.,.

- y.. L, ; gr,. -+

.\\

,, -. a '., ,a

e-

.<,7..; i. ~ w:'.,;; :I .c

C O M M O N W E A LT H ENERGY SYSTEM lt)t)O or the " Bullet," a device which aliows us to replace old gas lines with polyethylene pipe without costly, disruptive and time-consuming street excavations. Negotiating long-term contracts with five of eight of our collective bargaining units that call for an average annual increase of 1 %% through the year 2000. The remaining three contracts will be renegotiated over the next two years.

Continuing installation of our automated meter reading system.

This system is slashing meter reading costs while improving service by eliminating estimated bills and minimizing inconvenience for our customers. Approximately 98% of COM/ Gas' meters and 21% of COM/ Electric's meters are now being read electronically. Plans call for the conversion of an additinnal 10% of our electric meters in 1997. Rj.]f? f<@%;yf&M;ggg $$ ; O0:$ What is COM Electric doing to assure recovery of its stranded costs in preparation for the restructuring of the industry? q fn 6 % n Sasut % 2 6 y t1T a { ' J ' Of - _ l, Yi ' fy ; & - f. t', 4 ' \\ ? {& The majority of our stranded costs would be the result of contracts

u-3 -,

made with non-utility generators (NUGs) while prudently fulfilling our ..If'- ~ '2* statutory obkgation to serve our customers. Over the past several years we have moved aggressively to reduce those costs, canceling 7 $ -E '. '. /' - "~ or renegotiating 10 contracts with NUGs for a combined savings of p [M well over $1 billion. _ (; w 'z We will continue to be very active in this area by continually looking [- [g 's 'E~ for ways to work with our various power suppliers in order to improve h g yh[. l: g 8 61 ',}~ our agreements in ways that produce savings for our customers. ? In addition, as outlined in our " Competitive Challenge" presented g# ' ' ? w % F*~ ' ~ "

to the Massachusetts Department of Public Utilities (DPU) in early Prior to the advent of computer technology.

1996 in response to interest in creating a competitive power market, [e and w CC h we proposed auctioning all our power entitlements as a final step in reducing stranded costs. Work to develop an auction is continuing and will be submitted to the DPU by the end of the first quarter of 1997. What are COM/ Electric and COM' Gas doing to improve service and reliability for their customers? Despite our continued focus on cost containment, we undertook a number of projects to ensure that our service and reliabikty continue to excel. Here's what we've done in 1996: Introduced Direct Pay and Pay-By-Phone options to provide con-venience for our customers while reducing administrative cocts. 9 J

C O M M O N W E A LT H ENERGY SYSTEM IL)L)O Developed " statement billing," an easy way for customers with a multiple accounts to be billed simultaneously. This was something \\ our customers asked us for, and we responded. We are currently W;j working on another option that will allow customers to receive 1.f. ,.g their bills and research their account history via the Internet.

t. <

Ef,112sgsam mNesomer#g 411 Q Expanded the use of our Interactive Voice Response System to allow customers to get their balance and payment information, caH in meter readings or establish a payment plan on an overdue CAPABILITY-1,534.3 MW, including sales under long-term contracts with bill-all by s. imply using a touch tone phone. Other utilities of 424.5 MWresulting Combined our credit and customer service areas within each in a net capability of 1,109.8 MW Peak demand (1996) 668 MWon company so that customers get true "one-stop-shopping" by August 23 calling a single toll-free number. Installed a new underwater electric cable to Martha's Vineyard to handle the projected increased load on the island. . Began development of a Trouble Call Management System that will be one of the first integrated electronic trouble call systems in 1000 Retall Electric Unit Sales North America and is scheduled for operation for electnc customers by the end of 1997. This system analyzes power outage information ind s rial from customers' calls and alerts dispatchers where to direct line Other crews. The system will also provide customer service representa-1% tives with detailed information about the restoration process. Commercial 52 % Throughout these efforts, we are continually improving our service to meet the needs of our customers and communities. Residential 38% What growth potential exists in the gas and electric l service areas? r The areas we serve have pockets of strong growth which continue to provide excellent potential. A prime example of this is the 9/90 Crossing project in Framingham, Massachusetts, where over one 1 Energy h million square feet of office space is being developed on a 150-acre p rcel. An office supply giant is scheduled to move its world head-9aturalGas N 38% quarters to the site. The Worcester area also continues to thrive with nearly $1 billion in development activity underway. Oil COM/ Gas is generally experiencing fast growth in industrial markets 21 % with new manufacturing capacity, expansion of existing plants and conversions from oil to gas. A number of new residential subdivisions Hydro 8% are planned in the gas service area and most of those will be using natural gas. Waste to-energy Nuclear 9% 24 % (continued on page 13) 10

mm

se _
*e,.

fstoevst port Mirch 1007 DesseclausettPTEfforts to Restructure Jtins Electrl#Utilitylndustry; m lans'to restructure the state's electric utility ' metering services relating to distribution charges as P; Department of Public Utilities submitted industry took a major, step forward on q well as charges for the new power suppliers. December 30/1996 when the Massachusetts R Customers won't have to pick a new electricity sup-L Massachusetts Legislature its 400-page *Model Rules - ply company if they don't chooss to. Local distribu- {cnd Proposed Legislation.1The plan is designed to L

tion companies will offer customers " standard offer" guide the creatioh of a ~co' petitive market for electricity, generation service for the next five years, with the m

. providing consumers with the opportunity to ' achieve D Price of that " standard offer" increasing over time to ~1 Llower electric bills. encourage electric customers to buy their electricity !Also in late 1996, tlie[Mdssachusetti Attorneyy '. 1in the competitive power market. General's Office (AG) reached an agreement with the L ~ , s state's' largest electric ' utility and a tentative agree' ment - ~ " Customers who still choose not to buy their power with two others'that require those companies to gener-:- 0n the market after five years, or customers who for

allyLdNest their electric generation bu'sinesses and to some reason lose their independent power supply, j

. provide a 10% reduction in customers electric bills, will still be able to buy their electricity through a j

The' agreement also allows.for recovery of stranded

" default" service priced at daily spot market prices. casts through an access charge.L COM/ Electric has { - had discussions with the AG to reach a similar accord . The regulations called forlocal utilities to present j including an ' expression of our willingness to' sell all of ; model bills by March 3,1997, showing the breakdown j our generation assets and power entitlements and. of b!iling items into four categories: generation, trans- ] J provids the same rate reduction for our customers in mission, distribution and eccess charge. The access Eexchange.for the same guarantee ' f recovery of all'of. . charge relates to the charge for electric generating j o ' our' stranded costsE The rate reduction would be made - capacity bought for customers, under current DPU j ( possible by spreading costs over time.- ' regulations, to meet customers' projected need for j uin February 1997, Governor William F. Welda electricity. This access charge is often referred to j tnnounced his vision for industry restructuring which. as " stranded cost" and for COM/ Electric reflects the ] [ mirrored the regulations proposed by the DPU in late l difference between the contractual obligations we j s Orember and reiterated the ability of utilities to recover _ have to buy power over the next 25 years or so, 21004of their ht'a' ded costs. and the cost of that power in today's market. ) ~ rn z with one utility company'in late. February 1997 and the .) ' The DPU approved the AG's settlement agreementj Customer Transiflon Charge Legislature [which had the' ultimate say in the matter, is In 1995, the Massachusetts Institute of Technology ] now considering (March 1997) the proposed legislation. (10% of Cambridge Electric's load) began generating ' 1 that would be required to allow it all to happen. much of its own electricity, while remaining connected 3 g The' Governor's plan and the.DPU's plan are both; .to our service and depending on us for supplemental, 7 designed to allow consumers to buy.their electricity. emergency, and planned backup service. Given the (on the open market,-' starting January 1,1998, with a ~ rate impact that the loss of large customers would i competitive market forces l working to lower electric :

have on all remaining customers, we developed a

) 7 l rrtes for all customers. Under their plans: ' customer transition charge that would apply to any 1 s. of our seven largest customers who opted to leave - ' (. Electric customers will be able to buy their power on _- Cambridge Electric while remaining in Cambridge. 2 the open market from newly formed and registered. ' Following the DPU's approval of most of our rate Lelectric generating companiesipowerbrokers or - request, MIT unsuccessfully challenged the ruling before fpower marketers! the Federal Energy Regulatory Commission anr' 'he United States District Court. Also, in October 1996, l & Local electric companies such as COM/ Electric will. MIT appealed the DPU's ruling to the Massachusetts Eprovide only electric distribution and related services. Supreme Judicial Court. The Court's decision is j We anticipate that we will also handle billing and : expected in the second quarter of 1997. j ^11

\\ ';. i_ - * ;,. : l '.

L 3, ' :;. [. l- : ,;u,,,. ' c " _., ~. Q s, y'. ;, [* * '.. <t s ....;. ) ' ; ;,, l a ; p.p. :l : _ y ;'d;,*. '; _:f. ;.;l,., 4:.;y. ( y H q,,, * ;,.. l, '.3,. . h. -.,$.,..,. f.Y\\ f .kk.. l..I.f.0.,- l.,,.,

.$ ;:f.: _......a

?.,,,. k.,. _.. '..,....., U_f. j.). l.$:? . h....j..k. ...s, )_:,

0. l ?,..,.

...r s. '. -: o, y r .e ...........w., 1 e,. g ...- l* -.' ?l l?' :.,.' '..). ',. ?.?O..l Y l".$.Y : l' l*a : .bf' $... v'..$.w.f. 'k'. *"a .,0q'.' [. ? ' j.'. ' ;.1.,,l',,'[c,.;;<.U ( i.3 ":, ' 1, M../ *./...,c,. ', jN.j. 0 ).ll[' s s% h ? . '.?' I.N. ' ^ ]. h :^ ' - l:,' : ? 0 A. :' '..,.l &' 5 :'.'l^,'.' A M ,N. C. ' l l h' :.

...'../,,Gr.' '. P. ;.,i.'.p '. ' j;,' ',. % ;, I

../ l,4 y. $ ..,Y.Q f"..$, [.,. l n I 's.: ti.8...*. G,,'. s,. [:,T 5 ', ',. 'i. p., . M 8 f,^f. O J

e. *4 #,[;' 2.

. ', '/.:(, '. '3 .,;q e, :* : ;,.. ;... Y ^ y 'j'- l' ' *: #..,*r ..s- , -l 'r..,,M s.. (. '. .'*: ;_'.l

- '..,',,'.,,._,',-)y;'-.'.,,j,,

>.y'.*.

.,,t, ',..[j, -..,;; ' ' :, - / -** *., '[ ', ;;;). '.,,,. s n, o ,9 .y

. l.: ;-',,,

,(

'z 3,

,r..- a %,.Y ;, ;::l,; Y.,,, ..' y s,,".

l-

". j * ",a. ^ b ,o

>,,.I, l

gs : '.; :, U }; ;,.y b;...g[,[,W ' ,,l,'- . h_.Ql' '.,,:, }l_ {

f>:.; q, g '}.:, f. '., f., K :\\i'. [;f., l, ;;,4 ';.< zh.;,;l *:;[-[. :g" y-
'.*?.

:._ n.,'l. :..y'.. r'. Q ' ..s.,,_., {fl, > y : > l., " ; Q' iy q. ,s "* e. ..A

J : ',':

l ?,L ;'. llrd g. / u*;*,.:::!.. * ' 3, L 4','.. *.. l s f [. '.~.,':ll: ( e 'y j ['. .:.t...** - , *i.. [.Q. ',.3, ;., 4 n

f. 7.

"...I

R.

... +... ,.1 d.< a. W, 3 ...-. : ;... :-,' e L..,..s,.,'.. -..; r . :y,.. .s Y 'r*- .e 1. e...n, Y, f.<. : .:*N c. .s . v;.'.f..', r .'. ::,.f. x + :.i. J.. n ,s <.,. f ','. s. : ....? l*.'>?.l' : <.. %). - e,.,.-.'... a .r. .s.?':..*.. .,,.'.C,..3- ,s>. taf.,..,..... ..,.m,,e ,.. s'.c~y:.,: .3,.... ..\\ ..:

n;,

','2 :.- f '.n-; ',,. ~ n. 3:... 6f a.. .'..',~n..s' ' b *~., i - c'..-. A,'^ .L

. '.(,:?'..'.':

. ;, ^ '., ' '..,".:+ i *~.....'-. ,n .m'-i*:...<.5'..'.'.."*..:. H. s: '..' .n..,,..'..1 W .... ~ - .e i ,'.v,. 1 . -; * :%..- ;~n... .,..;-..... :. :S :.. ; - .'v. y:a.. cv.:..r,.., 9 ; a.' = n . - : -, -. w ,.~.a..,.- v y:. :,;.. - n. ', :.',...e. ! :.;, >",:,..,. :.,., s . j *..~.,..,'n,

.1..... -;s?.

,l,. :,: i ,a 't. .-.,. ; - n. ,s' - ~ x.e .c. ,... 4 >, g.,. Q...e '... , ~. -..... : . p-. ',.,,;. d ' l$ lj. , Y. }.,, }3.. :c',',.:.G fb..! N E. . '..; i.,, ' T. :.l. '.d,", \\.,.. .n v. f.,..... -.,,.; *;..:. a. ,~ -,s. 4o w. e,,,.. .. :,_... ; y,.,r.,. n.,: t ~ -' '... ~ ~... c n..: . r . ~ - , ~. ; _ . c4 ..s h..'.; ^ ^.;: r. o..,., :

*. %,b.d s' 7 ' i;; ' ' l..;_ '. l-l; ^; W ' W.'.

?..W!r '.... ;;\\,.

.;'g,.... <..'f-- s yu. y-; e .l t",l., ;. 9 (.. *=. ' c. :. /. .lz* : fy '. :. :~',,.. '. y,,. 6:.....V;-:, ;. - .g ~., : s ->**)..:s '...,...... ;'. = ;.x%;, 'h'-~,;,- "',',7:':. ' ;... 'm. \\ls ? ', ; c'.. .' >.;

r.;.

-m' y,:, ;: '.,<t.. i, gl, '. g r.., 'q! .4......,... ,g *~ p,",; .it ,a 4 ...,...... ',..,.u. g,,.';- ,..n.a,. g .e.. ,s-i','.,, ....,,s..,..,j...,,f'-;.r .., l, n,.l. F,,y, ..b...,,-., -.-.i s, s .<.e..., Y .( t,,,..,.,. - ',..r.... 3,.,.4 e,.#.,. ,,-,. ',,:a. s a: s." . 4, ,e t...- .p,. e y ,[ ;h. ',,, ' ', ,. f *. ',*.,. d '.. [ $ ', [', [-) .[. ;[ r.,.. [. . '., ',.,j.., .',,.. ~..,-..= V,t A --*s';.i'.,' i '2.. } s.p{. ....s, '.. ".,,'.i, ~ '., s.; y.n...,,,,.:s p." a. s ... y, y... g= . i.<- ..._:l. ,3. ...s.; f,...,

-_,c..,..,.,

.o . s, .,, ;;,,;.. a 1 ,..';...,.,:,...,.,g.. 7.+.: 7... J ,:,.p :;.,;.

e..,..f..,,,

q-..,., *.,,.' =. .o

l. e.-

e,......,..,, ....-.a:,,i..,....,, - :..,.., $ r,,e1,,' ,,uk...p .,, % * ' l'.. -,...,,,,,T,.,..-. e. #. '.. ,1,,;. ' dp' - ; s.l ,,. g ..I. ,. <,s e .c,. .o- .,.:.!a'.'...,. l- '., -.,.. ;,',';% ;. 9 ,fi.,'......, $, '9* l 4.'.,%'l - ".*

YjJ ':",

'4 .J ..,f- .c-o

1 c,

'.*.,:..),:..-.,ec

. ',W., ' *.. * **..- :..;,,... s .. 21.,9,,, :. ;...,..i ,[ l, \\ ;'.,.. ;.' { '+, %., ; ~,., . l l

44. s*:a

.;, &*',, 3. j t- ,t f..;. 4 ;........, ", .; s ';.',l.,', . fg',

, r. r.,.f.

,,s s.., y- '.... i+ 7, ..,...p,; .r 4 ...?. .:w ,,4., ..., \\. i. u ,c, .; -....c*, r. ....g,..:... ', r.. 1 '.: ,,n .. q K.%. e, . a.r.1.v.-.. q. e .; ;, 's.,,, ;. ',..;p,:..-A.., ;. N. o :., ; 4,; s-c .g ( y '.. ; -.,.. **,.,;n. q;,. %.,. ', y... 9 .,,,3- . o; .* '.., a;,...,

.- g

.,..e,. -!:.. _. ..4 ,q.,......,r... .7'<,...~,.,.sa ..-y,..,,.- ,s,,..: t*

.,.. y.,, o.

..'.,p..,...r., 2,,,.., '.,..,,' - :, - '. ';,.:..

,,. ;,, dv.

o.... r - r-. .s a,.,s c..*..- ,.;., f, +.....,;, x, ....,,,e,s ',:. ;

5

' Q,.}q, ' u.lq'r';. -l...w. h. l..l' } ;' f f.. ' ;' ~ ',;l,,.,..... c { g ',;p [l ? '. '. ~.,.,. -.. : l . ;,3 y.;,. . (,, _ .y, -, ~;; ; q, y : q,.',2; '.*. ';^ _,, ' g.,, -,. [ Y ; ;; :.},,; ' }l, y..: f..;}.y','*:., L*,,' s.. f );t.;Vy,c; y.. ";;.b., f'& * ' k *

l y : q ' g.;.

J.,: % Y r yi..; . %. ;. : g.. . ; ',,. *. :,;..;.,..... ;; g. ,r 3 3.y). p 2 ',. -.,, ; e.,. :. < :. ;,.. ; - (;. q.; .s;., .?..:. Y. : :h. h.')".y _, ' Y:? ; k.' l ': _...... '.. ; ' M ',.. :, :.. = w h. v e '. : v.;,, y : c 'l ',.;. ',,;,- '... *,.' 'k.f.n. .. r.y

'- 'm'.'

t f,'. L.$. 'h. ? I;. ,.[ [ ,[. .j ,- t g- .'...,f [, -v_.',,- r

l

,'t. l,'. r ,., /~. t e ,,,',,y *s. '.'r,, ,,,-. ~., ',...,a.,.

.;," /

2*.,5 ? .}:

.A
y

...f ,y ,.,,. ',,, /.,' ',# s. e .,....e.. ., t . i y /"*'.;..* 1 ,q s.,.. U - ...lh...,. ....,q~..' .' :.e..-. :,<*.....,... ,.,..'....~..v,.... .u, 1 ..:...... = p. .e,,. o. ..) .. -.....,....i... ,..k. ,..:..... <,,e - +.#

s. n,.w

,.u , c:s r , (. [:, ^ ' . /.. k. nl bl&,...'. '._',\\. '.,

s.

4 4p .c ., f ' ;,ll f ? '!:. - p ~,s..

f.@l:{,:,).;h;'..{:T.,,.)h*f.. f..'f..

l. e '[' ; lls lll AnaSh.. "l l.'._,>'_. l;;,'lg ] .Y. ', ;. :' k ' ),[ ".,l.., .O..:.-

6., t.

s's, .4 s... u; f, e.: : y,,..,s ,y 8 s.)..e. ',X, t ' t.

m. s

..O- ?..'-' .,, ti.,. :. 4. 3.s.>1.. u\\.. L,,- T ~.~.W.- .n.,.. s.-

t y...v...

..-i

', Yd,.iY;',.

s ....k ..t.s-(: +: yn -b.h. o,E;', Y,...,.';,,.;... b,.. '. s.s ~ '. l':. 'N . ~. ' .\\. b. A -s.*, .il; '^; .. - c. s,.b. l,.. ...* ? s.- .e -o..,,a,,s. /3..,.. ,,t ... Q. t.., a , g g %. n :y h';.,. :,y + - -. Il S k , j Q- ,,y,..:s l ;., y -., f.; q '. y.;.,s.. ,,:,,...'.y [,x &.ny..', Q,.&, '., :;... _ ;,.; : :,,.,..;..;. *, _r,,, . p y. ;,,,, s ' :g q s,..,[ :. -.,.....,, .z.. -[b 'b'E;!'.'.'.$.,'. '. h,[ y -'l,' M,;, ,' N ', '., j,, *,T ' - [' #. i . ', j,.' - M ;![< ';. ' ' 'l/ ' ' f l, ,. <',I N -fru."v, h[jf. 'S,,[j[". 5 +;. @,[, fj,'f'.\\ pl :f. " (@, "> k"./j r n, :3[:,.,'jL.., %.;c ~ f. ( -l;N,QQ; .. l ';<. i :. ;.'..p,' o:.y'...'.,~1 ,,, ; Q.. ;..... 9,%' -(. C. .s

. v

..y ' :. y . _..y.c..i .,.,',/ l .".1. <.n u:. V . '. ' F, rJ.. a-

t.'.v

i -. w

y: ~y..-

-.,.'T .7 .,..J.,'.s: -.:.,Ns 7 ..,;. v:pl..., r.,.- v. v; c., -.....,,,, :

- :',; f:;. * ;'.t(

~, 1, .h,% !'ll-}',. *','g,. + ";.(._ -l % - W St '_:l, < ;. ' ;.. ' $'.' ' 'j.,. y,i.Q. ),.* -:+* .).,, _ ;., j ,.j- [. -y_

1. l'..

...~.,;,l.:f..,. ". 1., U ~ h. J,.' *._',,:.

ll: %. ? ? '.c ;v..... * '.i

, ;. 'g., y\\ 'f,, f,'(

q,, 2.",.h),~.f,','Al [+ kp?-.

f 'I '..':* ::; e k} % Q,Q* T V.'

t

... V9:s?:sn *

n. j,.

...'..5,.';.' ..:....?..". q.- G:' t. j.. <1 .;A y u.; .s

,.4,,

'. ",.f. ;;s..,.,, y, : ', - ".- . g:yy n,

.: .- +

,.g

u. :' g+

( .,.<a,.,,,.3..,...,,,.,;..-l,,, -.-.'..e i. '[,, g* ' c.,. /:4c p re,.;,q*,..:., ,f,, ". i, .p.,- 3 g

.,., ..:.' g ;,:, t.e3 g,

w,, ;'.'y y,,p,.jf h k

4 l *. g, ;;.' s, Q -l:

,.,i ', "1 :" l '** j'.. ". ...v;4 ,i., h,.'. ' : ; l;.. ..,l g,,, p ;. ;y f,: J; 1:.j . g <f, ,.J. : '.'; 4 ;. 'a."- 4, .,%.'r-7 :.,,-,. 4;..+. '.. '. '.. 3. '.' ~..,: '; 9. :,!v.g h,. q, M, <. -, ~.y M. c ;. :~ q 3 .n.. g .j 'j:- ;.,.., L - y.:,c.*,.:,,-<.,, ;- ,4, s,, c :

m.:;. :a y 9

, ' ':.. b,,, '. '* : l '.,.,...

Q.[:.' @

.%l~' y,s , s - e....,. J.pj. ',,,.., ;..,., '..., ~...,.... '. ., ~+,+'.. r :. <.. :;~..".--...,., *..,. f ; ',- p

~,

'g :. g . g. t. v '. c.-) f 3,r,. J,.,s....;. .,)i ), n..,..,.. ..;,t.<..

.,..n ug f.

e. v . q,fe9,. ..-r7 + e- .,.. '. '. z. r %v.. r:.,,...,..-.,, ..s,1, y.. g,., a . G { j

p + --

?.

': 4. :..,.,., o.,

' n, 2,.' i. n ',c : i s e, t .;}.. ;.*.. :, u.,. ..... ~. .V .,J.., t.,.,.u; .u .. r.. :-. -.....?l.; ?,.... s.y" o . ;.. r'. 1, r. . $.a.. k .....r.s. .,7 ci,..,.,.gc, ..r.

f..

.o .,:-,,...,.;e..,. g,*,.....,.,.,.,..,,.,.,.y....,.,ta.<'.s.,;j;s...m.. ,y, > a ....,.,9-7 s. .,m,., .,A. r: ,n ." ' ^ k-. {; ( h.. .l,^. . p. ',*... - -,), e, p -, 't. >,,:,+, ; e. .'o., h.,,,.,.. ; 1 - *. y a, ,e m a n.'

t

] '. ~ : .'d. ?.'.,',- , l ..,.o......-. 4-.. 6 ~ r +- *: _.gp -!. : N f >c .s" ;:,.,.s>. - *:

g ~.s;c,3...,f.;.s,',y>......i.

c. :: -.. ; ',;

. :. 1 *..: 1:. : o.. . ya c '. p *;; g,,.._.y". ' _ A".s ". '.. ' v'. s. rs. ,r

A

),. A, 's,ti::.,'..., :....,... -.. ..u.

~

9. -:. ,4., u' ' :'::....,..W', 4. ;..' .) q..., ;. a... , y . c : .s. ..A,'2-r. 5 "s . Dz'f \\' J. ' t* ',. '.,r- , m,

r...

. u '..,.....,3 ,, i ,e., .. ~...-., 4 i'.b.,'.r.... ..1,.,,.: ,.. ".p-s...,..'.: ,,.',.';'..~ - 6 ,.2 e n,. 3 ; %., :s..~ -, 5

l. :..

7 - - 9,*,'*+- t- ~,. - i, .J. ,; o J.' W 8 >.,..'./+ .,..,-[,i.;,;'..'.*.#,.-...'s*;:.- , :,y f:W ..f..'

,, g ; '

.a...\\.. G: %. - V....;...(. 's.. g",. .19 A 4 l .i 4:. '^.:., - - 1_- s.;,sr,...... -.... c;..,..; ,..r,,.,: y ,f,. ~* .a. ~,.... v ;.1g ~.:p %...:,u_,.*,:.y..'.... ,e,. . q h, .P ...e .. f: -Q'. :{...n.,

'. '.,[.: ,;e.
,s.w.l ;..

,. ':.',.,. :.......y.....;;... 4.q,,... '.9( s. .n.- e.- .7 L:,...., -...n... - h t,.,. ;.; s. -... : ^-,. h......0,,. . :,u.: ,...e.>...~... g .,. u . :.,E.... s, .^:'. ' ;. 4..'y,.,.. ; >., 6 ,e .. a....: : m. s .q., ,. b :.,.. ':.'..,* , p s p .,..v.,... '.., W. -'

.. ;'c,y.q-Q. :.. -.. ~,.

..y-.. (e - .ld>. r... 4,,..., . 3 ,),4': '1 ?,4~::.., t).' ';>, 3 ?:., 'g,rq.. WY,Wy ;W h'% T.$* Y '-l

.. C,.. ' >%: h,'.~;,;i ':

'. '.,.; ; ): ' R e * ?, ,%. $. ! : ') *, ',A. y.. -l, ', '.. l V", ' '.,, )'s.:. 5 '.1' m..

.1 .s p,. :.x.y ;,, ;,, ? y,,,,,;;.< -:..,... y,. M,...i*:& f. ^ V-;;l' :*..Q. :( }? y ::, : >Y:., l,.,, [..Y ._ ;t s.Q'..':, r,., f. f,,. _....,,'. r .._. n q,. ;,1,-s y ig.,q., y

y.r.j

.l.,.- - e 6, . l Y,...., *.,.Ih.i.ll } N 0,,f..l..Y '.'sl:.., _ l , ; y ,.,., <,.. _.. .'s

l.. i,,' l:k.. bf

?.l'.Q. b,, .f..".:]p. '.';., -'l.

;..' ?,'. ; : l~-..,. (

(I. ^ . i... . a .s &t,... f ; o.,, p e..

i. -

,3 s y,.. t...;e n.. ..e..a.- '::.:.y.,....;...... >..,..,n.r, r> ,..,.. e ?, g:. 9,... .,......, s y .,(.:..,.-c. < :.... ' :,,,.. e.- q

4..:;e. ;,.. r ;..,..,;a

. + ; s < /. .s.,. ,.m,,..,..,.. h: e,..,,. e S. .. ft ; ;..

-...~.,.,;..,.,..3~..

i

.,,hp;y t

.:.....,.,...,..,, p. :.. x,.: a.. ...c, o s.q .s,. .:,..,.s s. s e..,y, %....e.,.3,3, ; i .,g

,.,.,..;,z -

q.;,.,, ,s.. ,.,.,n..p.,....: + .,,.., >;q .s,,:.-g y,.;,z .s. ( y: . ;.,,,., ;<.f, s,,., .,e: .,m... ,st,.~,, v f

).:".,g,,,

.l~ .7 g<. P. y. A :, l.,.,,,

,,y- -,*, *eM:

rf,,,.,. :3. _ .A,3,,,'.,,,,,,,,.,.9..,.p,y: ,s e; - hx n :... ' !:.1. A..,~. 4...,.:a,- ...p. :., o.,e .g. 3;; i i *.;y'u ;I{ 'I'l'+: ,o'. f u, 9 - r. ..;;. q. 9 . ~ % ' y % : $,, :y ;. p,,,,A ..',K.- '.*'s..,s..~... ...,t tn, y, p,,,,,..e ;;, .n,y,,.3.'. r

- ..,n:.'. 3t-.,,,

.n. 4 1 t * '..) r'yl' :,' } $^'.'...,.,, '.. . ; :.. w w +....h.,. .e;s; : ,,., - Q,.:. ',. .4..*f...''l,,,..':'.***..... ',. 0 ' ;' '",$. '.. .l v ', ? l;l !. s: ..,.,.'s *.,e'.!,,'l l*I., $ '.t'l*h,'..}slo.-;..,'.'^>*ev+;..'.n'.'.,'?...a,_.,y.'. y..->>,...t, ~t '..,4 .?? * ' ! 5 l: ' : n * l. l: * ?: l ll ' ' ..;?. -f* .._.'.<l

-l.l..

,1 .,..,.....,...,'(,y.. .b. 1,,,p..,.,. ,.~..*.r.r.:::..

l,. e s r -

-e* , ;4,'*.*, s.. g... s.

9.. Q ;...,,,; w..
-,.....+
a

e t:

..,.,:;.',,y'. q o,. .,-&....,y, e,,.8,. -_s 1'- ,.s,....... .q, h.,. -, <., 4 ,r.- ...4.,+..,.. ..v.-

;. 1 ';. '.: . ' ' ". '-..

..c; 9, .~...,.s:.- .=.a ,r., ..4,i,+,....- ....r-. :. .. O,- .s. s ,n. . s4...~.,... 4.... v. M.... ..e.,. ...u... u, .v. ... w.. 4 ;.,........: .. :1 '.- .m 1 % '. :E. l ::1.';c..d. i :,. ; f;8 . ' f. ' ...,, : - 'l' / c. ' .c.. ,f ' ~ f.., ".. :.< ' 'Y * : 1 ^ d N: .., ' i. :;, ;.. ' ' 4l ,<,*. . ",v

. i... n. ' ; '. ^

%. ; ' "..% e.:.. W:.,: '.:.. m h

,. ', ;. ! d. '. p<: ,',', '?f. : y<, !l:?'.4.. -.p:-.

~ :. -:

k., L 1.': rje,.f::;A. L... * *:.

f *... '. ! &. :,.'

s.:. ' ::.

( ;:

. 6? l.:,.!,.:V ' ;r . U::.,. : . ::w..:,: ~.- c:- y.: ?. O;...,. y ~ ..;..'...t. u ?. .-.,.y.,

..,.,&,ip:., r,.. H : ', y:,..,.y

'.. ' *.:.. l s',. y.,, .e a , i,..:.~.. e..;.... : ...c. ....y.:: :S, .,...,.,,.. ~........ r - 4 i... c.c.m,..Q,.., , ; e.,..,..

g '. ;, y n. ;.,... e._.-;

....;;..~. f... L ,e , ?..,, M..:+,y. Q. %..Q,,.. ..x..:,. !..;, 1. ;.g. f..: 4.1.;. #.: w. j .n. ,,.:,,.,,,...,....qs .o :: v,v.f : <:. ~~,.... 0.::...,..,..'..>.,..,......j R..,... y.,,_:;, : ;s. - c

, g q.: .,...?...;. ; :, : p;,... ';..<. ;, 7...,: n. _.:....,. ;. >......,.. :. r.,. :. s: V
y-....a

. s.,. ..g < ~; >.:. q... ,. ;: y>;....

f L: .......

>g.... ;,., :,;,..;... t;;..:.. :... : ,.i...... V.:c,:..('.'-' : '.'..'E',.. '.....', ' '..,, a,..s., n : :.,...... ....s... ..,,...,.e.... '**,... .'m'0...' 4 &,.. .l -. v.,r,.,.:p.'.'...: ,,i...:..<.r',s...a,'.Q',..'*k.. ;c;... ( ;..:.. p.'c." ~. e ..;.:...,..,... "...L., .- :4 5 ',* ; '.. '..e,.,.. ,.'..n..~... .f ,4 . ?.., :.p..,..a'..,,.',.-l. ...'.'.e ? .J

.p..'..,.,_.,;v'..,...,v.y=1,.:

- p .v ~... -~.;. e.,... w .a i _ .c-r_,. .. n. ;.T.p* ..',.l.C.- . -.s

..,..r.',

- o.. '. :; &, c.... ~. ~... z,... : ;,'.... ..,. A J,. < ' :*1....'R...,. ;..*? t .s... b

r.s.

.. ', ' l9 ' _d ' ',_r,...+aj..~v. _ i . v -.v ~.. q :. :. '.. .S n."..< r..,.d 1-R,,, L.* O; ; ',;. _y; :'.e 3 %. '.. :.'

...,4

. :., -.;k i.. d.O.. '.k. 1 '[-::'.::3..,y W. ',.:.. '.;' i- ' 7.. E R:.; : :r ;-. L, ',.'...' ;.; y :n :...;:::: :, y. N'

;',,, %.,.)_,.q

..} i

l' b q.,[.':[ ;.p; : '_ ;-]:.:.;;;',: O.! ':,f

.:i

.' ; ;" (,;? ' '_: ;, ^* y.., .;,5. ?.. Q :V. ~h; :. 's{ _, ? ::. :)'.. Y,:' ?'l. '! :';' '. ? %. ' '

-. y ;..

k,;; Y M.@.'., ?. j '.:l.f..' V. ',-J ? '; O... :!: ~ .,1,< ~..{ 1,: y y.. ' % ' i l ;.?%' Q: ' J. T &.f

. 7,lf ':. ',': ' jQi; y,

i; f 'L ,, - '.:,..: :..,.':.. / :. - ' ' -::..' ::: r.Y.. ' .. ?.. ; r..e. %.: L, 3... ),:; f,.;9 ' 'n. H :'..,:

: 3:; 74. ;, ', = _ J... : ;

i. '.s;: -. ".;.?..

n. k :>.,:, -. :.~.:..f.:y:.'.A ; ~.6.l:

-."^. ):... -. '.'../ ... f.. : rb ;. - n.' .' y. 4 ' '. '..- - m. r :,?:n-L: 9 :.:.n..'< :*:::%.:. : h. ', :,... : ' '.:. y; +.':? :, ; ;., r.. t c:... -'.,.qp..,. - ~

Ni. :...: f. i..: :.! ;. L L O ' ' '..,,..,. y ;..,.

?., ::. :t..., - ..,'.. y:rg, S";.

, ~:...... ~..,.._...2p'n

..;:.~. . s;t- . _ ;9. '. p. % z..,. m. p;....;._'..~.,.:;... W _.a

q..,. c. y, ;;.",;.

+- ;;;

c

g..

. ; ;. W vt _...,,... v: ;. n.. ; ..y 3 : _, a '< y

p s

s..,. 4 4..;._. x.n.->.. _

.s.- ...,..,;...; ;...-.e.. ,.t .:...;j

C O M M O N W E A LT H ENERGY SYSTEM lt)L)O In addition, we see further growth opportunities in new technolo-gies. Improved natural gas engir,e-driven cooling and absorption chillers are increasing in popularity and are desirable off-peak summer load additions. In 1996, COM/ Gas added 1,700 tons of cooling load with customers such as Mount Auburn Hospital and Lesley College in Cambridge. At COM/ Electric, we are using our expertise in the commercial and industrial area to market products and services such as surge protectors, power factor correction and power system analysis. As restructuring of the electric industry continues, we anticipate expanding this initiative considerably, creating value-added products and services that place the company in a competitively superior position. ,c COM/ Electric has taken an aggressive role in working with ' ' f - 1 4 c-economic development councils and local and state government ={e ' de.,, : to promote our area as an ideal place for business to prosper. As part of that effort, we developed an advertising campaign to generate interest in our service area for the relocation and I development of new business. We are also working closely with a host of local, state and [ g,,g federal officials, and chambers of commerce to bring new c - E.- P g,, business and important infrastructure improvements to our er area. Major projects in progress in 1996 were a new casino, ', M..,.. ?I expanded airports, designation of downtown New Bedford as a '- n

M National Historic Park, and development of a major aquarium.

Street excavation for gas pipes in 1951. In recognition of our contribution to the area's tourism industry, COM< Electric received the Commonwealth of Massachusetts Governor's 1996 Leadership Award. COM/ Energy Steam Company, a non-regulated affiliate, continues $gh b gegg$ges > to achieve exceptional results, enjoying another record year with

g g

revenues of over $17 million. We continue to strive to provide )234,500' high-quality service to our steam customers, and are exploring W + every opportunity to expand our steam sales into new markets. 7,067 square miles covering 49 - communities (including 12 served with electricity suppliedby.. COM' Electric) with ipopulation of What is COMGas doing to maximize revenue in the approximately 1,128,000 increasingly deregulated gas industry? Gas Plant: Distribution Lines - 2,778 miles At COM/ Gas, we identified opportunities that take advantage of our Peak day firm send out (1996)- facilities as Well as changes in state and federal regulation. One 339.773 MMBTU on February 4 of these opportunities is the expanded service options we can offer our customers. For example, where possible we are providing the service, reliability and pricing to encourage interruptible customers to switch to firm transportation rates which provide enhanced service to customers and stronger year-end financial results for COM/ Gas. Our innovative quasi-firm service rates also continue to be attractive to former interruptible sales customers who require gas for longer periods than the interruptible selling season allows, but less than 13

C O M M O N W E A LT H ENERGY SYSTEM lt)L)O 1096 Firm Gas Unit Sales year-round firm service. Our margin-sharing proposal on the quasi-firm rates was approved in early 1997 by the DPU and will have a posi-Industrial tive impact on net income in the future. 11 / COM, Gas' supply portfolio optimization efforts keep our gas costs Othe9r. Commercia 28 % among the lowest in Massachusetts. By aggressively maximizing our 5% f capacity release and off-system sales, we sell temporary excess gas to reduce the cost of gas to firm customers. These activities will have a positive effect on income as a result of the DPU's margin-sharing policy related to these services. Residential 56 % What is your relationship with the community? l l We have built excellent relationships in the areas we serve. Our community relations program includes participation in the activities of chambers of commerce, economic development agencies, and major _._[. k-h ! civic organizations. We meet regularly with local selectmen, fire, police and emergency management representatives, and a host of P' elected and appointed state officials. Our contributions policy targets important community programs, and we encourage and support our employees in volunteer efforts to i assist a variety of local causes. We are most proud of our efforts for c.,_ 1996 which include: (k. y La ' r t %g,,

United Way's " Month of Canng" for which almost 300 of our employees worked in 37 different United Way agencies for a day; Worcester Gas Light Company's storage tanks circa 1930.

Partners in Education where over 140 employees visit local schools to read, tutor and mentor students, . Sponsorship of Kindervision, a program designed to teach school 1 age children how to protect themselves; and l t [ IC96 Total Throughput (astu) Annual beach clean-up, where 500 employees and local residents joined together to clean up three area beaches. Quasi-firm Off-system e b N god neighs and inmW mehs d me Interruptible 4% N community is an integral part of our business decisions. A good example of this is a program which began soveral years ago at our Transportation Canal Electric plant when we began meeting regularly with local resi-9% x dents to hear their concerns about air quality. On September 30,1996, Total Firm as a result of those meetings, we were able to invite the community I 80% to join us in a ceremony to celebrate the conversion of Canal Electric's Unit Two to clean burning natural gas. By burning natural gas up to nine months of the year, annual emissions from Unit Two are expected to be reduced an additional 25%. 14 L-_----______._ J

'{ ' l l '.- ; r.<;, a .. a ::.. 4

- 4.,:, ; - :.;;;n,' :;. v...

s. .l.',,.Q..,;;d W'.";.

, ?..;\\ y;t gl *; K 9 * & r,

. l< Q... f ', ~ '.*,,'- h '.0 N ;' l h.. U.,.: y :,., t _ -. ., s.f <f: ^ r. [..., *...,, ,I

5. fl\\.'.v.,

',,Q li' E, i].,'*l ? ;.l1 >7. ;f.:.3. k [ .: N. , a .t. - 'j:: '.$. ...s . - a j,. ' a '. : *', ', Q. - "; l',

- '.. t.". ;.. -

t.),'...- ... :., -. a t. y,'. : :;; ::

+ %;,

- M f 'q: 4 i d 'c . 1, *[.I h. I:h: - l,. -f' ..: + A ,.,'.:-~, A l. n..0,,,. N ' h [{. ' f ; [.". :';%. '.,N., \\ ;h. [:<'. [ '. ['.,).s,.. n.'. t,. _. - 9l ;

),,* 'i.' M [ j.P[ ' /.[

'E..' ' O [- - %'.f;.'.# ' 3. 4 s -} f; I

y. Y...'

' :,$. k l - 1 -' ,.r..,. *l< -:J :,j ' - s +' 'c:. ' ..s_. * * '. n..~. ,h , :gr;f Y - - \\ tr e. .'.,'53: _..:.., f .:j b, i. ',.N' :5.(( * } '. \\' ' \\ Q* ^ _ (l'. ' ' ' ?,', '. '.'. l'. : htl't....i. 3 '. y.,, ';;; ;...._ '. ' - '., q l l'. : T..L' M.;,- _.. s., -s g..;., '.'t.' '.. t.p _ - L; :.- '_t...;; ?,1,:f3;.J *' ..'~ '.l N* ; '.;'.:' ? y ~ * /., s' '

i'l ? 5:'.f. ' '?';l;._

,,. _.;,% 1 ', .:...l,.,',,e..*:

~

_..,.,,,q I . 3.l', '. l I ),!

i;*, :. :,.:

.?. -k.

f.. -l _ ~*.' ). >-. - ~. : ,,f.; ^: ' :

i.t f* .f:q ; ', ;g._ N ?b U l[ ; .\\.1

%l

. ':. ' q'*:s..&'dQ y}_.; r * ;.h l r l l.'. ',. )... z.! .f,'{' ; ,"Q.: k. 1 >v.*, '.b' ' :e y. ' f' ::..:..'..-' ..? ? c .;%. r l '. - n' * : : :: ..i t (-

- -: n.?; ;&., *,,.,'.*, ;

. _.'.*:.".'Q,s..;-. t y,.:.' ;;. ~;;';;;.. . ' ' k ?: *. ' D. p,, e. . *L"+ s. k:^. ?,fsf *,',: \\l YA'[g. 3..

I'-

n - h.. i.:: .,N, ",.', *? ' '- - i..I .i b~ *' '.* - ::' t :.'.. ' l ^#'I . ~. 5( :E l. . O fr.y ' ' i ., c. 3.i.! ' l g R. o.N k j- _:~)'.:.'?.:.T. c*., '... Y.l " :, c..h'* : g)' '. ll_,* .;,.. ' ' k.'Y. q: - i 'b ': ' ' b ' ' ~= - '., ^ 4 +9 :t s :...

,' '._',b, ; $ 1 " -( ' (:b.\\l-A *.f f. ' ' l.. ?

I b. ,,i a..'. h E;,, v.i-= _ _~- ..',.s -.,' y } ' D :,"W.j { :.,; i ) ),c: A ' . :,"-)* , j ', ; .[ r.p.u. s

, *. ' / - lI' M [' M.;"'. Ii%si ;. '.,,n,n.., ; *,

-) :, -{. ;. '., 1'*Sl! l'i.

:.- '; :. ' [ 8 %. ',

i. O*.,$'_.'",'*,,; ; ',- i #';

c. ' %. <.

r- 'b. 3.',. r. 9W .n

,'_c~

....:."-?.... ' d" s...u s c' .s.t.'- ' <\\t. 'i

-...: L '.. '. e...

, '- ' */'..., ' <..,'. ; ;rs(.",,;f...

_n_. _. n...v.. e :,u ; ,':.~*..;*..,.c .,... v ; r : -. * - n.; s.

s.,..,',..;

v.:..,..' * -' 7.) WG l'- 'o f!, 4.l4 t,4p *;,..,', 'V. '.*. ;i .' * \\. : ;. s, : >..*... -. Y..;. :;.'.;*,. ;...:. L;* ',L.:m@-l" ': --.,... I_ _, ' M' ..',v,R..

s '

. : " :. ' F;. ~ 1

. '.,,x

..:'.,.'. '..-l'.'.,,'..' p ,V. s r n,-- .. ; c:. n, f h.,% V. 9 c. ;,- ) .;. t.

11. e... -

1 % v* s.e ,,.a'.. M,1, .s', ~: ..c 3

. '. x.; f c%... '

.

O, L. - - ' '.'.' 5 : - s.4: a.9 % C *"?'q' i:.+ i.),..$.,? 1 ? . 2 ;.

.,;;w.

Q {Q;n,Th..,.;,a.N:* R; :: ):y.'r f.,W:.[;':,%y,. .n - s .W"?V.M - y.. t;.ow . - ~, ;r -

p. :

n

's , ~... r; '.

.( ? " '... '

~ n.:..- ;... '.' * '- h (l - ' - ; . % * ' - w'.

w*

. ~. - -'- l

l'

,':..,....]:.h ' :; ; ;.~'..'4.~- T '., v ,? .:~.- .... s n .,, ^..... r.1 ? ~ 5 '.. '; ; ' '[.;.';..l, $' 1 lb. L ' '..... c : ' "- - ^ ' '!- - lJ :' q.'], ' - :.' - 'f [ ./ '. '. '. 11. h'$-- ('-- h ':, Q.:.i;, L.,. '...'..'..,. / : ' '. ' s' '. : ', _? .,..u. d*.3.....,, }. 3',e..,,,... m,...~ '... j .c... ', D; '. L : ::' :, : - 9 ; ;)., " S.p:,.. N, # s ' ... ;.1 i ? : 5 - u; - :[ '.' ::.. .x... t-

c

?.

.-.,e M ;.7.h , (')y.. -Q4 l' k '.if w'.1 31" ., :,]. .:p l.... u..,.. n.':2. .a.y. ),x li,..P.G.. 7.U... :.. r. ..e.. ....i..,,..c. ,.4 - :_- -. c. .,......,,g...... g-i. . y.,.p ;......,..,... v.t..... ; .s ........,.g , ~.,.... .; ;;w... g.t.,e.h.,.. U g *:q - e c c. . ~.,. ; m.. 4,, u r. '. ?-;. ..ms-- g- %b :Q ?.e,:y..;s.;p% c. n s.,.. c. i 1 y ,. ',,., **, %'.._.k,,. ' .W......,. '\\' 'r

l._. :'....

'9s .,t, p.- "..': - '. _.,- -, - ~ 'g,:s.4,fi;y* ti s o..'.' ,7,", 1. 'r'. l' \\ ' *'., .,n ','p',c,,',,.,q~g. _ ', :' - - ' ' __$,';s,'.. ',, \\s.' i.'.. - *'.. : :"- ^ '., * ' " ,' /', 6.' , ; l s y O t. .iQ.,'..",,-l 'y,,n... ;,: : w -..~ ,l..,.. .', ( '.. .,.j - [- q: :, ^ : ...e . o;3 s. ::,.-

s.,,

s y e.:,:: _,,:";, ;.:.. :;...... ^ .... %.h;.. :.3l.:lj.., ';f;y . 2. %. :q....., s } ':. { )' I L. e V..l' @f', 0.,,ll'.,; /. :(,. k..l.. ;. a.

=..

...s,.. .]. j f._' '.. . _l, ~.; ' '....._,., _. ;,. *- -.h

j..':

.l,,l ;. --.?.-. .,[-].. : _ ' l.;.l J

1A,'...>

'* '.,. _,, _ ;. o ..[; * ' 'l

f..

y l8k. '..: y - +. ; - - ' 'y,;.... y ~., y;. __.,.. <;<__' p, l:. -.;. : > - ;. '" j 1. l, ;.' 4.-

..,j

].,,\\.., :.., j : ' ' L:. '.i.:,..:.. y((l ?: '.p

ll,~ j ': 3., : - 4. s..,.. o,, f. :lf._ ; : [ Q ' '..p p [ 3.[.'.<-

l,. :., 7- } _. y:>.l 4.j.Q.lY. :.3, .^ '..; '[.. t..,.,;.....

p.....,...,.:. w.....,..

y, - " ~...,. 3. , f : ?.._,.* ?. ~.f.. L..f y .I. f Y '. \\..:- f _'. ' %.ll 'h l. :,; ' ~g. ...l,,_ -l'l, l 's i.:.. l s.h ...,, _ l ...,'f Q..3.. .,.., 3.. :...,.. - ': ;. -,~. ;;.,... r.. ...y .. -. i.. c. - r:.:,... -. ,.a.y*~.___. .sa.s.. ,se .v - ^ .... ~ j. l m: ye ,..[ G.. c.y;l y;;f:. :j g, ' _ _, ; Q %,.,la }' : ::-........., y,.,.,l }: }',,._... x: g p. y. .,;)

-

y [.....,

V. I. - :'.yp.: _, ' ? ; '.. m n. :.. :,.. s. ;;.

). - _:,.-

,L - ~..~.;..O~'; .,. q W....:: :" - '. ; :9 '...:. . p. ;;" ' ..:. :. :. c..' (.': ,) ,. [. h'. 4, 1 k. ,:[ .'.j-k .l }. j i *[ l t; - 'I ', l .( . h,:.. t. t ; (..-s.;., .,..s.y.- ',.; ..s.. *..gf. $ Ws k ;. ,-,.9,, /, ~~ !. e, '. .. f. .[ 'h '[. _')" l ' ~ f, . ~ '" 'l .{.. .], - .,..y, Y ~ .'.r-

.. -. g w.,..,_,,,..'...,'..s n

.,. -.,,, ah.. . :, s...;; my., r m. l.

. f

^ .l, .l'j. .? 's ('... ? *- g.. sy.. - - e. ,y, ,.r s.,.

r.,,,..

j%.

n.',-

l e

' ;:, 4 m ' v q f.+: -^.. :. f.,..,

..'s.- c.. .; g,,, ,[. ' I. .. ).' .? [;, . [ : (;. -. '. I i.' I F. h : : *. ". p.. ', Qt '1 e .7 ..s ....v 7:., <. - a ... ' +2;.,: er s .s .; I..';. f. s. ~ } :N':-;. -..... N k ': l ,\\ l,'.' ,,s.r.,. -.. ' e :..;.,:... -.-* '. i l- ~, i.n..,.. g..w:, <..,.m.

y o. g g..

,t s .,,.s... . r g ~,,, l ]. ), _.2 any .l .g'. f l. E' ?^ - D ';'.< : ' } ,,& = Q. ?. ll .r [ .s .i. " ? .r,' ' - S f' ':.., _ ' *. \\ ~ Y.. E' ..i-, .b, 6;N . Y ' - i..':., :, -{ ' ^. /.., .'!;.' f;_.l.. hl.N _.. f.b,'.'

. l: ' l l; N bA.

.1, E. O o - "q...:. ; " ;.g.. : *; 'j,, _.,y f..L. ; lj a ^; , f. a ; * '*','..%'_,,'.j.c yd.' '-* ~~p.:..- ,:. f9 ); . ? ',.., ... ;, :'. : g')lL' *;* - -...~. s~~

~~y.. '~~
~~'c. : '. ', ,( . :n(._;f_,l.,,,'. M a~~
~~49. i '..'v 4. :. ;',..;&3' np p.~~
~~- q";.y.p'd f y 'M .-'?h.. h,,,.,_l.b..' f.. o.~~
_.{ m ' v,'

'.' ]l.
~~h N, l, 'A. vannan..:?..:,,.,h r* b J. '.k; ~ 3 =, .y .*.': 'N. ' 's 9.h.'*,' &,f.f..,,.,...~~
~~g.. Q.'~~
~~,,.;'.':, ' ', f,. ;._. '..h. ; > I.;, ;,*.', h f ', f' ', : ~..~ e ' 4 .I- -)c . ;j. '.,') ).:?[t*j_.; hg t ,': ?., '.*' _,,. } ' ', '~~
~~I : ( *., d * * '.,..~~
~~9.,..,-~~
V ' l ) f ? '..,L
'L ,. ' -'9. [.p: t((p kw bec'fl h' *; ; ly / .1 ' ':..l .I '.[.. ? 9,;;. ;,. ' l -[ ' -* ' k, Y- , ' ' ' '...17. 5 T '.*. f, '., [..i'.-f I :,1 ._':G'Y.','. E..l .* ^ h 1 ' f,:.& k) ).i,.i \\' ', '.5 ',....., . '- ,A; k '., Y ' :'! l ? l, ',\\ ' ' ' *.. 'A','. l S :' ~. ' ' 7'..~'. ' ' ', ' - ' ' (, ';. '.'. 9Nhgegerrh****N,? ! ;'l.;,; h ^ J ' ;' ? - I. l: ' f. '- ]'.., ' ',? N, ,,;,.,, e., l _. - Q,;
Y
~~',, ;...l^_ 6 :'- '...H; ~y :,;' );;..'.' ;} $q.k k, bll;V) fg.y'.. 1,:.. _ g.p; ' $. :; ;..,. ' [ ';;, _ _ ' ',, ', - l*. *'. :l.} : .' l:.1 l. y.: ' ' j. '.~~
~~(. -..,,, -~~
g,.. .f'. 'Yl ';f ^,. f. Y - l.lt 0!f'_flb,bb _?l _ *' ' **' f' k.,$Eh; h.YI ?- A.I': b' i' ~,., $. ~. \\. '.'.:; :i, ' ' ' '. *,,j'. +'. ,A '$ l< ' , " ~.*.;. ! : N ' ^ \\ l T','.,. ' ~ ,,., I, -: *.,i':4,.Q.&..- Q.eQ;<. . L .4 3.. - l . y.,'. ' - ; ~ ' '.: n' ,'.f..'.'.'.,.[ R. :..,,' :. - ' f _; ;,: ..' = l.y*: ' L. ... '.f s;. l.'. )\\%'[. , e : U,:._ W;.:yv, c 'Q r ,9,. _ ^,l.l:... s
.y'.'..',-*
~~' ' '1-sh, {: s .:,?.".'.1' . ' : : l '!W, ' ' ', N ', :4. ' ~ s. i,,?j.- ; ' '; s~~
~~?*.<*..~~
.'."'.,e ' l. ' ' ', ;..... 't..*.'. ',.'.:. ' _ ' :' *) ;. R . e. 9%, . ;?4, ' : ^ ' ' - .,....,..'{~. .*. - '-.',....',,,,".,:..'. g,/....,,. ;. :-' '=
~~_ _,,.,. r g :.. r. :.,f.'...g,,.,,.+,.,~~
~~j. + .4 .L .q :a,_:M ..A.>s - g...,., ' _. - c; :.. ; ....,...,$,.7...m..h;'gc.,....,,..,.:, 4~~
~~g., :~~
~~. :./,- f... g..;....,. ,e .,.,,.c ,,.*.c -...j ..g .c..,, ,3 .- st ,., gs, *';- [, $;*, m, .,e.,,,~~
~~.. * - :'.=,*'~~
~~f*.c',;,,,,*,~~
1 -

o
~~,' (. : l~~
~~"..>('..,.-...~~
l:c....'.-. : c :,,.s t ',...,..-,. ,t -...1;.'*., .,;.'. -*~.
e.
~~.... 12 .m..p~~
~~'.s,,, ' ' l - :. %~~
...-!..?.m., : k' ,,c.'* ,....y .'.a .,,.....3; , !.\\_f.,.,.- ... 4. :. y-.. :: . ;] '- r; .a_- s, g .A u-. -%.4,.<*.%.- .,,;, f t,. ' - '.;.. ,o...~. s e,.r. 2 ..,c... ......',,': 's :,.... ;; :
;y
. r, r. _.

e
~, , n.-- ? *?; 7 - e..' ,,,.,,,y., ,..p.:'.'. ' - ... ._. 7 + ..,.$,*..;>..:' ;. '.. :: e -. ". _,..rv .,, g v, . _., y, g..; ? _s, x rq g: v ';,'....:.*'..h..~.,f...::.~.,'.,.'..l.;.;.'y-y,.'..:,..<-...m.$
~~. z.., _ :$,.',.,~~
~~f,' ';j.,,:, _.._.:'. n,.. ,,,..p,~~
~~',.,I l. :-.~~
~~..'s - Y..i. ': * !_. -.. f. ',::;, ;J. ; e ~.;.:< -l' k \\.3. f,Q '_... ; ?s !.,7..,.<- :,.... Q:e.,., ?.' '.4o' ~ G, f:.~ ' ' 's.'.. *:.' Y' '.lu O.U* ; _ h..;. :. ? '. ;' -l - ', _~~
~~^. *.;__ l _ ;.., ; :.'.;..l.l1~~
~~' lJ.*l... '. ', - '.* i _ ;,. _' p. '... '. 4 ', l p ~.,, L. N~~
~~j. ' b.,.~~
~~' '... ; :,, ch.,.~~
s

;a
~~. l_... _ ~, -l _., *.-Q.,,,u:.;:,..,. ',_ ( '. 7.s w.~~
~~-.;,,... _.f ' ~ ;*n ::; 'g',._~~
i - '. : "::. l :X' : x, ;. ?.... ; T ly *.f* s- *;n . : -,... _ y.:,... _ ;. ' '..,k.,,, R,v:s;x.*.,,gn,... a g: ;: } 2. _ ' V, ' '; :._ ; =. :v,:'.s *. ::, - l., f. ' ' =.... ..:... -. : ::l... '.... y g :.3' . s.,....,.g* g,.,.. .:J.' ,;..:,. 7 ,a_ ' -"'. ; /., y :.....'. . i. ' ',.,";.. ,...:, t y. [,
\\
.h. -,.,. ',... }l l' f "I, g {,i..'.,,. ; -p J,,.', -[, s,..;M;,, '.. - + 4, i 0*
. ;. '., ' ',.. a.. gc. ;;,.( g,, _ g

.g; g' [ *.y, ;., y;:;;;y
~~. ~. :. f,.T.. : w.~~
~~r i~~
~~' q., p, y { , '. y, ,f [',; ;,,;_ l:. .q ,q,.,:..".- -.. ;,.. ro. v - yg.. _.~~
._

. ; y ;., ;. ;_ ;,, _,,;
~..: \\ e.
y
~~anagensent's Discussion and Analysis of 1Fissancial2 Condition and;Rosalts of Operations.~~
~~- lC$mmonwealth Energy System andSubsidiary Companies [ 'u .[} 3 M~~
~~RAschsief0poreHons o~~
. fees versus feed : in 1995f eamings applicable to common shares j g ggg. .~.1 . increased $2.5 million or 5.2% to $50.3 million.^ y Earnings and earnings per common share by organizai Eamings per share increased 7c to $2.36. Factors-I
~~tional element for the three-year period were as followsi that contributed to the improved earning's;were a 1~~
~~-. - m -. t $3.8 million reduction (11c) in'other operation 5 1 E1996i V 1995: ..1994:~~
~~expense, the reversal of'a reserve related to the.~~
~~l ~ LPerc~~
~~Per?~~
~~system's energy consdrvation programs (4c), and ; I Per... < cAmount iShareC Amount ? Share ? ' Amount t Share~~
~~higher steam unit sales (1c).1 Partially offsetting '-~~
.l
~~(Dohars in Thousands Except Per Share Amounts)~~

thes factors was an increase'in interest chargesi e h Electric ;. ) $39,666$l85 ) [$32,247[$1'.52 $37$952) $1'.58 l (7c) primarily related to deferred gas costs and, to a ; ~Gasc (16,229i f.75; 115,352 - u721 112,346..59 lesser extent, higher short-term interest rates. 1
~~Other :~~
2.229 M.10. 2.687-.12 ' ' 2,500 1 11 2 m 1 Total; .$58,125 $2.70 $50.286 - $2.36 $47,798 $2.29 L Electric Operaftons. In 1996; electric operating revenues increased a Parent company earnings and dividends on preferred shares were , $44.7 million or l7.4% due mainly to higher fuel' 1 y$ves s gb nt C costs of $33.9 million reflecting the increased n th a nts en n e n share data for 199s and 1994 tias been restated throughout this availability of Canal's Unit 1 generating facility that ' discussion to aflect the tefor-one stock sprt that becarne e#ective Was out of service durhlg the first seven months kne 5, M96'i . of 1995 for scheduled maintenance and repairs, ) The remainder of the change reflects a $4 million .1996 versus 1995 > refund associated with a power contract settlement ) , in 1996,'eamings applicable to common shares
~~approved by the Federal Energy Regulatory Com-I increased $7.8 miIlion (15.6%) to $58.1 million.~~
, mission (f ERC) relative to billing issues in prior years, Earnings per share increased 34c to $2.70. Return - the impact of higher retail unit sales ($3.9 rnillion),' 3 on average common. equity improved to :14 4% from -
~~and the recovery in rates of $1.8 million for Canal's~~
>13.3% in;1995. Significant factors that contributed -- previously deferred postretirement benefits costs. u to the improved earnings included higher firm gasi L Electric operating revenues in 1995 decreased - ((18c) and retail electric (14c) unit sales, a refund 2 $32.8 million (5.1%) due.mainly to lower fuel oil ~
~~(11c) as'sociated with a power contract settlement...~~
~~' costs ($32.6 million) caused by a combination of Eagreement, lower interest costs (9c), and the rcversal scheduled maintenance and other repairs to Canal's -~~
~~of a' reserve for Cana! Electric Company's (Canal)i Unit 1L Also contributing to the decline _in revenues (recovery of postretirem,ent benefits costs (7c)i-..~~
- (C&LM) costs ($3.3 million).. Offsetting these declines were lower conservation and load management i Partially. offsetting'these factors were costs related ! Mto a five and one-half month labor dispute (11c) C Lwere increases related to the recovery of costs ~ resolved in September, storm damage from Hurri-associated with a power contract buyout ($3.9 mil-icane Edouard (6c)/a customer refund (Sc in 1996 t ilion including $1.9.million in carrying charges) and [veisus ic'inl1995) pursuant to a 1995 settlement c
the recognition In' revenues of $2 million in carrying

agreement witti the Massachusetts Department ofI
~~%harges associated.with Commonwealth Electric's - 1 .. $ Public Utilities (OP;U) that limits Commonwealthi~~
~~fuel charge stabilization deferralc j~~
~~# 2 Electric Company's (Comrhonwealth Electric) :.~~
~~l Unit sales (in Megawstthours or MWH) were as follows:~~
~~retum on equity, as defined in ~a settlement that O~~
Lexpires'in11997,land the reversalin 1995 of a ~ 4 .y ] 'F reserve (4c) related to a conservation program ) 1996 _ Changec -1995- ^ Change J19941 l . settlement in 1995.4 1* s Jiri Mar 6h 1996lthejSystem's Boa'rd of TEusteeh (Residentiali s1,802,973 :2.9 :1,752,430 -(1.0) 1,770,095 ; 'J , 2,430,188 - (0.8) 2,450,390 1.8 ' 2,406,077 Mm didereased the quarterly dividend rate per'sharey Commercial. ~' 445.037 q ~ # {2,7% from 37%c to 38%e,: an annual rate of $1.54. (industrial and Other i 449,844 ' 1.1 ' 445.020 Hotal Retan : 483,005 A8 A647,844 46-j,621,209 q M Dividends paid 16 common' shareholders in 1996 Wholesale ; 2,721,623 37.9 1.973,543 (48.1) 3,803.786 ~/ l 4 / were $33.2 million, representing a' payout ratio oil r u Total. 7,404.628-- 11.8
~~6.621,383 (21.4) - 8.424.995~~
~~,N $57% of 1996 earnings; ^ y; 74 v + s ) ,T i a Z &n x '=~~
M
E x.- kg A .m ~ (In 1996 retail unit sales increased slightly due to approximately 3,700 (1,0%) additional cusi 1996-Change 1995 -Change 1994 < tomers, the majority of which are permanent year , Residential 22,759 6.7 - -21,336 . (0.8) 21,515 cround residential customersEThe increase' in the ?
~~Cornmercial 11,558 7.9 10,710-~~
. (0.2) 10,728 T isvel of ' wholesale sales reflected the increa' ed l . Industrial and other ' 6,676 4.1 6.412 ' 1.8 6.296 s . M a W ni. 40,993 - 64-38,458 - @2). 38,539. availability of Canal Unit 1 as explained above; - The changes in wholesale unit sales have Jittle,L L $s 'h- ~ trn
~~if any, Impact on net income. ' Retail unit sales s interruptible.~~
~~1,883 55.0 1.215 : (36.9) 1,927 ' increased in 1995 due to_ a modest growth in]~~
~~Total sales.~~
~~46,362 1.6 - - 45,622'~~
(3.7) 47,354 4

customers (approximately 2,500 or 0.6%) mainlyn Transportation 4,852
~~~ 20.6 ' - 4.024 z~~
~~82.2 2,208 -~~
~~~in the residential and commercial sectors and,: TotalL 51,214 3.2 ' 49.646 L 02 '49.562 -~~
~~to a lesser extentf additional weather-related~~
-. load attributable to greater air-conditioning and 1 . ;The increase in unit sales to firm customers during ' heating use.L The decrease in total unit ' sales in ' 1996 (6.6%) reflects significant improvements for all - ~ 1995 was'mainly due'to a lower level of whole- , customer classes consistent with colder than normal sale sales refie'cting the, decreased availability - weather ' xperienced during the year, as compared to e of Canal Unit 1.
milder weather in 1995 that was 1.4% above normal.-

The cost of fuelincreased in 1996 by $33.9 mil-

Heating degree days were nearly 3.8% higher during lion due primarily to the availability of Canal Unit 1,-
1996 as compared to 1995 and 2.3% above normal. while.the cost of purchased power decreased by-A growing customer base, including customers formerly ' $9.8 million reflecting the availability of Canal Unit receiving quasi-firm sales service, alsu contributed to 11 and the reduced requirement for other more the increase in firnt unit sales in 1996. During 1995 costly sources of poweri in 1995, the 3t % declin's firm unit sales were virtually'unchar.ged compared to 1994. .in fuel costs was due to reduced consumption at Canal Unit 1. The cost of purchased power Other Operating Expenses increased just 2% in 1995, in 1996, other operation increased approximately $9 million or 4.4%. reflecting the net impact of higher 1 Gas Operations 7
~~general liability insurance costs ($6.3 million), higher j~~
in 1996, gas operating revenues increased p stretiremer' benefits costs ($4 million); and the ] net impact of COM/ Gas, labor dispute ($3.8 million). - approximately $34.9 million or 11.4% due to ; These expenses were offset somewhat by lower. higher gas costs'of $28.7 million reflecting both C&LM costs ($2.4 million), a $1.6 million decline in higher prices from suppliers : and increased unit medical costs, a decline in the provision for bad debts - l sales to customers.- The increased firm sales, ($1.1 million) reflecting improved collection experience, inclu' ding transportation,; equated to $6.9 million and the absence of legal. fees ($.8 million) associated ~ due to higher degree days during 1996J with the cancellation of a power contract in 1995. q Gas operating revenues decreased in 1995 by Other operation in 1995 declined $7.1 million or 3.3% $16.6 million or.5.1% due mainly to an $18.3 mil-due primarily to a decline in liability insurance ($5.4 - ~ l lion (10.3%) decline in the cost of gas sold that million) caused by' accrual adjustments that reflected ' reflects a 3.7% reduction in total sales.; 2 better than anticipated experience, lower C&LM costs
o
. Quasi-firm sales are designed for customers : .-($3.3 million) and a decline in the provision for bad . who receive.interruptible service in peak months: debts ($1 'million), This was offset, in part, by. higher i ts negotiated in each contract and firm service labor costs ($3.5 million) and postretirement benefits in'all other months 2 Fluctuations in.quasim,,7, ! costs ($2.6 million). Isale' had minimalimpact on net income in. Maintenance increased its 1996 by $2.5 million o'r s 11996 and.1995AOn January 17,1997; the /. . 6.5% primarily due to storm damage costs related to DPU 3pproved a marginJsharing proposal filed : l Hurricane Edouard ($2.1 million).- These increases were - by Commonwealth Gas Company (COM/ Gas) partially offset by reductions in. maintenance costs, 1 , for sales and transportation to quasi-firm cus. . primarily associated with Canal Unit 1 ($1.5 million), tomers. This proposal allows COM/ Gas to retain During 1995, maintenance increased $1.9 million (5.2%) 125% of the margins on these sales over a certain: reflecting scheduled maintenance and other repair ' threshold amount as set from year to year. The costs to several system generating units ($1.5 million). ( remaining margins reduce the cost of gas sold to Depreciation expense increased $3.S million and ifirm customers. . $4 million in 1996 and 1995, respectively, consistent ' Unit sales and transportation volume (in billions with the System's additions to and upgrading of its '~ ~ cf British thermal units or BBTU) were as follows: property, plant and equipment. 17 9:
Ms ' gy WP, < j
~~p. jy,dM M:~~
~~~ g7 4;. 9, m, y .a u N _p...~~
l%

g, : Q.:ny
~ %1 Othorincome. for additions to property, plant and equipment by ~ ja $The $3M milHon increase irh1996 was due mainly to $10.2 million or 19.2% These types,of investing. M h /the recording of a regulatory asset 6y Canal for costs ; 4 activities continue to _be funded entirely with internally- ,y $f T associated with postratirement benefits that were : % generated funds.= Cash required in,1996 for financing, 9
~~b - ! recovered in 1996 wholesale rates' ($1.8 million) and a >~~
~~iactivities was primarily for the payment of preferred' ' igain recognized on the sale of a' parcel of non-utilityi and common dividends ($34.2 millioh) and the funding L ~ ~ E~~
~~fland by Cambridge Electric ($.[million)pThe increase s E of maturing long tarm debt and sinking fund requirek~~
~~< in 1995 was'due to a decline in the expense compoi ments _($41.7 million).} Proceeds from short-term bory~~
~~g' 9~~
inont of other inbome due primarily to the reversal of a : t rowings ($62.9 million) helped to meet the year's.' cash - Wr reserve ($1;4 million) that had been established byf - ' requirements [Other information on the sources and A ~ n ~ ng ) Commonwealth Electric that related to certain costsi Juseslof cash for the past three years is includedln the( , q @ N associated with its conservation program,' offset by the ; i Consolidated Statements of Cash Flows'in this report.1 ' Wrecognition of.a reserve ($2.7 million, net of tax) relat-l 1 s 4 fed to a system generating' station that disopntinued 1 Capital Asquirements and Resources ! , foperations'and;to'a lesser extent, the absence of thel iThe svNsm's' projected capital expenN : W Common Equ'ity ( ' g [ equity component bf allowance for funds usedhuring ' Editures for the ' years' 1997 through j u rotaiostr s ', [q ^] ' j construction (AFUDC) ($.3 million)[ ~ ! 2001'are $392.2 million, including. ? E Prend Stock ? $90.9 million for' 1997 that consists of. Y .At ;. j tinferset Cha'rpos3, ~ $68.2 million in construction expendi- , gTotal interest charges declined $2.2 million, or 5%, ? L tures and $22.7 million for debt and i M g in 1996 reflecting rnaturing long-term debt and ! sinking fund 'paymentsh These _1997 : U t = scheduled ' inking fund payments.- Interest ' charges ' s , (for 1995 increased $1.1.million or 2.6% due primarl-. l.reqdrements WH be me@ma@ ( q ~ through internally-generated funds ' R ly to a higher level of l'nterest on deferred gas cbsts ~ OII70.8 million with the balance of /($2 million) and higher short-term' interest rates, offe $'2A mHon sWemenjed by long -
~~set, in part, by lower long-term 'inte' rest costs ($.9 '~~
and short-term debt financmgs.1The - million) that reflected maturing long-term debt and - System could also raise capital throughi scheduled sinking fund payments.L { the issuance of additional se_ ries of a preferred shares or additional Common'. r Shares or through changing its Dividend ? k.W W M W Reseueses
~~Reinvestment and Common Share?~~
~~' f FinancM1 Condition! K m uetunna o tn~~
~~Purchase Plan from a. market pur?~~
{The sy' tem s cash require, ?E Electric, Ichase plan to direct issue of shares. i q s The system's goalis to maintain'a? j4 $g ~ capital structure that preserves an' f ments are essentially'me't. Tinrough the generation of / l cash flows from the sale of l588IIII. _ appropriate balance between debt , e lectricity, natural gas (includ. and equiy yanagement believes its ! hem % e g iing liquefied natural gas) and s -. capital resources and. liquidity ' re _ f? a 1 N, fsteamEDaily cash' require @ -, ' sufficient to' meet its current and projected requirements. ~ The system's capitalization structureilncluding. /ments for current operattoris,g y y Aconstruction programsidebt; ~ short-term debt, is presented belowi . ? service and other capital 2 EP ,1995,. 1996-g frequirements ar' ' maintained % ~ e s (oollars in Thousands) MfQthrougliintemal generation! > Eand short-term borrowings; < Long term debt} _ t $410,411.147.1% - ; $369,565 J 40.3%. ~ ' tmade;available through the; y -Preferred sharesx- -13,840 31.6-J 13.020 : 1.4 t ~ 1 { system'
~~Common equity.~~
390,785 44.9 415,694 J 45.4 L % :banksh_s creditlines with) p Short-term debt 55.600 6.4. 118.475 12.9. Long-term debt ; W r ^ ifinancings are used to?[ $ f ' yTotal capitalization $870.636 100.0%. $916,754 100.0% 1-V refinance ~short-term debti -^ "%($by managemente i g M ' This discussion contains statements which, to the extent j Forward-Looking Sistements - j when deemed,appropriatel a:g. g, f~ J vTheisystemK1996 net ( they are not recitations of historical fact, constitute ]- 7 cash flow from operating P " forward-looking statements" and are intended to be jactivities exceeded,fundsY ? subject to the safe harbor protection provided by the jy used for Investing activitiesi *
***6 Private Securities Litigation Reform Act of 1995. A k @f ny jf p*+,
~N J' h . -{ ,,f u
~ .. g w '\\' Lnumber of important factors affecting the System's opportunity that currently exists for electric compa-l business and financial results could cause actual nies to recover their investment in generating plant results to differ neaterially from those stated _in the and other expenditures previously approved by the - forward-looking statements. lThose factors include DPU and included in current rates. The potential t developments in the legislative, regulatory and com-losses, which may lesult from subjecting electric ipetitive environment, certain environmental matters, company generation to the pressures of a competi-ddemands for capital expenditures and the availability tive market, are typically referred to as " stranded
~~of cash from various sources, and uncertainty as to costs? The single largest component of stranded l regulatory approval of the' full recovery of regulatory -~~
costs which are significant to the. system relates to. ~ ~ t Issets and other' stranded costs, ^ i ~ above market purchased power contracts that - Commonwealth Electnc and Cambridge Electric .have with non-utility generators. However, the DPU ! Electrk IndeskRestreetwelag ; has concluded that it is in'the public interest to pro- . r :L vide electric companies a reasonable opportunity to in August 1995; the DPU issued an order calling forJ collect net; non-mitigable stranded costs. The DPU the restructuring.of the electric utility industry in - has proposed that stranded costs associated with'- ~ 1MassachusettsyOn May 1,1996, the DPU issued ~ ' owned generation facilities, regulatory assets, and FA second grder containing proposed rules for L ' minimum purchased power obligations be_ collected ' Limplementmg electric industry restructuring that over the expected economic life of the generating >' were the subject of public cornment and hearings'dur-ifacility, the current amortization schedule of the
~~ing June and July 1996. Subsequently, on December~~

regulatory asset, or the contractual term of the pur- ! 30,1996,' the DPU issued another order announcing its -. L chased power obligation,'respectively. The DPU's 1"Model Rules and Legislative Proposal" as a guide in proposal requires that any stranded cost recovery J the creation of a competitive market forfelectric genera-for an electric utility be subject to mitigation efforts i tion in Massachusetts that would provide customers . to reduce embedded costs over time. The Model - ~ Jwith the opportunity to achieve lower electric bills begini Rules specify that mitigation should include such
~~ning' January 1,1998/ The order also required electric 1 measures as sales of cap ~acity and energy from~~
- utilities to. file by March 3,1997, revenue-neutral, owned generation, renegotiation or buy out of pur-unbundled rates and model bills showing a breakdown- . chased power contracts, and sales and_ voluntary ' "of the' bill into generation, transmission,' distribution L writedowns of assets.1 Furtherl the DPU will coni ~ Rnd access charge.categoriesc - duct stranded cost charge reconciliations at years -
~~In itsfModel Rules,"the DPU has proposed that the two, five and ten following the date of retail access, 1~~
j minimum structural reorganization needed to create a - ' During the last several months, three Massachusetts competitive market is the functional separation of gen- , electric utilities have announced negotiated settlement eration, transmission and distribution within one inte-l L agreements with the Massachusetts Attorney General's grated com'pany; and the establishment.of a separatel ' Otfice (Attorney General) that include. divestiture of [ marketing atfiliate if a company retains generation generati_ng assets, provision for a ten percent reduc-L assetsLThe Massachusetts. Legislature, which will s tion.in customers' charges nnd recovery of. stranded ' ~
~~rander the final passage of any restructuring law, is '~~
costs through a non-bypassable access charge. _One inow considering the DPU's proposed legislation.. settlement agreement has already been approved - J that electric customers will be,'s Model Rules provide.>able_to' buy their powerf J settlement may be affected by actions of the _. iOther elements of the DPU .by the DPU implementation of any restructuring s y M on the open' market; distribution services ~will remain a 1 Massachusetts Legislature. Wmonopoly service offered exclusively by the.existingi The system Is engaged in preliminary settlement ilocal distribution companies in clearly defined servicec ! discussions with the Attorney General, and expects Jterritoriesfarid customers wi_Il have three types of elec6 ' to reach a comprehensive.' settlement during the first '1 j tric generation choices 6 First, custo'mers may enter 1 (half of 1997? In the unlikely event it is unable to s tinto unregulated agreements with a competitive supplier l complete a settlement,' the system _would file 'a full 4for the' provision of generationJSecond," customers? ' restructuring plan lwith the DPU; m
~~may" continue to buy power directly from their electric e~~
. As described in Note 2(b) to the consolidated finan- . ' ? distribution company atla price regulated by the'DPU. cial statements, the system complie's with the provi-W Third, customers who. have received generation from a isions of Statement M Financial Accounting Standards - competitive supplier but who; for any reason; have s (SFAS) No;71,'.ccounting for the Effects of Certain - L - ) stopped receivir g such gene'r'ation will be able to l. > Types of Regulation? In the event the system deter- . freceive' default beneration, service, provided by distric rnined that it no longer met the criteria for following ; ah bution companies at spot market price 9.. ! SFAS No. 71, the accounting impact would be an extra-i Changes in the; electric industry may reduce the ' ordinary, non-cash charge to operations in an amount ~ ~ - ? 3 o 1 5 5t e y g qMWQq 4 mr ) ~
p that could be material. Criteria that give rise to the due to significant uncertainty as to the actual site con- ' discontinuance of SFAS No. '71 include: 1) increasing ditions and the extent of any associated remediation competition restricting the system's ability to establish activities and the ass!gnment of responsibility. Howeve ~ prices to recover specific costs, and 2) a signif; cant - it is expected that all such costs will continue to be change in the current manner in which rates are set recovered in rates as described above. by regulato'rsc The system periodically reviews these COM/ Gas and certain other system subsidiaries are criteria to'~ ensure that the continuing application of also involved in other known or potentially contarainated
SFAS No. 71 is appropriate.E Based on the current sites where the associated costs may not be recover-cvaluation 'of tho various factors and conditions that able in rates and have recorded an estimated liability j
t are expected to impact future cost recovery, the system. (and a charge to operations) of $2 million to cover the. ( ' believes that its regulatory ' assets, including those : . expected costs associated with assessment and reme- . rtiated to generation;are probable'of future recovery. ~ diation activities. These estimates are reviewed and adjusted periodically as further investigation and assign-ment of recponsibility occurs. The system is unable to estimate its ultimate liability for future environmental " Environneestal Matters, . remediation costs. However,in view of the system's 1COM/ Gas is. participating in the assessment of a. current assess' ment of its environmental responsibilities,. . number of former manufactured gas plant (MGP)]. existing legal requirements and regulatory policies, i sites and alleged MGP waste disposal locations to management does not believe that these matters will determine if and to what extent such sites have . have a material aaverse effect on the system's results been contaminated and whether COM/ Gas'may ' of operations or financial position.. be responsible for remedial actions... the provisions of Statement of Position (SOP) 96-1, Effective' January 1,1997, the system will adopt LThe costs assoc;4ed with the assessment and : c! san-up of these sites are' recoverable in rates : _ '" Environmental Remediation Liabilities." This Statement through the cost of gas adjustment clause over as . provHes authoritative guidance for recognition, mea-seven-year amortization' period without carrying costs
~~surement, display and disclosure of environmental reme-pursuant to a 1990 DPU order.? COM/ Gas has recorded '~~
diation liabilities in financial statements. The systerr an estimated $2.5 million liability that reflects its best has recorded environmental remediation liabilities m. Tstimate (baseion current information) of the costs to - Lof amounts paid of $4.2 million at December 31,1996. . be incurred in connection with assessment and reme- . Upon adoption of SOP 96-1, the system's estimated diationactivities identified to this point < COM/ Gas has liability will not incrementally change and further, man-also recorded a regulatory asset in anticipation of - ngement does not believe that SOP 961 will have a recovery of these costs. COM/ Gas is unable to material adverse effect on the system's results of predict the total cost to ultimately resolve these matters l operations or financial position.. j a ~ !Index j - Management' Report................. 21 1 s Report ofIndependsat Public Accountants...... 21 l Consolidated Statements ofIncome.......... 22 ) [ Consolidated Statements of Cash Flows........ 23 Consolidated Balance Sheets '............ 24-25. l
~~Consolidated Statements of: Capitalization:..... 26 -~~
~~i Consolidated Statements"of Changes in. 8 Common Shareholders' Investment......... 27 ?' IConsolidated Statements of Changes in L. ^ Redeemable Preferred Shares............ 27~~
~~Notes to Consolidated FinancialStatements... 28-36 i Selected Financial Data '................. 37~~
~~' Comparative StatisticalData-1996-1992.... 38-39 l Shareholder Information............,..... 40~~
~~Trus' tees and Officers.. ;........' Inside Back Cover~~
~ s' 20 l a_
y5 MCICgCatDGI'O OCPCrt Commonwealth Energy System and Subsidiary Companies The consolidated financial statements presented as to the fairness of the consolidated financial state-3 . herein are representations of the management of ' ments' presented. The independent auditors are Commonwealth Energy Syste.nl Management recog-selected by the Board of Trustees and report their nizes its responsibility for the preparation and presen-findings thereto through the Audit Committee, which is .tation of financial statements in conformity with gener, comprised of three outside Trustees. De Board of -
s_.lly accepted accounting' principles.)To fulfill this :

Trustees is responsible for ensuring that both the inde-
' responsibility, management maintains a system of :. l pendent auditors and management fulfill their respec-internal accounting controls,1ncluding' established puli. tive responsibilities'as they pertain to these consolidat- ~ cles and procedures and a comprehensive internal : ed financial statements. 'cuditing program to evaluate the adequacy and effec-tiveness of accounting and operating contrpts, compli-ance with system policies and procedures and thei James D. Rappoli, safeguarding of system' assets.
~~Financial Vice President The responsibility of our independent auditors'?~~
~~L _ examination is limited to the expression of an opinion J .. February 19l 1997. ( Deport ofilmdependentLPubHc Accountants To flee Boeral of Trustees of L~~
~~materlat misstatement.' An audit includes examining, Comensenwealtle Energy Systems:f on a test basis, evidence supporting the' amounts and~~
~~~ ' . disclosures in the financial statements. An audit also. ' We have audited the accompanying consolidated 4~~
~~includes assessing the accounting principles _ used and -~~
~~balance sheets and consolidated statements of - l significant estimates made by management, as well as~~
~~capitalization of COMMONWEALTH ENERGY SYS L j evaluating the overall financial statement presentation.~~
~~TEM (a Massachnetts trust) and subsidiary com-1. .We believe that our audits provide a reasonable basis _ panies as of December 31,1996 and 1995, and the # for our opinion.. ~~~
~~r: lated consolidated statements of income, cashD~~
! In our opinion, the con'solidated financial state-l flows, changes in common shareholders'investa i ments referred to above present fairly, in all materi-1 ment and changes in redeemable pre $rred shares? f al respects, the financial position of Commonwealth L for each of the three years in the period ' ended: Energy System and subsidiary companies as of ~ ~ ' E,ecember 31,1996.L These ' consolidated financial P. December 31,1996 and 1995, and the results of - 1 ~ T statements are the~ responsibility of the System and i E their ope _ rations and their cash flows for each of the fsubsidiary companies' managementf.Our responsi 'd three years in the period ended December 31, ~ bility is to express an' opinion on these consolidated i i1996, in conformity crith generally accepted J financial statements based on our' audits? - accoudmrinciples.- > We conducted our audits in accordance"with i ' generally accepted auditing standards.fThose - _] ttandards, require that we plan and perform the' g Arthur Andersen LLP W
~~cudit to obtain reasonable assurance about~~

~~. Boston, Massachusetts~~
~~whether the financhi statements are free ofi~~
! February 19,1997.- }, p pyg 21 (- /. l
i ' l Cons ~olidated Statenients of Inconie i Commonwealth Energy System and Subsidiary Companies 3 .-a 1996 1995 1994 For the Ysarri Ended December 31, - (Dollars in Thousanos, Except Per Share Amounts) + LOperating Reveneesi i Electric < $. 649,678 ' $604,980 $638,150_- Gasi __. ( 341,867:: 306,953 : 323,568' ' Steam and other;
~~19,360-17,355 15,867.~~
~~1,010,905 4 929,288 977,585 1 , Operating Expen'ses z.. ..: (~~
~~Fuel used in electric production, principally oil~~
~~.91,690 57,820 '90,414 ., Electricity purchas'ed for resale :. 265,019; 274,795~~
~~269,418~~

3 Cost of gas sold % - 187,530 158,835 '177,150-1 Other operation, 215,319: 206,280 213,370 3_. L40,913 - 38,414 "36,522 F . Maintenance 1 ~ " L Depreciati_on [ ? Taxes; 51,782: .48,170 c 44,188 > Local property i 18,049 117,5731 17,467 0'
income.1 f. '

36,099:-
-24,574 .'29,154 s Payroll and other" ~ .7,839-8.284.' 8,087 - 914,240 - 834,745 885,770 lOhreting.Incensej 96,6651 - 94,543 ~ 91,815' ^ s Otleer Incesne.' 4,878 - 1,461 627 Lineesse Before Interest Cleerges, ' 101,543 ~ '96,004 92,442 LInterest.Cleerges # . Long-term debt _ 35,586 .38,581-39,442 i Other interest chargesf 7,039 6,884 '4,475 Allowance for borrowed funds used during ' construction _ (257) (857) (443) 442,368 .44,608-43,474' Net lacessee : ^
~~59,175 51,396'~~
-48,968. , j , Dividends on preferred chares l '1,050 1,110 - 1,170 - Earnings Applicalele to' Cessessness Sleeres' $ 58,125 - $ 50,286' $ 47,798 - ~ Average NesseinerM Comesseen(Sle' res.Outstessellag. ? Mermisegs Per Comessese Sleere l 21,529,676 21,311,836 L 20,827,562 e '. $2.70 $2.36 - - $2.29 j ^ !The accompanying notes are an integralpad o$these consolidated financial statements. i S t 9 f {' t i + q w; .e.. 22' ~ '4' LD Gi i _.
,4 TCiccIldcted Statemcces ofLCach Flowa Commonwealth Energy System and Subsidiary Companies For the Years Ended December 31 1996 1995 1994 (Dollars in Thousands) -Ohreting Activities? i Net income 4 $ 59,175 151,%6. $ 4,R Effects of'noncash items * . Depreciation and amortization J 63,331 '
~~60,555 53,727J~~
' Deferred income taxes,' net : 3,515 4,182 -14,846 Investment tax credits', net - ' (1,285) - (1,401) (1,470) Earnings from corporate joint ventures. (1,557) (1,633) - ' (1,750) Dividends from corporate joint ventures. 1,376 2,067-1,651, Change in working capital, exclusive of cash-- ~ i Accounts receivable and unbilled revenues i(9,446) (13,626) 115,085 income taxes (14,097) 14,353 8,016 ; 1 Local property and other taxes (555) (950) 616 Accounts payable and other. .(33,956) 25,199 28,976 Power contract buy-out (25,500). Fuel charge stabilization deferral, net - 2,372 L (3,447) (15,964). Deferred postretirement ben 9 fits and pension costs (2,157) (4,479). . (8,536) - . FERC Order 636 transition costs, net 11,390- - (2,585) All other operating items' (3,391) ' 6,565 (15,017)' Net cash provided by operating activities .63,325 t-124,671 126.563-Investing Activities l ' Additions to property, plant and equipment (exclusive'of AFUDC)- { . Electric ' (38,607) (60,841). (37,997) Gas (11,591) (16,143)- (17,993) Other -(2,730) ~ - (3,659) (1,843) Allowance for borrowed funds used during construction (257)' (857)- -(443) q - Net cash used for investing activities-(53,185) (81,500) (58,276) ' FineAtin5 Activities. , Sale of common shares. 32 9,534. 9,434- .j Payment of dividends-(34,205), -(33,142) - (32,475). - Proceeds from (payment of) short-term borrowings, net. 62,875- ?10,750 (27,125). . Retirement of long-term debt and preferred sharcs through sinking funds 1 _ - (8,436) (8,7100 (6,406) Long-term debt issues refunded-(33,230) (25,00. (10,000) Net cash used for financing activities (12,964)- '(46,574) (66,572); Net increase (decrease) in cash. . (2,824).. (3,403) ~ ~ 6,007 '1,715 - Cash at beginning of period. 4,319- ' 7,722 1 ? Cash at end of period; $21,495 $ 4,319 $ 7,722
~~Supplesmentel. Disclosures of CasIs Flow Infersnetlen~~
' : Cash paid during the period for: i ~ t nterest (net of capitalized amounts)' $ 41,294 '$ ' 42,051 $ 41,022 - Income taxes $' 46,563 - $ 12,918 $ 17,563 : ~The accompanying notes are an integralpart of it ese consolidated financial statements. 1 l i 23 j
1 2 Consolid:ted dc:lacco Shodta. [ lbommonwealth Energy System and Subsidiary Companies - m: <t; L ece'rnber'311 3996- .1995 D -(Dollars in Thousands) m i Property,' Plant 'and Egelpmeemt, at original cost < Electric' $1,150,818 - . $1,118,630 Gasi 357,403.
~~346,990 L~~
~~. Other : L 66,365-- 65,020 1,574,586 1,530,640 Less-Accumulated' depreciation and amortization ~ 536,041'- ' 497,712 1,038,545 1.,032,928 -. Construction work in progress 5,485: -10,154-~~
~~Nuclear del in process ~ ^~~
~~~ 1,597 - 122 '1,045,627 1,043,204 ' Egelty in Corporate Jelut Ventures - Nuclear electric power companies (2.5% to 4.5%)-1 10,046;~~
9,814

Other investments 3,349 3,400 13,395 13.214 Current Assets Cash 1,495
~~- 4,319 Accounts receivable, less reserves of $8,324,000 - in 1996 and $8,040,000 in 1995 117,008 105,377~~
~~Unbilled revenues' 31,698 33,883 antories, at average cost-Electric production fuel oil :~~
2,221 1,683 Natural gas - 23,084 17,339 Materials and supplies l 6,220 6,516 Prepaid taxes, 9,079 9,044 ' Other ': 5,686 6,799 t. 196,491 184,960 ' Deferred Cleergesj Regulatory assets. 154,291 130,672 19,151 20,292. Other1 ~ '173,442-150,964 e 3 $'.,428,955 - $1,392,342 i:The accompanying notes are an integralpart of these consolidated financialstatements.- 1 ,F 24 e
q, p .; g .* r ( l- _5',e r Con ~solidated Calance Sheets i
~~Commonwealth Energy System and Subsidiary Companies e~~
~~p L December 31. -: 1996 1995 s (Dollars in Thousands)~~
~~Capitalization ~ and Llabilities ;~~
~~n !e [Capitelldation' (See separats stat'ement) ;~~
~~Common share investment <~~
~~$ 415,694.~~
p $ 390,785 ' i Redeemable preferred ~ shares, less currenti, O. sinking fund requiremants...,.. 13,020? 713,840 Long-term' debt, less current sinking fund -- L' i i requirements and maturing debt L -355,305-377,181" .784,019 ~781,806 - ^ Capital Lease Obligations:: 12,346 13,291 1errent Liabilities . Interim Financing-
~~Notes payable to banks 118,475~~
,55,600-1 Maturing long-term debt 14,260 ' 33,230 '132,735 88,830-Other Current Liabilities " Current sinking fun'd requirements - 8,473 ' . 9',103; Accounts payable. ' 90,269 100,715-Accrued taxes-Local property and other - 9,060'- 9,580- ' income 7,910 22,007 Accrued interest: ~ 6,267.. 8,389 - Dividends' declared .. 8,289 8,073 = Other 39,279-' 55,379 169,547 213,246 302,282' 302,076 Deferred Credits . Accumulated deferred income taxes '174,877 '170,182- ~ Unamortized investment tax credits. 26,618 27,903 10therr 128,813 97,084 330,308 - '2F 169 i i ^ / Comenaltenents' and Contingencies U ' $1,4'28,955 2 ' $1,392,342 f The accomhnying notes are an integralpart of those consolidated financial statements. ~ ~ + hL; i.( 1 A f - h 3' lI.,G.. a <+ < w w bgs.. ; %' c, n: I' I...I
p;; m y.< q 1 Consolidated Statenients of Capitalization ) d J i Cbmmonwealth $nergy System and Subsidiary Companies LDecember 31/ 1996 1995 ?. (Dollars in Thousands) Ceasemeen Sleere Investseemt.. ~ 0 Common shares, $2 par value-/ - Authorized-50,000,000 shares = LOutstanding-21,529,676 shares iri 1996'and :

~~21,528,268 shares in 1995 t..,. ;~~
~~i Amounts paid in excess of par valuel $ 43,0591 ' $ 43,056 c 111,685 J ? 111,749 < .l L Retained eamings ? <' L 260,950 = 1235,980; _ } Total comrnon share investment 1~~
~~415,694~~

~~390,785 Codeenselsle Preferred Sleares,i~~
~~Cossieletive, $100 Per Vales:~~
~~j Series A,4.80% j 2,640 < 2,760i l~~
~~Series B,8.10%1 4,000.~~
~4,160 L Series C,7,75% i ~ 17,200 : ' 7,740 '- Less-Current sinking fund requirementsL '(820) 1(820)- 7 c Total redeemable preferred sharesi N; 13,020' 13,840 Long-torne Debt i L System; - Senior Notes dde-t 1997,'10.48 % 10,000 10,000 1998,'10.45% 110,000; 10,000 21999,'10.58%
~~10,000-10,000~~

Less-Maturing long-term debtj (10,000) -1 Total System lon -20,000 - 30,000, Subsloiary companies g-term debt'- 4 ' Mortgage Bonds, collateraliz.ed by property of operating subsidiaries, due - 1996, 7 % : 3,800. 1996, 8.99 % ! .10,000- . 2001,8.99 % T .'18,100_. 21,750 2006,8.85%
~~2020,7%% '~~
134,650 ~ '35,000 - _10,000 10,000.- 2020, 9% % .40,000-40,000 '2020, 9.95% 25,000. 25,000 ' 2033,7.11 % 35,000, 35,000 . Notes due-20,000' ~ 1996,9.97 %. +. ' 1997,6%% > 4,260 4,320 11998, variable rate (0.125% in 1996 and 6.5' 25% fri 1999 9,000 .9,000 6
~~1999, 8.04% 2 ~~~
~~'10,000:~~
~~10,000 2002, 7% %~~
~~12,600 ' 2,700L. - 2002,= 9.30% - J.15,000 ? '15,000 - 30,000 - 30,000 s2003,7.43 % '3. 2004, 9.50 % :~~
~~12,500?~~
~~,15,000.. 42007, 8.70% 5,000 5,000~~
~~2007, 9.55%~~
10,000 ' '10,000 4 L 2008,7.70%1 e , L 2012,9.37% i ' '~ -.10,000 10,000 4 J 16,842 117,895 < 2013,< 7.98%o 25,000 - . 25,000 ~ 2014,9.53% q ,10,000-110,000_ ~ '2019,9.60% 7 10,000 L '10,000 e s 2023, 8.47 % ? _ _ i,., A > 15,000' 15,000 -
Less-Maturing long-term debt

(4,260)
(33,230) , ' ? Current sinking fund require.ments J (7,653) (8,283) . -- Unamortized discount,' net : (734) (771) 1 Total subsidiary companies',long-term debt = 335,305. 347,181 t ' Total long-term debt : 355,305 377,181 3 Total capitalization s
~~4.p~~
~~$784,019 : $781,806 ,r s.~~
~~The accompanying notes are an integralpart of these consolidated financial statements.~~
4 f( 26 j N-my s (g -} +
F 7 LConsolidatedistatements~ of Changes in ~ Common Sh'areholders Investment ICbmmonwealth Enetgy System and Subsidiary Companies ~ Amounts Par - Paid in , ' ~ ~, Value. . Excess . $2 Per! ' of Par. Retained 'O . Shares" Share.
~~Value Earnings Total ay M~~
Q. ~ s . (Dollars in Thousands). = Balance DecernbN 31,1993; f 20,590,"154 s $41,180 .. $ 94,657 $201,233 :. $337,070 . LAdd (Deduct) 5 ' ' Net incornef '48,968 48,968 l Salo'of sharesj t461,640 i 923: 8,511 9,434 z Cash dividends declared-V LCommon shares-$1.50 per share) 3 (31,305). -(31,305)i 7;. Preferred shares M (1,170) (1,170) ' Balance December 31,19941
~~21,051,794' 42,103' 103,168 217,726 362,997~~
~~- Add (Deduct) c~~
~~.G NetLincome L 51,396 51,396 -~~
~~Sale of shares '.... 2476,474i '953~~
~~8,581~~
~~' 9,534 ' Common shares $1.50 per share '~~
~~Cash' dividends declared-~~
~~(32,032) (32,032)' j~~
~~' Preferred shares K~~
-~ - (1,110) (1,110) i Bila ce December 31,1995 ' L 21,528,268 '43,056? 111,746-235,980 390,785 i Atd (Deduct)- Netincomei 59,175 : 59,175 ' Sale'of shares} 1,408 < 3 ', 29 .32 " Cost of stock split. (93): .(93) Cash dividends declared-4 L Common shares-$1,54 'per share c l (33,155). Preferred sharesL (1,050). (33,155) (1,050) ' ~ Balance Decernbei 31,1996:
~~21.529,676 ~. - $43,059.~~
~~$111,685 $260,950 $415,694 l ConsolidatedeStatementstof Changes. In Dedeemable PreferredLShares~~
~~Commonwealth Energy System and Subsidiarh Companies -~~
~~1 Authorized and Outstanding. 1 s Cumulative Preferred Shares-$100 Par Value. l 7 NJ L Series'A0 i Series B: ' Series C Total. d a.i ^ < 4.80% ~ 8.10% ^ ' 7.75%. Shares ?~~
l
~~' 'Y> _, i: Balance DecembNr 3U1993' 30,000i .44,800' ~ K L 88,200_. 163,000: i ;:Less-Sinking fund redemptions ( ". ' 28,800f 43,2001~~
~~82,800-154,800 i~~
~~1,200 L 71,600-5,400-8,200 - 4 ' Bklance'De' ernber 31[1994 c~~
~~Less-Sinking fund redemptionsj 1,200 1,600 -~~
5,400 8,200 j iBalance December 31[1995 27.600 41,600 77,400 146,600 cLess-Sinking fund redemptions: ', 1,200 "1,600 5,400-8,200 i Balance Dscember 31,1996) 26,400 -40,000 72,000-138,400 - The accompanhing notes are aN Integralpart Of these consolidated financial statements. I p y W, o
Qm u u y +,m; 1 5Notesito Consollslateel Financial Statements l Commonwealth Energy System and Subsidiary Companies i J. f(1)) Someral infersnetlen Certain prior year amounts are reclassified from 1 c d time to time to conform with the presentation used in L Commonwealth Energy System (the System) is the current year's financial statements. qn exempt public utility holding company with 3
~~investments in four operating public utility companies~~
( ) Regulatory Assets and liabillfles ' ) , located in central, eastern and southeastern ; J L Massachusetts.The. System is th'e' parent. company ; < The system's operating utility companies are regulated i Ind, together with its subsidiaries,'is collectively..
~~as to rate's,' accounting and other matters by various~~
~~] referred to as "the system."; System electric operations 1 ! authorities, including the Federal Energy Regulatory~~
~~Ue involved in the production and sale of electricity~~
' Commission (FERC) and the Massachusetts Depart-L to 363,000 customers in 41 ' communities including 5 rnent of Public Utilities (DPU). H New Bedford, Plymouth, Cambridge and the ge> ( Based on the current regulatory framework, the 9 graphic area comprising Cape Cod. Gas operations. system accounts for the economic effects of regula- ] l serve 234,000 customers in 49 ' communities includt tion in accordance with the provisions of Statement L ~ ing New Bedford, Cambridge, Plymouth and l of Financial Accounting Standards (SFAS) No. 71,
~~Worcester. In addition to the utility companies, the~~
~~Accounting for the Effects of Certain Types of isystem 1ncludes a steam distritiution company, five~~
- Regulation." Regu!ated subsidiaries of the System - ') real estate trusts, a company engaged in the opera- .- have established various regulatory assets in cases tion of LNG facilities a'nd two new subsidiaries that - where the DPU and/or the FERC have permitted or. i ne pursuing energy-related business. opportunities. are expected to' permit recovery of specific costs ~ The system has j,991 regular employees includ,ing ' over timet Similarly, the regulatory liabliities estab-c1,182 (59%) represented by various collective bargain { - lished by the system are required to be refunded to i
~~ing units.,Ori September 8,1996,~a contract was~~

. customers over time. Effective January 1,1996, ratified; fobowing a five and one-half month labor ' the system rdopted SFAS No.121, " Accounting for dispute,' with a collective bargaining unit that repre-the Impairment of Long-Lived Assets and for Long-sents approximatelyl17% of regular employees. The Lived Assets to be Disposed Of." 'SFAS No.121 l new six-year agreement will remain in effect through - imposes stricter criteaa for. regulatory assets by l March 31,2002. New agreements were reached in requiring that such assets be probable of future early 1996 with two other bargaining units (reprei recovery at each balance sheet date. SFAS No.121 j < senting approximately 23% of regular employees) did not have an impact on the system's financial I that were scheduled to expim on October 1,1996 - position or.results of operations upon adoption This and Novembe' 1,1997. These new agreements - - result may change as modificatioris are made to the { r ~ / will remain in effect until 2002 and 2001, respectively. current regulatory framework due to ongoing elec-l . Additional contracts with two bargaining units repre-tric industry restructuring efforts in Massachusetts. L senting approximately 5% of regular employees are if all or a' separable portion of the system's opera-3 scheduled to expire in 1997. tions ber:omes no longer subject to the provisions 1 . of SFAS No; 71, a write-off of rA od regulatory-f i(2) Significant Accounting Pollsles , assets and liabilities would t' oquired, unless some ~ - form of transition cost recomy continues through -) ~ rates established and collected for'the system'_s 1 L. (s) Principles of Consolidation an ccounting Eremaining ' regulated operations. In addition, the The consolidated financial statements' include the 3 system would be required to determine any impair-4 accounts of the System and all of its subeMiary com-ment to the carrying. costs of deregulated plant and - 1 paniesh All significant interco'mpany accounts and ~ inventory assets. However, on December 30,1996, transactions have been eliminated in' consolidation! the DPU issued an order containIng "Model Rules" a jThe ' preparation of financial statements in conformity for industry restructuring that management believes I ( with~ generallyfaccepted accounting principles requires' would escentially allow full recovery of stranded ) e 7'
~~management to make estimates and assumptions that costs. For additional information relating to industry affect the reported amounts of assets and liabilities and 1~~
~~~ restructuring, see the~~
Electric industry Restructuring" 4 disclosure of contingent assets and liabilities at the date ' ' 'section in Management's Discussion and Analysis iof the financial ~ statements and the reported amounts 1 of Financial Condition and Results of Operations.
Eof fevenues and experises during the reporting period.; The principal regulatory assets included in deferred L Actual results could differ from those ' estimates. charges at December 31,1996 and 1995 were as follows: w R 1 4 28 u y 4U 1- _ _j 1, 1-
n ~
]
,,M4, w s N g 1 P 1996 1995 power and transmission, fuel used in electric production, ,g (DoHars in Thousands)- gas, Conservation and load management and environ-00 ' Postretirement benefit costs Lincluding pensions - $ 25,051 ! $ 24,608 . not yet reflected.in customers' bills is recorded as
~~Power contract buy-out }~~
~~.20,794' 23,838 unbilled revenues. ' Fuel charge stabilization ;~~
~~21,504 >~~
~~22,063;~~
~~Deferred income taxes.~~
~~13,597 14,106 (e) Depreciation , FERC Order 636 transition costs 9,680 - 11,711 '~~
~~Connecticut Yankee unrecovered~~
~~.. Depreciation ls provided uaing the straight-line plant and decommissioning costs ' 35,879 method at rates intended to amortize the original cost~~
~~Yankee Atomic unrecovsred plant -~~
. 7,798 10,135 ' properties over their estimated economic lives. The and the estimated cost of removal less salvage of and decommissioning costs 7 Seabrook related costs - ' average composite depreciation rates were as follows: - $154,291 - $130,672 '995 1994 1996 1 i The regulatory liabilities, reflected in the accompanying . Electnc. 3.65 % 3.52%. '3.30 % 1 (Consolidated Balance Sheets and ' elated primarily to ~ fteam i 1 r deferred income taxes, were $17.7 million and $14 mil-LNG 3.59 -
~~3.20 :~~
'3.12 tion at December 31,1996 and 1995, respectively.1 . As of December 31,1996, $120.5 million'o1 the '(f)' Allowance for Funds Us6d During Construction. ' system's regulatory assets, including the Connecticut ~ Yrnkee costs associated with an existing power. Under applicable rate-making practices, system com-d contract (see Note '4(e)), and all of its regulatory liabilities. Pa.nies are permitted to include an allowance for funds l are reflected. in rates charged to customers. ' Regulatory L used du ing construction (AFUDC) as an element of j cssets are being recovered over a weighted average their depreciable property costs. Th,is allowance is -j based on the amount of construction work in progress ]w
~~period of approximately 11 years.' The fuel charge '~~
. that is not included in the rate base on which utility stibilization deferral is expected to be recovered over - a six-year period beginning in April 1998, pursuant to : ' companies earn a return.-- An amount equal to the r a yet to be determined recovery schodule and subject. . AFUDC capitaRzed in the current period is reflected in to final DPU approval. Requests for recovery of the the accompanying Consolidated Statements of Income. j r:maining regulatory assets (primarily postretirement While AFUDC does not provide funds currently, benefits' costs) are in process and DPU approval is e amoups are remwraNe M rewnues omme q expected during 1997 ' service life of the constructed property. The amount of ~ AFUDC recorded.was at a welv ? averag rate of - 4 l(c) Equity Afethod of Accounting 6, M in %95. y 9&n 19% - The system uses the equity method of accountingL J r Comennese Sleer es OwlstangHng
]

for investments..in corporate joint ventures due,'in part[
~~(3)! e to its abjlity to exerciso significarrt influence over oper ' c sting and financial. policies of these' entities. Under'this " ' OnfJune 5, l1996, the' System effected a two-for-: =;~~
~~method, it records as income the proportionate share of~~

~~one stock split of its cutstanding common shares as j~~
proposed by the System's Board of Trustees on n

j
! thinet eamings of thejoint ventures with a corresponding.' Lincrease in the ' carrying value of the inver ment? The c iMarch 28,'1996 and subsequently approved by'the ' " investment is' reduced as cash dividends ara received.! " System's shareholders on May 2,19961The record ( d ~ iThe system conducts business wit'h'thetorporate joint, . date for the stock split was May 15,1996.'. The split L
{
4 ' y resulted in the,lssuance of an additional 10.6 million ] ' @yantures in which it has investnients; 1 meipally fouri } ? riuclear generating facilities located in New England; z common shares and accompanied an increase in : h ind a 3.6% interestin HydroiOuebec Phase ll.in' " ' { the number of authorized common shares frorn 744 ,s .18 million to 50 million and included a change in - 1 < f~(d)[Operall g Be rues" . the par value from four dollars to two dollars per 7 mg 1 common share., Prior year amounts for the average - 4 j Customeis are billed for their use of electricity and;: ' number of common shares outstanding', ea'mings^ i ~
~~gas on a cycle basis throughout the month.iTo reflect ;~~
i per common share, dividenas declared per com- [rdienues in the proper period, th's estimated amount: mon share ' nd common' share inv'estment informa-a Lof unbilled s#es revenue is recorded each month. , tion in the accompanying consolidated financial. q bill customerr; for costs associated with purchased j ( statements and in the table of selecied financial ' % C System utility companies are generally permitted to : ' data have been restated to reflect the stock split.- M -29L 4 o w J- ~.
a ^ e. j(4)I Cemeneltmeests ausel if pies. $8.9 billion of public liability coverage that would , compensate the public for valid bodily injury and
~~(s)l Construction =~~
~~property loss on a no fault basis in the event of~~
~~The system is' engaged in a' continuous construction -~~
an accident at a commercial nuclear power plari iprogram presently' estimated at $302 million,; including ! Under the provisions of the Act, each nuclear s ' AFUDC, for the five-year period 1997 through 2001. reactor with an operating license can be assessed ~ ? Of that amount, $68.7 million is estimated for 1997. up to $79.3 'million per nuclear incident with a maxi-The program is subject to periodic review and revision. . mum assessment of $10 million per incident within one calendar year. Nuclear plant owners have . (b) Seabrook Nuclear Power Plant;, initiated insurance programs designed to help cover ~ liability claims relating to property damage,' decon-The system's 3.52% ~lnte' rest in thh SeabroSk L tamination, replacement power and business inter-t Company (Canal Electric), a wholesale ' electric (- nuclear power plant is owned by Canal Electric ruption costs for participating utilities arising from a nuclear incident.- ' generating subsidiary, to provide for_a portion of the - The system has an equity ownership interest in four capacity and energy needs of affiliates Cambridge nuclear generating facilities as well as a 3.52% Joint-Electric Light Company (Cambridge Electric) and ~ ownership interest in Seabrook 1. The operators'of i Commonwealth Electric Company (Commonwealth these units maintain nuclear insurance coverage (on - . Electric).i Canal Electoc is recovering 100% of its. behalf of the owners of the facilities) with' Nuclear - ~
~~Seabrook 1 investment through a power contract.~~
~~. Electric insurance Limited (NEIL 11) and the com-~~
~~with Cambridge Electric and Commonwealth'-~~
bined American Nuclear insurers / Mutual Atomic Electric pursuant to FERC and OPU approval.~ ? Energy Liability Underwrhers (ANI). NEIL 11 provides 1 ~ Pertinent information with respect to. Canal Electric's ' $2.25 billion of property, boiler, machinery and decon-joint-ownership interest in Seabrook.1 and information, , tamination insurance coverage, including acciderstal ' relating to operating expenses which are included in premature decommissioning insurance in the amount the accompanying financial statements arel as follows: of the shortfallin the DecommissLning Trust Fund, In excess of the 13 1995. underlylr g $500. mil- - (oo;iars in rhousands). nPo % M L Nuclear fuel 21,613- '$232,647 Plant capacity (MW)...
~~150 Utilit),. ant-in-service~~
~~$232,183 9 Wed 20,138 Canal Electric's share:~~
D
~~' ' sub- . Accumulated depreciation. Percent interest ;,,... and amortization L . (57,359)'.(50,230) Entitlement (MW)........... 40.5 m' " Da' " Construction work,in progress - ~ 844:~~
~~946-in-service date '.....,....... 1990 assessments iflosses~~
$197.281 $203.401 Operating license expiration date..,2026 exceed the accumu-lated funds available. 'l 1996 1995 1994-ANI provides $500 million of "all risk" property damage, 1 - (Dollars in Thousands) boiler, machinery and decontamination insurance; An
~~Operating expensesi additional $200 million of primary financial protection~~
' Fuel ' ' $ 1,727 .$ 2,353 $ 1,939 coverage is provided for off-site bodily injury or property tenYn I damage caused by a nuclear incident. ANI also 8 provides secondary f,inancial protection liability insur-Depreciation ? 6,544
~~6,542 6,531~~
, Amortization - 1.319-1.319 ' 1,320 ance wHch currently provides $8.7 billion of retro- $14.671 $15.882 - $15.818 spective insurance premium benefits in accordance with the provisions of the Act. Additional coverage 3 ' Canal Electric and the other joint owners have' estab. '($200 million) provided by ANI includes tort liability lished a decommissioning fund to cover decommission. . protection arising out of radiation injury claims by ~ - ing costs.' The estimated cost to decommission the plant : nuclear workers and injury or property damage is $449.9 million in current dollars; Ca'nal Electric's caused by the transportation or shipment of nuclear materials or waste. share _ of this liability (approximately $15.8 million), less ~ its share of the market value'of the assets held in a Based on its various ownership interests in the five decommissioning trust (approximately $1.9 million), is nuclear generating facilities, the system's retrospec- ' approximately $13.9 millk.a at December 31,1996. tive premium could be as high as $1.9 million yearly or a cumulative total of $15.1 million, exclusive of (c) Pr/ce-Anderson Act ; the effect of inflation indexing (at five-year intervals) and a 5% surcharge ($4 million) in the event that f under the Price Anderson Act (the"Act), owners of total public liability claims from e nuclear incident . nuclear power plants have the benefit of approximately exceed the funds available to pay such claims. 30 i 1
x 79 p 4, e K i 1 l(d). Power Contracts x The estimated aggregate obligations for capacity
~~Cambridge' Electric and Commonwealth Electric have under the life-of-the-unit contracts from the operating~~

.'long-term contracts for the purchase of electricity from ' Yankee Nuclear Units and other long-term purchased pw ads in eM Me M years s@sequed j v;rious sources. Generally, these contracts are for) a as Mows: , fixed periods and require payment o a demand charge: r 1 for the capacity entitlement and an energy charge.toi Equity- - Long-Term I , cover the cost of fuele Pettinent information.with respect J . Owned. Purchased s Lto life-of-the-unit contracts for power from nucleari ' Nuclear Units ' : Power Total ' units that operated in 1996 in which the system has ari loonars inThousands). 1 equity' ownership:(Yankee Nuclear Units) is as follows: - 1997~ $11,474 $216,032 ' $227,506-1998 11,003 219,702' ~ : 230,705 - Connecticut. Maine' Vermrmt.
~~1999~~~
~~q 2,768 ' 224,508 237,276 - Yankee * '. Yankee - Yankee. 2000 12,779' 229,992 242,771 (DoHars in Thousands) - 2001 11,908 239,253.. 251,161 i i Equity Ownership (%) 14.50 4.00 '2.50~~
~~3.59 -~~
~~(e) Yankee Nuclear Power Plants Ptnt Entitlement (%) 4.50-2.25~~
~~Plan (Capability (MW) ' :~~
560.0-870.0 ' 496.0i On July 22,1996, Connecticut Yankee Atomic - ~ System Entitlement (MW); - 25.2 ' 31.2 J 11.2 . Power Company'(Connecticut Yankee), which oper-Contract Expiration Date =2007- -2008-2010-ates the Connecticut Yankee nuclear power plant (the L1994 Actual Cost ($), 8,902 ' 6,250 .3,660. Connecticut plant); took the unit out of service in con- ~! .1995 Actust Cost ($) 9 j,498.
~~7,* 76 4,003~~
' nection with certain safety-related issues and refuel-1996 Actual Casz ($) 9,259 16,51C ~4,208 - ing. During the outage, Connecticut Yankee's owners evaluated the economics of continuing to operate the est mate 0 ) $). 410,582 - 380,718 366.142 System's decommis-plant over the remaining ten years of its current licenso sioning cost ($) life, compared to the costs of closing the plant and. Market value of. -18,476. 13,668 8,238_ . incurring replacement power for the same period. assets (100%)($) 209,448 - 163,536 159,613 As a result of this evaluation, on December 4,1996, System's market vabs - Connecticut Yankee's Board of Directors voted to. l of assets ($)
~~9.425 5,871l 3,5' 1 -~~
~~permanently shut down the plant. 9 Cambridge Electric has an equity ownership -~~
~~Refer to section (e) for further information on Connecticut Yankee. :~~
~~interest in Connecticut Yankee'of 4.5% which, at December 31,1996, amounted to 'approximately Cambridge Electric paysits share of the decommis-~~
$4,7 million; Cambridge Electric, through its owner-5ning expense to each of the operators of these nuclear ~ r . shipinterests has a corresponding capacity entitle-- i ilities as a cost of electricity purchased for resale, ment and power purchase obligation. The system also has long-term contracts to purchase The preliminary estimat'e of the sum cf future pay-i . capacity from other generating facilities.. Information t . ments for the closing, decommissioning and recovery r;lative to these contracts is as follows: of the remaining investment in the plant is: 'I approximately $797 millien Cambridge Electric's-Range of share'of these remaining estimated costs is-E piraton InRtigrnent 1996 '1995 1994 approximatel $36 miRion. Based upon regulatory 7 n p Type of Unit - Dates ' 1%- MW ' Cost Cost Cost precedent, Connecticut Yankee believes that it - (: (Dollars in Thousands), would continue to colle'ct from its power purchasers ~ [ '(including Cambridge Electric) its decommissioning l Natural gas 1008-2017: f *: 204.7 l $120,842 $121,636 $137,304( costs, unrecovered plandhvestment and other ; '. Nuclear
2012 1 11 73.6 37,072 ~ 40,376f ' 41,475 - ' costs associated with the permanent closure of i

Waste to-energy.. ; 2015' 100 1 67.0:
39,622 _-'37,526 36,107 - the plant over the remaining' period of the plant's. I Hydro. 1 2014-2023.100 '23.7.. 12,537- : 9,933 ' < 7 521 4 Total: 369.0 : $210,073 $209,471 $224.407 o erating license that expires in 2007. Cambridge Electric does not believe the ultimate outcome of the earty closing of this plant will have a material l '?includei contracts to purchase power from various non-utility gen- ' adverse etleCt on its operations and believes that erators with capacity entitlements ranging from 11.1% to 100%.. - recovery of these FERC-approved costs will continue j E
~~Y. Costs pursuant to"these ntracts are included in~~
~~- to be allowe. 'n its rates at the retail level. l~~
~~electricity purchased for resale in the accompanying'.~~
This action follows the permanent shutdawn of the l ~ ~ C:nsolidated Statements of income and are recover. . Yankee Atomic plant in Rowe, Massachusetts in 1992. 1 g able in revenues,? - Due to changing conditions within the nuclear industry, i 31 l n a
4 Co. 1 s Lit l's possible'that the remaining two operating nuclear ~ln May 1995, Canal Electric refunded certain unpro-1 L plants in which the system hks an equity ownership? . tected excess deferred taxes to Commonwealth Linterest could be shut down sometime in the future: Electric and Cambridge Electric resulting in a reduction [ prior to the expiration'of.each unit's' operating license, to the 1995 tax provisio_n, JAccumulated deferred income taxes consisted of i$, L.. (f) EnvironmentalMstfors <
~~the following in 1996 and 1995~~

UThe system is subject to laws and.regdationsi 1996 1995 j administered by federal. state and local authorities (Dollars in Thousands) relating to the. quality.of the environment.1 These laws - Liabilities L
~~and regulations affect, among other things lthe siting 4 Property-related.~~
L $195,810 ' $190,763 , and operation of electric' generating and transmission' s Power contract buy-out 10,002 10,002 ~ } facilities and can require the installatio'nlof expensive L fofre ifementef ts plan air and water pollution control equipme.nti These reg-Seabrook nonconstruction 1,183 3,089 ulations have had an impact on the system's opera- ' All other 20,018 20.006 i 1tions in the past and will continue to have an impact 242,579 238,776 on future operations, capital costs and construction Assets schedules of major facilities. For additionalinforma.; investment tax credits 17,205 18,035 L L } tion, see " Environmental Matters" in Management's i f,nsiOP Oability gul Discussion and Analysis of Financial Condition and : " All other 22,239 21,570 Results of Operations. 54,324. 53,517 ' Accumulated defer.;d - j income taxes, net - $188,255 $185.259 (5)Tincesse Timmes The net year-end deferred income tax liability above " The system files a consolidated federat income tax includes a current deferred tax liability of. $13,378,000 1 retum. For financial reporting purposes lthe Systeua and and $15,077,000 in 1996 and 1995, respectively, 'its' subsidiaries provide taxes on a separate return basis. ,' which are included in accrued income taxes in the ' The following is a summary of the' ionsolidated. accompanying Consolidated Balance Sheets. provisions for income taxes for the ys ars ended ' The total incom_e tax provision set forth previously , December' 31,11996,t,1995 and 1994L M represents 38% in 1996,31% in 1995 and 37%,in - s a :- r. i l1994 ciincome before such taxes' The following. 1996'- =1995! ~1994 table reconciles the statutory federal income tax rate - ' (Doliars in Thousands). . Federal - to these percentages; Current : $28,375 $15,954 $12,789 ; 1 .., 2,784' j 8,2311 ' :12,617 : 1996 1995 1994 1 Deferred : 1 !!nvestment tax credits, cet ? (1,285) - (1,401) - (1,470) - (Dollars in Thousands) I { J 29,874 < 22,784 ' 23,936 35%' 35 % 35% Federai statutory rate. LState 1 -. . 5,542 r :4,176 3 ^ 3,171 - + Current 5 + L Deferred =
~~8901 1,11 5 i 2,403'~~
~~Federalincome tax~~
' 6,432' 5,291 -5,574 < expense at statutory levels ' ' $33,363 $26,007 $27,406 '. 36,306 c 28,075 :.29,510' I 4 t increase (Decrease) from 4 O Amortization of regulatoryi. statutorylevels: .) t liability relating to deferredf .w 1(159)' -15,164)' ' (174); L State tax net of federal fincome taxes s $36.147:. $22,911 ' ' $29,336 7 . tax benefit ;, 4,181 - 3,439. 3,623 ,f^. s m 4H MMFederet and states s [ Tax versus book depreciation ~ 1,553 1,369 1,471 ~~ q 7OM f 4 MJnortization of investment ' LJ s t['>. . tax credits l (1,285) (1,368) (1,457) < charged to:X. 1 / eversals of capitalized - R ' Operating expense i, 1$36,099 ( 0 $24,574 k $29,1541 ," ', / ,',s yp w" Other (income) expense M 48 r J (1,663)i 182 cexpenses> .(654) (652) (654)~ j Dividend received deduction (381) (389) (428) - n' l $36.1471 ' $22,911 " ' $29,336. Amortization of exesss
~~based on the difference between the financial statement _~~
~~[7 ~ 'd ** " *' J Deferred tax liabilities arid assets are betermin'ed : $36,147 $22,911 $29,336 4- ~ ' a and tax bases of assets and liabilities using enacted ; m,~~
~~itafrate's'in effect in the year in which the differences 4 Effective federalincome 3~~
. ~. T ' tax rate - , 38% 31 % 37 % ,are expected'to reverset " m'* 32 ~ + 'ld' )$
l.y +- l
~~(C)$Emaployee Benent Mans The following actuarial assumptions were used in k~~
~~s (:) Pension : determining the plan's year-end funded status:~~
~~lThe syst$m has a noncontributory pension plan 1996 1995~~
? covering substantially all regular employees who ; , Discount rate 7.50 % 7.25 % - have attained the' age of 21 and have.' completed a ' - Rate of increase in fu_:re compensation ~.25 4.25 4 ? year of service.~ Pension benefits are based on an ? dmployee's years of service and compensation. Plan a' sets consist primarily of fixed-income s SThe system makes monthly contributions to the plan and equity securities Fluctuations in the fair market cons' stent with the. funding requirements of th_ei value of plan assets will affect pension expense'in ~ ' Employee' Retirement income Security Act of 1974. future years. 1 Components of pension eipense and related. z assumptions to develop pension. expense were; -(b) Other Postratirement Benefits ts follows: . _ Certain employees are eligible for postretirement 1996 1995 1994 i benefits if they meet specific requirements. These (DoHars in Thousands) . benefits could include health and life insurance coverage and reimbursement of Medicare Part B premiums. Under l ' Service cost. . $ 7,663 $ 6.386 $ *,316 - certain circumstances, eligible employees are required 4'4 '4 5 n en p an assets-to make contributions for postretirement benefits. E(gain)/ loss :
~~(45,961). l (62,9Ej - ~ 4,544 ;~~
To fund its pos,tretirement benefits, the system / Net amortization and 4P326^ -(21,990) ' beneficiary association trusts that were established makes contribut,ons to various voluntary employees' i . deferral ' = 24,520 - Total pension expense,10,684 30,330s 11,322 -' pursuant to section 501(c)(9) of the Intemal Revenue Code (the Code). The system also makes contrib- '^ n capitalized utions to a subaccount of its pension plan pursuant to nd de err 2'
~~M23 fund a portion of its Net pension expense -~~
$ 5481- $ 8,488 E $ 8,499 2 postretirement benefit obligation. The system con- , Discount rate. 7.25 %1 :l8.50% '7.25% 1 tributed approximately $13.7 million, $14 million and Assumed rate of retum - ' 8.75 - . 9.00 L 8.50 ' $14.5 million to these trusts during 1996,1995 and ! Rate of increase in future' ..4.251 5.00 4.50 The net periodic postretirement benefit cost for the . compensation ~ 1994, respectively. years ended December 31,1996,1995 and 1994 include ) ~, Pdnsion expense reflects the use of the projected) the following components and related assumptions: 7 unit credit method which is also the' actuarial cost w method used in determining future funding of the.. 1996 1995 1994 plan. Commonwealth Electric and Cambridge Electric,1 (Donars in Thousands) Din accordance with current ratemaking, are' deferring {!, thd difference between pension contribution, which is) Service cost $ 2,211 $ 1,774 ' $ 2,198 c reflected in base rates, and pension expense. Thel Interestc st 9,352 9,022 8,299 ~. funded status of the system's pension plan @ sing a-A o za o of ransiion. Tmeasurement date'of December 31) is as follows: ' obligation over 20 years -. 5,336 5,336' 5,336 Net amortization and deferral 2,038 3,692-(1,118)
~~i we~~
~~'1996 -1955i Total postretirement : ~t~~
~~(Donars in Thousands);~~
~~l benefit cost. .13,761 14,028 14,529 ..Less: Amounts capitalized '~~
Accumulated benefL 1atit., n

and deferred' 1,614-5,898-8,811
~~' Vested ? >$(254,888) $(240,585) ' Net postretirement ' Nonvested ; (30,604)' ' ' (26.772) rbenefit cost ? $12,147. $ 8,130 $ 5,718~~
(
~~' $(285,492). $(267,357) ; '4' ; ~ X.. Discount rate 7.25 % 8.50 % 7.25 % ' Projected benefit obrigation ;.~~
~~$(340',850)h l$(323,652)-~~
.t 1 Assumed rate of retum 0.75 ' 9.00 8.50 Plan assets at fair market value : L 343,884 308,969' d kProjected benefit obligation lessJ , Rat or (greater) than plan assets i,034: i(14,683) future co pen ation-4.25 5.00 4.50 ' Unamortized transition obligation 18,036! = 9,6431 L Unrecognized prior service cost . ' 13,357 J 14,792 The funded status of the system's postretirement
~~Unrecognized gain (.~~
i(43,918); (27,349). benefit plan using a measurement date of December 31, i Accrued pension liability; i $ (19,491) - $ (17,597) ' 1996 and 1995 is as follows: -- 33 1 y K'
W i 1 1 1996' 1995 (c) Savings P!an ' Accumulated postretirement : The system has an Employees Savings Plan that 7 benefit obligation:: . provides for system contributions equal to contribu-1 Retirees :. $ (72,827); L $ (71,270) tions by eligible employees of up to four percent of Fully eligible ' active plan each employee's compensation rate and up to five [Oter ive pl participanti 1' percent for those employees no longer elighle for postretirement health benefits. The total system con- -(125,647) -(125,944). tribution was $4,053,000 in 1996, $4,393,000 in 1995 - q
~~Accumulated postretirement!~~
~~~ 145,967 33,324~~
~~Plan assets at fair market value i~~
~~. ar.d $4,302,000 in 1994. y benefit obligation - T . greater than plan assets 1 i(79,680)' 1(92,620).~~
~~Unamortized transition obligation.~~
L 85,368 L 90,703/ (7) ' Interies Financing and Long-Terni Debt iUnrecognized (gain) loss (5,688) 1,917-x (a)' Notes Payable to Banks System companies maintain both committed j The following actuarial assumptions were used in and uncommy hes of cmmo% shoMerm - j { determining the plan's estimated accumulated postre-nan ng f their construction programs and other tirement benefit obligation (APBO) and funded status. c rporate purposes. As of December Si,1996,. ifor 1996 and 1995: system companies had $135 million of committed. { lines.of credit that will expire.at varying intervals in. j 1996 1995-1997. These lines are normally renewed upon , Discoun' rate. 7.50 % 7.25%- expiration and require annual fees of up to,1875% - t ' of the individuallinof At December 31,1996, the or sa n 4.25-4.25 z Medicare Part B premiums ' 9.50 '12.20 uncommitted lines of credit totaled $20 million. ' Medical care. ' 7.00 ~ 8.00 Interest rates on the outstanding borrowings ' Dental cara 5.00 5.00 generally are at an adjnsted money market rate ') ~ - and averaged 5.6% and 6.1% in 1996 and 1995,- The above dental rate ' remains constant through the respectively. Notes payable to banks totaled - year 2007.i Rates for Medicare Part B premiums and $118,475,000 and $55,600,000 at December 31, - - rnedical care decrease to 3,1% and 5%, respectively, by 1996 and 1995, respe'ctively. ~ 2007 and remain at that level thereafter.; A one per-cent change in the _ medical trend rate would have a _
~~(b) Long-term Debt Ataturities and Retirements~~
$1.7 million impact on the system's annual expense and .would change the APBO by approximately $16.1 million. Under terms of various indentures and loan agre_e-Plan arsets consist primarily of fixed-income and ments, the System and certain subsidiary companies equity se urities. Fluctuations in the fair market value are required to make periodic sinking fund payments iof piari as sets will affect postretirement benefit for retirement of outstanding long-term debt.' These payments and balances of maturing debt issues for ? expense in future years. the five years subsequent to December 31,1996 are J Effective May 1,1995 the DPU app' roved a settlement as follows: , ; proposal sponsored jointly by Commonwealth Electric " and the Attomey General of Massachusetts which allows Commonwealth Electric to; fully recover costs relating juds Maturina Debt issues w Lto postratirement benefits and to amortize its $8.6 million Year-Subsidiaries System Subsidiaries Total
~~deferred balance over a ten-year period. In February -~~
(Donars in Thousands) - 1996, FERC accepted for filing rate schedules that provided for the recovery of Canal Electric's expense 1997 $7,653 - : $10,000 ' $ 4,260 $21,913 t effective with its March 1996 contract billings including 1998 7,653- -10,000 - 9.000 26,653-f the recovery of previously deferred costs over a six. '1999 7,653 10,000. 10,000' 27,653 2000-6,153 - 6,153
~~month ' period.H Commonwealth' Gas has 'recently.~~
12e _ 7,581 3,500 u,e requested a ruling from the DPU as it seeks to fullh d stecover its costs. In addition, Commonwealth Gas has l ? requested to amortize its deferred balance of $b mil-(S) Redeemiable Preferred Sloares tion over a period not to' exceed tenLyears. - While the W , J system is unable to predict the ultimate outcome of its , Ea. 'eries of the System's preferred shares was A request, it believos that fne' DPU will authori,ze similar ' issu i at par value, $100 per share, and is subject to treatment as provided to Commonwealth Electric. periodic, mandatory sinking fund payments. The i 'i f 34 n o
g moy.L k y 5 E System can mak'e additional voluntary redemptions, ferred stock are based on quoted market prices of the ?not exceeding the required redemption, at par, on a ~ ~ same or similar issues or on the current rates offered 5 non-cumulative basis, on,each sinking fund.date.' .for debt or preferred shares with the same remaining
~~i. ; Preferred shares may also be called for redemp. :~~
. maturity. The fair values.shown above do not purport tion, in whole or in part, in excess of the required ' to represent the amounts at which those obligations j and voluntary sinking fund redemptions.j The'oblig-would be settled.
~~ation to make mandatory redemptions is cumulative '~~
J"
~~Tand the System is not allowed to' pay dividends to '~~
~~" l common. shareholders' or make optional sinking; (10)nLease Olellgeflens L fund payments if mandatory redemptions are in f~~
~~arrearsc Details of redemptions for each series~~
. System companies lease property, transmission. l faciW and ' quipment under agreements, some of e < are contained in the following table: wht capital leases. Several subsidiaries renegos 'A -f a-ri lease agreements annually. These new Sinking Funds Optional-C' Dividend. 1997-2001 - Redemptiorn 1 m 3 are.for a term of one year and are renew-Rate ' Mandatory - Optional Call Prices at ithereafter. COM' Energy Services (collars in Thousands) Company. s agreements in ef'act for office fumiture, . computer v.nd transportation equipment. Generally,' Series A;
~~4.80%~~
~~'$120 $120 $102 e these agreements require the lessee to pay related' s Series B. 813-160 160 101' taxes, maintenance and other costs of operation. 1 Series C ' 7.75.~~
~~540,~~
.540: 101 Leases currently in effect contain no provisions which . prohibit system companies from entering into future - 1 Preferred shareholders have no voting rights lease agreements or obligations. cxcept in the event that six full quarterly dividends.. The following is a breakdown, by major class, of prop-q ( ferred shareholders are entitled, voting as a class,have not been pald.L in this circum erty under capitallease at December 31,1996 and 1995: E ito clect two of the nine Trustees of the System; 1996 1995 j (The prefarence of these shares in involuntary liq. (Dollars in Thousands) Juidation is equal to par value. The shares are of equal rank and are entitled to cumulative dividends. j(ans ~ e rni ur puter at the annual rate established for each series.. No equipment and other [ dividend can be declared on any series unless pro-1,500 < 1,888 13,954
~~15,016 portionate dividends are concurrently declared on.~~
Less: Accumulated amortization - 77 85 L the other outstanding series and in the event that - $13,877 $14,931 fdividend payments are in arrears, the System may. l ferred series are redeemed.-not redeem any shares unless all shares of all pre-Future minimum lease payments, by period and in ~ the aggregate, of capitalleases and non cancelable . operating leases consisted of the following at. -(C)/ Disclosures Alpewt Fair' Velve of . December 31,1996: Flmenefel Instrwomentsi Capital - Operating ' Leases ' Leases 1The fair valuejof certain financial instruments includ- . (Dollars in Thousands)
~~ed in the accompanying Consolidated Balance Sheets~~
~~! as of December 31,1996 and 1995 is as follows: ' 997. $ 2,941. $13,791 j 1998 2,319 12,182 t y'~~
1996

*.
~~1995 ~1999 1,810 11,369 1 1 Carrying ? Fair Carrying - Fair - 2000= 1,732 5,032 N ' 3 Value., Value - Value Value - 2001' 1,669 3,058 6 s .;(Dollars in Thousands). . Beyond 2001 18,845 12,159 '{si~~
~~Total future minimum lease payments 29,316~~
~~$57,591, Ty Long term, debt $377,2181 $417.,411; $418,694 $475,661 l Less: Estimated interest element 7d ? Preferred stock 3 13,840-14,601~~
~~14,660 -~~
16,647 _ included therein 15,439 j ' Estimated present value of future K _ SThe carrying amount of cash and notes payable to_- minimum lease payments $13,877 banks approximates ths fair value because of the. [short maturity'of these financialinstruments. Total rent expense for all operating leases, except .gAThe estimated fair value of lo,ng-term debt and pre-those with terms of a morth or less, amounted to >35
~- 7 9,, L $12,922,000 in 1996,' $13,867,000 in 1995 and. in central, eastern and southeastern Me sachusetts i
~~$13,052,000 in 1994,qThere were no contingent..~~
- and, in addition, sell electricity at wholesale *n J rentals and 'no sublease r.entals for the years 1996,4 ' Massachusetts customers Other operations ou% -- system include the. evelopment and operation of d
~~1995 and 1994,.~~
~~rental properties and other activities which do not i presently contribute significantly to either revenues (11) : Dividend Restrictlen~~
~~or' operating income.~~
1 Operating income of the various industry seg- - At December 31,1996, approximately $112,717,000 l ments includes income from transactions with affil,- i of consolidated retained earnings was restricted against ates and is exclusive of interest expense', income . the payment of cash dividends by terms of indentures.'
~~L taxes and equity in earnings of unconsolidated cor-~~
~ and note agreements securing long-term debtg porate joint ventures, LThe amo'unt of identifiable assets represented by . the system's investment in corporate joint ventures - consists principally lof a percentage ownership i.n System companies provide electric, gas and steam l 7 the assets of four regional electric generating plants . services to retail customers in communities located L
~~and a 3.8% interest'in Hydro-Quebec Phase 11.'~~
1996 1995 1994. (Dollars in Thousands) Revenues from Unaffiliated Customers Electric $ 649,678 ) 604,980 $ 638,150 . 341,867 ~ ' 306,953 323,568 Gas ' Steam and other 19,360 17,355 - 15,867 -l Total Revenues. $1,010,905. $ ' 929,288 $ 977,585 l Capital Expenditures (incidding AFUDC). Electric - 1 $, 38,844 - $ 61,643 : ' $. 38,754 Gas ' 11,611 16,198 18,020 Other 2,730 3,659 1,843 $ 53,185 - $ 81.500 58,617 I Operating income ] Before income Taxes - .92,374 - $ ' 78,817 - $ - 85,823 Electric ' Gas .36,984-36,611 31,664 Steam and other '3,406 3,689 '3,482 LTota! Operating income Before Income Taxes $ : 132,764 $ 110117 $ 120,969 Identifiable Assets. L$ 982,384 - $ 931,168 Electrici $1,011,306 : Gas 4, ,6-A88,930, 374,615 380,805 Steam and other : - 58,081 57,269 53,914 3 (,
~~1,458,317-1,414,268 1,365,887 Intercompany e,liminations ~~~
(42,757). ' (35,140) ' -(34,503) Investment in corporate joint. ventures ; 13,395 13,214-13,648 lTotalIdentifiable Assets ' - $1,428,955 $1,392,342 $1,345,032 - ~ 4 Depreciation Enense i / Electrir $ ) 39,977 $ 36,977 $ 33,188 10,061 9,656 9,559 Gas ;
~~Stean, mrl 1,744 1,537 1,441 Total Dep%. son -~~
$ 51,782 $ 48,170 $ 44,188 \\ I s 'dy-1 T 36
Sclected Fibancial E'ata . Commonwealth Energy System and Subsidiary Companies F 1996 1995 1994 1993 1992 .a,. (Dollars in Thousands Except Common Share Data) Operating Revenues Electric i . $ 649,678.$ 604,980 $ 638,150 $ 622,039 ' $ 595,112 . Gas. 341,867. 306,953 323,568 ' 302,644 294,874 . Steam and other '19.360 117,355 15,867 14,035 14,307 -Total $1,010,905 ' $ 929.288. ' $: 977.585 $ 938,71E $ 904,293 Net income 59,175 $ 51,396 $ - 48,968 - $ 45,834 $ 39,897 1 Common Share Data-Eamings per share - $2.70 : .$2.36 $2.29 $2.18 $1.91 l Dividends declared per share $'.54 $1.50 ' Average shares outstanding f 21,529,676 '21,311,836. ' $1.50 - $1,46 $1.46 1 20,827,662' 20,431,228 20,163,736 i , Total Assets. $1,428,955 $1,392,342 ' $1345,032 $1,318,940 $1,273,475 Long-term debt $ 355,305 $ 377,181 -$ 418,307 $ 448,893.$ 361,092 ' Redeemable preferred share investment
~~13,020-13,840~~
.14,660 15,480 16,300 Common share investment 415,694 - 390,785 362,997 337,070 315,219 -I . Total Capitalization ' $ - 784,019 $ 781,806 $ 795,964 $ 801,443 $ 692,611 ) 1996 by Quarter ) .1st 2nd 3rd 4th (Dollars in Thousands Except Per Share Amounts) 'l Operating Revenues, $298,614 - $222,667. $226,909 $262,715 Operating income. 36,131 18,608 17,601 24,325 i income Before Interest Charges 38,622. 19,863 ' 18,838 24,220 i Nat income 27,907 9,463 8,360 .13,445 Ermings per Common Share 1.28 ,43 .37 L,62 Dividends Declared per Common Share .385 .385 .385- .385 Closing Price of Common Shares-
~~High -~~
~~25 25%- 25%- 24% Low 21"L 22% 21 % 22%~~
~~1995 by Quarter.~~
~~1st - 2nd 3rd 4th - (Dollars in Thousands Except Per Share Amounts) L Operasng Revenuesi > $265,225 $208,776~~
~~$206,542 o $248,745~~
' i . Operating income 1 -30,011 17,237' .17,253 30,042 l cIncome Before Interest Charges : 31,913 17,738' 17,945 28,408 ) Net income : 20,933 6,430 ' 7,116 '16,917 j Errnings per Common Share. .98 ; .29 ~ .32 .77 L Dividends Declared per : (. Common Share L .375 .375 .375 .375 Closing Price of Common Shdesi High 20 % 20% 21 % 23 1 Low. 17 % 18% 17"A 20% ] 37 J 1
Comparative StatisticalEata Commonwealth Energy System and Subsidiary Companies 2 - J- ~ , Ei. 1 - Five-Year Compound . Growth Rate 19961 '1995 V 1994 '1993-1992-(%)
~~'H m~~
~~(Dollars in Thousands) Operations 1 D g Revenues- , $1,010,905 - $929,288 $977,585 ~ $938,718 - '$904,293 - 3.0 Operating Expenses ' 718,362 e 98,688 2.6 . Operations -~~
~~759,558 L~~
~~'697,730 750,352-y~~
~~Maintenance 40,913 38,414 36,522 40,574 39,836~~
.(1.6)r Deprociation. 51,782-48,170 .44,188 ' 42,480: 43,164 4.3 Taxes ' 61,987 50,431 54,708 51,947 44,837 '9.3' 914,240 834,745 885.770 853,363 826,525 2.9 s Operating incomej '96,665 - 94,543 l 91,815 85,355 77,768 ~ 4.6 Add-Other income.- 4,878 J 1,461 627-4,430 3,567 .n/a c l' ss-Interest charges 42,368 44,608 43,474-43,951 41,438 (1.9) e Net income
~~59,175:~~
51,396 '48,968 45,834 39,897 24.9-Preferred dividends 1,050 1,110 1,170 1,230 1,291 (4.9) Earnings applicable to - ' common shares - .S' 58,125- $ 50,286. $ 47,798 $' 44,604 - $ 38,606 26.3 . Sources of Cone *idated Net income- .. Electric - ?$ 41,299 - $ 34,739 $ 36',473 $ 30,30: $ 28,415 - Gas ~ 16,789 - 16,229 13,568 - 16,299 14,855 Ster.n and other 1,087 - 428 (1,073) (766) (3,373) Total' 59,175 $ '51,396 $ 48,968 $ 45,834 $ 39,897 Financial . Property, plant and equipment (including construction work. in progress, net and nuclear fuel in process) s $1,581,668 ' $1,540,916 - $1,476,518 $1,434,951 $1,410,376 L Accumulated ~ depreciation ad amortizationi -'536,041: '497,712 '461,661 434,287 413,423
~~Construction Expenditures l(exclusive'of AFUDC)~~
~~' 52,928 80,643 57,833. 54,385 49,094-~~
~~Capiteilzellen..~~
$ 443,307 $ 458,893 $ 368,092 LLong-term debt 0)f ' $ 3 369,565 $ 410,411 Preferred shares ' 13,020 13,840. 14,660 15,480 16,300 ~ Common equity i ~ 415,694 ' '390,785 362,997 337,070 315,219 L Totali $. 798.279 = $: 815,036 $ 820,964 $ 811,443 $ 699,611 4 ' (1) Includes maturing long-term d.rbt. 38
, o

Ctmporativo Statisticci Cata

Commonwealth Energy System and Subsidiary Companies Five-Year-Compound -
Growth Rate- -1996 1995 '1994' 1993 1992 -(%) ' Statistics and ReflesL { , Unit Sales '.. _ MWH - Residential - 1,802,973 : 1,752,430 1,770,095 1,744,181. 1,726,139 1.3 - Commercial 2,430,188 12,450,390. 2,406,077: 2,378,073 : 2,305,720-1.4 - Industrial. 425,748 '421,224 421,821-- 411,527 .414,777-0.3 : l Other ' ' 24,096 23,796-23,216 22,243 23,236 3.2 : Total Retail - - 4,683,005-4,647.,840. 4,621,209_ = 4,556,024 ' 4,469,872 1.2
~~Wholesalel 2,721,623 1,973,543 3,803.786 3,689,129 3,898,924 ~~~
_(7.5) i Total 7,404,628 6,621,383: 8,424,995 8,245,153 ' 8,368,796 '(2.6); Bbtu-Residential 22,759 21,336 21,515 22,252-22,392 2.8 d Commercial 11,558 > ' '10,710 10,728 10,931 10,913 L 3.8 ' H Industrial. 14,468 '4,445' -4,401 4,205 4,717 - (3.7)~ l Other L 2,208 '1,967 1,895, 1,831' 1,788 6.9 .i Total Firm 40,993 38,458 38,539 - 39,219 39,810 - 2.4 -i ) Off-system - 2,420 4,043 6,401 n/a-I Quasi-firm - 1,066 ~ 1,906 487 'n/a interruptible. 1,883 1,215 - 1,927 - 1,896 ' . _2,464 ' -(8.5): , Transportation 4,852 4,024 2,208-1,753 '1,090' -74.5 Total' 51,214 49,646-49.562-42,868 43,364-5.3 i . Capitalization Ratios - ~Long-term debt - 46 3 % - 50.4 % 54.0 % 56.6 % 52.6 % Preferred shares. 1.6 ' ' 1.7 - ' 1.8 1.9 2.3 Common equity" 52.1 47.9 44.2 41.5 45.1 Total 100.0 % 100.0 % 100.0 % - 100.0 % 100.0 %
~~Rtturn on average' common equity,~~
~~.14.4 % 13.3 % .13.7% 13.7*I 12.5 % i Common ' hare dividend payout - = 56.7% - 63.6% 64.9 %. 66.8 % 76.2% - s~~
~~Average price /eamings ratio 8.7 -~~
~~8.7 ' 8.8 10.4 10.2 ' Common Share Data - j Earnings' per share 0) $ 2.70 : $ 2.36 - $ 2.29 $ 2.18 $ 1.91 9.6 1~~
~~Dividends paid ;~~
~~1.53 1.50 .1.49 ' ' 1.46 1.46 0.9 Annual dividend rate at1 . end of year- ' 1.54, 1.50 1.50 _ 1.46 1.46~~
~~1.1 -~~
~~1 Book value ' 19.31 -18.15-17.24 ~ 16.37 -15.54 L5.1: .j Closing market price' '.' _25%. R - High : 23W 22 % 25W 21 %~~
~~Low..~~
' 21 % 17% - 17 % 20 % 17 W ' . Year-end, - 23 %.- 22 % 18 23 % 21 % - 1 ? (1) Based on the average number of sharet outstanding. 39 l
an Shareholder 1nformation k) Commonwealth Energy System and Subsidiary Companies . Annual Meeting paid on the first day of February, May, August and . All shareholders are' invited to attend the next Annual . November. Preferred dividends are paid on the first ! Meeting which will be held on May 1,1997 at the System's
~~day of January, April, July and October.~~
~~corporate headquarters at One Main Street in Kendall - . Square,' Cambridge, MassachusettsJ A formal notice i. Sisereiselder Servlees~~
~~of the meeting together with a proxy statement; a form EThe' System has a dividend reinvestment plan -~~
of proxy and financ,alinformation is enclosed for use i . hich provides holders of Common Shares with c.n w by shareholders' entitled t'o' vote at the meetingi economical and convenient method for purchasing - additional Common Shares of the System without Market Price Range for Cenesmen paying brokerage fees or service charges. 'Sleares and Dividends Pald! 'The System also offers direct deposit to Common - Shareholders so that dividends can be received faster. 1996 High - Low: ' Dividends' - Dividends can be electronically credited to a checking, 1st Quarter' .$25L $21 %. .- $.375 savings, credit union or thrift account. 2nd Quarter. 25% 22% - .385 4 3rd Quarter ' 25% 21 %. '.385 - A seasonal mailing address for your shareholder j 11 - 14th Quarter- . 25%- 22% : '.385 account (s) is also available for the period of time 1 requested..This can help avoid lost interest on delayed 1995 High - Low. Dividends , deposits caused by forwarded mail; 1st Quarter $21 $17% - $.375 ' For more information about these services or any 22nd Quarter
~~20%~~
~18%~ .375 other inquiries, please contact a Shareh' older Services 3rd Quarter 21 %. 17 % .375: representative at the appropriate toll free number ' 4th Quarter - 23 % ^ 20 % - ^375' listed below: The System's Comm'on Shares are listed on the New 1-800 336-3773 :(within Massachusetts)
~~York and Pacific stock exchanges~~

1-800-447-1183 (outside Massachusetts) Ticker Symbol *CES" Daily Newspaper Quotation "ComES" pen Data Trustees under indentures of trust are: Citibank. N.A. - Transfer Agents and Registrars Canal Electric Company Series B, E and F Bonds Shareholder communications regarding transfer of State Street Bank and Trust Company - > Common Shares or lost certificates should be directed to: Other Subsidiary Companies' Long-term Debt Common Shares > g,,,,,,,, g,, y'g,,,,g,g g,,,,,,,,g = Transfer Agent and Registrar:-. The System files quarterly r'eports on Form 10-Q and LThe First National Bank of Bostory. P.O. Box 644 E D , an annual report on Form 10-K each year with the - . Boston, MA 02102-0644 - 'E ' Securities and Exchange Commission. Requests for - these and any other reports as well as questions iPreferred Shares - regarding financial information should be directed to:
Transfer Agent

a ana e vestor Relations W.;
~~. O. Bo 9150. ' Commonwealth Energy System~~
~~Cambridge; MA 02142-9150c+w' P.O. Box 9150 -~~
4 a: - - Cambridge, MA 02142-9150 Registrar: c '. s m i State Street Bank and Trust Company. 'Certain information requirements of Form 10-K are sat- .. 4.. isfied in the 1997 Proxy Statement. Financial and ,. Dividend Payanents other information about the System, including Forms m Dividends are paid by,the' System subject to declara-10-Q and 10-K, are also available on our web site: tion by the Board of Trustees < Common dividends are - http://www.comenergy.com. 40 e
s.n Tractoco ed Officora Commonwealth Energy System and Subsidiary Companies .i ' (3)Sheldon A. Buckler, Chairman of the Boant of e ._ Trustees of the System: ' formerry 1rme Chakman of the _ Board. POW 4 Corporanon . Cambndge, Massachuserts. -- 0) Peter H. Cressy,
0) Henry Dormitzer,

0) Betty L Francis,
' (3) Franklin M. Hundley, , (5) Chancestor. Umweretty of {4} FormerlyExecubve Mce {4} Execubve Mce Presidunt and. {4) Memberaneta Managmg - Massachusetts Dartmouth;. Presodent. Wyman-Gord6n . Chiel Credit officer, Honeside. Drector Rch. May Bdodeau. North Dartmouth, '. Company. Worcester. Lordng. kic.,.lacksonville, Flonda & Flaherty. PC Boston, Massanmusetts Massachusetts, ' Massachusetts lAitomeys). .p 4
(2) William J, O'Brien.

William G. Poist, (2) Michael C. Ruettgers,

(2) Gerald L Wilson,
{3) Partner. Centre For :. PresMentand Cluet Execnevo {5) President. Chet Ewecutive. (5) VannavarBush Professoral Generative leadershsp L L c. '^ Oncer of the system arnt Ctwirman, otticer and a Drector EMC Engrneenng, Massachusetts. Hametton Massachusetts Chm! Executive otrocer and a Corporation, Hopkmton, Instituteof Technology. Drector ofits subsdary companea Massachusetts ^ Cambndge. Massachusetts ' Cceperate Divisten ~ Utility Operations
William G. Poist,

Russell D. Wright,-
~~- President and Chief Executive Officer President and Chief Operating Officer~~
~~Robert A. Paul Samy H. Ibrahim,~~
~~. Senior Vice President-Corporate Planning . Vice President-Gas Supply~~
James D. Rappoli, Richard D. Johnston, Anancial ViCe President and Treasurer Vice President--Gas Operations

Michael P. Sallivan.
~~James J. Keane, Vice President, Secretaryand GeneralCounsel Vice President-Power Supply and Transmission~~
~~John R. Williams, Deborah A.McLaughlin, Vice President-Corporate Services Vice President-Custorner Service John A. Whalert,. '~~
Kevin F. Roberts, Cornptroller - Vice President-Electric Operations Nsw Eosinesses uember or uanagement committee Leonard R. Devanna, - President and Chief Operating Olficer. COM' Energy Enterprises, Inc. COM/ Energy Resources, Inc. k1) Member of kant committee (2) Member of Executive Canpensarion Commsttee (3) Member at Nominetng Committee (4) Mamber of Benefit Revew Communee (5) Member of strategic Plannorg Committee The sete purpose of thus raport M to che p'esent security hotoers Information about ttus System and its subsdary comparues and it n not a representakon, prospectus or circular m respect to any secunty of this system or ciits subsdary companes. .The name ~ Commonwealth Energy System'means the trustees tar the bme bewy (as trustees but not kuvntually) under a Decaration of Trust . datedEecunber31.1926as amendmt. whch a hereby referred to, and a copy of wtuch has teen tJed mits Ine secretary of The Cw,m,w --ri;, of Massachusetts. Any agreement, obinanta or hab$ty made, entered into or encurred by or on behalf of said system ornds only the trust estate and no sharehokier thractor, trustee, offrcer or agent assumes, or shalt be htM to, any kabt?ity by reason therect.
i COMEnergy Commonwealth Energy System One Main Street Cambridge, Massachusetts 02142-9150 Telephone (617) 225-4000 http /www.comenergy.com 1 CES 1.i-s c al _N,..YS.. E & Printed with soybean ink on recycled paper to preserve our environment and natural resources.
, y,;:. 9.., : ~. u...,.,. y y:a < :...... a :e.._.;.......,; ;, g. c: y.- ,e.. .,.......,,<.a..y a, g;g.:s., r.17;;c.p (. n. - - ~ .,.:.:.s.~1.e.r.'.......e.p.:..,,.~....=.-.,,... x 3 ..a cr..<., s. .:,~...,.,*.._g...;...,9.o:~..-s.s...,Y.;;.,.. a.l. ...,,,.,.:~.., A%......._..-. ..e:. -. o.t.. .. l-e. .,..v.;..... y.. .,....,c - r. :: ~. p-_ . g.a.; .,...vs. .i..F..;. _... y ,5 .. m, ~
.,.

~
a.
..* f.h ).

:f.
~~5lf. ','j f' ; I.' -:. ~., *.- E ' k;......,~~
~~4 :...... :~~
~~.yn..a .a .u ..;..~ ..... s.,.. g . ' S ?.f.. y[> .w .,,._...,.....;.'. : " * :l' ' '.* :N ?'-(( f...< t~~~
~~f.N 'f:.~~
~~, '&"',' g: l' N L '. Q.,.f*,..l A _ l _.4.. ;, p;..f. y,.;. ..l'_.,.,,. ? l, .3 z~~
~~n. 3.._. ;,,;..,s.... ~,...~~
~~..'e,,lty; . :....:.' m ..,..,n. .. :~.. ~g. y ..y eg. a .+... - _ S .y a..- -,.c - g.;p, _ k.:: :<.. ;.., -b._. v s,...., s .a:... r~~
~~4.,,..=....\\..~~
~~-.... m'.',.....'".!%.~~.*..g ?v: 'y.,m. ..c;.,.~.._ '.w y..., -; m...\\ r.e. -...:.. '.' .....- -.pr.y.,:. .s...a.....e. , ;, f. ,r . v.~~
;.,y..,.

! '.',. *.* ' i *:
~~v; -<'*h:^..,~~
~~. s;._.~~
a
~~j. w;.~~
~~...,y.+... f.1.. v.4 : ' ~ 'M l' i. .'.'r..~~
~~. y-~~
~~',..,,.~~
~~y' * ;., %,*. :.. ; ',: :J.: l,i-l~~
. ;' l'. - * ' h t '... -- -' '.^, A,p '. " ~. ~'.,.-::t'.. f. f. ?V V'. p), .e ; "." ',*.,-: */ ; ' ' ';;i *.,'..u .c. ;. ,. -,... :.'..., tp "..c;;,. I'. :. . +- _,v;.y ,..M,- ^.'j. S p ' s ' '1N .}y-a. : b.: 9.,;,,.,..'":._. F..,. ', . i;.;. y.-, ; ',.;. ~. A l:. /..,.,. g. - %.. '.;.* ', : ? [ n ) '. )[: :;:) .s u.
~~y;',. s..,; '. ; 3;:.i }}' :f.:.. '.i..: '.,,,y:,*1 f: ^ 7.y '.~~
~~a y p~~
~~. r~~
~~.u ~._.. f.. 7 3,.,%.s. ...,. i ~..,.,... . u;?. 9. ~..,.._r r. e ,q,.., &.r f... ::. a...'. l.~, 2:c e.:......... -.. * -z. - ^... f, J;. '. * - 'T r.: .:.. 4f 'W' ? ~.~~
~~^.. -.. --..~~
. !.e.. z. &, _. 3. J, o. ; :. ;:; : m*..-.-. .r :. -..~.;.;;. ..,s; ..y ,.,. + - s. < .. i...'- :i. '.. ~* i U. A ,_r. t. a.-: ~ A, : '1*G; e - '.-l...' . ;; +.. \\.. ~-- 3 * :: ?.. ', 'i k ; c. -.....,- ,s..:.,s., l,l ;l 4'; _.g.'.l f..}..%...'.:.L,;) ?,,"**: j:.,,... ;- ' - ~:..,, u ;.-l ,.p.,..,,...,.,.:.,. .,,.\\ **, e ' i.;; ~.".: <.: *
~~.. l. :.. s ?~~
~~,s.: n.- s..g**,~~
~~n.,(~~
~~p C *T. :)lc '. - . /,. ;.,-,.. ...- s-;* - c -.-.. ,.*'... _.' :. g .,7 .,.* -' w*/..m . ;..:-. e 's t.,..... -,.~....., e o'. ...s.;~~
~~, %.' s s...;..,~~

4 ,.4.+ ....(o,.,,+. : : .v L '.. ~, + ; .r 2.,. I. .'6. 1. - -- ^ ;- ...~.?..,..- ......., ' ' '. + 'l... :-....; p '. .; ' ^ f lc. ' _,:. '...* s '. ...'J.. '.'r ,.n + ..s -., T. ? r, >, s'..... v,..
~~v.,~~
~~. + y ~ ^ ', ^' ).- k.- < +.. - i+*- .....,'.g~~
~~p%. ;, :. Q:.......~~
r._,,_;_ _ ..f t- ?.. _.r t i ,, i-,.- cy ; *. T '., ., -.', 3. L Nq1N..~~..- ' ', - .'.,^&- ...',:'y, ~ ~..;...,, ~ +, g s .,'.*-..'.T....'n.'.'.'".. ..'y, -, .....t .. ~ -- -. s?.,~0. 4..... *.. - ...Y. ,., _-.; '., ~,. . :y --.
~~4..~~
~~T.- e .,.. - L -t-,,. n- .-.;'.~..r- '.. - : y. -,:. y ,.;.j,,.. .,. ~.,,. -., r... -~~
.t
~~.3 .t.,~.,- t- .Q* a ., ' ; k... .. _...,,....., f. s,. ,.,y..A...,,:L.. : - n, s ' .,3 7, - 6.. ,7.-..'" .- + * ,.. ;*,e~.* + "f ,.. *..+.:. .f:^3 ;.~~
~~,.. a~~
.. [:'.;&.. ~n;.4..;;..; :;;;.g.-, .u.. j+ ~. ;. :.c.-b' ~ .F. c+o.,,,...,..,.* .a G'... ,,4 ^,s-q.x..:,., .. ',';3 3.j '., 9 b i.. 4. .s. .,.-L ~ .. > f. J., = ;..,.,a - ~.-,. _ y_ /p. s (. :,i. '..;....,.~..,'.:',.,;.._:,..'.
~~,. ~.~~
~~l n- +1.... -'.,,..'.. + - 'r~~
~~.,.'?~~
~~',.,c. ._.f,,,~~
b
~~.i m r~~
^*:.*
y* ). - + e y ....,.n. . s. .f...,... ~. .S',.,I.-.g..',.'.$..C'['.].;..;,"'.'^ 'J,.
~~C...-..i *,' [~~
.I.y, ', ',.O g;'. 3{,., J,, 'I ~ .'s [^,.,l, '.1 'a]' ' i .:--.t........:.- i -- ,,.,.,........,.......,.s p e ,. ( av..:,.,.n.,<v.e,z.. :-,..,;..,. - ; -.- .: + s....... .?.,,:... .y g..-._.....:,..;.........:... g.'
.<, e.. e>.,.

m... -........,....
~~...~. :.:. v~~
~~, s%...,.q.,.-.~~
~~.t '4 ..._7 ..,, <2 . - e. . ;, _......;...e e. 2 's.,;- n c'.-. - 1 f ' .J '... D.. ?.,,- * *.. :.. ,g-~~
~~: '-., y l,s ",,.. P y ^ :....;,..,..,,k. *. -~~
~~... s'~~
~~. ;.f ( -."~~
~~i... t. D. 't. r.;; :. '..: -f ' 1. ',.;;,; :, n.-...... -t.,.. g.;..; - .-..:...s. *...,,.;.. ;~~
~~3 - s;,~.,.~~
'7 r . f.,'. 3.,s,. ';. ,),. ,, ; : ;....~,, ., s - -, ,.-,.;.,..s. _ ;.. <p.;_,, ,.._,1,1,1, x.... .a ... + 9.:., c .,e.;: .1 r. ...;.., ~,.....,,;; ^a:.. -.. '..., ,,.,.. -. a ..,...cp... .y. _ .g .... ;-+ -
~~^ ~ - +...~~
~~e.,. ...t,.u,, s ^; ..,.-.,:....:...., s. .i.y .r. .... ~.. ,...v.{. 3- .'.\\.L _ / _ f.. i._ y ', L.... e..,... - 't + ^-' ~,l '} : ' ((,.. ^ s. .. c,. .,cy.-<,-e. .. v c.. - fi f '. 4,. ^~~
~~y..j,;. ': :. '~~
~~f.: f.'.._...,._ 'f.- s,.-Y. :.. ; T._ '[ ::'[:'. _ y ,;[ j:. .L l. 4.: * - ; };,.. ;*: l L [, y ;,;; ;,.& '.- f'.}.,', E .9 ....... ~... _. jyl * *' :l ; _._. ?'-.~~
~~3. }'..~~
~~_.....~. g i~~
~~t..,;-.-.,_~~
~~. :[i ;,................,,,. g.i g ,..? .;.,.,,~., ,.s,. ,b' ^:i.:.*.:".'...,', -. '. ..a., .... ~. . z ...,.,.4.,. -,a s, 4,~~
~~s., ', ' ( ^.~~
I... ) h#. /.'.)......4 .*',' ' h; [ '.. 9., Y s f, '-,,. .7..,. ; ;' 1 : ..;.'.'.f. , ~ ..s ' ~.., * -. >8. .E".,)*. .. '.. '.. ' '. = ..a. d 1. ,p . -.-%...,.c,. ^ y,. s,.. .i: .i.'. (.., - c.. - + *. ', - g*..A '. cs C .C/. .t, .i.-.
~~..~-.-..m.',.'..,~.,.:,.,.,,e...:~~
~~....-n..... '. ' - -.a ..)i y ..,a . s -n'-.. .**.,i'. 4-.... 8 q+ ..... :.... a _ 6 4' .....a,.. x... e',,... c +, '.. _,..'.,.. ,+_.,._':<.,'*, .c -:cv.. . w' -. '7. ' *; v - :- ' \\~~
~~f. [_ L..".~~
~~, t a a, .., -. ~.. , - - - e s.~~
e
~~,s,. .u .w ~.'. --~~
,c -W...

.L : ~
~~t.< _~~
~~b.f _. i.~~
~~3, '. '..,.,. ..70 .9:,v . ~. ....o,,,...r n.... e. \\, ,. +. ..g. c.;,:.;.~~
~~.Fi.~~
~~s >. . :.. ' L :.: - *:. > > n ... -.i ..I......,..;....; : n %,'.v,.-.' ) ;. :. .,.~:.,..... ___ \\n.... ...~. i i~~
~~t. m.~~
~~c .,,v... '.8. ' +' "... " - ;.. i,..g i '. n: : ::y' %..... :.y:. ...a.~~
~~...;,..c..*.,. - :~~
7,- .s.,*
~~' h +;,~~
~~, '. [*\\ ' ' les,.. ] .y + d ; ;.,. h:. y- '., .,,E J.. '. :'s.l., ;:h,., :..' ', W, '., ;.,[,.. ~.. ;.~~
~~.*e..;.-:~...,~~
+.
~~, " '.a( :..~~
~~3-.. ' -. l. 'O' ". u,- '. *;;; '~~
~~.f,,...,..,~~
~~..c- , ;~. s', ' n ~ p: -},['y.: s y,.;;. * ~_n .;>.;~;,... .. L 4.;- ;..n%. ; 2 a,. - 1.,i. e. 4., : c ; - i.. '.~~
~~.. 3 o. m. :" ~ g... ' ', w -~~
~~.: 9 .: w' <. :.; ?., ry;. 5_:. ... - ; ' n s...- ' -. ' ; lth.. _,.",':. ', k. g '. .u .r. ..1...-:~~
~~. >.6.'$ ' 9. a y.#~~
~~"/2 .. ~. ',.'..*.\\ [.. .. f. [, *,,V ..e .:.., ' [ ' ' '...m, *,..:;. m.s,,h s,I: <..,.s..\\.,...,'m4,. .,.c -i O '..,. ' ) *.. ::..e ; e..'. I '..,.!- 3 Y l*-~~
t
~~.f -I ' ~- ... +... -..'r r $,.,'.....:. i t~~
~~.'.~.r o~~
~~v, a.~~
~~~. . '... =,. ....i..~,.,-a:>. %.,.,.. ..M'...-. .... s s ), n: ..4.,.. .,,, ~,,., ..h,....... .g'..,- st; .s._:.p. A D :I,-~.a ... :~:7. p,4 ',' *, ~g;~~
~~? /,g. M' W t Y.... ' : p {'n: '; m %.;f; W.,::_; ; ;;;.5.~~
~~~ '; Lary:.. 4 u sg~~
l, ;,r. N, ) R_..,. 1,;i. ~ ~ 1

9,.Q b T *,,.....,.,,- ~ ?:*
~~? .s. -.,i : ..s. _.._n . +. - . { O. :,3 4 :. 4.id 4^ -' n. 4 ' A. l 'l s,' ~ '~~

~~f; '.~~
~~, - 6 'l .a ( - * - - ,',.'.,+,,'J.,$;: '.. -.n ;.1. s.' ff, ...t'Wr::-f:'.2.,'.t..d'.w,- .1-~~
~~.".f.' M 1,...**...'l.-~~
-..,,.U*#*~ '*{... ,.,"[.'.le-p. , ; i. * *,., '., -.,.' : -...... c...,c....>*. o.. $,.,' 'l,(..,; f.., ; e'. ;. i> ys* ". ;... ,,a.c<s,,~.. !,7 +.' i q u..,',y. :.0',.:.. -;t.e f ,.. - q, -,..f,
~~, t 3, s y~~
~~g.,.,-~~
~~,['~~
~~) 1 ',..y,! ',,.,-f.v, 4_ n. .,.y1 .s ..Y.. ' ' ',.., / _;. . -..,.3,....6 ..:n.2:9 - .s-o3 + .,*..,.,p:::.~<*.:.e..'.-. ~e-- . t.-.s# '. v..~~
~~., - se~~
~~+ 3.- 4,. -.s .f.'.;., v*. 4 . /, s ' c..s.. ~.; u.' - ~~~
~~i a~~
~~u',t~~
~~+;...~~
t- , ; './ '<<..,.t- . h .t - .s+ 'w c,;..-- y _.3 +m .,. g s. '.-.. '.....<;. :. y J = 1 .. *, ~. _.. k[. a. sp_ L '_o r,, r.,: - i s.. .s ,.s.-- .x. * *- + - : . '.,", _. m, * : ", (..y;;... :.,,.,.-.,- = f-. s s,'..- l..,q..~_-_..=.,.j-~ ._.. t \\r >,',..,, - _..,...:e. ns e-t. , '.'.:s V,. u ,s, ! .'r O,. .s ,..s.,.
~~-..,,\\.; !, :.p o '::,.~~
~~,C.~~
~~,-+..,.,y :~~
~~.,,n, : ;: t'. W - l ' :Q ._.3 ).. r ;.- 3. m,.. +9s. s. ,..,, '. e.L'.: ,*l . c. 1; .*.."'n, y~~
~~y.,,q::~~
~~s...,. og..,e'e .,.,..y .%.','*..."+. ,,,..f,a...c ? .. ~,........*. s.. 4 ..3... b.,1 : .s'... :~~
~~l; +. ~,**. :.~~
~~4,,. .-...,.i;.. p. .;i g_~~
~~3..v...,,1 g~~
~~,.;....+... J; Y '.'g. f.4-4,','_, , -. y A ,.;s . ', ' 3 ....- A. l* 9 - ', n .+ e- .g,, .,.e., I n;c,:** i..,:.e..~~
~~..e.~~
~~f....a-i' '..,~~
~~a.;..- :g...e.L.~~
~~. v t.._..,y ; :. '.,.*:(; ..,-,. ".,.. ga'. l 'j.,' '.,.. ,; q t.;. :., %...;. K.,g -.. '-... ,.,.: :\\ ;.:.;. j '... q, v -t .r .y .-n ,..,L, ;.. '...,':~~
r s_. ;, ;. '_. '.:..'* 2 ',,

L,b

l a ^ ' q..;.
~~_,.- - *~ ..p ">}) ['" ' ';.. ; f~- % V <r ,W~~
~~.. n~;([ ' ' v,... :. ' ' A.,./.. 7,.,.. ; :~~
~~sq :.,,R'.. '.. _. 3.,., .z,..; w....g ;( ~p : - _. *'.. *.j, r,.". .'.:.<, g .,., '. p : ;(.,.. ;3_~~
~~.,*, i -..;~~
~~,'..c ..,# c..; _,, -, p '~~
,r ' l

g'.../..,..-
~~Q'=, - - ;',:_..- ,r ; ' [' l, ..1 .- :,. +;;.,.' y '.r. ^., s 7j -.],. $ '.. ;. ( I4,l, ' 1, ". % ~ '. 1'.l..,t h A-, - D ' $,.. ','}.,,.~~
~~,;.... ?', " a:.j ' _. i. j $'l b y E t ' i".,4.~~
~~',Q., '*^ ;, 3' m,'. *;1 f. :ll., e. - ' j . '. ~ -- ','1 ^ ..t... s ^~~
~~. '..3'.~~
~~3. s, j t,u!, .'-4~~
i
~~,,, t~~
~~, 5~~
~~s + ,A . * - [g. 3 '4. 8~~
~~f. ',.~~
..N, ,,' k.. ; ' '.e, ' # U. '.';, f ,.p +, ;. ^y ',.,; * + . - [. -}',,,7 - '[- 3*
~~/,,,~~
~~. r8Y P,.,,..':.~ ' ? '. ,,,,,,.,, ;-; *..}.'_,', [: ..y t,',...; t c,,.. .a ,' 1 ... ',. *.. - ;s.,, ;: in: '4 .'t,;,.T, ... '.,.~~
~~o t~~
~~s ..- l ,, ' q.:\\. . " '... ' - *.5.. .'~) . +~~
~~y..~~
~~,j,., -.. ; ' * ;. f _.~~
5.*
.','c. .,9 r 'a. r + ;% + ,..'..-,..'[a.j,_L,..:,:..'..,.,._.;
~~[, f.. R.,...~~
,, %, 3 ',p, s...L.... g., .l,*
~~,.-.. - x *.. _..~~
f, ;.. lu. _ _.,.. _ :-;..._: _ ,....u. , r. y,":s. n.; 7. .g_ ,.. v c _,..,c.,... ~., ,3 ..g , -.. :,,.. li).. /,. t..,.- ,... r..* f. p..([ B'.,$ 7 { *.. .l f '" (; . '.: ] : s,'. 'j.f, ( 1- - s 1l. ' *. <... r :,. -.s..,_ B. ' f.. :. y&. l, j, * = : ,*.>*..sh.,*. t: ,- }. .,,c.. ...; oc.,. * 'g
1
~~..,..g __..;..-..... a ./... ..2.g....,: .., :. :*.?;.,,,. .. nje > m~~
~~g., -..._...~~
a..,.<., , s e o. ....,<.s.:'.., " i.'.' *
~~p' i.; 'y, u s.~~
~~1.*n ,{,.. <,et + ... + '....,,a.., '......;..,~~
,,s,

l..;
~~.1 -....: :. e ':'. ' ', .r + ..2 ,s .,e w -. - $ l b.: N l ,5 j~~
~~j._.~~
~~f!' ',. ;,y ;' l \\,' ~ l y.' . :> x$y .f. q + q..:;;',30 },;;, sv., i.~~
~~;..,., s g. - - f,..; }~~
~~' '. - - '.,+ ,.... f., : : ' r[.. '.t j ;~ :.' _.,. ; *.. ,c*.. ..J_., _ [._, R v,.,..,. ;. g =. y~~
~~n...~~
~~e.,.,,.s. :.,,4. l,s~~
~~. *.,.; *.s.4f,..*-b'*i,.s.....~,..m..,'-.i..';,~O~-1'. %~~
a
~~,}. *.m -;s .. j j.: ' **; y.. [;.r,. s s 1,.*.~~
~~,* =~~
~~'s..'~~
~~.t {.' f;.,l f.~ '~~ $; ' ',, k.,** :,.... ;,, ..t .e s (.....* ';,,. ..c. '?.f.h,, :l,,.., ., :h~~
g
~~.i;,V.,.....,. ...';\\'.. .s~~
*:; k'* : I : ',.
\\..... i ..*,=:v- + f: *.lf,9!.** _ f.[. ';].f.:' l-l0 f.f. ; [. ' N'('h. > '..l, q }..f!. : ?,. , '., l fl; ~. % '. '.,-' -...)
n,,.W cs.

.i. W ?. n.',.,9..s.,, e i. ;. %.,. im.l O sy:m.,d.e.V....E.,.,f.,f I.. 1'.;j.Qj ':i., -( y -.,,.;,..;....
~~1;,.~~
~~n.. ;.#., g g...!.~~
~~.H.;, O(. ; t... 4.,;. 3 - ' ~.,..g ;. %.W 4 p, jn 4 - a 5 .,,,..;-y.., i.., -n g~~
~~3...~~
. a.....g s. ..(. -.;...",.. - n.... - n ',ljs', j ;. ;.* ' ^,'....',A ; y. g., ? p ;.... i 9-j .,s.. r. .,,'s.. '.,.,,. e c..',1.;o :=.9 v.-, . c* e a's,,.,... . 4.,.,m s,,.,,, *:= s.,Al. t '..,'s. i::,
* - * ? R :.,.J,; '***d..;.:.;....,_.,
~~y V'. <^ .. '.x.e't',,:- .,..,1 ..,e. ,?* ,.,..A.'..,.y'3~~
~~g..s.,........!~~
~~Q?: .r :w.- y. i, .,...,.....i.,,..,~,.f: t;;.., *. .4... ..-,..,..:,,.,ae pf,f. .. ;p; ,.,,,,;,-...,,.j,,p.-.,..,e,. s y:, t ' i ' ,y~~
~~t..s e.~~
~~.s.,,.,., ,..4,3... . f. g-. j, s. 4g:.,,.,;,,, 1 [;.s. -3...< .h #l 7 ' [ ,1,'(. i,,s. V ,- N. {~~
~~/ ,~~
~~. '. I '. ' h. ,.8 '.. *hy .[,... 1;,- I ,.*Y',.'.. .,: ' ^ f.,, ; ,k.'.*.'..... .'. '51, ,.[ * ),,, - ;,.. ..s~~
~~...-c-~~
~~, a .'..:..'{...,,.' .,.f,'..., .4..>..,"...p.,,. ".T y, r,, 3...- v..- s. ..i,s.. g b g ;,.~~
~~,.,,f,.,,...-,.t~~
~~.,.,t"( -'Y I '['*. ,.,,. ' "- +. E ,d . + g *'., 4.- g.. ...-,.,t ....n,-. ,,.. i~~
~~e. ;~~
~~s c r ...e .3 e .' f.- b +.* *,.,.q,.7 ..) 7,,, *,,.i..,.., s. r 3. .'g'., + -f4,g gg.ggyj.w.4gygg.g.g,..g jag _.j y.,g , [ j+ y,, 6'i .' \\ {,.. '**) ,'l pp~~
4
~~.4:S.f' }.~~
0$ hM'Y:: 2 $]?l ?. ?$d. 6,,%.l.'::lD:: *.;' f 4: %Q.*.",O.N.:).',4 )O.f)'.* j.% l V.l[l.l:,!RT:V @ M.' *;l hQ.":;&C l: .:%Q .?i % y.';;.... R l'y !*: jl: i: f.$Q.ff!.B :.?l;. 3. :'.*..y. i,9Q_ :- i W:J:}; l.,9..b %, Q o,. .. p t:^ '.,: ~ }7. > q :l':'.';.;.: '.:,,,i.," 'a@.,s:....:.Q. 2... s. f z: l ..'.~p ys. . a ;.;.. ; &.,.,..'.,.n :. :, ",
~~c. y,. %. A.. d. n: s.y...,'..l y.~~
,*7 ;.: y-.': !:, ~..~... -. m .>e......,. -..v s,.. < ...,le..... ',, i ; r ;,,,,- * .x. .i t '. o- -',g, .f.x' @:s K, e' ' ;.. v. .,.'%.+.;.'.'.";'....::- - $ ' ' (,._ ',.}' .. ~... .,... ;+ y:..... o.. e> "'# al. :..':' c. l -,., a .?* .6 ,-l.,
~~' lp;~~
~~'.,n., %,. ,V*. 'j ! ' e, '. { p .: y-s. t i.,e g.f \\ g,. m. t. "t~~
~~,.u, 1~~
~~1 (I . *,,j - > ,,,a .1, ,?.h ;3, ' *:..'.;._:G" 1., n p r n* . n :,. ' ic;. q.',., s., '2: ' _,; W., ,. ;.l, l.) 't.f f, ' ",,,* {.l -l, J,Q1~~
{G, q 4, _.,, , s ',,[ :.
~~(. y.' .( t~~
~~:.a.,:. 7 e-~~
,~ ; ';.8., ',.~ - -. %

.., ^!.,s :
~~I, $2 <~~
f;' *. '. *
~~',.,V,' -e' '.*'.,s ? '.,s. g,1, ' *. h. /" e<,',,.','.;,.,', U, ,., l,.,, r '. .*}'.', U '~~
~~l f:,~~
s
~~, l,':~~
~~.*'t ( '.g i, .',. l. ' ', *,'~~
.(
~~,. y, e~~
~~;, f l ?;3...u., g.~~
~~1,,. -. **'.... r, ,,a.:. ,,,'n,,l, e +:- - s.. ..Q..*m,g. s',., s, 1 ..i . f, r, ^ Q.., ' : ) '.. .,3.,.,.s h.'.,.,.',...,. ,t ,*.h.,, 's. g ? e. r,~~
~~l. l,.'~~
~~' mgeqm. nE*NsR:. GY<'Q '_SE' f,;yS T E WfeWW s s. es - *.. ~, 9:, :. [: le *. g A .," - '?.>., -. " {,,; 3....ll - "a. b~~
,.'.;.,.,J.' L.

>__,;
~~.- m. ..'g ,, f.D.. %- t'i e i ;,.-,,.} _.s. ' - '. '.. ' _ .,j k.f' o. ' ' ' '... - . ~_. ', ; Q:- 3.; f';*', ( 4 '.y '., . ' :%.,,s : ;..~~
~~s..;~~
~~,.- 'ag.. L, .n .ns..^,;,).,<~.4,.'. - c, v- .,s. ,, h :. *. '. *. y. g. - ',- ~: - -a fl,;..,.* y i, *.,,,,,.-..,. Q. ' ;.,.. %...., .f >s . n % n,.,~~
~~~.; h.~~
~~g '.YJf :f f )' l - .Y * [..[.?, h'.... ...c[...,.. 5. 's. 'l $' l,' : : V..: h*. : ) #*A,=T.E '::.':,...:'. :: .c o...:. Y '.:Y.. Y,f'. _' ;?'*^~~
'^

f

'

, +. ' '."' h :~. Y.
~~- j:.I ,.,l.~~
~~_.'...;'e~~
~~...i <4 Y.,... t{.. y ,,4 ' 'a% - #:.%. ' l. q,i.1, .;d. l.,,. i sD..'.,+:.'.',, a..'-~~
C
.t g .,...,.;,',].l ..,,e'. .. j '.s :., >l ? 1 H. ,:,,.,'...+- ..*q,,.,..'g. ..,,i. ., I, c... , e. a ,,s.,"- ea A. e.,.\\,+,,,g m - ;...g. -r.,;... g'.,, ..g'., ,2,,. 3 p,- .s 7 ..,".,s..,-(','.-] ,.' [,..' s !. l<,.. 'J ; Q 3,N,./, '.I ' l 7,'.'.d,'.* }' '.* +,..,, v s i ^. g.., +, ,,'i'l,';. l * '.,#'.. ', I l< ! %',, ' , "., ',Q,, < l, '.' ':,j"],.,:$ ',. [,.,, a. -('al, .lf,. ,\\. 'r ' :,,y,.,. '. Q, , 1. ':] ' -, d ,_..}.' n .. g,g.., ..e- ,,,'W - > My', .,,:.,,',? ',.. l', i 1 - J M.y '. -., ':'-' l. y -. ;?.',.,-l.,..*'..'f,, s a ".:.;,.* "', '. (,. h. *' /' ' ,t. l -...5" ' [, : f.i.;. ...../..c.y'. s/
~~... q.~~
. v,,.. / ' 3 [ r ' <- f*. a.: '.*.;. y. ;,n u. t: e ..,, ? ".,.,: ; ; .r>. ,': ~ - u s. g s.. r,:4 .,..,. '.i.,, '., ;. ', y;, v... .,.%..,.3. :.., g,,:,...,... r,:..,. t,. y ,1,'e.a.,. ~- .'..z ,... ~ .-..e.- ,-;t. y. 1 ,' g;. O: o. ,:..,... '... <,:..,._-~, ~....y .,., J,. *.,.... >.. F e
~~s~,.:..~~
~~'? ,~;.....o,'e. r: .g.. :,,..,%,,,- *. 9.t ..-...,m." 6-~~
s
~~_,, g l* m ..,4 n../',',.,:..', ..'... - [,,'l, l l-g...- .-, '.* h. -?.. ^ .*7.,..i} ' ; g <.,., ',.1... - ; ',f [/- ) ,...y,. ,(. l',. t 1. ,,,,,,,.r.. . ' ",,,,, g f.. g ' s , e, e~~
~~' ;..'..... ;,', e...__,,',,l+v~~
~~.g ..u %. V., * ' ' ' *[, : * *l *.....,.:. {.g ..'.4 ?**..'*,'.,..;'.?.,,,.f.:n~. f s -l n- ..',.l', _-Q:.'._- v l j.,, - -. u, b*, .*._,, r.; l, - ...r. .... *... -,,.,; e. } ',.'.. '..., -~~
~~- ;._ v q... r,.,,~~
_
~~w': c. 4,...:~~
~~o_ ? .,.C.. .., 3. -,...~~
,,y ;..

y *
~~_. _ ~~~
~~1.. }, '. <. .,=.e, ...,sr...,..;. :. - - <,.gj.. . -g << \\ %.,; q...,,^,,e.3,t,','.',','., .t..- ,.,... i,.. .',,p ,,V,~i,0....s3.~~
~~.. l..;, ;~~
~~4,,, t.,,,, ,.',.. + I .e.,/.., j *..,...t, ;,...,. . ; 3 >: .e g, u,~~
~~.j,.,.',.,.,43:,. O.;. ; '.'. :, 3,.:- /.",;..,,'.'.'.,,.>> }',, ','.l r., gf,. '.,', g :'....I L l. n ?. v.. :~~
s:/ ..g. -4 6,.W/, .,(,,,,,..- s. .,,J ,a ,,.I' :: %g'p;,'. ',f. 1, Q ^ l v.,4:.,.,:*. D. ;l.f q;r (..... .'e.'.....g......l.**';:'i...t*h',,.,,.E . Y Y ?.4 , c, ; - : i.::, y : :. '. c,.rl'. r:..- ' * ,% !.. ' : *. '~: l,g.,,;. . e., ~G ; y y *.. e>,3,;. .-*._-l r,* b. l, M
s) 9. ' *..f*
~~, %5'."'**^' .g.. ,e n - f o ~;. ;._ g ';;[ l;,,. '..g,.. ,_ a a :.. '., s,' $ 1., >.,';~~
~~...,,; f -~~
~~,. ' z.,7.,. -~~
~~,..y. ~ :,,,'l].. '.', '. ~:..' g N,, * *, l, f, ^? :. % ?'. ;.,. I'.!...' '. t '. ';% ,k *, l*:, i . G' ? l,.,. :z. i '. '. ';. 'S . [s,'.;.s4<<<-* 1' S ~ s ,Ib v: 'u~~
~~l-p.., : :g c :. : ;,n'a.4..q+=.~~
~~.' 'q; ....>.'5.'.... I 'c,.'.'~~
~~1. ; 3.. ;., c. ;.,',c ;.. ;~~
.s :), ~,:, ;..,.,.. :,.,... s .... c. .s .,1; sa 1,v. s 4 Y ~:".p! b.; ",'s'.. :., : *..' ;,,; ; :.... _ u'. .y : ...!..yr.. -. -( \\ ,q: x: k i ;.. : .- >:'. r... :, ;_ v v, l :, , r_4 : ;;, p q;-...:::,>..,.,y 1:.
~~.s z ' ; ', _. ; : -.'~~
,v,,.,, ,.. : ;; _.. :u. Ly,* ::;.f ;q..
~~,. 3* O:,, g.:,.a.~~
~~.,s. c~~
c. < :

c.,.
~~.g .y ~. ;f r-k... . ~.. '... S '. ?:',.: -l,...- , V. >.,(; .c...~~
~~n. G. ',;,' Q. ; d~~
~~'l,.. [?*,..' *. ( : '(:'i ' i. '.....%.',',': :0,,",. !.!* :~~
~~l. '..s;~~
..y.f i:4, : s; ' yg s",.%,., ': 3,.':s,~.'\\.'..'.. .,? '.' '. ~. ' N' i ! N ' *'".':T',*.',':+ v;* \\ ? ....., ;,..,, T "r ':' :.,. ~ l,;*. A. s :.-.. ~-,, O ';:-.:,'..... -s..: .,,..v. .,sc.',.....- r ._.-s o t- ?..~, e;, ~. :',;. ; :,.*.;;. s .. :., ', : i;; ' y,; ' ' --,.,,,.- , ',.'.,,*,.*6,.-l.'}t ,q
~~p, ('..,.I' y~~
' ~, 'l-y _y. - : L:. ..,..,w 'gv. .,'.V.,.g, ,'o*
~~. ;.i m'3,~~
~~.n. . yv..:~~
~~~.... '. -~~
~~s ;,< ' ',*~;~~
~~...s..l. * '.... +n:h : : ). .g l =. :: .:s.; -. . L.j* .:t~ o. _s.~~
..,..y,_.,',

? p
~~.7. ;y '.-.; ;. -. ?..p,- q,...;,'..s +* 9:- ;- ' ', -.F - J~~
s(.,.j*
~~..l l 1; l~~
a e-1.. -,v 5 .e i. e.-, .;6 ,4: '.p l l l,.,. p :.:. -...' l, N ; e.,; " :,:{:: ;:+. ','.'.' .b'.'.. : ,; ".. -... S. "1 .. ' l., y ,,3..T. '. l. n r~.*.< '..s.'s,. ,.t 'd,,','}.'y,.,,..,y, N~*,', ',,, ;,. ',: ,.o-.. J t' -,,'.'s' Y,',' ' 's: ,.;.l, , : 'lf.. ' ::, ' t,. .o '. Q,. '.p
~~i y ' %.;~~
~~, ~. '.{ y, '. ':; '.,b.l *;. ,m.* ;_ ~,.:, g~~
~~p.,~~
~~..;, 4' * ;;. ;': -.. :(l : > 4, n: >. g;. :.... ',<. 1,,s..:y_..e ~ ..;c- _',.,;;..'...._.s, ;, ;:. 3's~~
e.
r
~~s..,~~
~~., 2. :g - f~~
L'
~~.*1.,m,. s, . e e* o u t no- ,:.!,l 3.. '.y~~
J.~,.;' y. ' 4 h;,i ;l...l

,Q.y
,.i :.. ;,, : : .j ;r,<..,...., i. n ;,,,: y, , *,.. s. J,s ; ;fi... ...so- .., -. ; M y, '.'d..;~,.. '.. i - af ;.,. '..,,,. 4 :',., ' - l'A.w-- ' s y [,:,, *., ' '., r,;, ., =: '.. ; 3 -e- ....': ;l.s. .e,. ).: ~'.: 1,' ('.,,".l 1. .:, ~. V:. ':-, [', s, .- q ..".'.,p:,..,,..,.~..,.u..:.c.;.),, q .,Y. ? u,,-] y0. % '.. '; - a.'. .-...,. y n. : k.:', >.... '.,'(,.',,.,:1 ... %.:. - l..
~~. ;' ' ', 's;.d. '~~
't
.s
~~.l 0, 3l : ' y ' L. :.~~
~~.. '. ?:r~~
~~..'s..- l b.;?.,e. ' ;,.;. '. V.,',f~~
~~.:..z, ' ' :l k~~
' - ' a ." \\ n. '. ' '.:.. s,!., . '..., i..,. }:.. !:;. ,.....,,;..2...' L* n l..,.'.,g ~:. t - '.;'.L'. y. 1 . ' ' ' '. '*l.. ... <.",,: ;. %,.?. W q cs, * ':. .: -j, E ( m. .y'..f:;' ?.., - ' }. 's i. '.'.T.l".. W. ;i * }l.h ' *. :.L. :. v b....,., ' ' :
s.
~~'y [gq,'. ".'.f... k J(('. ?*: @ \\ ',_:,:,0 lk. f. yR. s:', %*h , c:..-.~~~
^*
~~Y.: ' ~., ;l'. tr.,,~~
~~. ;. ': f.l..l.; :Y&. ' '. . *,, ~. n..l: c.~~
t . 6,. 1, ;, 4, s ;. y (.'. E g. Q.,.: '
~~~- f~~
' f l4' - i, '..,A ;' ;:' C.. '.. V & v'. 9..: .e,..'v...,,. ~g. ( .....::g... ' a. ,,e v% :. p.-3.;,. v .e'. _. ; O..o.., : y... l. s. , ;. y.. '.. ; e,.... g.:, '. p - -,,:. y + y.,, -" <g. ..,).-, ..cp...., ...o...... .1.....- , *. ' -,,.s ..e :. ee. : ; .+ ?' ,...;. f..~..: ,.,,h,.,. ],,, f, $ ;, : i.,, s e n: ,.,.,....;,f ......,,,.f . i' i ';i,.i .,... *,i,',..<.,.;',.'.",.,.s .,; y l*,f-.,* s ,,g'.' ., if. ,4,...,g. ,g, y //.,, =f'.,:,.,,-.)-..:,.. ; - ;.,..,,., i..i.s,,4;,:,,.. . y ,,n .s* d,;,j**,. s,, Q. n.j '.,,. %,;( + iV.- o; .,c.,.
~~- l g.~~
~~..*o- _._..) - l[f *. r r=.. v,*- p- ,.} +_.:- 'a j'. :. ..? i... ; L:,... ' -.... f.: . ".,....c... gs.., y, ..'.'4 .,, y ;e,, n.. >. e ; ; 1,~~
~~...q~~
~~.,v.':~~
~~t._~~
~~.,s: '.~~
~~s. '.~~
~~.e.:,.; y.., '.. >,.. _..~~
~
~~.' /...,.~ ,,{ Q:'.j,.., + f...Y'G. l ' :;.'?, : L,..1.l,.'..,,+t . :g.. s..~~
~~(lyV :,I'. l.3~~
.. ;} '. *;. Q, Q.. s. (.....,,..":, ;4,.'...'G...,f' , ; '.,. 7..l '? >?'s, , r. :.... rs.,.... . p ~',,s Q.* Q ~ 3...ge.,.,.A.f M.:.y '.. " g * %.,...',I: :. l '. ...,..,'::; '.. : ' y;, ?.'.a",,._s.', '.*; .' r...,.,."" 3,1 :':, :;; ' ::.,~.3,,;,.,.,..Y. i' s -G, ^Q %, y's p.f.i.,.,yl
~~e,,.~~
,,,/, - .-,,.: o 3,.. ..c.,. [ ;. l;..\\.' '.:' e;.,;.,,cl 'l:,. s.;g y.s... h.., \\ * ' .r' ^ ;+: i ..q..,. S -. t. ,1,., s..^. s... .'i. ..'.t. s)... :.s.,., q.g("i *: + s, v. c +,J!,,:., D..,f ' ^s* <.. ~ s 0, g'.%w~ n.,,.,i : ~. ', '. n -,. .p ; : 1.,..,. ; mw v.., c. .o.. ..l ' h.'. ,,' ' f* %..: '. z. '*? .,-.} .., :..,o ? ..o . '? : ; \\... C, W.,... :)%.., '.;. :..i :> s..;.. s.,. c ;;;:.. ;. Q .N.'..',* A.. - - :J ' ? _s, p ',L,:: r m i *?: ...,...'(w,',n. ., : 1 :.. ., g u .,-..,.'.l. 'f. '.
~~.. ~; o s..~~
~~k'. h ; ? Ih?f.hl '..:' .s G .W.. i.i Y.., , 0 ~ ', J..i,, s.. :h Y. .:~s 9?h 5 ' Q.b et~~
~~,5 l'~~

~~e '.* .Z / - o... l:!..ce t t, 9. /.:,..f. g..",' ;.,; is 5. s..:m, c,Y, .. ;, :.,A,; '.G * '..,%:n. %. ;,$ ',a m,.,y':y"f;f , y '... '.,.. h, 4';. N, ;'n lL.~~
~~9. g, K.*,. "'. c,~~
~~....g,..t +,3 ... g: a n. e,, z,.Q. .%.M ',. ' ' ;,%.. g. A.., /, T.l-i.' &~~
.y e, '.!

y. \\ -i. % '
~~, e.,.,, &.'a -,\\, v a y g * '.,p.c,..g. g r, ; u P. .. ^~~
~~g :,~~
~~..,s.4 .,,. y.s;~~
~~i. g..: a s~~
~~3,<. .,.j . i.., 3:; e, y n~~
;Q 3,; '.'.. '

? %.. y,%.'.(.'.,:;'.y,,';.e.,o )) f,q:.,. ~ y %:.l %.
g:. eg, }f. f.. s);t : ' u.: ,,,c. .,. d ';' d <:g, u. n,s y T..r.I,y.,% i ^. Q. U; v, .y. ...l;.1Q % I.. - y< .R. - lj'l Q ;i: i..',;., l.,)l;a y:. 4,g'. - ll.; y,Q Q.,,..',",A, r,,.; . f.,. :',:l ;,, ::l,.R. y;.;, lY,. :.'_i, L..?.;. ,.....f : '.n % m,', .-*i 5 :.X Y *. , c ,W.... .,'; f *, q'.;;h r y.j; } 4..
~~O : \\ p., f. y.,'Y", }y,k ( c~~
~~,.:) ' '.,) ?*,e, l ' i . : : y / j', y.' ;(..,,.'.",';l-J, g .'L. % s 1 '. ".;n..g,.'.M.c pg.. i ,,,.... ".;,,. '.p ;.i,..' y K...i;j' r'.: s:. a.;. 4 ,s.>i,,,,n,~~
~~k. n '.~~
~~,,g, 4 ~...is. w g,,,o, t. .:si- ,.. h '. f..... (!...E..%,'zQ S....h,,l'h,, 'i.\\,'4 ik?sS0;., .., f.,. ;r -. $ ' rf. s. *,, ',', f..'I, lf :~~
~~0:' y :h.,:~~
~~'.f.._s.'$ k,,,~.,b l$.f' ^_A.~~
~~f. <.f. ll'UQ... $'t,. :~~
~~f ll> \\~~
~~l.,~~
h t s. ..ny, 's.. : 4 m - ....s. + s .t 4 . I ., y. f.. f'f h !,;,. ^ - f, Yf.$o. .f,.f...'s.,) p ..:'..,%,,.,t,.,,,o,.j. 4 3.,- g yI', ...,y -l 1,.'h b. ;,,.j{.... '.f,:: .h._; f.}.l...,,. E. '?. +;_.,.,-:,...,...R. p..;, s' p .,.,y<- A., f
~~s. <,. >. :q'e (.,J p,.,.,,,.,m.,......,., t' l...~~
~~,, 1..v : ,),. e' ...,4- ...,r*.,~-.'- - o; ',. ,.y ,... :,. I.. ,w, .~..,s,.,r., '. /. i #,n. i s....... '. 'q; ' ,.a,m,,,, >,* y[+ : <y: :. ~.y. : c. - m,.1 fi, v' v.,t ,W,.,<~~
~~z. "~~
s
;.. y '.' n, i eat,

e-
~~.-s. )+~~
~~.s p., * :o..~~
~~4 p, n,. g- : < u. ........t;, ' s. J ... n ), 4 g '...,, :', q.,,.'g',(m ! ;;,:v ' ' A. ,-a,, c. r~. :,..,' ;:, ,,s, ". j e..q:>,.L.,: e. e :,:,.* w; s -.s.. < -l9 3,e~~
~~c..g.~~
~~y a ': -.., ;., , q.. ; : ;.~, >. .- i h;9.. :.;':), - 11.c. '. L.; W. ~ :.l'... gi. ; :,.!...,. ',5;.'.o . n Q,:v.~~
p '..

:,.::,Q
~~). \\, 'n. ;,'. *l.. a,,. :\\, >; s w.b., % ;;u,\\. ;.i;., '. : ;. e, o p :;._..; 't,b w '.c.' c. I, ;.,"# .. '. k:.:.:.u '.,.., t. \\,: < .l... , i ":!. i. * "' t's*..;~~
~~,... y '.,~~

~~.b A,. . ^ .*..:n b.".,,.s, e, ;,, e 9.h.... n,,~~
~~T:c'.W N. *J, ",. ) ', :.,..:. '~~
~~.',r ):. ^ ' c, 7, u',a" j.v s "t, - J-p 4p'.',,- : l ;, '" e d,.,..;' [.:t. :.,::* ' ',, J.~~
'.l'/ 4

e,,,D'
~~.Nf 4~~
u.
~~..:,r....' .. i 3. ,e : g ,,.1 Q L '.. * *../m.;,. '.~~
p.
. ',, *..d:.,,'* t ,. - '. T. .s t, > * -, '. t v ^*.. ',. > .," ff;'.. ; v.:.}.'._ '_,._',..,.,;*y,..'., j.. l. " 'r. ?.);f } l.[:,:_.. *[ Y h i Q:,. ,,' 4
~~F-J..;u.~~
~~v :. u.. h .. g% '..., P. L,},"j. :,.. -.,<: r ' a p;* p,. L.:- ,' 1 ,e? ' 4. ,n M* . : s d~~
~~,, N, [:. ;,,.[:. ~.., l.,~~
~~% (p l', . i..... ' {ql;-- 9,, . I. ..t,..?.;, D. ? %.y j, y,1 Y.., (..,e;,,..Q :... 'y, :.3, ? <:.,.' - ,s..',,.A, s... ,,r... , ;' X.p.,',.,..,.......;-,,,....., s. ,,. ' c ;g 'j,.4 c......,,,~~
~~,,,',,., ' '.. A...,' y',W; - 1.~~
. ;, ' '. f.4. r,jw. p.-;h.., . :f;, M.,..:.,,. ; at*, *; ',;.,l, .l3. g, ui . *'s ,. *,*? .?..' p%;;,a.. ? p':,. s - L. , " ;, =., '. r ;.. '. L . ;,' **.>.:' '_,'> J.,.'p j ...m .L;'.*.;m '. ;l '4: ',; t '.
~~,,, t~~
t:
~~s: a , f.;. '~~
s:
~~..X. ' 'L'.~~

~~s.?C.," l. 1 s *., 'ip ',,'>. ;.'. ',,'. ' =. W A.~~
~~.a . 4,,' y ., > f' : e< .. y ' -.i. ,'.. ~ '.. d.: a Q'. ;. ",.'.: .'s'~~
~~p... 9. r ;' ~:t~~
~~..r,';, : '. s .i 4 < %. ',.. !,, ; ~,.,%.9. ,t ... ;;.;,:. "g, 'r',.m:. 'vs 'm o.,f Y,i %., s' '.,'*s.s',,~ ' l. j. ,M r% ..: *' '.. ? -.... ". ", '..,'l 'l'.e ,4 ,', f,,;. n..~~
~~! v, s, n. m~~
..',,2;.,- ,:,c J.. ',' *,, h ( '. ,'s' ' li,. t. Q. ; . i .'.c<. ,s ,N -.s 2, e .. :, g ;..:,.,; t.o ; s,,3,,:." -.' e,;l....; c'. i.,.- o y.'..), 1.- ..t,;. 4.. o.. '.%.3 : > y .,.,...s.a.,.2.,;..': . ' p sc.e.u... " h.:.... y\\.1;.., A,. -........,..... q ; ::. : > r
~~[ t _;.m '. ;..,..;.',,,.~~
p y."): ....,.s.. .r....3... :.:...,. ~.. ..,s.n.. , '., ;. lu ? ; M. : ' ;" '.. : '. s c:. _,,,':'. -^..i..,_ ; ;;g, : !., s R.. :;...,,.. '.% . q. k;.' b ' o.Q*_,, Y .',,'. Y,.':.'? 5 :'. .(.l., '.f.. [,', \\.^;..'..' ?. ;,i' f.f, i,f '. N* I &. ll..Y'f,. s.{:*:' ?.: -: N hll
~~f. j: ^. "*Xl j;f,:,, '.:s;..: l~~
~~' f~~
~~h... ' c, ; :.,., * : e},l '.' '~~
,? h '.,.'.:.' .'!?l'T. ", ~,[;....'s. 1:f,. c., ..,v...' ..L,. .v.- m ef..... ".-.~ n 's .s.,.. y ;,,. : Y::. : +,..,..,; -. %q. ,...;ac,.,.:..'..~.c',- .si,... .n ..r..- n -. j> .p. .~ ;., . c: ? c \\f. ' t;,"15,.,
~~4. l', l'~~
~~,., j ,r.',.=,1.~~
~~-,5.,,,./.,, ;. ;.~~
~~l, -.',.[. '#,, ' [, ; } !.h, J ):f,.' - [',,' J ',$" '.,. f.' f.,1 r.,,.g' , J '<t 'i ' '.,. ' (,,, $<b,. 't[i - ,,'?."*Me, ' ;, ;f ' J f ).',f " . i' ..; -:'y '. A. ', /. ).,~~
~~q.,~~
'-\\ v, t..1. :,. ' - '.. fl- [ k ', 'M..,; *',. :... . '. ',I ...... ), hf....r.. . Y.[ 5.. " ' '. .l. rm., T., e,':.'., -[ ;F. !'.'"'."^^g'r'. I' .;,'"....'.'..,,.,;;,.Y,%.....'$ .t, 1.;" ,' i .t q . ~ + .. ' e..: o. 4.,.. t. [, .1. 3,,.-..., s.. s.l.. t e.. ,,...v..., ,, ;+ % j....,.,.....:.s j. y.,.~',.; 1. '< } ' ( $; l as
~~a..,.f-s..,,.~~
..9,. p... ";.~- .. g % *....j - ^,,l,,% ' .t ..r . Q. '.'.;.s,;(. :. i :'l ] , ' ? '.(;Tj ?;.g,l. Q,' ep' :;Q, .c -..v.. ,s b,. .s !, hl:'o,,). ~. ;, lf r:,l. M, 'Y,. Da'1 ', % ;':,lb l,'.ll1 .j:;,l ',,',lC. Nf, '.:..' i a.,.f',,.' 4, t.* $,',s,. ' %. ' .. l2.,
<,.

Q * '. * ;
<,4.'..n.........'f'.'.~:=,ni ., ',, ' 'c..., ' l, d, ;.? '- ) q '. ; a .. p..: - *,..f,i..,..7,,.. . :... :.. a***-.. l . : = v :; ' 1 :., 4., ;l.,s.. ',. V*
g.
~~t r' ' e ri~~
,e
~~. x,,.f N g, j: t, (c ; .ve s.~~
~~-. :'. y,: f. ~~~
~~..)',,- ..'/ 5, 'j {, f,;,.H s, 7 ', ; s f : g;...,'.,,,,.~.. 3.,.. 3 .g.. 3..,, *; /.;,. i *. - .s, ' - ,,l;.. ,t w ... y,;. 47.,, ', s,, s,., y.,p,..-.' , u.,s.,.y:r- ..s. .gs y c.3,~~
~~y,,~~
~~>a .s, .., r ' ; y, -,..: x...,.z n.,~~
:.M :.., h ;,.., y

',,: ; ;, ; ;4: :. m, J,,
~~l.: i. e.,,, 4~~
~~.g..~~
~~.,c .- u.:y.. 3 :,~~
~~o; M'....y').~~
~~j+. v..: s. .,. ::, y_ ;.,. v,.. p' a,.,;:\\::;c;;;<;,q, !7:c,,,. :.... ; p. : y~~
7.
.n.; J c, ': e,,., 'm.. Y : ,.r. .; *.n,q ::. g ;_. \\.;..:;..:,gy ;.:, ;y, c, ::, s &,...,... y.,. g.. : ..y;;.g:.q m u.:.:. ~;, ;.. %. c r .g.. b.":: :,,.,,..;,,. : ( 9. ;m.:.; ;. u .u 4 y.y :...,.. s.x<,.. v., :. f... ; y,,. m :. c.... ;c q..~ :..; ; x. ! w..:,:,g.g:....y t;......, 4 v.' y ' , 3. ; . :^ ;...
~~n,..~~
~~1, ;.. 6,~~
.a
~~,>..y,~~
;q.,9.r..s y

::,, '.', &p.,,..
~~v. ..,,?. ...),..-. r. ;._.~~
~~,s.. ;...u t v. v,. ;... y 7 -. ;>,.:.~~
~~s. .n..,.,~~
, n

a ;.,
~~L., y:. k. ;;,...:. W :. y ;- Qk.l...1 k; &.lk, &f;f.r,..s... '::tl (. '.&.:,.d,.lllv..:,. ;;.f..'.f. :~~
....

w., v. ; y..
i.1 ,:m...:. y., : ; 4' \\m::,: : lq?,::.. 1 ^ :Y'Y.\\;'. l,f.. [. f,. "?... '. # 'k, h, :;.. n: w.: . ~ L.<,-) :]e,f::. ,".),',[!.j ' N L . ?,l. ' l... ~ =,',. y.d:Y '.. Y. !'.. I. :;# ( -' 'f Y ^ 4 U. h;..'O : '..'.-.,Y,t..s,,,3._,f.:......,...... ',.. ...: 8 v ~ v, e :,,, - a p.,,- - s,< ..n.. ..s.- v ..i .s. .v. .g. -+... ,;,:.....D.r,,f( .. -:,. a. : ..c.. .g,.... k. pi.',,.,- ( =,j . 5 .... -, [g ',',,4,=.-:. ...f*O,y*!'....,-'.'.'.4.'I,4.#.. '.,,N- ' ;c. e. 3.,'-,,s-..,.. *; [ ?W.l$; :' $6 ^ 1 j&iQ.'j{ '.l'i$:Y l.)'l$dWW&O.3 f{ lW;.D.3.hl.W jM. M.%l.Wh ;'s??(.?f,%%hl%lW '3,P.- '.g ^ ', ', ' ' ;;.(',.',.., .+.( .... 8l] I.;; V,,.. c. -,s
'J,.

,.4 g
~~4.i / 41* .'!,'"f,,~~
~~'.n;; Q~~
,i: Ws::;
o o 3ORT XllElVe __lg11gES 1995 1994 4 } bbb bks })iSlb (in millions) Operating Revenue $931.4 5979 2 ( 4.9 ) Other Operation and Maintenance $238.8 5244.0 ( 2.2 ) Operating inconie $96.6 593.5 3.4 Net inconie $51.4 549.0 5.0 Ol'EllATING DXfA .ustomers Sersed Electrie 359,000 357,(W M) 0.5 Gas 233,000 232 (XK) 0.4 Unit Sales Elect ie (MWIl} Retail 4.647,840 4.621.209 0.6 Wholesale 1,973.543 3.S03.786 (48. I ) Gas WilTU) Firo. 38,458 3S.539 ( 0.2 ) Interruptible and Other 7,164 S.815 ( 18.7 ) Transportation Volume 4,024 2.20S 2.2 Regular Employces 2,096 2.169 ( 3.4 ) CO.\\1.\\l0N SII AllE DATA Earnings $4.72 S4.59 2.8 Disidends Paid $3.00 52.9S 0.7 Disidend Rate at End of Year $3.00 53.00 Closing Price Range $47%-$35% 545 A535 Closing Price at End of Year $44". 536x 23.0 Average Shares Outstanding 10,655,918 10.413.7S I 2.3 llook Value $36.30 $34.49 5.2 Disidend Payout Ratio 63.6 64.9 ( 2.0 ) Price / Earnings Ratio 9.5 7.9 20.3 Net incoine Earnine and Dn klends Paul Per Common Share Other Operahon and Mamtenance c- ,, f X $250 $$ g.J g y., r., y.- g r-- , ", Y usx ,. M" ',' r. u 17 $2no E Mo i d D E %ISH 5 \\ \\n ? ) Mu N gio il 550 '~ ~ ~ /wi /wJ /w3 /W.4 /v4 /wi /wJ /wy /wg Lanunp Per share E lhudendsl%l ()thei t )petauon stamienant e $'lCahr HutC tl hit deta5lCll[iMaHclal AtalClHCHIS afh$ othCT infiH HhltiOH, prepared in accordance with the rnlcs arhi regulations of the Securitics and Eu hange Comminion. are inclnded in Ethibit A of the IYYn l'rv ty Stateincnt. @ Pnnied with soy bean ink on recycled paper to presen e our ein ironinent and natural resoortes. I ft b l{}f}
I Commonwealth Energy System is an exempt public utility holding company w ch investments in four operating public utility companies located in central, e. stern and S -nc System electric operations are involved in the production and southeastern N1assachusetts. s t ~ _?*~ sale of electricity in 41 communities including New Bedford. Plymouth. Cambridge and the geographic area comprising Cape Cod. Gas operations serve 49 communities including New Bedford. Cambridge, Plymouth and Worcester. In addition to the utility companies, the system includes a steam distribution company, five real estate trusts and a company engaged in the operation of LNG facilities. The retail electric subsidiaries receive a portion of their capacity and energy requirements from the system's ownership interests in four operating nuclear electric generating facilities and one oil-fired unit. The System is a business trust organized in 1926 under the laws of N1assachusetts. Subsidiaries of the System have common executive and financial management and receive technical assistance as well as financial data processing, accounting, legal and other services from a services company subsidiary. u c.:-' s-s gQ, [ l M a:s )s k 'I& h.c l.. l.. + a l camurud ii ~ lw s;el.t Q ;
9*!**'* *
h;
~~. Lfm FranmW l ,4[ h n~~
~~& *mkwe <~~
~~P j; i g,3 -y .;d l.-~~
~~W tu rn. er n n t~~
~~.., ' ~ p ..,"V .l r is,,,,,,,,, i < u,.. Q c;as.senu e Area c.n,.. c..a n.n 1.lectric Senice Area & <;as and uccinc senh e Area % ntu. et %und CES A -s I isted g El E !E= =_= y~~
=
,E E. ~a.-.. Em 2
We are pleased to report to you that of approsimately 33M assuming the 1995 was another excellent year for reinvestment of dhidends. Commonwealth Energy System. Our cash flow per share of 59.75 for In this summary annual report for e 1995, we will be using a new format of the year exceeded the disidend - 0 lp pq l questions and answers that address the payment by more than three times. U issues and concerns most often raised e The sy stem's capital structure con-S throughout the y ear tinued to impros e as k ng-term debt by shareholders and was reduced to 47% of total cap-the investment italization. compared to 51% last year. community. COM/Energ) Sersices Company is e llow did COM/ Energy do being redesigned to offer market-e in 1995? priced senices to our operating companies and external clients. 1 The year 1995 was sery
~~1. positise for Commonwealth Th - first of a number of planned new e~~
Energy System and I am proud of the all ances was des eloped with A&C results we achiesed: Enercom, Inc. to proside residential customers in a broad geographical area 66 The results of . Earnings per common appliance service and replacement share for W wne contacts enagy managernent and a our efforts will 54.72, an increase of 13 host of related pnxtucts and services. be a stronger cents or 2.8% f rom the J C.ommonwealth 5159 anained in 1994 Beyond these strong achievements. Energy System that - and the highest year-end COM/ Energy made important strides will truly prosper lesel since 19S4. in the regulatory and ensironmental through change. 99 arenas in 1995, both of which will be e Net income for the discussed in our report on our gas and wullam G. Poist y ear w as 551.4 million, electric divisions. 1 President and CEO the highest we hav-ever reported. What is COM/ Energy's policy e on common dis idends? Return on as erage conunon equity 1 e was 13.34, far exceeding the 1 During 1995 COM/ Energy as erage for the industry.
~~1. paid a quarterly dividend of 75 cents per share, w hich equates to an j~~
The market price per common share annual disidend rate of 53M), and a e closed 1995 at 544.75 per share, an dividend payout rati, of 63.3%. In increase of 23% when compared to a fact, COM/ Energy has been rock-536.38 close in 1994. This price solid in pay mg dis idends...w ithout a appreciation together with the 53R) decrease..in escry quarter since 1947. annuali/ed conunon dis idend per share The most recent dis idend paid to share-resulted in a total retum to shareholders holders, on February 1,1996, w as the 3 l
1 l l l 195th in a row. w hich I belies e is quite an accom-CON 1/ Electric's plan is required f or submission l plistunent considering the changes the utility by late summer 1996. industry has gone through over the past 50 years. In this process, our electric dis ision. Os er the last five years, the dis idend has been CON 1/Electrie, submitted brief comments increased twice. that we laSeled the "Competitis e Challenge,' .. 39 w,n earnings has e that suggested a concept f or our companies '1 p continued to increase that would allow us to sell 100 percent of our 21 ( g and the sy stem's power capacity entitlement. (including entitle-(S[,f. condition has in turn, our customus would be free to buy ~ os erall financial ments w ith our ow n Canal Electric Company L 1 y '. 7. g,. unprosed. Although their power in i fully competitive market from past financial w homes er they chose, and we uould focus our . iE e a' perfonnance is no ef forts as a local electric distribution company guarantee for the to proside top-norch distribution customer luture,it does lay a sersices, and a host of new energ)-related
~~1. E solid foundation for products and sers ices.~~
progrew and growth. In selling our entitlements through an auction. ,). The lloard of Trustees a true market-based s alue would be established l ~ w ill continue to res iew f or the contracts, with any difference treated as a 1 the s) stem's financial " stranded cost" that uould be awumed by the perfonnance and other electric customer. factors influencing the This proposal uould make u. the first utility in rate of disidends paid the state to s oluntarily proside customers with ll'illiam G. Poi 3t and is committed to the tspe of competitis e choice N1awachusetts l Presulent and Chief Dccutire Oy..u er disidend grow th and hopes to ultimately achies e in its utility regula-enhanced shareholder s alue. tions. At the same time,it allows the opportur".y l to remove ourselves f rom a portion of the llow will CON 1/ Energy be affected by business u hich pros ides only a pass-through of the restructuring of the electric industry ? costs from power generator to customers and returns nothing to shareholders. 1 Efforts now undernay m restructure Ily selling our entitlements, we uill _Le the electric industry in N1assachusetts become a stronger system because we shed may have a significant impact on the way our billions of dollars in long term contractual electric dis ision does businew. The electric obligations for the yea that some of these disision contributed roughly 60 percent of the contracts are in effect. sy stem's nel proGt in 1995. Despite these potential A more detailed description of our changes. I belies e that we will be a stronger and "Competitis e Challenge" is included in l better managed business because of it. pros iding our discussion of the electric disision. 1 es en greater s alue to our shareholders. l Through N1 arch 1996 (when this report was What is your experience w ith . stranded costs? puolished) the N1assachusetts Department of Public Utilities had receised restructuring plans or comments from fise electric utilities. In 1095, the DPU ruled that one of although it had requested plans from only the L. Cambridge filectric Light Company's three largest companies by February 16.1996. largest customers, the N1assachusetts Institute of 1 4
Technology, was obligated to pay for the costs and that allow s us to take full advantage of our j obligations we incurred on N11Ts behalf, w hen esperience in the gas and electric business u hile its onwite cogeneration unit went on hne and it better supporting the creation of new, f ully-substantially lef t the Cambridge Electric sy stem. competitis e, market-dris en companies. Our aim The DPU's decision requires that we f urther is to ensure that esery thing ue do is profitable in aikhess the issue of AllTs stranded costs in our its ow n right and can contr;bute to the profita-restructuring plan, required for subminion by bility of other System companies. late summer and that we explain the steps we have Our approach to new business des clopment is taken to mitigate the loss of AllT as a customer. to forge alliances uith other companies. The in the meantime, AllT took the issue to the first of these new alliances,I am pleased to Federal Energy Regulatory Commiwion (w hich report to you,is with A&C Enercom, Inc., a ruled in February that the state had the right to subsidiary of Virginia Power and Light, to impose a customer transition charge) and to the proside customers in a wide geographic area N1assachusetts Supreme Judicial Court. w ith sers ice contracts, energy management, We are sery heartened that the FERC upheld power quality and reliability sersices, and a host the DPlPs ruling regarding recmery of stranded of other related products and sen ices. The costs and are optimistic that its decision will be development of upheld in the appeals process. In our view, the other strategic DPU has clearly recognized the rights of host alliances are in utilities and the regulatory compact which has the works. ,.3s. esisted and it has set the stage for the recos eiy Also in the of all stranded costs. category of new 4 business des elop-1 S-A g Where are we poing and w hat are w e ment is the re- . doing to get us there? design of CON 1/ Energy y 1 At last year's annual meeting we Senices Com-4 d[ I. talked about our plans to embark on pen). Oser the a program u e called " Prosperity Through years it has done Changel It is an aggressise program which outstanding work w ill both strengthen the competitis e position of on behalf of our our regulated core companies and create new regulated busi-opportunities in the unregulated arena that u ill nesses, but like pros ide greater shareholder value. those businesses, Ain hact P. hullnan ticitL vii e prnident. secretary arul,ecn-g m.g g,yg g p y y,yg g,y,c7 g cp,c3jacy, Our core businewes-gas and electric-are if it is to sunis e, 3utenn, p/armin.e aiul Jct clopment: anJ Jamc3 D Rappoh w orking hard to meet the needs of their cus-it too must now "ich'VI'Am' iol ti' c Pinidcut and ircaturcr; ar e part o/ tomers, des clop new products and sers icet redefine itself to I" "' of the comnntice are it ilham (L I ont, prc3ident and < lurf cut operating costs, improve their competiticf become more no utiic o/M cr; Runcl/ D. It'richt.pinident und hn1 "P""U"V "//i< o. COAf I]cetrn. and Kcnnoh f Afarconian, prestJcnt and < hul opo atm e ollit cr. Cmf (r}a s. position, and prepare to take ads antage M cost-e ffectis e, regulatory changes. more com;~titis e in deseloping new businesses, we are pur-and smarter in.he way it does business. Our suing opportunities in the industry we know goal is to reshape the Sen ices Company to best--energy-and our f ocus is on unregulated prm ide high-quality, market-priced sen ices energy endeavors. To aid us in this effort, this both to our operating companies as w ell as to a ycar u e established a new corporate structure host of estemal clients. 5 J
Our efforts are getting results. We has e compounded annual rate of return of nearly restructured the Services Company, appointing 184. Assuming the reinsestment of quarterly Nir. John Whalen as Vice President and Geneni disidends, at the end of 1995, that S1,000 imest-N1anager. Nir. Whalen was formerly the System ment has grown to be worth nearly Sl2.MO. comptroller. We base started to seek an array of We belies e that a shareholder should consider contracts in the unregulated arena. Our work has the dis ersity of the sy stem as a real strength. just begun but we ensision that the Sersices Because we operate in three energy markets-Company will be able to provide a s aluable electric. gas and steam-an insestor in resource to our companies and enhance value to Commonwealth Energy Sy stem gets an electric our shareholders. company as well as a pas company to proside We beliese that the results of our efforts stability. Also, an insestor should be impressed in the regulated and unregulated emiron-with our plans and ef forts to successfully inents will be a stronger, more saluable compete in the eser changing regulated and Commonwealth Energy Sy stem. unregulated energy markets. We are formulating and implementing plans which will not only Why should an imestor consider ensure our succer ful transition into the new CON 1/ Energy ? world of competition but strengthen our position in the distribution of gas, electricity, and steam. t ) CES Stock Perfonnance j [1. tions an imestor may One of. he niajor attrac-In c.iosmg. we are confident that as arteen-Year Resulmt a s um imesunera competition comes knocking, our experience .A. g,i yg consider w hen looking at and talents are ready for the challenge. ~~~ / / CON 1/ Energy is our tremendous We believe that the results of our efforts [ track record of quarterly dividend will be a stronger Conunonwealth Energy / pay ments. Our overall total return System...more efficient, better managed. sum // has also been quite impressive. and more diversified than ever...that will M As an example, an investor w ho truly prosper through change. Jan t.19xi th. 31. Iw5 ourchased $1,000 in CON 1/ Energy We extend our thanks to y ou, our share- $14 375/ Share $44 75/ Share common shares at the close of 19SO holders, for y our confidence and continued m,,,,,c.,m ormc,a,,n mc iao,,,a,,,t, a n a f usa a,a,cm.-umna,,t an a,.,,d> has benefited from a fifteen-year support of Commonwealth Energy System. Sincerely, William G. Poist President and Chief Executive Officer 6
electric rates through the purchase of %, hat is (.ON1/Electne,s power on the open market. It will also position on electne mdustry protee our shareholders by simplifsine restructunng,! the issuc of stranded costs (see page 1i ~l~ f 1 On February 15, we presented for additional discussion of deregulation L. our preliminary comments to issues). Part of our proposal includes the N1assachusetts Department 1(X) percent recosery of the difference O of P+iic Utilities (DPU) out-between the current market value of our lining a vision for restructur-pow er contracts and their original costs. ing which we called the Recosery would be made through an "Competitise Challenge? This sision access charge p ad over time by all is dramatic and is the result of many customers in our franchise area. discussions with industry representatises, CON 1/ Electric's "Competitis e government officials and customers. Challenge" has receis ed positis e Our "Competitis e Challenge" propmes resiew s from several state regulators, auctioning all 1,14() megaw atts of power including 51assachusetts Attorney capacity entitlements held in 21 contracts General Scott liarshbarger w ho praised by both Commonwealth Electric the company for taking a " bold step." Company and Cambridge Electric Light lie commended CON 1/ Electric for em - Company. The entitle- " stepping up to the plate and proposing 155 ments would be sold on that the market determine the amount, the open market, subse-if any, of its costs that are stranded by ,". y h., 3. quently allowing our cus_ allowing consumers to freely choose tomers to purchase elet tri. suppliers of electric power / city from any supplier of their choice at market What is CON 1/ Electric doing prices. We w ould still
~~to lower operating costs to g~~
A continue to I3rovide our impros e its competitis e position? l, s sersice territory with dis-1 Three years ago. CON 1/ Electric / tribution, customer ser-L. began an aggrewive cost-sice and marketmg cutting program w hich to date, has activities. included a reduction in our work force of In making this pro-over 1() percent; the closing of five of our posal, CON 1/ Electric is in district of fices as w ell as our Cannon a unique position. H Street power station; consolidating man-relation to other electric agement functions; renegotiating or can-Raswl/ D. Wright heaident and Chief Operarm e Ot/i< cr utilitics in N1awachusetts celing several pov er purchase contracts; in that nearly 1(X) percent of the and, stabili/ing the fuel charge portion electricity our distribution companies of Commonwealth Electric customers' sell to customers is bought from other bills for a three-year period. In N1ay companies. This " purchased power"is 1995, we receised approval to reduce relatis ely expensise and provides no Commonwealth Electric's residential additional return to shareholders. rates by 52.7 million per year through a We anticipate that our proposal will settlement agreement with the state allow our customers to achieve lower Attorney General's office. 7
Other examples of our cost sasings mea-expanded airport are being des eloped to com-sures include: plement the city 's free trade zone. A new com-muter rail line to Boston is also on the drawing Decreasing our annual construction eywn-board, along w ith a new aquarium, and as a major ditures f. rom approumately 550 million to both! to the region a new casino /entertaimnent 525 million. complex and a host of spin-off businesses. N1arketing our excess power-saving 52 mil-Recently, we successf ully completed the first lion per year. part of a broader program to sell a range of products and services to residential customers. We're also Receis ing appros al from the DPU on a settle-a using our expertise in the commercial and m. dus-ment agreement that allow s reduced spendine inal area to market products and services such as on conservation measures during the restruc-surge protectors, power factor correction and turing of the electric utih.ty mdustry. ~ ~ power sy stem analysis. Negotiating cost-sas ing labor contracts. Our efforts base also focused on maximi /ing our existing assets. These efforts bas e included Cutting the total salue of our insentories from renting space on our radio towers to communica-SS million to under 54 million through use of. tions companies and selling rights nationwide, advanced computeri/ed inventory control sy s-to s ur Work N1anagement Information System tems and innosatis e pannersh.ips with suppliers. tWMIS) which was designed by our employees to streamline our customer work flow, \\ L What COM/ Energy Steam Company, a non-regulated i ~ grow th . s affdiate of COM/ Electric, continues to achiese 4' ~ I potential exists in serv positive results, enlounc another record year, the COM/ Electric both in resenue and steam output. We continue sers ice area., to stnse to proude high-quality sers ice to our 1 Recog-steam customers, and are exploring es ery oppor- ~ .L. ni/ing tunity to expand our steam sales into new markets. that our fortunes qg are closely tied to What is COM/ Elect.-ic doing to impros e e the economy of the . sers ice and reliability for its customers? In response to a rc,picsrfor he tp in km crine their cleari' regions we sers e, bills. COAf Elet tric nas able to ertcr the naakers of 1 Despite our continued focus on cost Chatham Ud/aee < rontons in ll'archam. 3fanat husetts a we'se undertaken mone y -savinx n onomic des clo/unent rate a number of initia-
~~1. containment, we undertook a number tises to attract business to the area and help of projects to ensure that our sersice and relia-those already here to expand.~~
bility continue to excel. Here's what we've These initialises include working with regional done in 1995: economic des elopment councils to des elop a mar-Increased reliability and capacity of our trans-Leting brochure and companion u.deo to promote mission sy stem with an upgrade of a portion of our area as an ideal place for business to prosper, our i15 KV transmission line. By ace:lerat-We are also working closely with kical, state and cia ine our design work, we were able to take full federal ofh... ls, cis ic groups and m. diudual cus-advantage of a lull in constructiori actis ities tomers to bring additional des elopment to the to reduce costs. New Bedford area w hich is the heart of our indus-Completely updated our b ADA (S) stem trial sales. This area has enormous potential and + is sery receptise to new business. Plans for an Control and L)ata Acquisition) control center. With helpfn>m COM/ Electric, Brittany Dye & Printing of New Bedli>ni was able to applyfi>r a $5()(),(){)() grantjnnn the Department of Energy to e.\\plore using new electric technologies in the drying of text: s. 8
W A. p q I 9, 'g 1 p I ~ j e 4 - ' ar Y e a s. 1 a e t sY f '1; [ ~ }, e. n ' /, y .g- .*,j 3 m, f", g -,s e O.: # b~ p
)
~~4 'h g7 -g v. h p - [. a f jp i y s I 41 . gf.'~~
~~l=,,.~~
~~1. ;a = g-. .,,a g f,,a / g .g ' a sg + t 'j F s ( _. r, .g'y N ,s f 4 M 'w f~ T / 4 g*' t p "A ~ J a , i5_ -yy y 'p e , 'h '11 h <- ,A ,= v i p j g we~~
~~1 r-l~~
~~,, VL 0 - 4 J, D c s. I) W.. a s g 4" iG g e -n s -I' / .y~~
y
~~'p ~. n Y f w. ,~ ? ma d <m, r' g~~
~~y 7f' s~~
~~y p 4 g e T e .n ~^ *' a-4~~
~~I y~~
~~,e 3 ~r g d 'I -'a: ,W W ~ a 3 a e 4 g Y p ,a ?. + 1 ' A F t, eg ,e s -~4 e .L s ' ,1 , ga w a r w 69 j,. - r wa j y -r~~
n.
~~.s, r. / 7 ,/ . '..s t ,/ y;, ~ Gnm ~' w ,o / ~ ~ r /, n. k e. / =~~
~~y - ',~~
~~y-' t E 7 'e / e f A } g; 'O t s I~~
c
~~/ 2 c y s' /, ..p :; 4 -s o / .q }, ~,~~
t*
~~i p. n Kl t' a k / ^ O j / i / % in o r v.c s x w /> h, 6 - g a -l ' :? lL,l~~
~~, - - g~~
~~,g': S. ih , u i r p ~ / ,n, p s <, 7 x ,-e 8 A8 2 1 .W '7. is fe /) ..w t 8 ['Q- h . ~, a -7 / Q J.. y = ., / p'. 0; o g ea ,,u, g... ~ g ,i -x,. T /" < u ') A i f . s J-m, o a - ~ r O / "ge~~
~/
= .F , / _s. ^ g ' p.,' U, .4 r.' a p ~ e a a e e fr r, s ~* r ~,, ,? v w s g,*', a i ? e $ )S> .F 6 't. 4 f- ,ti 1 Ls 'J r.,. g~~ t +) 4,- 9' a s v a w + ( ,s I s 4 ,y 4 ..M.' d - A '+ / = a j. j g ;. - .,q i eg A 4 s' t -E 'p 4 o A ,. a 4 s x. I h 6 . T ) e t,. h: 't F ( r'( ~n ,4 t f', ^ ' d'f ~
t

g
~~=^. A d .9 5 .'g F s 1 e~~
~~i i-1.~~
~~d r O c 8 g ,p t , t y 'M A y ^ as, p-9 t s.o> p[ +~~
~~s f'~~
-h ^9 ,sm I " ( I:' D '9 y t ) 'N' 8a g f A .,. p , g ~3 4 g + h l+ t 4 { E g I k> a} O N - ",, .y,y [ .. 4' d 9 4 9 O A y., ' f' "I r +. A 8 8 ? -e r +fa Lg d .e e WW 4 D 6 7 a 4 ,-w, b,,, z o W 9 w 9 ', e4 * - f V e ( 9 g a
All new hardw are and volunteers, we are committed to being the best u ' "y g softw are gives us s astly corporate citizen possible. i f &&N M K..l;Apgj improsed flexibility A prime example is our Cana' Electric /" and allow s us to be plant w here by burning lower sulf.ur oil and -a w g gp 7l ready for our future installing new burners and emissions needs. A new trouble monitoring equipment, we made a dramatic call system linked with difference in sulfur and nitrogen emissions }, the new SCADA and greatly improved community relations j,,as***'# $i system will be a big along the way. This past year, we went a step help for customer f&r by starting a consersion process of services, identifymg ~ Canal Um. 2 to clean-burning natural gas. t outage problems and On the new technology f.ront, we are work-enabling our im.e crew s 11 hen Sea ll' art h /nternational. one <!/ the n orld's ing with the Union of Concerned Scientists to begin repairs faster. largest spa ialty seafood processors, was e onsiderin e in a research partnership insohing a photo-locanne a new plant, CWI Eles tric provided the
~~Redes.iened our soltaie ssstem and special, highly-eff.icient technical anistance and t ompetitive rates thev needed to t ome to Xcu Bedford.~~
customers' bills to be variable speed motors at its national head-easier to understand and quarters in Cambridge. We helped fund a show customer-friendly information about rates, 22.pawenger electric shuttle bus for the usage and temperature comparisons. Martha's Vineyard Transit Authority which Implemented a consenient automatic monthly w ent into conunercial operation on the island + direct bill payment sy stem, and an integrated last summer. We are also continuing to soice response telephone system that will nionitor the performance of New England's allow us to introduce pay-by-phone and a host first fuel cell at the U.S. Army's Soldier of other innovative customer sers ices. S) stems Command in Natick, Massachusetts. Our commitment to the community is In addition, automatic meter reading devices clearly. demonstrated m. all our actions, are now being installed in our high-cost-to-read Whether.,it s partnersh.ips uith schools, areas-first in New Bedford and then in beach cleanups. seaf.oodi.estivah or donat-Cambridge. Installation of these meters will ing money to the Um.ted Way, our employees impros e customer service by improune are quick to respond, buildit ~lationships accuracy and eliminating estimated bills, and showing the community.at we are while reduc.ing operatme costs. an integral part of the 41 cities and tow ns Other Operation and Mamtenance w e m've W hat is the com-giu i Our conununity support was recognized pany 's relation-ir this past fall by the New Bedford Chamber !5120 ship with the communities j S H'O itserses? of Commerce. We were inducted into the - $sn Chamber's llall of Fame for the tremen-j gm 5* 1 dous strides we have taken to uork uith Through our L. intohement our industrial customers, develop solid _ /W3 /ws /W with civic and community relationships with cisie and community other operanon M mnienarwe groups, interaction with groups, and provide personal attention to elected officials, support of local causes, indhidual residents through a wide range and employ ee ins olvement as community of employee s olunteer efforts. 10
Restructuring of the Electric Industry
~~Separating or "unbundling" 1995 Retail Electric Unii Sales E'"" ""'""'"I"~~
~~" ""0 nm Massachusetts looks to industry irstructuring, distribution services;~~
~~l b.~~
comphitive chottefor consumers Ensuring that all customers, With all the talk 37 M '4 including low -income customers, of the restruc-receive electne sers ice; turing of the o ?a Mc ? Supporting and furthering the goals electric utility 52.7%, mdustry, w here Ji of environmental regulation; does hiawa-Providing incentives for better chusetts stand? Reudennal Industrul utility perfonnance. commercut oiner , ebate saries While the principles set the ground rules for from state to competition, there are many issues that still have state with about to be worked out. The one that is central to the Dchorah Af< lamehlin, vice pres. entire discussion of restructuring is the so-called 35 states ident 4cu3roirier 3crvic c. is nationwide Icadmq COAL Dcctric'3 resiense " stranded costs" or commitments u hich utilities nhe 5'au's electric mJuwv hasing begun made in power plants and related long-tenu iestructuring < hallenge. the process of power contracts under a regulated ensironment rnising regulations to promote competition. the to serve new and existing customers. The DPU DPU dramatically accelerated the process with order indicated that utilities should have a its August 16,1995 order outlining a schedule reasonable opportunity to recover stranded costs, for hiassachusetts utilities to submit individual probably through a non-bypassable access restructuring proposals. Under the order, three charge on customer bills, utilities were required to submit their proposals The DPU affinned its support of stranded by February 16,1996. Commonwealth Electric cost recosery with a and Cambridge Electric's formal plans are not landmark decision on due until the end of the summer, but we sub-September 29,1995 mitted comments to the DPU on February 15' w hen our Cambridge 3N : m 2Y.'s 1
~~I;112 squete mHes covering 41 humamminimp 1996, outlining our innovative " Competitive Electric Light NM NapguenieglelyM$Jl@h Challenge proposal.~~
Company received 7g g: y# ' Y ' ',, $$ g The DPU order outlined seven " Principles" approval of its ll3eegric Meng [, that will guide a future competitis e electric indus-proposed C ustomer LCapshilft.532.5 NimoleenNelse? try, consistent with those developed by the nearly Transition Charge
~~muler long-tone comrects with%stilities l 3~~
! of 434 5. MW seauhing in a net egeWiisser4 ; ,0 groups and agencies in the..N1assachusetts (CTC) to be applied a j jo8.0 MW"e -g w g e, Electric Industry Restructuring Roundtable," w hen large customers . mn,,. Sp,g, ~ y ' n;S MW caf"'justM995h . w. They are: discontinue service ~ "'~ from the company. Prosiding the broadest possible choice y et remain in Cambridge. for customers; On another front, the N1awachusetts Legishture's Joint Committees on Energy and Ensuring that all customers share in the Government Regulations have both held benefits of increased competition: hearings on the restructuring issue. As of Alarch Ensuring full and fair competition in pow er 1996, no comprehensive package of legislation generation markets; has been proposed. //
What were CON 1/ Gas-Reduced from ten weeks to ten day s f . financial results for 1995? the tin e required to pros ide gas senice to a new customer's home. 1 CON 1/ Gas' earnings for the Eliminated warehousing expense for O IL. year increased significantly our heating equipment ins entory by ]( compared to 1994 despite sirtually using direct delivery from the unchanged firm sales and distrib itor. This allow s us to be O. w.q e1q< 1or1s towerresenues. Ourstrong more competitise in both equip- _al~nd. _ - ~ the aggressive cost control Reduced our distribution and and improved operating procedures w e construction crew s from four-hase undertaken that allowed earnings 4 to grow without the to tu o-person crew s. s benefit of fasorable f w eather conditions. In addition to the continuous 4' improsement of our operations, t L llow is we are partnering with technology . COM/ Gas to help reduce costs and enhance ser- ' ' ~ reducing costs? sice w heres er possible. Examples of our use of cost effective tech- /1 Using the nology include: [L cus.tomets' / Automated Nieter Reading ( AN1R). 3 perspectis e as a guide. I A .The A51R Sy stem uses radio tech-A g cross-functional nology to enable us to read gas employ ee teams are meters f. rom a computer-equipped explorine esen oppor-schicle. This has dramatically tunity to control costs and lowcred meter reading costs, sharpen our competitis e improsed the rate at which meters position. These efforts Kcnneth M. Marconian are read and enhanced customer President and Chief 0peratirn: Offi< cr include iner asing orga-nizational know ledge, of.our meters are equipped with streamlining operations, and offering AN1R technology and the monthly new technologies and innovatise senices read rate has.mereased f. rom NO to increase eth.etency and reduce costs. percent to 99.74 percent. In each case, the goal is to maximize Interactive Voice Response tele. profit potential w hile minimizing costs. Other Operation and Maintenance r.h.is 13 pe ot departm. ental inter-phone technology has been put in 5'"" m7 %64 w27 action has resulted in meaningful phce to h lp manage more than j"" reductions that would not other-6t dOOO in:oming calls annually ~i 56" wise base been possible and has by auton..ing certain telephone C J sau allowed COM/ Gas to stay a step requests Approxin;ately 40 percent ahead of the competition. of osu diers are choosing to use the go i am sery proud of the resuhs sy stem for cons enient access to 199' _ t vW _ Ive we base achieved. Some of our billing, credit and other account Other Operanon Wnienance successes include: information 24 hours a day. 12
New trenchless technologies are being used to We has e also expanded existing senices such maintain or upgrade our distribution sy stem as the merchandising of water heaters and heating with a minimum of cost aad disturbance. sy stems. In addition, we changed the financing One technique employs a des ice know n as of our mer-the " Bullet" w hich allows us to replace old chandising gas lines with polyethylene pipe. eliminating operation, the need for costly, disruptive and time. bringing it consuming street escas ations. in-house and offering longer-What is COM/ Gas doing to term financing increase revrues7 w hich pros ides benefits to our i As part of the COM/ Gas strategic customers d de plan, we identified opportunities for and improved revenue growth that take advantage of the unique returns for character of our company and sen ice territory, as the company. well as changes in state and federal regulations. A We has e offered expanded service options to What our customers. One example is our innovatis e use e new of quasi-firm sen ice rates to customers capable of o13Virtunhies do " '"' "" i#in c "#"I "uw r"t" # use of Ic< hnolver. ( (nf Gas burning alternate fuels. Typically these are fonner you see in your i3 inme a miniannc < amcra interruptible sales customers w ho require pas for market for '" #"^P#' ' 'b" ""### " "II' "I lon preswre cas mains a ahout interruptine service to < intomers longer periods than the interruptible selling season future growth? or dnruptine hs al roada av 7 his i3 one of scieral nca trem hics3 allow s, but less than year-round firm service. The ic< hnologic3 brine used by c(nl Gas to hc/p redm e < o3n and benefit of this sen ice is tw ofold: It increases the 1 The unproie3cn un throughput by lengthening the time a customer _ L. area sened by COM/ Gas has pockets bums pas, and, by retaining the same supplies in of strong growth w hich continue to proside excel-colder months, ensures that the Company has lent potential. One of these is New England's access to less expensise peak suppl). second largest city-Worcester, Massachusetts-In another example of accessing new markets where nearly 51 billion in deselopment actisity is by increasing our. rvices, we receised DPU underway including a new exit for Worcester appros al in December 1995 to offer firm trand from the Massachusetts Turnpike. portation sen ice to all of our commercial and in addition, we see further growth industrial customers. We also receised approsal opportunities in new technologies. 3995gg g, g g to cons ert our industrial rate into a demand-based Impros ed natura! gas engine-dris en rate, providing ses eral of our major transporta-cooling and absorption chillers are 5 n. i tion rate customers with an important incentise increasing in pgularity and are 38 " N to shift back to firm sen ice. desirable off-peak summer load addi-In Nosember 1995, the DPU appros ed our tions. As an example of this, a _ 33.39 effort to scale back demand-side management team consistir g of Worcester city and phase out non-cost-effectis e programs. In officials and COM/ Gas representa-m' addition. we collected 51.4 million for 1995 in tises is gradually conserting the lost margins (lost revenue associated uith thenns city 's public schools to gas heat saved by conservation programs) and, in 1996, and airconditi, e g. M Residennal Indusmal n .4 will be collecting 52.1 million. Natural gas senicles for Hects M conuncrual other 13
represent another small but growing market as the renegotiation, we reduced pipeline charges, the Clean Air Act restrictions take etfect. The thereby reducing merall cost. Gas Research Institute (GRI) chose CON 1/ Gas We continue to benefit f rom our valuable for one of several LNG-to-CNG refueling sites llopkinton LNG facility which straddles two in the country. GRI is providing partial funding major pipelines, giving us the ability to mos e of the station w hich we plan to hase operational gas w here it is most needed at any given time. bv the end of We base added reliabihtv and flexibility to theyear. our gas supply by purchasing pipeline capacity g 4 When that was previously intended for a power plant in /* j. 4/ completed. Pepperell, Niassachusetts. This additional finn 6 / this semi-capacity allow s us to mos e more storage gas from Steuben County. New York to our customers in public station will be the a timely and economical w ay. h largest We hase maintained an actise presence at k ( g capacity the Federal Energy Regulatory Commission station in through our participation in Associated Gas New Distributors. pipeline customer groups, and Laptop computen help (..m. f G,as empimces streandine the prot cu ofprmidine xas servin e ta a nru ant <nncr's home and England. by holding a key Executise Committee provide f7c ubitin forfinam in e re3idential appham c3 g.e go position on the Gas Industry Standards lloard. exploring other opportunities to use LNG as an Ihm is CON 1/ Gas siewed by its cus-onboard fuel for heas 3-duty commercial vehicles. . tomen and the conununks n md Last year we worked with the U.S. Anny's Soldier Sy stems Command in Natick. Slassachu-1 Our absolute focus on customers ngland. first fuel setts to introduce N,ew E. s L. has resulted in excellent favorabilits cell. Fuel cell technology uses a non-pollutmg I. or the fif. h consecutive sear, we rat m es. t chenu. cal procew with natural gas to generate has e earned the distinction of being the electneitv. W.e are monitoring that mstallation ~ N1assachusetts pas utility with the fewest closely as in the long-term. fuel cells represent a complaints filed with the DPU. tremendous growth opportunity. %,e maintain a hich s m..bility in the conunun-ities we serve throuch school education pro-Gas.Operatw.ns What is grams and sehool/ business partnerships and e CON 1/ Gas oring programs such as Kids' Fair in y ,u tailes' covering 4koommunitiess Worcester w hich attracts more than 17JXX) S(includmg 12 served with electricity 3 parents and (hildren. supphed byCOM/Electnc) with'a((f in addition, we has e a strong emphasis on ipopulation of appronimatelyl.128,000fgp g Our gas volunteerism w hich has earned us wide-spread ]yfi
~~2. L costs are 1 [f gg _~~
public recognition. I am sery proud of our 4, e gg, g 3" Dimriensich dari-2,778 mileh anployees who settlessly and repeatedly donate N1assachusetts. During their time and money to help those in need. 4 [NatdhM$$dM350',SISMMB'IU : 1995 we continued M Whether it is a food collection for the Sals ation ?on Fehmarydi/1995(, renegotiating a good CON 1/ Gas employees are there. making a differ- ?' r drise costs dow n by Army or a Christmas party for needy children, m m portion of our gas supply contracts. As part of ence in the communities where we lise and work. Alacy s and COAliGas worked together to develop the perfect energy solution-natural gas heating and air-conditioning in Alacy's new 210.000 siptare-foot deparnnent store in the re-constructed Natick Stallin Natick. Stassaciunetts. 11 1
[g*R;,na,f8+; ~'a l
~~j -~~
~~+ ' } l " n [A, p, g-n. xu g, +. i t.y ,.,s. lh ~ + .- n r 't f' f,y4' g f .y, '.:p / j !l ij 37 g~; Y 9 i I ,xa, ,, y ,l* - Q '?E~~
~~f,%~~
b i, j .s 4s. 3 e w + ['$ { ,. ).
~~j) pg}}Qn 7{.l e~~
~~m, ,z~~
~~s, ;~~
~~~ l g .~[ 3 ) s 9.7? W. 7_ s a ? /~. pp yi g ' . r4 Q,[?? n:,, nq,e,// i -e ^ s' .;j Jf;$:_~~
~~,yr}v, "s/~~
~~.. i ; i ,( I >. f[ ,j'~~
/
~~s ' y >" l$l" y j.. t oy~~
~~t...~~
A
JlllilllClit b3ull1111Elly ,o Continona'calth Energy Systc/n and Subsidiary Companics The following is a brief discussion and analysis of during the summer months and the increase in heating degree financial condition and results of operations for day s during the founh quarter. Somew hat offsetting these 1995. For a more detailed analysis, please refer increases was a slight decline in residential sales caused by to Exhibit A of the 1996 Proxy Statement. the extremely mild weather conditions during the first quarter of 1995 compared to the record cold experienced in li(lfill/I[/S UN(/ llflHfH OH I (/ Hill / 1994. The increase in retail unit sales also reflects a modest 1995 versus 1994 grow th in customers. mainly in the residential and conuner-In 1995. earnings applicable to common shares increased $2.5 cial sectors, resulting from more housing units and an million or 5.29 surpassing 1994 as the highest year-end level iniprosed economy. The decrease in w holesale unit sales in the System's history. The return on average common equity reflects the decreased availability of Canal Unit 1. Iloweser, remained strong at 13.39, down slightly from the 1994 return 11uctuations in the level of wholesale sales bas e little, if any, of 13.79. Factors that contributed to the improved earnings inipact on net income. w ere: (1) a $5.2 million reduction in other operation and main-The $27.2 million decrease in the cost of fuel and pur-tenance (2) the reversal of a reserve related to the ss stem's chased power reflects a 36% dechne in fuel purchases due to electric entrgy conservation progrtuns: and (3) higher steam the n duced consuniption at Unit I reflecting maintenance and other repairs discuwed presiously. The fuel charge umt sales. Partial!y offsetting these factors was an increase in stabilization deferral (53.4 million in 1995 compared to interest cl.arges related to deferred gas costs and higher short- $16 million in 1994). implemented in April 1994, was tenn interest rates. famrably impacted by the successful renegotiation of a Earnings per share by organizational element is pre-conaact with an independent power producer (IPP)in sented below: 'P" I" }" u uu u" M 72 ~ period coupled with the tennination of a second long-tenn 9 contract with another IPP through a buy-out arrangement. 53 []US ()])flYll/H[l llflTH UfS UH(I Cost ol'(iUS Sol (I s: si Gas operating revenues decreased 516.6 million (5.19 ) due gg mainly to an $18.3 million (l0.39 ) decline in the cost of gas /w3 iwa tw5 sold that reflects a 3.79 reduction in total sales and lower Muecme a Gas M other C&LM costs (5910.(XXh. Slightly of fsetting these decreases f were higher res enues from transportation s olume and quasi- [;,[ff f flf (l )f tYll/ H[/ llfffH HfS. l',Ilf/ UN([ finn sales ($917,(XXh. Quasi-finn sales are designed for cus-l'H/TilOSf([l'Olfff tomers w ith dual fuel capability w ho receis e interruptible Electric operating resenues decreased $32.8 million (5.19 ) sersice in peak demand months and firm service in off-peak due mainly to low er iuel oil costs (532.6 million) reflecting a periods. Presently. these sales has e no impact on net income. combination of scheduled maintenance and other repairs to A portion of the margin realized on quasi-finn sales is used to Canal Electric Company's Unit I turbine. w hich kept the reduce the cost of gas sold to finn customers and the remain-oil-fired unit out of sersice until August 1995. Also ing amount is deferred pending the appros al of a margin-contnbuting to this decline were lower conservation and sharing proposal filed with the Mawachusetts Department load management (C&LM) costs ($3.3 million). Somewhat of Public Utilities (DPU)in December 1995. A similar offsetting these decrer.ses was the recognition in revenues proposal for of f-sy stem sales is expected to be filed in 1906. of 55.9 million pertaining to Commonwealth Electric Company's power contract buy-out and fuel charge blfUlH ll/)flTil[Hf/ llfffRHIN stabilization deferral. Steam operating resenues increased 51.6 million (129 ) due Retail unit sales increased due to higher sales to commer-primarily to a 10.69 increase in unit sales as a large customer cial customers reflecting increased air-conditioning load expanded its operations. 16
l 7ill811 cia Summary i Corninanuralth Encryy Systein and Sulisidiary Coinpunics Ol/lC/' O >Cltllioll allcl Jla/HICHallCC February 1,1996, the common share requirements of the l / w ae fu e mugh open madet punases raMa l Other operation and maintenance dechned 55.2 million (2.29 ) l reflecting lower liability insurance costs (55.4 million) result-than de direct iwue of new common shares. l ing from adjustments to insurance accruals attributed to better Supplemental interim funds are borrowed on a short-tenn l than anticipated experience. This decrease also reflects basis and, when necessary, replaced with new equity and/or lower C&LM costs (53.3 million) and a decline in the pro-debt issues through pennanent financing secured on an I vision for bad debts (51 million) that resulted from improved indisidual company basis. These capital resources provide collection experience. Somew hat offsetting these decreases the funds required for the subsidiary companies' construc-were higher postretirement benefit and other labor-related tion programs, current operations, debt service and other costs (S2.6 million) and an increased les el of maintenance capital reprements. Sy stem companies also maintain lines costs (51.9 million L of aedh w hh bank At December 31,1995, short-tenn j notes payable to banks were 555.6 million, an increase of "# ' Y'
~~E' l]C]HTTlHll0H, billul'li:HIl0H Hll(l [U.lTS level of borrowings declined 18.49 during 1995 versus 1994.~~
Depreciation and amortization increased approximately 54 Bank borrowings were used to temporarily f.und construction million (8.19 ) due to a higher level of depreciable plant-in-projects and to repay maturing long-term debt (525 million service primarily related to electric operations. and Sl() million in 1995 and 1994, respectively). The System's Total taxes declined 54.3 million (7.8% ) reflecting a net cash How from operating activities of apprcximatelv Seabrook-related tax adjustment that resulted from a settle- ~ 5124.7 million reHects a 525.5 million power contract ment agreement. d.ncussed later m the " Regulation 'section, buy-out between Commonwealth Electric and an IPP that off. set, somen hat, by a higher les el of pretas income. ~ will provide future cost savings for customers. The ssstem's capitalization structure is presented below: OlllCl'lHC0lHC UH(l $HICITMI CllHlYlCS The expense component of other income decreased due A [- M -. E-gny l primarily to the resersal of a resers e that had been established gq by Commonwealth Electrie w hich related to certain costs gy associated with its energy conservation program, the recovery of which was subsequently approsed by the DPU. Offsetting this decrease was the recognition of a reserse (52.7 million, o" net of. tax) related to a generating station that discontmued tw3 19w tw5 operations and the absence of the equity component of Lmperm den hmmon Eque U" allowance for funds used during construction (S341,(KX)L The increase in interest charges was mainly attributed to The system anticipates that future capital requirements a higher les el of interest on deferred gas costs (S2 million) will be met primarily through internally-generated funds. and a rise in average short-tenn interest rates (6.19 for 1995 sersus 4.49 in 1994). Somewhat offsetting these jg increases were lower interest costs related to long-term ' jg7[gg debt (5861,(X)n) reflecting scheduled sinking fund Rate Settlement Ayecments payments and maturing long-tenn debt. In May 1995, the DPU approved settlement propc. als spon-soredjointly by Connnonwealth Electric Cambridge Electric CU//[lH/ /[CNOHlTCS Light Company and the Attorney General of Mawachusetts Capital resources of the Sy stem and its subsidiaries were w hich resols ed iwues related to cost of ser ice, rates, account-derived principally from retained eamings and equity funds ing matters and generating unit perfonnance reviews. provided through the System's Dividend Reinsestment The system's management is encouraged by the support pro-and Common Share Purchase Plan (DRP). Effectis e vided through the Office of the Attorney General and belies es 17
J111811C18 SullllllaPV q. tl CoIHill0llllTillllI Etterg!i Sistetti <tini Stil).sicliciry Cuttijuttric.s that these settlements will eliminate the need for potentially power contracts and their original unas oidable cmts. costly litigation and regulatory proceedings unit, by modera-This difference characterited as stranded costs, would ting rate impacts and enabling the system to remain competi-be recos ered through a non-bypassable access charge tis e in a changing environment, the settlements are in the best paid over an appropriate time period by all customers interest of the sy stem and ituustomers and shareholders. in the Companies'senice area. The auction approach has received initial positive resiew s E/cc/ric /ndustry Restructurin# from the Commonweahh of Massachuseus Disision of On August 16,1995, the DPU issued an order calling for the Energy Resources and the Office of the Attomey General. restructuring of the electric utility industry in Massachusetts. The stated purpose of the restructuring effort is to allow cus-Cin/omer Tr<msiti<m Charge tomers Mexibility in choosing their electric service prm ider in September 1995, the DPU issued a ruling largely approving and to deselop an efricient industry structure and regulatory four rate tariffs, including a Customer Tramition Charge (CTC), framew ork that minimizes long-temi costs to consumers that were filed by Cambridge Electric on March 15,1995. while maintaining the safety and reliability of electric services The CTC will protect remaining customers from paying with minimum impact on the emironment. The electric stranded costs that were incurred in the event that Cambridge utility industry could uhimately be functionally separated Electric's largest customers discontinue full sen ice. These into three segments to help meet this objective: generation, costs include long-term power contracts entered into to meet transmission and distribution. projected energy requirements, im estments in substations, in February 1996, certain utilities submitted required underground and overhead lines and current and future proposals detailing how they plan to move into a competitise decommissioning costs associated with nuclear plants. This market structure. Since that time, the DPU has gisen notice ruling is beliesed to be the first retail stranded cost charge of a generic proceeding that will focus on many of the policy approved nationally and follows the aforementioned DPU issues raised in the DPU's original order. Each of the state's restructuring order w hich endorsed, in principle, the electric utilities, together with other interested parties, will recovery of stranded investment costs. participate in this proceeding. The purpose of this generic Through the CTC, Cambridge Electric w ill initially proceeding is to establish a set of rules governing the restruc-rc.over 754 of net stranded imestment costs as calculated turing of the electric industry in Massachusetts. These generic in its proposal. Cambridge Electric's other rates include a rules would set the basis for the DPU's review of each of the Supplemental Sen ice Rate, a Standby Service Rate and a utility specific restructuring proposals. Commonwealth Maintenance Senice Rate each of which were appaved Electric's and Cambridge Electric's tthe Companies) with only minor changes. Management is encouraged by the proposal is due in September 1996. Management is unable DPU's position on recos ery of stranded imestment costs and to predict the ultimate outcome of these proceedings. expects to address reem ery of the remaining 39 in its restructuring filing. Competitive Challenge The Massachusetts Institute of Technology (MIT). one of On February 15,1996,in response to the DPU's initial Cambridge Electric's largest customers. appealed the DPU's restructuring order, the Companies issued thek " Competitive decision to the Massachusetts Supreme Judicial Court (the Challenge" by offering to soluntarily put their power genera-SJC). A decision from the SJC is pending. In addition, on tion capacity entitlements (1,140 MW) to a market test in an February 29,1996, the Federal Energy Regulatory Com-effort to develop a competitive market w hereby customers oission (FERC) denied a petition filed in January 1996 by would have the flexibility to choose their electric supplier. MIT, seeking relief from paying the CTC. The FERC ruled The proposal calls for the auctioning in a competitis e market that the CTC does not discriminate against MIT as a quali-of entitlements in all tw entpone contracts, including contracts f>ing facility and that stranded cmts are to be resob ed at held by the Companies involving the System's generating the state lesel. Management believes that the FERC's subsidiary. The proposal provides for total recos ery of the actior uill be an important factor that the SJC will con-difference between the current market value of the Companies' sider in the appeal process. i 18
01x ensec Sxemen s of Encome Colnnlontecalth Encr[jy System and Subsidiary Companics For the Years Ended Decernber 31, 1995 1994 1993 tIbilars in Thou.una. imert Per Share Amon9N OPEllXrING llEVENCES Electric $607,047 s639.801 s624.020 Gas 306,953 323.568 302.644 Steam and other 17,355 15.867 14.035 931,355 979.236 940.699 OPEllXI'ING EXPENSFS Fuel and electricity r trchased for resale 332,615 359.832 348.836 Cost of gas sold 158,835 177.150 156.709 Other operation and maintenance 238,777 244.024 247.627 Depreciation and amortization 54.087 50.056 48,244 Tases 50,431 54.702 51.947 834,745 885.770 853.363 Operating Income 96,610 93.466 87.336 OTilER INCO.\\1E(EXPENSE) (606) (i.024 ) 2.449 Income Before Interest Charges 96.004 92,442 89.785 INTERESTCil Al(GES long-term debt 38,581 39.442 37.116 Other interest charges 6,884 4.475 6.730 Allowance for borrowed funds used during construction (857) (443) (195) 44.608 43.474 43.951 NET INCO.\\lE 51,396 48.968 45.834 Dividends on preferred shares 1,110 1.170 1.230 EARNINGS APPL.lCAHl.E r<, CO.\\P ION Sil AllES $ 50.286 s 47.798 s 44.604 AVERAGE NDIBER n/ Coll.\\ ION S1I AI(ES OLTSTANDING 10,655,918 10.413.781 10.215.614 EARNINGS PEllCO.\\l.\\lON SH AllE $4.72 s4.59 s4.37 The accompanying notes are an integral p.tri of these omdensedfinam ial statements. /9
20lK ellSec : 3a a13ce s,ee s Continanuralth Enct3]p Systent and Subsidiary C0mpanics \\ i December 31, 1995 1994 <twim in mw mau ASSEl'S 1 P1(OPEllTY. PLANT una EQL'IP\\ LENT, at original cost si,5i5,624 si.444.464 Less-Accumulated depreciation and amortization 497,627 461,310 1,017,997 983,154 Construction work in progress and nuclear fuel in process 10,276 15,974 1,028,273 999,128 LEASED PITOPEll'IT, nei 14,931 15,729 EQL TlY IN Colll UllATE JulNT VENTUllES 13.214 13.648 CL'IlllENT ASSEl'S Cash 4,319 7,722 Accounts receivable, net 105,377 92,157 Unbilled res enues 31,642 33,161 Other current assets 41,381 48.250 182,719 181,290 DEFElli(ED CliAIIGES i30,964 134,92i $1.390,101 51.344,716 CAPITAI.lZATION una LIAllli.ITIES CAPITALIZATION Common share investment $ 390,785 5 362,997 Redeemable preferred shares,less current sinking fund requirements 13,840 14.660 Long-term debt, less current sinking fund requirements and maturing debt 377,181 418,307 781,806 795,964 CAPITAL LEASE 0BLIGAT10NS 13,291 14.098 CUltitENTLIABILITIES Interim financing-Notes payable to banks 55,600 44,850 Maturing long-term debt 33,230 25.000 I Accounts payable 134,908 117,953 Accrued taxes 31,587 17,947 Other current liabilities 44,510 45.297 DEFEllitEDCitEDITS -- 299,835 251,047 Accumulated deferred income taxes 170,182 160,944 Unamortized investment tax credits and other 124,987 122,663 295,169 283,607 COM. Tilt.\\lENTS una CONTINGENClES $1,390,101 51.344.716 The accompsmying notes are an integralpart of these condenseJfinam ial statements. 20
V ,OlK ellSee sxe133eits ol.,as, a ows C01111tlolltrCHill1 Ettertitt S isterit Uttti Sul>siclicit 11 Cottiprittics For the Years Ended December 31, 1995 1994 1993 iDoll.in m Thouunclu OPEllATING ACTIVITIES Net income $ 51,396 $ 48,968 $ 45.834 Effects of noncash items-Depreciation and amortization 50,799 53.727 53.088 Deferred income taxes and investmen: tax credits, net 2,781 13.376 15.559 Earnings from corporate joint ventures (1,633) (1.750) (1.642) Dividends from corporate joint sentures 2.067 1.651 1,981 Change in working capital, exclusive of cash 24,976 52.693 8.303 Power contract buy-out (25,500) Fuel charge stabilization deferral (3,447) (15,964) Deferred postretirement benefit and pension costs (4,479) (8.536) (10,175) Transition costs, net i1,390 (2.585) (8.805) All other operating items 16,321 (15.017) (17,451) I;et cash provided by operating actisities 124,671 126.563 86.692 INVESTING ACTIVITIFS Additions to property, plant and equipment (exclusive of AFUDC) (80,643) (57.833) (54,385) Allowance for borrowed funds used during construction (857) (443) (195) Net cash used for insesting activities (81.500) (58.276) (54.580) FINANCING ACTIVITIES Sale of common shares 9,534 9.434 7.118 Payment of dividends (33,142) (32.475) (31.101) Proceeds from (payment of) short-tenn borrowings net 10,750 (27,125) (93,625) Long-tenn debt issues 134.(KK) Long-term debt issues refunded (25,000) (10.000) (37,600) Sinking funds payments (8,716) 16.406) (6.419) Net cash used for financing activities (46,574) (66.572) (27.627) Net increase (decrease) in cash (3,403) 1.715 4,485 Cash at beginning of period 7,722 6.(W)7 1.522 Cash at end of period $ 4.319 5 7.722 5 6.007 SUPPLE.\\lENTAL DISCIDSUliFS w CASIl FLOW INFoli.ilXflON Cash paid during the period for: Interest (net of capitalized amounts) $ 42,051 5 41.022 5 39.685 income taxes $ 12,918 5 17.563 $ 13.528 The accompanying notes are an integralpart of thesc c ondensedfinanc ial statemerus, 21
m 30:esto oix einsec ;113t113citi tt e13,eia s Col!Illf ullIITalth Encrttit S;istclit an(I Subsidiarit Cornpanics
1) GENERALINFolulATION requiring that such assets be probable of future reemery at Commonwealth Energy System tthe Systemiis an exempt each balance sheet date. Management does not expect that public utility holding company with investments in four the effects of SFAS No.121. w hich the system adopted on operating public u:ility companies located in central, eastern January 1,1996, will have a material impact on its financial and southeastem Massachusetts. The Sptem is the parent position or results of operations. :ow ever, this conclusion company and, together w ith its subsidiaries. is collectis ely may change in the future as changes are made in the current referred to as "the system?
regulatory framework pursuant to an electric utility restructuring The detailed Consolidated Balance Sheets, Statements of order iwued by the DPU in August 1995. The principal Income, E:atements of Cash Fkm s. Statements of Capitalization, regulatory assets included in deferred charges at December 31, Statements of Changes in Common Shareholders' investment. 1995 and 1994 were as follow s: Statements of Changes in Redeemable Preferred Shares. Notes 1995 1994 to Consohdated Financial Statements and Management's Discuwion and Analpis of Financial Condition and Results pg ,,, g, %,,,,,g,ny pens,on, g 24 s of Operations are included in the Proxy Statement. Power wntraa buyout 23.83x I uel charge stabilvanon 22.nn3 I h.M X 3 SIGNIFICANT ACCOUNTING POI.lCIES F I'M. (hdi r M6 transitnin msts t 1711 19.2n l Yankee Atonne unrecoscied plant and lol Ol'illrip/(N O[rlfrDunl/n[/ deconmnwnuung cosis in,135 18.36x Seabmok relaird costs 9,511 12.64x .l'he preparation of imancial statements in cont.ornuty with < 3 ny, 33,434 in;in generally accepted accounting principles requires management $129,436 $ 1 t 1.737 to make estimates and awumptions that attect the reported amounts of awets and liabilities and disclosure of contingent The regulatory liabilities, retlected in the accompany ing assets and liabilities at the date of the financial statements and balance sheets and related to deferred income taxes, were the reported amounts of resenues and expenses during the 514 million and $17.3 million at December 31,1995 and reporting period. Actual results could differ from those 1994, respectively. estimates. Certain prior year amounts are reclawified from As of December 31.1995,596.2 million of the sptem's time to time to conform with the presentation used in the regulatory awets and all of its regulatory liabilities are current year's financial statements. reflected in rates charged to customers mer a weighted aserage period of approximately 10 years. In addition, the ib} llCflulalonf. \\ss(ls an(IIJabililas fuel charge stabili/ation deferral is expected to be recovered The syste;n's operating utility companies are regulated as to mer a six-year period beginning in April 199S. pursuant to a rates, accounting and other matters by s arious authorities. yet to be determined recovery schedule and subject to final including the Federal Energy Regulatory Commiwion (FERC) DPU apprm al. Sptem companies intend to request and and the Mawachusetts Department of Public Utilities (DPUL expect to receis e approval for reem ery of their remaining Based on the current regulatory framework, the sptem uo in future rate proceedings. accounts for the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting .h a MTWE w 0 LNM a'E Standards (SFAS) No. 71," Accounting for the Ef fects of IUl IUI" bOINUfIN Certain Types of Regulation? Regulated subsidiaries of the System have established various regulatory awets in cases Cambridge Electric Light Company (Cambridge) and u here the DPU and/or the FERC has e pennitted or are Commonwealth Electric Company (Commonweahh Electric) expected to permit reemery of specific costs m er time. has e long-tenu contracts for the purchase of electricity from Similarly, the regulatory liabilities established by the sptem various sources. Generally, these contracts are for fixed periods are required to be refunded to customers m er time. In March and require pay ment of a demand charge f or the capacity 1995, the Financial Accounting Standards Board iwued SFAS entitlement and an energy charge to emer the cmt of fuel. No.121." Accounting for the impainnent of Long-Lised Pertinent infonnation with respect to life-of-the-unit contracts Awets and for Long Lived Assets to be Disposed Off SFAS for pow er from operating nuclear units in w hich the system 1 No.121 imposes stricter criteria for regulatory assets by has an equity ownership (Yankee Nuclear Units)is as follows: N
1 J0les to 'Olx erisec aii3a13 cia s a:emeirs ColHlH0Herrall/l liHerfly S!slCan an(I SHl)si(liarti CottijulHits 1 plano. At December 31,1995, Cambridge and Conunonueahh connecticut Ntame vennoni Yankee Yankee Yankee Electric's respectise 29 and 2.5% imesonent in Yankee Atomic announ umo and" was approximately $1.1 million. The companies' estimated decommissioning costs include their unrecosered share of all E I t l 9 Plant capabile alwl 360.0 8700 496.0 costs associated with the shutdow n of the plant, recovery of sptem Enntlemeni (Ntwi 25.2 31.2 11.2 their plant im estnient, and decommissioning and closing the plant. He nmst mcent et otimate m pennanen% sut dow n i I t i I 7. 1 4 Iw4 Actualcositsi 8302 6.250 3.660 the plant is approximately $225.2 million at December 31,1995. 1995 Actual cmt i$i 9,498 7J76 4.003 The companies' share of this liability is $10.1 million and is Decomnmsioning cost estimate t ux>w use 385.523 361.212 347Jx3 g.g g g g,. g g .g Spiem s decommnuorung cov (Si 17.349 12.968 7.816 Ntarket s alue of assets (l004 ) d) 1803X8 142.116 141.3nn corresponding regulatory asset. The market value of the suiemi market s alue of assets is) s.:17 5.102 3.179 companies' share of assets in the plant's decommissioning trust at December 31,1995 is approximately $5.7 million. Cambridge pay s its share of the decommissioning expense to each of the operators of these nuclear facilities as a cost of f(*) SC(ll)luo/c XHClfytrl'0HYTl'/uHI electricity purchased for resale The system's 3.529 mterest in the Seabrook nuclear power The system also has long-tenn contracts to purchase capacity plant is ow ned by Canal Electric Company (Canal). a w hole-from other generating facilities. Information relatis e to these sale electric generating subsidiary, to proside for a portion contracts is as follow s: of the capacity and energy needs of affiliates Cambridge and Commonwealth Electric. Canal Range of contraci is recovering 100% ofits Seabrook i Espiranon Ent:tlement, 1995 1994 1993 insestment through a pow er contract Ts pe or l' nit Dates y N1% ( mt Cost Cost E " (Dollan in Thousands) 205 3 5121.636 $l17304 5104.599 Electric pursuant to FERC and Copenerating 2008-2018 Nuclear 2012 II 73.2 40J76 41,475 40.578 DPU approval. Waste-to-energy 2015 100 67.0 37,526 38.107 34.189 Pdnd information with respect H dro 20l4 2023 100 23 6 9.933 7.52 l M.904 3 to Canal's joint-ow nership interest in Total 369.1 $209.471 5224.407 5188.270 Seabrook I and infonnation relating
~~I",f'3 j';j'[,;f to purchase power from various cogeneratmg umb with capacity enutlements ranging f romto operating expenses which are t~~
included in the accompanying Costs pursuant to these contracts are included in fuel and financial statements are as follows: electricity purchased for resale in the accompanying statements of income and are recoverable in revenues. '"5 '""4 awnuun umuunao The estimated aggregate obligations for capacity under the t~nle puni-in senice 5232.547 5232.174 piant capacity 61w) 1.150 life-of-the-unit contracts from the operating Yankee Nuclear Nutiear f uel 20.138 18.500 Canals share: Accumulated deprecianon Percent mterest 3.524 l Units and the other long-tenu purchased power contracts m and amom< anon <50.230s sai.654) Enocement 6twi 40 5 effect for the five years subsequent to 1995 is as follow s: Construction work in-sen ice date 1990 l in progren 946 651 Operanng hcense Long Term $203,40; g3o9,37 espiranon date 2026 Equity Owned Purchased Nuclear L'mh Pow er Total g,93 i994 p333 abitan m Thouunao <lbuns m husando 1996 521.195 5211.037 5232.232 On ratmg espenses: 1997 21.130 216.527 237.657 Fuci $ 2J53 $ l.939 $ 3.851 1998 21,596 225.337 248 333 Odwr mrahon .l.292 4J40 43hb 1999 23.153 216.470 259.623 Ntaintenance IJ76 I.688 893 2f Xio 23.813 239.709 263.522 g.mciamn AS42 6331 63M Amorti/ anon IJI9 1.320 1319 {l)) NIHNCC. \\ loll i(' NH('lC(Ir l'OlCCr l'{UH f \\l5.KK1 %15.%I8 $17 l67 In 1992, Yankee Atomic Electric Company (Yankee Atomic) permanently discontinued pow er operation and began 'he Canal and the other joint owners have establist ed a decom-deconunissioning of the Yankee Nuclear Power Station (the missioning trust to cmer decommissioning costs. The estimated 23
T :es to oixensec ainancia kv' a:en3eits 0 C0HllH0HU'rollh Enerfly System and SHbsidiary Companir.s-cost to decommission the plant is $431.6 million in current transition costs. Conunonwealth Gas' current best estimate of dollars. Canal's share of this liability (approximately the total remaining transition costs from its suppliers is 515.2 million),less its share of the market value of the assets approximately $11.7 million. This balance has been recorded held in a decommissioning trust (approximately St.5 million), as a liability with a corresponding regulatory asset. The is approximately 513.7 million at December 31,1995. ultimate level of costs is dependent upon future events, including the market price of natural gas and final settlements iff) fHI'ir0HlHCHIU/ MullrrN between the FERC and the pipeline suppliers. The sy stem is subject to laws and regulations administered by in N1ay 1995, the DPU allowed Conunonwealth Gas to federal, state and local authorities relating to the quality of the accelerate recovery of its FERC Order No. 636 transition costs ensironment. These laws and regulations affect, among other that uere incurred to date. These costs had been deferred and things, the siting and operation of electric generating and trans-accumulated as a regulatory asset and were being reemered mission facilities and can require the installation of expensive air through the cost of gas adjustment (CGA) mer a four-year and water pollution control equipment. These regulations have period that began in November 1993. The costs are now being had an impact on the System's operations in the past and will recovered through the CG A m er a one-year period that began continue to has e an impact on future operations, capital costs h1ay 1,1995. The accelerated recovery period was permitted and construction schedules of major facilities. by the DPU due to the minimal impact on customers' bills. Any further transition costs are expected to be reemered by fr) FERC0rderX0. Mi Commonwealth Gas through the CG A as incurred. As a result of implementing FERC Order No. 636 (Order 636L each interstate pipeline company is allowed to collect //) DIhrr COHIHlillHrHIN certain transition costs from its customers that resulted from Other major commitments include construction expendi-the pipelines' need to buy out pas supply contracts entered tures, maturing debt issues and sinking fund payments as into prior to the issuance of Order 636. Commonwealth Gas summarized below: Company (Commonwealth Gas) has been billed a total of approximately $23.8 million from Tennessee Gas Pipeline tw6 IW7 199x 1999 2nnn ' l *
l h"""*
Company, Algonquin Gas Transmission Company and Texas C""* """ # P"d"" " 272 " 2"* "L* " 2 346 Eastern Transmission Company throuch December 31,1995. M,aunng deM issues 33.23n 14.26n 19.non 2m n xi ~ Commonwealth Gas. pipeline suppliers have made certain SmLmg fund requnements
9. In3 8.473 8.473 8.473 6.973 filings with the FERC f.or the collection of the.ir respective 3elon oCnc elenc elGu ric Accouniaits To the Board of Trustees of in our opinion, the information set forth in the accompany Commonwealth Energy System:
ing condensed consolidated balance sheets as of December 31, 1995 ai.d 1994, and the related condensed statements of %,e have audited, m. accordance with generally accepted li d iem M M h WM M h h e auditmg standards, the consolidated balance sheets and con- ~ n the period ended December 31,1995,is fairly stated,in all solidated statements of capitalization of CON 1510NWEALTil matenal respats in repon to the consolidated I..mancial ENERGY SYSTEN1 (a hlassachusetts Trust) and subsidiary companies as of December 31,1995 and 1994, and the related consolidated statements of income, cash flows changes in common shareholders' investment and changes in redeemable preferre : "iares f or each of the three years in the period ended December 31,1995, appearing in Exhibit A to the proxy statement for the 1996 annual meeting of shareholders of the Hmton, Maaduncits Arthur Andersen LLP System (not presented herein). February /6. /996. N
OlTl X1Piltive Sxis ica 1 tlal Coininonaraltli liner.itti Sistent anci Sul>siclitirti Coinjurnics 1995 1994 1993 1992 1991 (Dollars in Thousands p OPEllATIONS Resenues $931,355 5979.236 5940.699 5906.450 $873.434 Operating Expenses Operations 691,813 744,484 712.598 690.991 665.255 Maintenance 38,414 36,522 40.574 39.836 44.312 Depreciation and amorti/ation 54,087 50.056 48.244 50.861 44.660 Taxes 50,431 54.708 51.947 44.837 39.751 834,745 885.770 853.363 826.525 793,978 Operating income 96,610 93.466 87.336 79,925 79.456 Add-Other income (expense) (606) (1,024 ) 2.449 1,410 (13.419) Less-Interest charges 44,608 43.474 43.951 41.438 46.565 Net income 51,396 48.968 45,834 39.897 19.472 Preferred dividends 1,110 1.170 1.230 1.291 1.352 Earnings applicable to common shares $ 50,286 $ 47.798 5 44.604 5 38.606 S 18.120 Sources of Consolidated Net income-Electrie $ 34,739 5 36,473 5 30,301 5 28,415 5 32,874 Gas 16,229 13.568 16.299 14,855 3.120 Steam and other 428 (l.073) (766) (3.373) (16.522) Total $ 51,396 5 48.968 5 45.834 5 39.897 $ 19.472 FINANCIAL Property, plant and equipment (including construction w ork in progress, net and nuclear fuel in process) $1,525,900 $ 1,460,438 51.409.997 S1,384.634 51.335.795 Accumulated depreciation and amortization 497,627 461.310 425.483 406.069 372.987 CAPITALIZATION Long-tenn debt t h $ 410.411 5 443.307 $ 458.893 5 368.092 $ 409.582 Preferred shares 13,840 14.660 15,480 16.300 17,120 Common equity 390,785 362.997 337.070 315.219 300.859 Total $ 815,036 $ 820.964 5 811.443 5 699.611 5 727.561 (l)Im tudes maturing lone term dcht. 25
o 3 OlT1 X11'ElilV6 LEElSilCEl Elift C0lllinolinTulllI Elltffly System and Sukidiary Companics 1995 1994 1993 1992 1991 STMISTICS una RATIOS Unit Sales - MWil-Residential 1,752,430 1,770,095 1,744.181 1,726.139 1,694,445 Commercial 2,450,390 2,406,077 2.378.073 2,305.720 2,272.146 Industrial 421,224 421.821 411,527 414.777 419,940 Other 23,796 23,216 22.243 23.236 20.565 Total Retail 4,647,840 4.621,209 4.556,024 4,469,872 4,407,096 Wholesale 1,973,543 3.803.786 3.689.129 3.898,924 4,027.714 Total 6,621,383 8.424.995 8.245.153 8.368,796 8.434.810 BBTU-Residential 21,336 21.515 22.252 22,392 19.851 Commercial 10,710 10,728 10,931 10,913 9,575 Industrial 4,445 4,401 4,205 4.717 5,388 Other 1,967 1,895 1,831 1.788 1.581 Total Firm 38,458 38,539 39,219 39.810 36.395 Off-sy stem 4,043 6,401 Quasi-firm 1,906 487 Interruptible 1,215 1,927 1.896 2,464 2,937 Total 45,622 47.354 41.115 42.274 39.332 Capitalitation Ratios - Long-term debt 50.4 % 54.09 56.6 % 52.6% 56.3 4 Preferred shares 1.7 1.8 1.9 2.3 2.3 Common equity 47.9 44.2 41.5 45.1 41.4 Total 100.0 % l(XLO9 100.0 % 100.0 4 l(K).OG Return on average common equity 13.3 % 13.7 9 13.7 % 12.5 % 6.04 Common share disidend payout 63.6 % 64.9 % 66.8 Q 76.2 4 160.4 9 Average price / earnings ratio 8.7 8.8 10.4 10.2 19.2 Common Share Data - Earnings per share m $ 4.72 5 4.59 5 4.37 5 3.83 5 1.82 Dividends paid 3.00 2.98 2.92 2,92 2,92 Annual disidend rate at end of year 3.00 3.(x) 2.92 2.92 2.92 Book value 36.30 34.49 32.74 31.08 30.06 Closing price range - liigh 47 % 45M 50A 43 39Z Low 35% 35 X 404 34X 30 t1) Based on the as erage number of share ; outst md.ng. 26
Tlms ees and 01icers COHIIH0HHTHIlh EHvijf,Il SIMciH <!nci SHI>sidiar!I Cornpanics r i t h l'UltT ll.fft% th lletf\\ lkifClilAT. in l's'th l,I!;!heis in I'lllhkIN M llUlH!iC\\. m Chan. cifor l nn erun.1 \\ ar f ormer h I tn unsc \\ n c a b i sn ran c \\ u e nnutent and 14r Alem/wr arula Alanaumg Afanan huwin-lbar smouth neu h nr H unan GrJon ( hwli mann tal 4ipu er. Hann - Ihrn he. itu h. \\l.n. Ihl,nh an s b bhvltli tll.\\. l\\lleklvf. \\ onh Dar unosah Gunpang n on e acr. Ihron \\lorteacc Geporanon & f lohern. P C, Ilouon. \\ lana < huwns SImar hunctis las k son ulle, I for ula Afanan hanern e Anornes u Chautman of the B.w J of louuce s of the u urm I or mo h \\ v c Chao man 'N \\ q of the lhoJ. PolaroulCmp. , :J ('amhiulgr. Slauai hincni ^ I...i .g
j
) 4 ili Wt} h; tut l. l l hfit 11, Wllh;thll i lbN i Mich;tel C l;Urtl@Ts in t iclitkl L Wik!L < 4, Pn skra. H ethaml O Hoen.fm Presh niandChwt I sn um r m Pre udent Chwf f to utn e m 1 annn as Bash I'r alenor al .%ahhasuch \\lan.u huwtn ojih n al the \\ usem arst Cluurnun. t )lfu cv and a lla n vor. I th ~ l neourtine. \\ lana. lunctn Chwii sn ume t *tti< cr anda ( neporanon flotsmton. bntmac of In knoisev Duo for i4 m Submhan uenlumn \\tanas huwns Cambo uler. Alana, huwrn ColtPollATE1)1 VISION El.ECTIllC I)lVisloN GTS 1)lVIS10N Wd!Uth (i Ibnl. j hw !! ]). \\\\ l p;ht. krjaa th \\l. M IfMldll Chanman and Chwt f we ume Ulpa er ocudent and L hwt Opoanne iHrun neudrnt soul Chwl Oper anne Utfu cv '" "" ' d h"" "" Mh" " Dr""* 0FFICE qhlte CEO \\ u r brudennka hupph and Iran,mnuon \\ u e oruJen+ starturnne and( uaamn Rclanoon I.t1Cirtl ll l h Uthh1 lh }s dith.\\ % EDdhh. y g g p.g g \\ u c hcmkni 4ur no. Planmne anJ Dn clopment t u e ncuJcnn Cuu. orra heru c c ,p gm,. ,g ldCh % I). !bpp d Jiihll jl WllhdGh ygl [) Jg, g iinam ual \\ u e ocudoa and iicauerer \\ u e ne uJa nl Dpnanoon \\ u r I,rru.h nnDpcranons M ji hael l' MlhUllL \\ u e ncuJ,nr. \\n oeran and (;encoalCounw/ {())l lyl{( Q ${,j((j(($ {()M pg John A Wh;tlett \\ u e neu,1cra an.) t;rnaal \\lanaecr IJun M Off a h. \\ u e Pre udent --( hwt Infmnuno on Ottu o (l) Alcmher of Ausht Comnnttcc (h Alcmhet of I sn utnc Compernanon Commince th Alcm/c of %mmanng Comnunce 14) \\lember alltenclu Rcuen Comnunce th \\lcmber vi.\\natew Planmne Comnunce lhe wic purpose of dus rcport n to en e prescnt sn urns imiders mformanon about tius % arm and us subudiar; < ompawn and a n not a rept csentanon. prmpc< tu s or < ut ular m Iorn t to ain'so ut us of thn M urm m of its subudiary < ompamo "Ihc name "Commona rahh Encre; M ucm" mearn the truure.s for the nmc being on u tnren but not mJindrudh > tmda a iJa laranon of Innt JatcJ lDn ember 31. lY2h as amended. n hu h is hochs oejer ocJ to. and a u opy of n hu h has been ided u ah the.\\n retan of Ihe Commonn calth af Alauas hurcus. Any agreement. o%eanon or habdu; made. cruncJ uno or in. uncJ hs or on behalf of sarJ A ntem hmJs unh the innt cuate. mJ no sharrholder. Jun tur. n usicc. oflis a or agent anumcw or shall he hcIJ to. arn habdus In reason thocal v /
\\ \\ r o lal'e 3 ore 1' itoimtoon t Commonicculth Encryy System and Subsidiary Companics ANNUAL.\\lEETING Di\\'lDEND PADIENTS All shareholders are insited to attend the next Annual Disidends are paid by the System subject to declaration by Meeting which will be held on May 2,1996 at the System's the Board of Trustees. Conunon dividends are paid on the corporate headquarters at One Main Street in Kendall first day of February, May August and Nosember. Preferred Square, Cambridge, Massachusetts. A formal notice of dis idends are paid on the first day of January, April, July the meeting together with a proxy statement, a form of and October. proxy and financial information is enclosed for use by shareholders entitled to vote at the meeting. SlIAltl]lOLDEliSIlt\\ ICES The System has a dividend reinsestment plan which CIDSING.\\l AltKET PIllCE (Coll A10N Sil AllES pmsides hoiders or Conunon Shares with an economical and convenient niethod for purchasing addhional Conunon and DIVIDENDS PAlD Shares of the System without paying brokerage fees or 1995 Iligh Low Dis idends Ist Quarter $41 % $35 % 5.75
""O

I "I#~
holders so that dmdends can be receis ed f aster. Dividends 2nd Quarter 4l M 37 Z .75 can be electromcally credited to a check.ine, savmgs, credit 3rd Quarter 43 X 35 % .75 union or thrift account. 4th Quarter 47 % 41 .75 A seasonal mailing address for your shareholder account (s) 1994 fligh Low Dis idends is also available for the period of time requested. This can help avoid lost interest on delayed deposits caused by ist Quarter $45M $42X 5.73 forw arded niait. 2nd Quarter 43x 39 X .75 3rd Quarter 40 Z 37 M .75 For more information about these senices or any other 4th Quarter 38 Z 35 % .75 inquiries, please contact a Shareholder Senices representa-tive at the appropriate toll-free number listed below: The System's Common Shares are listed on the Boston, 1-800-336-3773 (within Afauac/m3cits) New York and Pacific stock exchanges: 1-800-417-1183 (outside 3fassachuwlts1 Ticker Sy mbol "CES" Daily New spaper Quotation "ComES" g.,ggg The System's annual report on Form 10-K and quarterly TilANSI'Eli AGENTS andllEGISTilAliS reports on Fonn 10-Q as filed with the Securities and Shareholder communications regarding transfer of Common Exchange Commission are as ailable without charge upon Shares or lost certificates should be directed to: request to: Michael P. Sullis an Common Shares - Vice President, Secretary and General Counsel Transfer Agent and Registrar: Commonwealth Energy System The First National Bank of Boston P.O. Box 9150 P.O. Box 644 Cambridge, M A 02142-9I50 Boston, MA 02102-0644 M of the infonaation requirements of Form 10-K are satisfied by the 1996 Proxy Statement. Preferred Shares - Transfer Agent: 005UUNIA Commonwealth Energy System P. O. Box 9150 Trustees under indentures of trust are: l l Cambridge, M A 02142-9150 Citibank, N. A. - Canal Electric Company Series B, E and F Bonds Registrar: State Street Bank and Trust Company - State Sucet Bank and Trust Company Other Subsidiary Companies' Long-tenn Debt 28
'( h,. j.U.y,(:.k ;. t j, '.;.. j. $:. .k .'.,y ,/[. .fl.
~~2 L.a 1,~~
~~'Y[.~~
~~$ I.~~
~~.:...f ?l.., '.., s ]v' _ - % - L.,',..e...'..;.',.,.- ';' y'...*n.r;..- ,;r - f 0 : :?,;.~~
~~L..~~
~~r,: 2;:,.' 's'v. ';:.5 >,. '.' M* ; ' ',4 J. ~..L...,i.n.,.*.r'.,':...,_.,:;..,..;.;+,;..'.*...+.s ?.$.. - ',u;......... - .,~,.,,.,a.'.x..'s a~~
~~m..~~
~~...g....,,,.~,_,,,:. t,.... ,3,. q:u+..<.. ,,.s...... - e -9 c. .e + ,..,e.,.; ..,.,r...~~
~~c. <~~
~~.. W.; :. 5,. t. q-A.. f,,. v;~~
~~.y 7....;,r.~~
~~,.,n j, :p -.. s - ;.. ;,';,,-~ c ..y,3 _ :.., t...; .. :,;, g... ; 4;-..,7.,..:.- , +~~
~~gp r.~~
~~g y,.3,Q ~~~
~~t. ~. O -*.~~
3 t.,yU.. g...... .4..'.: ,y,......,el. s..a. .s. ..,g.,,.,, ; r. ...,.j,* g. < e.. / p,.,.. ,,...,n'., .=,;.'.*~ _ ; - ::;q. y s......1 ;.-.,,,.. \\ r ),r.a.,., ....f ..s ; 9 .' g; . : ny 3 a.,.. &..n <1 ..... n;::. M.;. '.7, s,
r
~~.: ?,... :% :.T L.... [.. ' ', ;', ),:,.; ; t. i,.+.,~~
/; n._ ?. 2. 'n(y ;\\. 'g,., '

,.. ' ;
~~,n L. ;. p.'. s g. * >,~~
~~; f. L.~~

~~.,t ~; j.'., c. .e. _:; ' _,. v4, {. ; 'g. '. -.'[ . a~~
~~h.,*\\','_ [..~~
~~,9 .,.-+f.- g e ,Y,.,.,..,,.,._..> !: (n '. c.*- g~, f,. "<.-.,y c, ,.,4,, p. .,',..!*4'..~~
~~.,'.g~~
'4
~~..,A..; d.'.',..~~
~~1. '..*... * 'L.5c,';*.. c.,s y~., +~~
~~'.':.*'.*.,,:,...L.-.~~
~~?>en - '. r,.th, ',;. s .,, " y;v...c -.y' *. '. - .;. : ~. > s -,,,... : . -9* ^ s ?.:. :- .,... : ;.. r.v. ; ^ z. .?.. -;;.. x.,1 -g,;. '.:,.:.,-,. :,.t. ?,; t. ':. n ~- ,. ?, c. ' :. -~~
~~. '.. :. a:. - r~~
~~'.h s.f... . ~, o.~~
.

; :,q.
~~.L:~~
~~< - - - :' *"' q' i,~~
~~.i -e. . s e.. 'e... . n f....,'...*:. 3-... j <? ..-,. ; 3.., _. * ;, ;~~
~~j,,.*p.~~
~~i.~*. .'.j-t*- .y-g. ...e : :: '~~
~~a '~~
~~-', y :., ( _ l...: ._. - g. e t,."y,t.. '. '~~
~~q :..~~
~~,.,7. +...,...;, j. 7.. ; 7,,,.... -. ....;., ;. /._ y ,S. g :.*.,. y '.; 4 e -,; -- w .:.; u...~... : U: ; ,.1 ...w . 3 ,+,...., g,7, .. -+,-,i.. g.,~~
~~7. su.. h.., 4, v~~
~~. *,,.. t:. : g. - 3.-- .+,:...... s.. -,* =,., '. ../. ,4,. .,...;, ;<.,,.,....,t.9-.._ s: ...- :..x.. - .~ : .)~~
~~g c s.~~
~~( :, u.' -.;.. - 4.....v L'. n a,- p : v w (-, o; - m s~~
~~..s....~~
~~.c...; :,t : ; j~~
~~.i.:..,, _.... ::.... ;..~~
~~va.. -~~
~~' l. p.'.,....: '... f. (..,'_ '. c,~~
~~. _ ;c ;..,..:.....A.~~
~~'. '... :.. a :... - :r.~.'..~~
~~.r.:y-~~
~~. w : 4 4; ;. :.. 1 . " :. ; ;.'.,,. ; ',, *.,. :., /. s.r. :. ; ? p," 't.. i n. -c < v ^ '.i Sg; g. F ':.~~
L
~~-::. f:: % c? .. :.. ;.t, y. .o. j. 9.7 . r, ~ F.::..:;. ; : y.5.. x -. 3.s . 1: <.... i t n.< ' " f: c.;.._. s _., 7. r,.~.~~
7. _

.+. 7.,..,..,
v.~ j,...._ _..,.., _,...L;f .,,,c M,.r x;hl:: ' f. ',~.. E, f, ;. a,L ( [ ) n ':/. ' '. l,. a.:.,. a.L.*.:'.'*-> '$; h 'r * ' ?..-L,.:.:- .(; . ;3. . ' ; z...> < p,,... ,.._. __ >w>.., w. y g ;. :.. m. .p., ,....n: . N~ : y,....,,... :a .,5 m...4. a .\\.. ~..:-,-.. :....,, . i, 1 . :.: ' ',, :..' A. .u .~.:, a .M ' ".'. ?,a k i l...h,j -. '.Jf. '. lh {U[,[M ( L? .j, $ C-y;,',. ' j '. a s. ,c f l? 9 ?. *. '..., . ( ) I... j,.,..; d ' " 'f- -['. ;.. -.. v c N - y-2a :.- s y -,m. .... ~ - r ].p'. yl;.' ll '... f ;...,. }.. '- 7 :,; (' ];.4 ;]. 7:. ; j'. ..;;.y
~~77.v.,g. J [ '.: Q':~.. :,('.'~~
~~. f.'-[l.,' f '.f :( ]' N -. h,* M ' ;.] : f 7 f..k' ; ; L., .L. j.: f, ll* *X s [ ?. l;.) o ' f.") ^ g. : ;;,_... ^. - ;flC,j' s. 4 p. (~~
~~y~.,. -~~
_ :,...[ - ~l- ) V - [' .. i.' ( . a ?;.:l. h.Q:Y.3 Q. $~,. - ,-... j. ;- ' :..): -..: . -+ +:. 3, ~ ..j....,,,...,..,.,#,.., w-A'..:'t~,~'.~.'.3,- ', '. ' J,, ;...'g..',3 T:..+-...,.... .a ,.- A.+,, q!.: y,, c, ;. ~.:... n. '3..g.- ,.,.s. - i ~ .k...'.- ' - ' ' t,*gp ; - 3%+ -. R *^, '. 1 s . '.O. s. t,.4,. Y '. s.:..$. ~g y' -. -5.
~~.W,..-'.~~
3 >:s....... ', n ...t-F 1,, .c 3 .. ~ ~ s.-;'- .'".. $...c,- 1 3 y....-- s.:. j,v .... -. * /. '.. .,.L..3c..- u..,f.. 5.c...'+a......- .s....:. 3s,...'..;. ..,.r. ~, .t.. q;,,..7< ;... .y .-,q .,y ,n. n.... g, :..
y, ; y,...,..*
~~.y'-;..:_' -:.i.. r, ,v,; 3 -*,_.,,u. v ,, _, ~ 2..;,~~
~~. ;,.n.:~~
~~m... (~~
~~. p. _,f' <: 2,;.~j*,.;.~~
~~(. i. ' : %~~
~~k n s :.~~
~~'.g'; .. ~! ?- : r..,. \\: -; >.-~~
~~7..~~
[
~~}':... J :.,_ s,..'. ;.'^ q..~~
~~...'.,.%..,('_,:._..:-.. .g.., .. +.G.. J.. i-. ( ,'..,*A. c:. :...,. . ~ :<., ; '.v=.~~
.

.:p. e ; s... '.;.v.;:.,'!_.Q... [,. ~ :-
~~a.;_,n -?,J . -,- -..-,. -: ; 2.,.... - 4 ~ 'L.-.. J ' _. y :, e >...- - ! l, ..... ~. r..,, c,a s.~~
~~.s.~~
~~u r..- r e.~~
~~....g~~
~~?.:,,. ;,t. v..,....a:....: .q s t s.~~
~~. y, - :~~
.' e .. sf',< g... ;*
.r
~~^.. -... :.....r~~
a
~~-.'h;- ~. r , f,. i. * ?. 'i. ' *Q,, :. u._._. :, ;~~
~~h.. y '.... :.f, <~~
,.,.~_. '..._[.._ 5 .g. - ~ - s,., A . :.. ' ?.v :. : :w.; .%, r.. m.. c.. :. ;. 4. ' ~,,, - .y ,y- ....- W... ; d, :., : '- fu s. .y. '..'s.1 1 +.'$....- q\\.... ..:s Y. ~. .n. - ".' - 'e ? v -..' s.- .. 1. .^ ,_,.c,.,... e. -~ .., : +... - ,:. l. ?'*?. c. ^ I .c '\\ .I '. ' ' . 6}:.. '. ::Q ' L': f, f % i .l % V, ~ .Y ^ -.. ? h.%;,:>'. % ;.T.* :i.. O^i ~ - ~ : ~ .:; ; } ' ,z-t.. e. .c:' g .....} [, [b. ,.g'...,..j9 [ * + .... ',.-.,-.., '.., -.,. +.- - ,4,'..> .a..;- D.: ?...;:- + s,, -. '...> ",,-. 2, e .,,._.y ...'o .L:?.. = .:q .w-..;,\\, ly ' '. ' + 35 I. ..' ' f '
l. ? '. ? ?.

f. ~.
~~b..,e ? l l .'!, ~. _ [.],, 1'E ~.-l ~ f' h,Ni - -" f. p _ ' .'~v.. :.. .L': , b~~
~~$. :;'sf.( ^,f... _ S l"..,.' [. l l_.... ', ;; f t _ '. ;. '.~~
~~- (? ^ l. f. : ' y[ ; *., 1, y g y.,'.*,1'.: -N.; '.-~~
m. ' ",/.: 2: !a L ' l';,... *i_,.v i '., - '.

v.
~~i 3 \\.T..~~
~~c...~~
~~.? .6.. 'g :p,. c Q' :1,V,- , Q., p.. v -.:' ;,-. _ ; < : ,. Y. :':,.' h ' I, **. : ,0 ., ;W'~~
~~as i.~~
~~..!.Q 'c~~
~~, - %.' ;_' ?;..,. j,;~~
~~f g, g.. -' . k... -( ,[_ _5 ;. ei-).f.X. ; :t.. ' ';'. ;.:,. _ 3.!. 6.;... l.- C'\\'. s, - ~. v - [u ' ' ) y., '. u g:. pw~~
._ } 1

[: *.:; ?.,.; ~.fJ
~~.,*.'.,,.\\ a~~
~~5. - ;. '. ;,, ',;,~~
~~..j ? ,*}.' y-[. }.'..'.[,(., l. ;.;? +.. ", 3. > ; ' ' ~: ..w -c s. , s c go.1 *: '.., M ;;. t.... a. +~~
~~9..~~
~~.>5 v- +... c u.6, ~ +.s s 4.a.. :. N 2 ,*r. g..c.h ..... -. i 4. - A : :r : u "., i, n ':.... '.. : p g. '.: k,., ' ;,3, sg ' ' l ':.~~
~~n.' &.~~
~~.'{'2 ,..~.. p',. ag.~~
~~,\\~~
~~,..'~.;.. - .3........,,... s,......,.. '.. +, ..2 v~~
~~3..~~
~~+.. gc.~~
~~.< r ;.,.~~
~~a.. q- ? ;c. .v .c l... ,! l':~~
~~Il +~~
~~..p.,,, p;, 9 ~~~
~~~.\\ _ ^ ; '.d, ~. jv. l '[?.~~
~~.,- ',,. _= ,y: _ s.ll:. T ' " :- 1, '. ?. {l. ~j ,h: 'ls ll':.~~
s. !

e A'ca -
~~.[ * : ,.c.. wl: w{., a.,:.- . : y , m.. w~~
~~,n;~~
~~,.a s.:.;....;. -...n. S ...g 'x,. * ~;;. ' '~~
~~w. ;.,,y~~
~~. %m.o{g.: 1 ,,4* r.:.... 4. ;, '.,,.,. __, _...,a..n.. y :, s . e' ~ r,....'..~~
~~e r~~
g'.. 4....... g;, _ ,,.;.y .. e.. /a ;,.....n,...:.v'.... .,..-;,.,....v,.. ) r.. -,.I e -,..,,. -.- tr - u. ... h. , v.. w -... .. /'...- L. ..v.' 7' t . :~.. . n c, :s.. .c.',.....v. 2 .p. ;w,. c gr. ...~ i ', [e. h... N ';h;.'.[.
~~.,,' [ '[. ',3,..~~
~~. f.i * '..sE.*.. I ~. p t....,. I ' ' ' J ,),'*. j: .,'.g-M.'., > a ~ I,7, . 7.'k. h[ 4.;hQ' c . i..; ?g A'. :,,.,... ' ' '.,..,. '.. '..,;... d ( 'C~~
e
>.o:.y.,....,..Yr - - Q :.. g . ? :.', e -. L. g..9w.-. .p. '. : r,., '.,.., .b..'..,~.,'; ..., 6,s w e~-p. P... s ' ', ' w, _.... . O? t, ',.. .,.s., 'W ls. ^ : f' i.t,.- 'y ;. ; .s -; ,.% p. :.. 'J t, L.L. .,e ..s-
~~x. :. r.i..; ' k..,~~
~~+,. f ?., _'l;^.. . c'!% ? :l y * '.a f,+..s..... -.'.':.'u'+*.,'.,,: . *....t..'.....-., s;, _; ;_ -,, .ry.*. '.,...,... *; c *.~ 1 s.- . ; 1_ :,, y.. :. _,, ~- s .,p~~
~~5. S. g.p+,..,. :.l. '. O...,.3. n' t,.l. $;h..,.\\.y. s. <~~
~~-1 < :p. ,y~~
~~g in~~
~~.,..:. ~ h, L _ s,- _n..n:.. ',." g .'s 'e %. v_ n.'-(*. c~~
* < d{ '..

..+
~~. _. %.a:... ::f,.,..p._, s. J: y...:..*:. = Q:., :. ~ _ n*-.[ A^ ^ ' ' .:s-u' i .1 \\.~~
~~w. p -~~
~~1,4....,, f, L.r.: ; _~~
~~.c '_ >'. s,' s,..^ .. + ~, \\...' :~~
^
~~<i s L..w - ~4 s. y. ..:= - ~-r,* -.....'r. .. y :.,'..; p . '...,.',,;:...'s. ( l-L- :.. y. ' :.,. e~~
.'.';..w,...../..

5. m :.. '.... ' ;.i,
L.,,., ..,. '.,,,..y:.s.j... u+< L..r+ - :;;...../.,..;,
~~9..' ^ ;,~~
~~+x j;,.* :~~
~~g..:-.,-~~
a
~~e.... k.,.l r.~~
~~V, a n'..'...Y..,,. i. X, : *.'.* *. r3 n- .? : 9 s ,' =. J~~
~~4 'r.. ; '. :.y~~
~~.. a. s p, : .,<..y 'p';.1 U.c ,.g. v ".n v.; n t.?~~
~~w..,-~~
~~.v ;.~ =>..~~
~~~ 1:,. -~~
~~.s + x: e s+- ,... ".p.9..,',.. f' f ' ' ' *: ' '.' F,' iq~~
~~.'.I'.~~
~~' ' L:[, - h~~
~~g,,:~~
},*' [s *{k . fI.f; h I*.'. ....'.'.,,.,;.g. ' '.'j..'.'.-....,',,., 4.;,.. " . '.... - h.. ..g. ',+e.- -h.-%... ...', ^ --' 4' ',,s... ' ,-t - ' '..I ' ? e.;-.<... +; 4).;.... .s -q. e x3, s; '.. ,,., - - +. - ..v. ,!.y.. ,V':.~ '., ~ : ^ '+ ~ ..!".f,*.*!'"',.' ,.,. - p,.,q c,. -... -...... ' ry '.; 4-'c' ~. ' '.'.. '. : '. '. ' n N;. > ' *. ' I.D J'. ~ 0 ,il ' ' ' 4 *f' : a'....',;*t...n';+A'. ..v.. .. + b +
~~...? ! [1.1.~~
':.,.l. e,p L.'*.'*
u

.. ;. j. <
~~. ; ' - Q. y l._- l j. '., '~~
.-.,,y

3. m.-
.e ;J, S, ' ' ', ".,, - . r x.- c.:.. ,,n - ;,y,. : ;.. L.: ,p.#, v.: ',, c,. i - t; ,. :.r.,v.<,',s.. m., ,-. U V.i;.. :. 9.:, ' j,.,.. q. .. e ...^ 4;*_,,. ^'. ,v.' ., '..... =.. q. .,,.....,.,i.... v. ..lt:J:.,. g ~.. v...i,...:..r.,,

~~.,..f' 's;;, ::: !'. ;,a'- za.'-*,.s.~~
~~-o _'4.. ~ ',.<.- : *. ..y.-, ,.'s,... i.. '. - .,;,.,2'.,.. ;.. v 3~~

~~; [ ** -...j * ;..~~
~~i....r. yl ).,..,.,.. '{..,, -'L'n ,..r '. ; ;~_. ;,. :g - $ :,,,., ' :... t.~~
~~f 'l e,,,;, '~~
~~l,. ):. :.~~
.,'. q.

., (:,,,,,. -. - s.
~~e, L.-. . C '..J _*.,',.). f... ' l P. h,,'). r ?, g .,u, -t .;.s 'L ..* }:.. ~. r e ' A :f.. '.., ; av~~
~~,:r;... -~~
~~,.:a-1 ' -: \\ * - .., ' :<./J.-~~
~~-.i.~~
~.s' ~..... -. ' >%. i.;.*-; *. -..:. ':. A* .., '.. ~. ?. *..' :.,q' - + ......_:%'~;'_p.. . x,;;;f,-Q ;.:' .S.m. f. . : L ', y:*. ',..s - d : M:c..; ' p , L: a,... n... ... q ,'*:_. ~ ; [. ~ -. ...,_g.',......,.. _.. <.,..... ... ~ ~. >,.. -, ~. :... f c.,,2..'\\c,,.: :.. - Q. <... '.. e..'. .;( i ;._,; m._,;.,g.,...';.,'_.- w ; ; ;; 4.. a p ...w~-....r 3:;..
~~.. k,.;. -~~
~~s. ...g j. g ' Q,. q,5 ..d,.,.[.., 1..p . g f.. ,f..,., .~. :, .,1,.e _:, J. ...r., .._.af.. f. ,.n s.,.-........,- ;., y.......,.,. ~~~
~~4. F;~~
$1 ' ...r ..l ..,,.,.,s .,..._..,4 ^ :., s.t. ;.. ;; ;g,-. _. a.....-.,....<.:.,.,.2,-:*g ;; 4.; s ;. n.r...j, c. _ y., .'.V '.:-..,.... y> : : q',......,.,.e .s se;. s, y,.. v,.~.,,g. t.n,,.......,;;..
~~s, ('~~
~~.v, , s.. .. r.~!... y. c. .a...* .9. _ ; : :., ?c;. _~~
~~y. u. $ e,. :0 1.4 m..~~
...t,.' ',* & clTf:+*a, , c 4 ....,.:.^i- . m,3,i.l(t';?4: ~. ..,.3,., . U n ' '.., 4 i .,. '.;;;. h,' Q /... : ". ;; 1 % :.'.Q..' : . ;, ;,'., b.,', :!.- (:. a,.~ v.. n i. .:v-,. . u -s'.-:.1 '%. o .?,9 :y ". L;.'..y y. ~. V' {. ' ^ y. ..s..;*..~4 .1 ^...: ..e
~~$.tn.,.. '.. n 3, : :v,.~~
~~. y. 9 '...;..... ;W:. u: J... -.. ..y. 't.: m e + r --. s ,2 O., .-,\\ ".y : :,^ ;... '..,. n.. .g :. - - . :t. ; ' : !... '. : -~~
~~g..,-. -,~~
~~-I:.- l ?.L. ;~~~
~~t -;~~
~~s ., c, :..~~
~~d. :.~~
p- .g.a 1 r. ..((# '.k 7 +, <, 3'.. [i.";.... :. 'y, [; * '; s N,.,.,.,#.,4,.%,.,' ' ;,. s',,. ' i,.14. k..,. y,; -,,, N I; .[ ~ [ I I- .s 4.,., - ;,I ' }.' ).:((. :[, ed :. -,:..,, .f.L... ' ',..f ..,<<,N,.,./,.[.,., y '.t.:r, ,,.. v. 4:. 4.. ,, y y
g~.-t,

,...,p s'.s',
~~,. (e -. v-Aj.,,,;-,g*- . p'. y .,.,,. -j ./,-.'. p.. ' t ,1- , y+,':l ':.e-..,...,. , _., ~.,..s.'.-.,,. . ;'r',-'~~
~~...c;~~

~~^.g;> M-s*> 'c.:'i~~
s... se '. ^

-.,c.
- : ~. .. M. i. '. w' ;. :. z. ..e..*...., ' f. .~r..-:.~ '.,.;,','N. ' b.. s. .'..-: - +i.'.:.,* h.. 1 - n.., :;' ; :3....,.t *.. i 4:.'...? u. 'n '...:;.,;;_,. c p ^ - ,f ;'., -.. l4,:..q. .c 9,..'.... ex.9 ., W, 4 4.q
t
-. _ - _. -.j._ .s). : ,* j : .,.'A.. . ^.;; n n.f i;.;.......... p. -_ A. ' ..; ', % },f Q l'.. f.9.. jp.; :. -.: :..; Y,. _y _,,,. : j '.. ',; .y,,.:::... ; v,.. m. n'b*.,.t:'w : .:. c -A. ...~..s5..
~~c. 'y ' L.' ' ; I ~, '. '.v..~~
~:: ; ': ), j [.G:y ~,. j. '::. < ' '.,'. -f,l-...; 4,; a..",.' , y..c ; y... -,.t i;;* .vi.. ; . :1, s %, y.\\g,1. t 1 ,f Y * &: f,,A %.lh;)% (I '.lf %l" c,'";g[ 1,v:'.t; ' Q'Yg g; '..:\\ ; M;i.9'4f,,y.3,f.q:;x ;.,. ", %. :.; 9, G f *y l ' ?;. L -,;, )s?, QM.Qqii;$,. ;.f g'.p:4.. fyrf-)?. J'. ' i f,. ' ,g. JyWQ*., E. ' E:.., g., ; *.s,.,
~~5, g,, D. : ::.~~
~~.. s .h y !.. ;z \\ ; ~ 4,; u *,...,, s., 4,, y ~~~
~~,A,,., L,*f. ' :,3 ;:. ;*,;, ;~~
~~( ',., _y, , u, e.:r ;. $ ;. * ,q : ;,'_.. >.;,. . _ y. 3;.. p. m ? < v.~~
~~x f~~
~~.c.s:I~~
p
~~.j,'. ',9,. A 1". '.... - : hs 3.;; }, p... }i;.~~
~~g r, -~~
~~., /... ?,' b. '.;l c,, .. s, a 1.-;.\\ - r, ; 1'..~~
~~?.. s.,1.]. T. '...., T.lll > ^~~
~~L+ . y.e / ...; q - h '. L. . :. 4.u. :.. + ' ;':::- ;., v: ':s [ '... j f 'i.\\ '(. 4,f..,,.. :', '. ' *, ', '~~
S :'.N,,

Y,.'
~~.,...' ~..;._ '...;..* :..;.(%. ..? I* . e j '. '. C '; %' ?. ' L.. ' ' ' ' : ". ' : *r ' '.~~
~~f,'.~~
a.. . ' '.,' ' ', '., ' *.Qf;:f~ ?. *
i C*
~~,*:. T, -~~
~~.; :x;;,' l.:I f. ; /:.' hl ; ', ;..f,.~~
.'.?., '. :.-...c f_*s 'G.h v*.; ' _ ' k.y b
', ;y". 5 l',13.;

.,.. g,. $.
~~.N il l- ?._,l'.!;),.. &:ll ^;Q ;r f, ::).r.' .., ' ;).: .'. n~~
~~. ~f~~
~~.--~~
~~e i~~
~~.'".A*c;,,~~
~~t p %, ' ; * *' ::Ny ;y., ' 1 f '..' ; nf~~
..{ . Q'..,, p., .., 7 p. *-, '. ' ;.,.. c,; ' '., - 3,.*'._ .\\y a oi. . ;F t, h :. ;;] ?, '.:.,,, a; gjl, ' '. l f. ;:. T.h t Y l '*-l'. -', < - W[j(:;f&_a'.h...q rl l. 2';~ ~, ~ .::(Q: ' ~, :? ;.e:,p s, f &, ;t -v. ' _..
.S

:
~~~ c ;* 4.: ' y,... !.s, '.m.g.,7..\\ ); r .:e, >, s n,.., ,.,.. L %i.V.. -,' %l):*.,s. );. ;::Y :.~~
n,

~~.t ..-m.:.,:.,:,c,-__,,,, Q.. y...,,: n. -..,,..;> :. - - -. :~,., +; 7, s w...~~
., f:p., i, y

u..
~~,,~? ~: , ~ -~~
~~s.. :.%..' :, z}. ;8.:s~~
~~.., y.:.. 7 L *.s~~
~ q...

.'.*. -;;.\\.c :(:. Y.. ':., '. 4 ' 6 : ^ ' ".; *..
,s . y_ ^ ... g;i. 11 : + 'a s *
~~9 ss.,~~
~~,.,.,,',..,M'>o,.k'?..,;t ..pH .. '.*::y . 'r :. o.c s- . l ;G., h. - p, y Q.< (g _,, :f f *;( y ;) ',, ;, *,e,;. i.,. : : - *l. .- Q.,.~ g.$ j., ;50 .o . '-*q q :',. b '; h :,. - '..~~
n c

j
~~. q,,,.,M !n L S. -q v m -... *. -::- fvg 'g 4 y,.. _... u, Q,.'3gy,; y. ;, *,e . jp' 6 ag: ' p. , >; f p y J '.c,s~~
. y'

s b.r.

.y p j r _ y A i p.;. Y, *: o' -.+ p; 0; e. _ : ; r,. %, _.i ' g,.1, f . e [<, _ + s J ~ e,,9 :
..;. i, a., ; * '; cq., ' '., n.;,.. r n. ::.,,v; e.. ',.. s q. , -. ~ p,.., : '., ;sW ;,.,,<..,.p..,. ' m :..:,.,, < +: , m: m,... 9T..;..,..* f,; ',,.. ,, i. +c,

~~', ' n' : ;. k t/,l, -r e, ',r...,.-.~~
.s -,i <.,i g.. A. a4 ,,.r s ,, ; i., ;] e :.,, - 1,r ' -,-, ,.. -i, 3 ',p s ., f ,s .v ; ' s.... 8 "-7'.. l';, % '.<'s.. N 7 '<. .h .0 h% (.;;,,e.m, ;;..; D;; k+:.i.. '.,'J,,j ',i.g 'g:?.., Q..p%. ".i -n...'. 4 ^ Aa,. g f. s
~~" ' i ".'. ;- Q '.~ l. '.:.;' ;l'"(K%b s~~
~~.rs, . ".Q l: -{,1,: b *. %~~
f : e Y

K. ( ' f * ~ fy, > l, c... ' '
~~6 ,,y,.; (; -,. ~ x~~
~~9 -) <:- :~~
h j / p, r, ;,'c.,, p lt,,. _ q.' . . W, m'... e +.. .,4.. lp., g ).. .,4, r,plV .f. 3 '.t. ; i i... ; ",e ,. e, ",, ( ',,,' - l. y : e ',C *\\ ' ,, C/ p!,' f 9,, }f..' A.Y<' t',q. ' ',j ".. Q..'1. &. 9 :.y [ 9 r.,). s ;,b \\ ? ', d,..n.
~~:, t, -. ;.~~
~~e,* W. 4', ;, !, Q' Q. ', . s,/y ' O L,. ' '.,',[ 3.. 4 '. :,., y 4 ,. Yi, s~~
q. ? I. Q tv:*
~~.T., .-, *.lQ:,_ = y ',;b.",,. f,,4' %.. ml3,s .. \\.. < f f m'.~~
~~. i. M~~
e
~~.+%'*." ,g. ,, ); .. ' q 'Q.x,...< ;p.a, :. % f.,,',.: ,,r** r,~~
~~/. ', : -~~
~~M,,r.+ ', s,: As.,, .9*/ 's '*,6 ,,,; % ; - l , t, x .,,, y y.~~
~~s.,:~~
~~-s + ;; e' G b ', y*sy,, t, V,.,,,~~
~~'.j.'.,~~
~~, sp'. f, p. o, f _, i '. ' lU *,X "A ' gk,} > '.:,n, ;., lY;l.?,6;. )v. ~,' - e, M.(,,? Q' ' '*#foi.,'Q, ~ , C. .*[ . ',) _ ' (,~~
-h..,*
~~,y.,. a, } l- ,'t,, ', :7 J 1 ? :.,'/,,.* -.. < ; .,s. r...., q l. p,. :.,.,m.:..,. z '. *;)), f*. }~~
~~*;%,;*, s s :~~
~~V % '* .') 's :,~~
n.
- h. ' b' a,. t,,,.p Pq.,,,,,. '., ;,. ',. ~ '.*;...';.,-. ;.;,'..., ;,' 8, A *, %. (^..,. g.*- s. ) , W s,;q ', : v. ., > l-.... -,:: - s,.,-< .e.;.. y p} y: v ge..l - c : q,,.., ' 4 ;, ~, _ f.t 7
~~,e,~~
,1 .. %e Att,:;., - : :<- ,.~.:. ..c1 s.~.-,,,:,. i; ",:4.a. 16, y r. 3.., n,. .~., . - ) ;.,,., ,.n, ) >, -.,.';.~-.,. > : b ; ;,,,,. a,;,,.,. si .,4 .. 4*1 ) s,%, . 4,... f.. ~ <u. ~ >u.. :.;. ;;.
~~~. ;~~
9.
,{....c.... e ',,,,,, >., c. ,s , ?,. ,,.. '.,, o. v ?,., t.. c, . }}.,,.. - ".., -,: ;... :..,. h.,.. ~,..,.,.q, -.,,L ,Y~~.." 3._,,, , &:. L:,;,. A, ' s... _,. < s- < V;. ;;..,' c.0 ' yt -.u , 'e~~
Y.
..p. .v. -.i ..v. >,e b..,,-,.., Q,f., ,s, ?,,a. ?.', s. X, :., ",. * ', '.... ..w,u.,.,.. ~ r... a*: o .g %, f.?. ' :. '.. +?.. ', ',z.q-e g .... 4 uu .N:'.<.".. .,. '. ',r....:o ..',.i h.,.,, 4d M..l. ...o- .: a,.j' .,s. '.,". .,.sc..
~~s... s.t e a~, -~~
.. '... l 4,. i. :.. .. s....... :. '::. .. J. i .r-3. t.s..... . : - s. ..e 4 ,e:. A's,' .':...=...,...,.....;r,o.'.'r.,,.r.,,.e. ,o n.,'. -. p' ..., ~ . \\v. 'l-a \\ .e >~.v ',.i,, .,,t>'- ,,, ~;..q k.s t,, A. 's
~~.'\\.~~
~~_~.j.,, t.- :.,, '. j;.j,y...,:.~~
~~a. p: I., *9.~~
~~, t. r s ' ; ., -.\\ e '.,..,, ;..,, p,, t..a;* ?. :,, ~ -,.",, - :,, ; - r,,tj,,.,<,, s .e ....',";.... ;A..; /> i,. z%, ( .,..... ;.,.a, 9,.,,,,,~~
m,_*
e.,. w y . v,. .,t._ e: 4.y~ p....%. .,.,g,. p. ,y*....., '.,., '..'. ; 7 g}l ' *: '....,, p. < ,'6*f,..,.,,.,,3. *.,.,:, - ) ;,h e f < j,..' _ ;.,' G. ; ",,'Q..,,'.,*:s *.'. % ',..'?. *....,.... .,,:.>K.' . ' r e s 9.,,;,.'.: !: M' w p ..c p 't. '
~~d.. o l..~~
~~,3 .,2........,. ' ',, ;., ;~~
l?
~~.,W. >.s.'- ,,1',.,s. G.,-~~
~~., s~~
,g* ,t.i.. , y ', i; ,,:f. q.' L. / ..'o . P. 4.: .,u -,,.-, *,.* .'s,' .e,.;;a o. '..J..,., , *,.'.,,:'*'*e'.',..,,',a. ',..~.*h. . % 1. : - .... *'a.. .-l. - '. ' ' ',. '., ',. '. ,n .:,..,..'.,p.,'..,...'..-
~~'... )~~
~~v e,* g,. r.. s~~
,.-s e

o o s..
~~t y.;.~;*s.,.,.,,...".'.s. - ).. .'s.' .a.;-< .*..t... ~ v.:..'w. 3;.. /. 7,,, :,.,. g ,g - .;.:.'.y'.., y l ',,t \\ "..t .. lL..: f. -4~~
~~t,-~~
~~.r. .,.,,',,..T s.',,*. f ',,, r ',,,;.,,'.. s .., g:p..,. ...s . e ::, '. (;.' a. ..a _ .....'s,, ,....,,.;.,'g. -.,-....s..s,..,. ..... g, i .,..e. . s. 3...c..,: q, ;,...y~~
~~.p,,...,4!~~
~~M,,, : .,,,,.L .o. =- g~~
~~r, s~~
~~.s. y,. ..s , g; s. ,y,c eq...,... . ;... :.. q- ,'1 3 a, ,j.n- .,'9,... ...,. ;.s 4;,'.l q 4, ,.~. 1,,,.j,,s,,,..,,. ;,-~~
~~.r~.>.l,~~
s, S,, .*3.. p,-,.,,., 7 ,,, -,, IC ,,*d, [;, ', ;'ke *
~~h '.' ',)-'. ;~~
~~.,',','.yl,. '.' ,b,.' .5' .k,, 2.; '}, } 5 '.,'E 'g. a- .'.,', j C *-. g. ....o; _.=.n, s,~~
~~., ;w '. '* sL,'.~~
~~i ^ - ...',.',s,e',.,. '" ' ) ;:%,,y,,. < , ;.:'; : '. * 'q - : 'e -q.y~~
~~s ;;~~
~~.r....... '~~
'h,,,.. '. - > .o. l';, .'.~,5,..' ,.:,n V, f : '* : r 'f Q;., Q '.;' [.'.l fk'...; :. 3 ). . : y,.,s , s. '.:.'.z.0; ;,' ; ;.' i - '., "-Q,j...,;- >, f '(.i *
~~1 1~~
~~4 '1 .. '. ;..; 'l..'.' ,. n: :., ".'. .e.~~
~~. ;-- ?~~
~~.:.e ,%?.~~
~~l U'..,., ;-~~
~~.'u...,f.^.,t.* -; y .,.'r. ^.: s..~.., *.. * ).~~
~~) :;~~
~~[,; 4 _s m, p.,,: g.... A, a. ..3: ;yy : < =, .., y :, "l. '. ' ~~~
~~E ' '. l ' ',., ' j. i.,,^:~~
~~'s '.,". ', [, [. ::.. ' '. { l. _. ".~., ', ;,,: ' ', . i }:) 1~~
~~;', N'.~~
~~-;'.',,'.,-l,1. ,j,', * *,. _;;... ' y- 's g, ',* ';., %. ' ',k ' ,,, 8: _'!.;'.,):y ': ': ^ y -py* t.1. 4., t, ,f * ,.,,.g.,',:,'_'.,'l.. .._s,. ,f -',e,"* * ' - ).. ':~~
~~5,. - l[p. l'~~
~~'. 7 ,,N* , i ' i', 4,-~~
~~,,e~~
, s 3 is .r e,;.,: 3 y /.? ,\\- /, 'N -4i ,f '; ' ',, p / '[,,*0 ., - ( d. *,. n..,..;k, :, '. ; g.. _e _.m-. - ..f.,.,'*', ..-,, ;, s,. _ ;,.;f;. gn i,', '. ",*;. ; 's,'..v...,,'.z,$, ";.... : - , l,. ',.s l .," l' :' . l.',:: ?,. ;. ;,. :,,: ? 'I .':. y"; ;. 3 ; :.. ;. ". '; y'- ,n, j ^ .. - ~,,: :,.3%
.. g'_..,..,*

_:
~~c- '.' =.. 8,'~~
~~g d~~
~~,,c ,..e, =.: y" . af, p.,,i .=<.t .),'4,s,...,.... '..,,,L,p,~.>:....~~
g
~~.. 9 J3 , c. .,:<s..,..:.,.. ..'...e,,s...'.:,s,~~
~~t..:",c'...,.~~
~~. ~; %.. :. g..., i : ^".-%...". y.,.... . ; ',..v. :'4se' l' ' N '.e L.- i;. s, 'g ga.'.,..s,-,',*f,...,. .i,. '...',u.*:. *1 *-~~
~~'.:,'.'.'?..,a,-~~
~~g ...,,a. f..'8.-... -"s,. .,=l.-,' ? r - ' l's. ,:.,.,,,Y.,,,,,.,s.,... f'**'.,;,>,),$..-(, .g.. s.., c ,s : i..,,....,.. -.-, - ..u.~~
q. " ' -., -; <,. ?. 6.,,.,

s
~~.. s. ...,s, .,s./- ', _., - -.- s s:.s e; f. ' f, s - p~~
q
~~,) % f ,t_- + r~~
~~,. u. s...:~~
~~e ,.s . /.., v. .:,..,,e. n ...-. \\. -,,, ,.j ;~~
~~\\;'~~
~~- 4 - :.s' g...a r, -:L:.;..,.;*,.6,y; e. 3....,, 'r,,,j.,, ...,q. q:. ll: :;. 'f., ;,[ ",' [. n.: ' ' *q :,; :. ':..,. ' : v- .,.u..-,.;.. ~ ~~~
~~c. _:;. - r.~~
~~J. y" '. ;. '.,1,..}*.'.;~.'. l:' ' :... J f* ;',. - -',i l. ? ' % j l '. _. .'..',.,.j,'.._..-,,,..l' f,.~~
~~,( (,,.~~
~~}' ' l (. _, l l* ,', j ', } 'l~~
~~n. [, '4.;'l.fi'. _~~
~~'.f[ ?. (, 3. - '-~~
~~y ".;~~
,,.,,,- 9 .'e> ,e ,a .Q ; *, C/ e; '. ,,,, '.,,....,..,.,e ', ' ',_e',, -.,, - -.j. y:,,' *.. ,,f g s..', *,,, '( .;c.~ . p,i,,,,,,..,.,,.. j *,, .,m. ..>,;.a .e ..y,,,,-,.p;,y.,., ,. 9 ,.4,/ .,g.* m -s e ', $;. .,.j.;,,.,,..,.. -6,. fj :,..,,..... 3 g..,...,m..:.,. 4 4,. 4 t i.;, *- e, r .mi., d, W.., ,, '.g..n.,,. '? .,3. :,,,w >..s,.....; t.,, sa.- ? m.,..,i;),. . c..;.,. t !, o:.p.,3...',.. -. l. t 4 . gs. -t :.:,1...._.v ....+.;- Q,.,.':.,.'.'.*~'e..:.,.n..,cc .o ,+, ... -an - ~ ..,,...,L- ...v. c f..- . ;'.' ',,, -y' ;. ;...). g,' 3 ~.,. ; _. - 4',h.~, .-l.... ,,u 5, ;,, 'y' L.,.,.... r L.r a ~...,-.:... . : G.J. %' ',,t ..,,.s,- L >.
u.
~~ys *,.,,..;*.,. ::~~
~~< p.'s.~~
~~'w s . ;,;;:. 4::. ,z%y' d f>.y. i.- *: e ,e 1. '- i ,r,1, .,,s .1>. .. c. ,0 e.:, 7 ~ ,.l. ,y n,.. 2 . =. z I; l; dy, ?- i 's ,,; i.,3... T y', ; V, <.~~
*Wl,,l. j

t ; r :,.* ~.," f.. l. ?* '..,y,..: ' ' : ' F :",.
~~.'f iv a. ;1... ' ly, D : ...,..f C,' q.., ' ;[:.,.c. .;W. t:.: ,3. '3 J.',$.';; y,k *:y,.. . -- );, p >,hr.,.,,.,i.-~~
~~y 1v.;..',.,.7,'.7.~~
~~n, '. : J.. yT .e...,'.s..,, s %.f,,..,, :.... .f,, P f. : 4,n... r;. t,.~~
,Q.

'.,:.. a t:, :ra.g:. y y'.,., ;.., p. ;
~~s. '< O.l ~ ' g y~~
.=
gh 1e.l 3.

i.
~~.,.., erg~~
~~,. H s. &.-~ 4v..,%.. 1 s.. ,.1. .3. q -. s, r. v. < ,g. m.- l) :en,'. P..'l:. . - ~:. y q -{.: ',. c -.... p:s - ~,^ i %,;Jr,..: 3 h,g 't,;.e,... . ys,,., sm .c : .;,.,~.'.-,),.,.,:,. s,,. s~~
~~r,..~~
~~., M Q. .s ., J.,.? -: 4 3 ;. y.; y'G p;s'~~
~~a',,~~
~~.p '.1,..s.,~~
~~q R,%, u ' 's ~~~
~~',a~~
~~r.r - r,.p 6 ;~~
~~.c Y, 1 ' y., .. r,. a '.';. g ; ),m .n.: ,o.v. .p '?. '-[' 4 e ;;c.,.*C..; g,~';. g .y.. ' b '. f.,.. ', D%,~~
,,

:,.., '. Q ' ;, O.
.(.,,.,:y
~~?. '.s a ;.._ l., /, [* :~f { ; ;ing., _ ' y *,M ',..,,. ;z.,, tv, '.: '.{m e, }, :,, :.. X. .y ., y*,, ',.. l> : S ) y: 3,b R?h. C,g~~
~~[, ' g y,.. > 4 q,,~~
~~e,,,,.',,.,,{.. \\ ; y, '"[ } . y'. :';; 1, .C,.f.*f (( {* I, *. <-A,- t I. '{ ['. ', l.. '[. ~ ,.'y "l, } ' t,l h.1.". .( s . j ',[ ', ).( 1,'~~
~~. i,~~
},',, I' . 'j.' t,[,.q} a',.,,'l;, q- -':s ' k h[.i'- ; Ns.Y'
~~b,,,h, f 'j,, - *,-.:~~
~~, k~~
~~5% ',N,8; - I ' ) '5,' ', '. ' )h',..',.~~
~~', '., f, ' ':'.[, ;* Og $' j.( [.,",, ;'. pI.'.l A.[. . '[ - ' \\ ' h ,, h j M ", , U 'i I ". $ i, : '.. I,',. ' '.T![., ' [~,. :',O 7,;E~~
-k
~~,l.]7~~
~~l I :'~~
~~.. a i h..,. f.,2 .T,#,~~
l
<e..., : I.[i {, ', ..,y>n.,,,. j',f g (l,, f;#. T., x. :.. m'.....,y.,.e ~ ]. ,*[ - h: '? ),;r 5, ,...h'.',,,,.'., , ^,1', U.'. m.,$',I k. N. pk, g.- -.., k,:.. h. ,,.E, k..+. e,- .s: y..,*,;..<..',.s ..,,....,.' / $*. U: './ ;u,j. s + n . : s u; :.. u e ~., <,. -...-,..,
~~g. :~~
~~.,,,af,<-h.... :s: '..S. ..f.,g~~
~~..n.',.,... y.,~~
~~., ' - s a 'w,,..,.- .p , :.n... .~ ~.~y>,. A , f. T * -^s. y.,- s.. ,,.,v.;~~
~~.h.} 0;1..h.., ';L: : Y..,';; '%,,;. '.;..e. : c:: u.'.:,~,'-f~~
,,? ' O ? 4,..... $y,,.,,,:. si e Y{'c. ;...;;:f' h ' ; l.,, s :V; ,N.' :.Q A . ; '!. j :' 1. m i .)*, o 4.lL ?.;. '. :; ',.9, *.W -::.:f,,.{ 'f. :.f.".*:. <;;. O;9.,I ::;'_:: Mq'3; N-s +;a ,c
~~z..~~
~~,....;,..<'; n - ,v ,?~~
~~.c..~~
~~9 r .%..t) u .y ~, ',. .Q~~
~~-.,.,(~~
~~T. :~~
P.
~~.';...:g.,...,% e ,,:. v~~
~~e,.~~
~~.,.~.'.g; ,,. 3,., t' ' a 'o'.;.ff,, n....y * ;f,,..'.,. ;, t %f. h.; * *, y-(9 :.,,. 's f.',..,; ......e..'.t '. - ~.... y.~~
~~j...,~;,.'. k, d, n.~~
~~', t 2 y:.~~
L
~~.a....,-l.y.-.-Q 9 n.p' .,: ;.A 1 '. s l,. , f A ,. -..p =Vy's..... ,.yt,,,.,.,n,, 4.. < *. ;. 's.s \\ .y.R. w a .q~~
~~t.,.,~~
)b
~~-... ~~~
~~,s. s .n e. +t... q !(, o. ,s p. g.. c. Q,,, g,. + .s .) 4. .( , },'.. r.J. v 4.,,,,. ;~~
~~c. f, y ' ; %.,,j ys,. 4'4.'j ', ; e" q >~~
~~.f;~~
~~.. e. N,,~~
~~e+..,g,...".,. p,,:2., s; p.-..,.,,s,.,,. , j t f:;a 4,~~
~~,.- h.,.~~
~~,'g'*..,.~~
~~y;g.~~
~~.. Y i y-.. . g... g y *., t,j p~~
c.,.

e 4
~~,-.ij, ., *:q ,..r h,,. . +~~
~~, - n ff /16.,t'.V~~
~~.::,'} ': %"sy,%;; :;, :(;'d;.;y' y ell s* . i.e,; I.~~
,t
~~('f. 't tr*.\\. ~. ' :,' /, y K' :.'? N'.o',, -?,f.. : ('. ;., a,..: r. 2 '.u.,;,b .:.e~~
~~4.7.p, s!.4. &,, M.1, g,.W' p.. ('~~
~~.c :;'~~
~~1.-~~
~~."s~~
~~. ':, ;. ?... :','2' :. ::.. t ' is; :.'L-~~
~~.';.,n .;.' p, r :,.:4.j*.r.;;. Q.. ..e*' ~. s' .yv*. 1~~
~~f.,, },.~~
~~s: ~ ,..,Ja.M,,,.., ...,,., w. y 2 .e~~
~~T %~~
?
~~m, e.. -'{N'.' -[..','., g: 4i;. 5 . / :'.c s ... '.'d,. C o' t.*../i). ( {~~
~~Y '. [*.[ <'./ qn.f.%_.n}o~~
~~(- .e, p l ?.,, Y,, y, b E..~~
~~I -.~~
~~- 'f f; 4.. y '.'.,4....,, N.,, ' [... a.f~~
+, '

'[. W. '.,
~~'U.* ;M ' ?-f. 5. f /, l'j, k'.'-[^.h.s, 'l #, * ',( q,J[, $'. ', /. l; -ls' g. n. . :,' J.,. r' ~:.'.c: i* f J~~
~~[..?. 's;(;.~~
~~'. e. :,. ' t,.%' d ~-s ;: '.. l,. p;~~
~~y.w e.'.. ". ~~~
~~g ..?. a 0 :y,.1 y 3.,;1' $.n %.g.c.,1.,....,..,'r .,,., ',, 1~~
~~q, ; :p ( ; ;.,'4 8.',;..~~
~~.(- q d, \\ ;,~~
A.
~~r., 's.sL- .-o,.. sr* ,c.'.: ..s.. s v.- a - s. c ,s.._m..,.,, < p : ;.. h.t-.. ;.,' y n- .....;...g..-,-p;s .c. .c 4...,p ,.n,.,~~
~~.e.,s..n h.~~
~~q,. s.,-c.,.c~~
~~.,. 7..,., - c p~~
~~t,, Y I.N..~ '-. >,., rs :.,y : ;. ^. ;..... pt~~
~~o. ',. '.~~
~~c '.9s i . : ^,.. - -~~
~~.c;-~~
~~1. ;,y; L. -.~~
~~c *, .,s ..s Ry. g:. a.1 ,. m;f.~ . f,.~~
~~r, f.~~
~~p?. f;D i{'Iy". i.,$:-l. i. (.,,,.=lg'f, qj, &g..' C :', W; i~~
~~e.,. :..,~~
~~.l y,., %..',fk:lL,@f nt 'sg s:[\\.5 %. ': f.l.% f(,..., jr ....Jij l . l [ % '. ' 1.. ',,~~
~~G. y}.!l,I '*j, &~~
.,q, v. "..,, Y ;,.., } ?.'? T,'::j, 3.R ^. l '(,' k. Re : $li ' k ' N' _ k,f.b '.,.1l 0".N:I [+'- [:ti., .'? $- ?. h. h.: ' ' ?l. %# * '?? i.'-. 'h. ..'i .'NJ[ hile ?. ?.V.3 !)k* N K!k Y.00 .Y. H.l. 'Q:' 5 . l '*. J? - : :., n. ;,.... '.:y % :, n..:L,,,. y. '.f.;, *,,. '..,; y!.:,?.,.c.'. .-l'.. '!.:.,: s,,' f. ".:v . V:y ', ^ R : : ib.'.'. );, , ! ll.:.:* ;. a b, '. ',..,.....},'.h.,f.,4, f ' y'..;r*:, ?,. j'.Q.,;/..-f?;e..,,... ,,b:.: 3 .;,.17:
~~... - :4' -~~
~~.....;...;,.'..~s:.: ,(. _...:.),.7. ':. g p,, -9 . Q. (. ', c ..i. r.. s.\\4. r.. .. ; : n:,6,.s.' .a, ; _ :. s., s s. v.; ;.. .. ~,~~
~~n. %.. g '. " _..a'...4,7~~
.:.3 1.- - '.c- .<e....,.,,.,...r:.,qP-40..y-. '... ; \\:.g..y. 9.,.. ).. ve; ?; ;'.. ; .%, f 4.o ,~,. l - : : ', ,,.a..'n....<., ; :. -,:.- .-D..',y 7:3.,..'. -..:: .s. g 5 ,. a.. s,. >, ::. '. ;... q ->";*. +., ;u- .~%-. m,d(.. n;<: ., R... ;: ;. ::... {,b,',.*~,. r a * : s. -..: g.',
~~.n>:.-P.~~
~~.;,...,..,, s.y....~~
~~t..~ :. ;.".,y %~~
~~,1,,.: ; ., a ,.a 1 T; h..p+. f.p t.. e.. a'.!,.;;; >+.'...':,;.,.=.;.-:.:..i ; s+ w-,,.; : +,s. - ~ *,,.... ',.,. .*-., +..,~~
~~., ;.. : t :...e;.,*'.gq~~
~~..... :.e t,.s ..s' ,.,...4.<... ....V..f* c* w l ,q -, 9 b;:.b..; .5s.,4.x~~
~~8....o.~~
~~,. s.., :. :.~~
'.

. * :,.:,...*..g-

,. l \\.*. *
. s ly}.p..,., - ' -. >. ~' ',,n.. s\\ se, .s. M. '.,:..._, ;. sm,.; v.n. g..... s,; e,.- ' ',. *. :. ' ea *
~~n +~~
1
a
~~..r..-a s .,' g \\ y y *..&,-.<.... .. e,,y.;, r. ;.. : 3 ; .s,, c.m-, z.% im, r.; ;, o -., r.n, '. o:.:y-~~
~~s :,~~
~~v. . ce ,. v : :~ :.... ;", ' ; s u :..~~
.~
~~v-c'. /, },-. ',q... ~. y,:. .o~~
1
~~,.O -.c, ,W.,s,,, ;: f%~~
~~1. _, V.~~
~~.,.. _. ',...,,;; u... s.(,..... :...'a~~
~~i.. }l.~~
~~u i;;..b.., ,. 'hl:f * ' 7.,.,, :: ;. :.. ;.e.y., '.x..,..,.~ ..s.. ,. !;.. >.,. L... _9:.._,. ., i. 'y V 8.'[. '.. l ' :1 '...' : : :. 0,. '".;,...-.%;[~~
~~j -;','.1 ' ]. ', _.,,.,;;..; l:.~~
~~'g.... ;;,~~
~~f.,=.- ' ', *.' _ :' f.j *. Q %.~~
~~r,' *... . ' ' *, 1 :r!.* y ".. :i: }. ' y .,'r, z l ~S_~~
~~h.,l%ih N' h:h.'-.,_~~
f ' . f.. ?; /. _, e 5, ; sf. '- E 5 .' ill * $Y ' ll hl. v...'.,,'. ? ' 1
~~I. D E~~
~~$ *. b. \\,p's -*.'r:',N :., i TNUrNNEANh [Q Nb '.. ' v..I,h (,l*,:., I,2. [..b. ['? .p . p,f h. h J,3 d b,'1 .1 h} '.,'..*'N. h,..' h'~~
~~^ }, [, h Q '., [. '. ;f.~~
~~,,,f ' + ' '., } , ^ / .', ::. ; -[ f ' % -f;.,,; W... 'a3;',,. y 1(-J ((u,,q- .1. '. ' '. ';t .f.g:y,y;-; f ; %' .' :, ;'. - ',-,s.- h:,~~
o r::. 9 * '. :,e 9t* ' ; 'e ~,

g *.
~~1 :'Q ' t. e' .6 f s' , )Q![ 1., ';y'.y,t " *. r. a.[; ',..; ;" : : '- Y, 'l f. _ .v.; 'v!:*Q y ' z, L,.j,y() 'kf , y..i~~
~~p. 4 8 '. q.y.,.~~
~~M , /~~
~~..p,w '.$,'.,. g ],.r,~~
~~y, ' *U('g+.'{h C'.h.:.,{ p j M, :g.,.+...(f V.A ' p.;.i .., ',..l.l1*&j,\\[,c'.. :). ' 4.y.f..:}*. ' .~~
~~-[.~~
, ".g {]'..A::.s[ - 'e,y.D.' : o *
~~,s -~~
~~n 2... :.'?., ;;;..: '[, ...l.,.,)',..g. ,,.,,' j.f'.,. ;, -r ;- Q :f 'g's ;. h^:',..;, e* (l *..: 'r...~~
~~4. ';,~~
~~y ; G:.p *-li. ll.? ' h' '. h~~
ii^ l. d,M 5 h,' ,')i,, '. '_ s : % : i *-l2 'i,,:K y v ',a
~~., - ' &,' :. ' : 4 .: 'J: ! ' \\: ': ' -l.. .y*." . di ?.* 'Y'. ' Y <*,' W',. .i,y..;.';;)L..f ;, *;., :,,, ' L.~~
~~1. s.~~
~~1.. * ; +.'. ; **.:. *c, m..e f.... ; O ."%* '. ' {ii;. }-l: ~-. '- 'h f t];.d ::*L ': ":, Y.';O ' l,;.: ),i : :~~
~~y:., 0, f, ' l.: * :\\~~
~~l',..j,&f, b ], { ) lt.,,'~~
~~; '. i. _ ..~~
~~s. : > g.'.hfi;% f '.. 'ffl.::Q.(( l : ':.ll );[,, - ] ?, ? ,l. ;. f. :'e y_f,!l:'. ' $. '{;;* \\o,b!)d.l. l/. q,'}l.(..,,. ;,! ?,,.*l,{ j':r l,'.. ' ; -), .( . 4. :;"..yl: ,s., n.'. ::,~~
~~f. '..~~
~~l:y. - y *;.. ( ey' ; *J,a~~
~~..,. r:'L a:.:, v~~
~~' ; -l' * ;, ': q ', ' '.;'=,.,i : ':' * * ';. n _ q,5 .s*.;,', ;; (. p' s.. ;. - ' q.e - * : . c $.%). l'., Y.:lr ;E, ' ',' :.i.. -'. % ' y~~
~~4~e,~~
~~- H :. ' 4 j' C.,Y c 'a \\ f... ;, ':e i e' . l 'pV' l ;, '. l' d ?l2 ' q. .T;.~~
~~c ' &~~
~~,_. \\ ",. }.* ) ' a. i. 1 .Y.]. r~~
~~k ':,.:}., f t. 6 } j.* l, ':*.[ 'l. 'i,,". '".}$4.W. \\.:.. :..:..'.s~~
."..k v. . ll ',*{Y $:.. ':,y". '::. }..=;'.:. N l l*: Ql'. y) \\.b.:_sl4 '*.1;;?'Q ']:f.:)., ;, ;l ? " $,:;,:,,
~~i,.,~~
~~]'V.'~~
~~'. ;\\ l}~~
~~.. '.i,.); p.; ( y',,_ ;;2.').. ' f'.Q.,,', '_ {.' s. z ..i,-,, ...^ h,^ e. ?e-t' '3,,, ^p:.t% ; s,,!' Y'..:.\\. f'.'.~~
~~f. 3,.. f. -'e.. g..s,...'.. f..~~
~~- ',. 7:,hf 'bf. 4. ' '..'~~
~~~ ;~~
~~(.. . f,l g-:,.",.~...Y,,. 5. ~. s- ~ l' -v.-l,.. t~~
~~1. )l '~~
~~'.,c. y 'J ',' l. ' ' );. :s. ',: j.~~
~~J.l.f'i'~~
~~..:..k ' *, ;), ;. :, 'i. :,.; y ;x q. ,: ~.: : * ; * ; *. ';Y,.~.&.l-, '.'G l :.., {".:j~~
~~jf W,,*,'[ '. ?. i. ',Vl 3,;,.,f' ', '. ;;,,,,...f (.~~
,. /) ' &, fc',.5,,;.**, y ll.y,: f j ^ ._. W, t[' 4.', f? N.. ;,..... ' . l' N.*.,' +, - -.,, ~:, j, *:,. ' ',.. r g':"- 4:.",, 4 ' R., 4. '.,.. 'j: ; '. %;j ) .. 4E,(, ri P ,.. :. v y: :., L }tq...',.,.:'.,'q.,.....::'. c,:... g (,;., c ':'..>.. : 6,l' .;'O, y -ls : '-..,..:p','.,.,...... 9 ;,... ':.w "_a':T. ;r :l.... '.,.s. ^ "w 4~ .. $, :f's.l,rl.*..., ' n. i :.:c:.. 1 1 , ) ~s %.,.., : ., ^:*. '. ,..*,v l o n,. i.. ?,.,' f. *... l,- @. L '. _ ','.. ' i.n. ;'.,
~~h., :,. ',' p i. ;; *.,5 l r ::~~
~~,,n:, C: .., v.. ..,:*'3.' ^ p *.- ;.,,..,...j~~
p.
e l ,4.,,,. ,.e9,'.'- ' l,. E, *,. '{q,.., '.g. s..e.h j,,....,.%.,.5 ,. l:' h,,! :. .~, . '.* $ ', ',; ; s.n,.. . :h., l,,;, l. *, ; >:; ; < [, ',.. r t,'., l..2,'.-4,..... 1. g,- g' 3.,,...'.f',"'.,,,;..,,-..': l@: :. ^ .p:. ; v,.:.,: ; v.,..... s.. L, ';:,3: .y.,. ->m.*. 9...v.c.,.,, ; ; t <. ,_.,.j i s,. .,.., f., s c.j
~~7 q..'~~
. v.. V. 'J. '; :.;.. ?. ".e..,::.:-;.t f: *,,il:', i) :4.W.....1:. ..',.. L(: :.. n,,8 <:". :.. q::. v:c :..:, ^.: q. m y%y;. ':'..,...... h. u ~ y. A e ::. '.>.. ? :........... ; .:w '. ;>.- 1 .,..,.y . '.'. l 'y. a 'et...,.,....:...:,.-: ...-J....
~~..' ;s e. : v. N:....,.:~~
e-
r
s.; f ;"; Qt..sh 9. $.}'v.( ?. l

l n.'.-l2 u p,3.+2. ;.. ; ? ' {t...:-l.. p] ::%.j,.. ;,,y ' ;.., -. e -r\\.g,:l,.1 :l, y.
~~. t A r + q 1..- ,r f..s..s' l. :*. rf .b-... v...~~
e p

s.. '., ', '~...\\., tQ,p.p.s,.
~~s. ..' 3,l:}s..p.. 'g-..' ', ;.;; i.',';. i. :. p., ~:,,[.., : > n! l...._ ~.. _W.. n.4,f li..,:q l(lu,. f,W.. r p...,.N :k.,l:f {,l.-l ' :p .3..., s....,.. n...,Yl;i[- pjG:[.~~
r1
. w wl.,. e.i- .,. _ 'm,.. ..s..: s: t. ff f ' _.l&.r.e. l,f k f}.x.' .v,;...n: u ....r..-. <r. ..s... l.; ?.L,l... ,.,?. o:.. f.l-l,.f: ..f. ; *.- }t_l', E l f;.: ;', c. ' !..': [. '_ ll. f,, ?; (: f*.f.,f. :.. 'f' &,l,' .,'.y e..:t,, -..-:....t ^%. l ' !. .F.l' ': l ^ . Y) .f. l'. k.. 3 )',;h Nl.,*
~~l [, % n... f..~~
~~l, l .\\ .......sp :... n ;< R e.- ' :~ '.... h..e:.: .....r. . :,.:.. :s. .n ~n..j. - p s,s y,a :... ' -~~
,v.

.. n >. h +. '.. '.. 'c.., :
.h.
....,.. :.. : y;p - 1,.,. 3 7 .: ;. a " x%y :.:. .;;. yl4 :m ;L '.& l3m x ;, ... y' c. - ~ e. - ~; = l. L .. ; : * ' ' o "w-A. -n.- ..:1 c:; :; ; '.. ^,^ ;Y b *. ;,;. W l[ 'l g, ~. :.. '; ^ I.:'- 7 % {l.) - f ":.
~~: N. 5.?.~~
~~,.$.L,. '.'. . ;, ::. t,j 'j.~..... '. __?,, !':k ' m.kJ ; !.;._..V_'-~~
'. ^

p. a a

y.. y :.,.'
~~L'. s.. :. .\\. q , ; ;,. s L..c... = '. 7. [..,, '? [.... s ;, y ,l' [' ^l . [ ' (- l. i h L'ff.h [I. .Ll. ..;E :- h $q.,;j.::'.;..nc.;;n.b$.:.h;.,.h@~$$.Tj*:.,M-tMi$di$~~
~~w. ::: L.h. e ;? v.~~
~,,.., ;. :....;,;g 7.;2).....;,z _.....g.. <f. - - :. ; y - c,,,. - :.:. :... s.. ;.;. y - y..' e_ :... .;.., v... c,_. ,..v .., +, c .. +. 4^ M.,.: y t, %e % W J,.fM: ~,...... c.-.c =.- f hM8 . ww' m[.?:.[y$-@:M ) h h @h h h [ +.i M.- I M [ % :nm$ an,e m
~~..a s~~
~~&l}Q Wi::jfN).M f L..h ~ 'l j.l f. ). '~ A ~* W V r &hhhjf lD ~ a D m_m_p@;gg%m.... c" '. #rh m w~ g t;.. [me ',07 M;e, ' ' .1i j -'~~
h
~~%w:'j;; . " 7[g:a.Y,i ';,.. ! g $MK,. ',.....p s.. 4~~
~~cy_~~
~~..a 2 .;,3p y e n.,f [.9... ~. - pp..., .y ,.g. _6 .(' ,j ~_. g z. [ pf}'k .[.? -,. 4 [ ~ '.g-1 g , su - 7 5.;~~
y
~~.g. 1 m ~ w~ % # 2 n,t m-s; + M.je )J . a 3~~
~~.. m zL w3 c...,~~
~~r . ; ; 9;;. t - 4..:.. - 17 ...m.. i s..: - g g "] f: 7 ' l r ;g:; ? " 7 qg lf ,g, d l:.~~
?
ll
~
~~_W t .r 'L ' g '.,'. 'y' Nl;' ;.,.~i;.-a N,.'.,.. c '/ O,. <.?t; f'. ' ' ,'~~~
e
~~^. .. g./ ;._-._...' ' a g '. 1 e ,, u. '.f, q ;:..; ;. spy - '... ;. 0. e ; ' .[ .y ;' Q '. a.q - / w~~
~~f. '. n } : :l.:. : [f. u.; e _ _d. ' ;....~~
~~../ i: '.. '... - ^ R[. m'_ L c ..;;. + :._ .;s' ?. .? ). ' . 4 .s c... ..f 1-~~
~~7.. l.f~~
~~[ '- .. ' L ) ...( l- [' }. _ 8 h ..j, . n ce.,.. ..[ ' 5f ~. - ~ }.; ' . ' ; n....' j (. ' 7 3,. m. a c +-.... .A ;- ;~~
~~4....~~
~~. +...,. s, :- f~~
g......

f.,.
~~.t s~~
~~4- ..s c ?'*%*4e.9 L. 'l. ((... ' { ;? (( '. _ l -[ '. } j. t. ~ '_'4)(...,.. gg f.]%:,.;;.l.f:.,g 3..~~
y
~~..:( -.. f. g., {. 7 ~' - - >f A p ;,....,.~~
. ;.,,

:_. _ f ;.;. '
";/. : .c T... f:. m
) a ~ + i A s g# y
~~w. w $~~
Table of grnfik' Contents 1 .bunionwealth Energs systeks an exenipi pubhc o > Comparative Highlights...I iltili+v holding aonpany with annual revenues exceed 2' ing si hilhon and assus ni approxiniately sl.1 billion 4 4 / ( ( al' Energs serves :E.000 electric cusioniers and 2:;7.(m gas. > Shareholder f Letter.... 2-3 l cuslt H{lt rs 1115 X clininlUnitit's nl t aStel'n blassacilliv'lt 5. Strong economy ~. ( ( 61/l ni rgs ot ters a unique bliqui of energs suppiv and de' liv. in COM/ Energy n servsce area > Electric and ery sci vices inclutling electriciis. natural gas hquefied natural Gas Operations............ 4-11 i. gas illl(1 stt '~lll! [}lls I'lle TKV dis t'rsits 'llilant t's ( t Ibl/ l'.lld TgV's s ie k 'bj coinpetitive position in the deregulating energy industry anri. iadustry ~ Restructuring iydon s wrather related volatility in carnings. Update.. 12 4
~~f. '~~
In addition to tour regulated ope: rating pubhc utility coi$ipanics, jd I 4 1 > Unregulated the 5vsteln' includes a striun distn > tion conipan a(on pany Businesses. engaged in the operatipn of IN, lacilitics. threr non utility unregu. ......... 14-15 Excellence in utility operations lated subsjdiaries that are pursuing energy d business oppor > Financ,al Section............. 15) i .+ r lllllitit's; alHI divt' I t';tl 4'statt' tl' Lists. 4 g a business trust organiecd in ly26 under tke laws , The 5> stein i in \\ tass. chusetis" .4h A' f COMEnergy. ge;-4 ? ~ e bacNe n; Customer choice - ' ^ p s . ns s Massachusetts electne industry restructured w
Comparative Highlights hEnergy ICommonwealth Energy System and Subsidiary Companies ThreeYear Growt c 1997' 1996 .1995 (%) Financial Data en maions) Operating Revenue $1,041.7 - i $1,010.9 '$929.3 ' 2.1 - Operating Income $87.7 * $96.7 ' $94.5 ' -(1.5)' NetIncome $49.9 * $59.2~ ' $51.4 U.6 Common Share Datal Earnings ! $2.27 * ' . $2.70 - $2.36 (0.3) - i Dividends Paid ' $1.6 / $1.53 ' $1.50 - 1.8 - Dividend Yield 4.8% ' 6.6% 6.7% ~ Closing Market Price Range ' $34 h $19'~ $25bS21%- $234$17% Market Price at End of Year - $33% $23% : $22% ' Average Shares Outstanding ~ 21,531,433 21,529,676.- 21,311,836 : 1.1 7 Book Value $20.01 * $19.31 $18.15-5.1 - Dividend Payout Ratio ' 69.2 * ' 56.7 63.6-Price / Earnings Ratio 14.6* ' 8.7: 9.5 25 550 $ u l 1 a i l I We t":~" . ~. ^,. *, - " 1
~~Reflects one-time cliarge ol$10. 7 million (after-tax) or 50 cents per sharefor Pmonnel Reduction Program.~~
k j/,.. [
""' ech" ett err"ri <" re tr"<t"re ine eiectric etiii-TO O u i- ?9 ty industry. In November 1997, the Governor of lea ah ai eho1d ei s Nies,acnu,en,,igned inte iaw iegi,iaden,c,1,ue,u,. 3 n ing electric utilities that recognizes the right to fuH Coammnweahh Energy System's earnings per share a omy o non-mitigable, transition costs. As part of for 1997 were $2.27 compared to the record level of ctric's restructuring plan approved by the $2.70 achieved last year. 'lhe decline for the year was Padmen o ( conunun adons and Emm Um due to the one-time after-tax charge of S10.7 million, or n y padment of PuW hiHM on 50 cents per share, resuhing from the implementation ua y . we w m Ugam our transidon of a voluntary personnel reduction program (PRP). ou sa e o our power plants and 17 Exclusive of this charge, earnings for 1997 would have power contracts. We expect to announce the buyer been 82.77 per share. ew a% cts during the mond quader of 1998. o The PRP was part of the consolidation of the man-agement of our gas and electric operations in an action New Opportunities in that wdl greatly enhance the competitive position of Unregulated Businesses both businesses through significant reductions in hik our primary focus is on excellence in our operating costs. This resulted in the elimination of energy distribution businesses, we feel there are approximately 13% of our workforce, systemwide. The opportunities to enhance earnings through our cost of the consolidation program is anticipated to b, recently created non utility, unregulated subsidiaries - recovered within one year. COM/ Energy Ntarketing, COM/ Energy Technologies Consolidation of Gas and and Advanced encray Sysiem. with thew new com. """ie" *e h"* devel" red h"*ine*** diat com+ Electric Operations ment our core utility operations. Our experience in .lhe consolidation of our gas and electne operating energy markets and our knowledge of customers'
d...msions, and related reductions m personnel, was needs enabled us to recognize new unregulated busi-made possible by enhanced productivity and elimination ness opportunities. A more detailed discussion of of duplicat. ion throughout the company's management, these bus. messes is meluded on page 14 adnu..mstrative and support functions. These new effi-of this report.
eiencies, over and above the gains g ,,g E wW lsere y.:g g g: g we nad aiready achieved in control-Wall Street Recognizes %~ a une t-w.mur ling costs of our stand-alone utihty COM/E,nergy operations, has led to a more effi-
~~! d d~~
We are pleased that Wall Street has i l s .g cient and highly compet..itive orga-recogmzed the strength of our compa- 'l N mzanon. M.e hre making these ny, resulting in strong gains in the changes at a time of strong finan-value of our shares. COM/ Energy's etal heahh for the System, and market price clowd 1997 at $33'. per these streamh.ned operations will common hare compared to 823S in have a pos..iuve financial impact well 1996. an merease of almost 42%. This into the future. S.ince 1990, our price appreciation, coupled with the workforce has been reduced from dividend payment of S1.57, resuhed in i 2 % employees to 1,727 at the end a total return to shareholders of cf 199,e - a reduchon of 33%. approximately 51% assuming the rein-Restructuring
~~soneni of dividends. This compare~~
"' '"" "" '" ' h" " ""h t e d """x" of the Electric total return of 2X% achicWd by a peer Utility Industry yrouy ef s7 ewetric mintie, fono ed n, EI onsolidatc,d Many of our changes have Value 1.ine. Inc. and the 33% total "N been made in anticipation of return of the S&P 500-shareholders
~~--w 2~~
New Chief Executive Officer Announced A Message From As announced in January 1998, I am retiring on September 1,1998. Russell D. the Chairman M. ight, formerly president and chief operating officer of our utility operations, r has been selected as my successor effective upon my retirement. Russ has bee" of the Board with the System for 25 years in a variety of capacities, including six years as the n behalf of the board of System's chief financial of6cer. lie has played a critical role in revamping our { p } trustees and the many electric operations and overseeing our efforts related to electric industry restruc. turing. Russ became vice chairman and chief executive officer of utility opera. members of the tions effective March 1,1998. COM/ Energy family, I would like Also on March 1, Deborah A. Mclaughlin, formerly vice president of customer to thank 11111 Poist for the outstand-service for utility operations, succeeded Russ as president and chief operating offi-ing contributions he has made to cer of utility operations. Debbie has been w. h the System in various positions, Commonwealth Energy System it including audit manager, for the past 18 years. over the years, 11111 joined the company in 1971 We are very confident about the future. Our new management team, coupled with s,gm,ficant utility m, dustry i with our three-prong strategy - mak.mg our electric and gas compam,es more cus-expenence and served in a num-tomer-driven, efficient and c, ber of positions leading to the role productive; maxmuzmg our of president and chief operating existing assets; and creating officer of Commonwealth Gas. In new opportunities in the 199111i11 was appointed to his unregulated arena - will 5: present position, president and allow us to continue to { chief executive officer of thrive in a restructured utih-Commonwealth Energy System. ty environment. What a ride theselast severalyears g,, In Closing ~ unprecedented change and chal have been! During a period of I would like to recognize lenge for the previously staid utility what was a time of great industry,11111 has guided the compa-sadness for all employees ny to strategic and financial success. of Commonweahh Energy During his tenure as CEO, our annu-System. On August 7, as a alearnings growth rate averaged result of an underground 8.5% (excluding non-recurring .y manhole explosion, charges) and market capitalization ggfjfg, g fygf, Douglas Pollander, a President and Chief & era / ire Opfrer has doubled. In the past year,11111 Cambridge Electric 1.ight oversaw the consolidation of regulat-f Company employee was killed and four other employees were injured. We have ed utility operations, dealt with mandat-taken aggressive steps to prevent the possibility of such a tragedy from ever ed deregulation, improved operating happening again, efficiencies, and launched new non-We extend ot,r thanks to you, our shareholders, for your confidence and con. regulated subsidiaries. Hisincisive tinued support of Commonwealth Energy System. Upon my retirement, I firm. Judgement, broad experience and intu. ly believe that I am leaving your company in firm, committed and extremely itive vision of the future brought about capable hands. significant benefits that will serve us well for many years to come. ) We wish Bill and his wife Tma, the Sinecrrly, very best for a healthy, well-deserved and satisfying retirement. SUU PA William G. I'vist President and Chief becutire Officer Sheldon A. Buckler Chairman of the Board of Trustees 3
U T I L 1 T Y 0 P E R A T I O N S I 1 p] Electric and Gas Operations ed commercial / industrial electric load was up ggj our core utility operations performed wellin almost 10% over 1996 - new commercial /indus-1997 with a robust economy adding new load trial gas load was up 30%. for future sales. Electric operations served Throughout our service area, there are 367,000 customers, an increase of 1.2% over exciting new projects planned or already 1996 and our gas operations served 237,000 cus-under construction. Some examples include: tomers, an increase of 1.1%. CoM/ Electric bM enjoyed record retail kwh electric sales in 1997, increasing 2.4% from the previous year. Firm > The Route 9/ Interstate 90 crossing in bbtu gas sales for CoM/ Gas, however, were Framingham, with 1.5 million square feet of e mercial, hotel and light manufacturing. l down 5.6% compared to 1996, primarily due to warmer than normal weather. A dozen buildings are t planned including the Strong Econom.ic 4 ( 650,000 square foot head-o 1 Growth ~ i quart ers of Staples, now +.? under construction. The economy is very strong in the areas we serve ! 3o > The 1.2 million square with a tremendous amount '\\ T foot forn:er Digital Mill of new construction and expansion. As a result, the f t rate at which we're connect- - > Medical City, a huge 1 ing new gas and electric load one-stop shopping hospital g to our system has increased Russc# D. Wright, complex in Worcester. substantially compared to N#/h""#" U/#" "## the rate at which we were 'Diese three projects alone have a combined adding load in 1996, especially in the important forecasted annual gas load of 2.2 million therms. commercial / industrial sector. Newly connect-Electric 4 > WorklCom Corporation's 24 hour-a-day telecommunications switching center in Cambridge, with a projected annualload of 8 FOT ~- nullion kwh. w,,% y'o, n% q; ;, 2 ""'%%.R y > Museum Towers residential condominiums h in Cambridge, with a projected 14 million kwh ./ b annual load. 4
......,-.v.. ..c.,.- .. a
.. p..

.s..... ::.' ',,'...... :*..-
~~.:...".g....._ .n.. ,- >::. y.. 'z l ?,, '......,. _.... .....,: g.. ; "., _ ;,.;,..,*...-:,_q.'.,,-..~~
~~,t..,.~~
,; ; ;;.,._-...., : 9.1. s._ t. s. : *.r.. _\\..; p ; . G.. ' ' ' a: \\ e. . y- .e'.. ": A % ..,?- _,. 9 '.,.,, _; '. :f. :. ',?.. '.',,,, ;..';;s -. -l- .c* -.p...< .~ .,..h,...,. f,.,f,', f' s y " i. ' ' h, ').$.f,, d . I: j (',' ;...* ;,,',; ..,[ I ';., '... ' '. ~ b ..s~ .. ' *-..',.( - i. / ,,s. 3, ', .1 a' ,,.4.. .. \\ s'.;,mo, c. ,_n *.- . ;},.;., '; o,f,,, ;o ;. > * * '.,. -.... 'y,. ,,,-). .'l, s., ,. ' ;,7 '.. s._ \\. ,.; ;(. -. - ri p -; \\ .f, z .y - :. 5 y .. --,e; -.c,_ ^.. .g. ',:, c, i ' :. * ' J. . >..V,*. ..5 ...R. [ f:. X, ",.r.': .,a'; :, ',. q, - ;? ~,q. u^...,.,..,,;..;l \\ 1;:,.. - ',..1
,; :... ', ', ^
~~0.' ' ' ^. ?;. ',.. l* ', ',, ' '9l ., f ' ^., f.* *. 4,. E. ..,.c.~~
f
~~.h N.~~
~~.,.,,,,f., '. _ ';'. %' l~~
~~..k.f.3 W,.], k..j: ' ;;',,*,.....,'.<'[,.'..,...,...p,..':',.'.'.' 4. ?. '.;' .;. y g l ,s f j. v..~~
~~,u_,,f.,.,:[.',-'~~
e. : . 3, s. -.,. ,,,.,.p .)q ,i e 3.,v.. '. ' ' ,,,. - -,,i..,,. 'p..... ,..,...cs" ..,y <.- t .c .. g.- ..g 3 e -.. i 4, 7 :,w,.;.,.:/ q .. @ ::..'. ;.*..; :.'; '.:.., t ) l :..; -,,. 'f ' ,o i'.
~~. ?~~
~~5 f. '. 'I '- '.';, ' l s L ,i . ' 4.~~
3.. ',.., ~._ v 7,.,,,.. s.......y ?c,: '?:' %,;...a.n.%,, (. p,:,f"..,..;,.,.

W n ",g. '..+':,7.R.,.;, y,,..
~~y....~~
~~:.. s~~
~~,-y:- .'.. *. " ;:_. ::q ;e -. - i . ',,.,,1 s: .s...,.; g.,.'.. e ,c. r.... s ,..,_.c.- 5.y.,,w '.l~~
~~3..~~
~~f..... p ; :,.- ,s. " ;3., t,. - ;.j liS.. (,t,..,,. s. f. t, , -. M, N.. s N '>.,,i,), ..r. f y, n 6..., T. >,, >,.,e '.. '.1 '.. m,~~
,.<.'., ~.,;;... ; '.. S

,, ~,
~~N; . g , '. 4.'- ,.<,.s.- [,.u.,~~
~~,.;3 0.i,,' its,;.; :. :., 'i., ac~~
~~....& <J,;.. : N .~..'1 ., - M4 : - ...,4.,. .,. ~ '.a m. a . c.~~
,. c,. c's a,,.,..,

s. ... s.
~~vc.,,,.,,. t.: r ,u,,.(,,.,...* ..,,u.,. J. .,,,,.,. ~....~~
~~. 3. 7... jr.-+,.. -. -. ; -,.-.~~
~~c., '..r., ...,,y,,..s,,&>..,.- .%,,"q'q.~,,', . A ~,. ).,,i. i ', s-.,,-,_.- :,,4 'v "., >- s lv. y - ;,:.... e~~
t
~~', 3..: - ss s,. p,._..,, e,. ,-. n A,-... k ' ; '. ;,. t ;. _;.'....'+.3-qg.,' ',A. (. y J,. 2,,., :F' '... :-..,,.... a:: b,.@.,5~~
~~~ :J... ;.+. ;..;;~~
'u
~~'us.,~~
w l. A-a,.", e ,,,.g,r:'.,,? y 3 -.s t ..,c+i,. p g f. p 23' 4.,..~,n,. .v :.:.'-~..,....".4,- '?..,.~_~...-.,.:.2,+,q,,- J...,.;R .<.,y,'>...,.y,./ .;.a, i,... ,s '. :.(."J, '. h,..: n f. e, ;..-a...,j: s..g, p,) .,w.. .r n"..*y.6 .,.,;'., /. ',%.L_ f 5.lq*,.. ' 'S..;.\\/ *f Y: f:^.] f., f \\.. '...,.' /.:f.. ',0.' j ' ? : f+%).. ..<... t .k. n-c., s. .s, ~- '
~~:b:.~~
~~f:'l*~~ 'l.,b. .'1' l: ' ?N,~~
~~l ' J...LMl.'.O(.lJb..O,;N,h,.~~
~~-\\;:' o,f, ?: : .,,.. ', ja. :.. .R~~
,i
}" ,. f Y 'f b - 3 l - ;). ' f. t....',. ;,.. ; h .p.z. ?: L - c.- :'; .,,,g ',. 'A ' ;'. ..y.. .-.:s, f ~, s;','.m.. . :Qe t.. ..,',:,.~.~.....;., ., :...,,. z,.,v.s.. ~ :: t.., g. '., ~. e-. .y, _.. -.. :p.h. ., :.. (... p u., W.. ....* l,;g. ; ,1..i.,..,.. * ,.. ' n:... .,.,..uy .~; ..,...,l,.v. w 's ..i
?
~~'3g,,.... - t;. -. - ' .,.n n a ,. '... '. o. ; >. ~ '.,., ...;',-A,- l:.. n.';;. v-~~
~~:v ;-~~
.e,. . ; k';. ., g..;<,' yg ,.. ; g.,71, 4.f ,w l . ; ;..'* p ... k., a, '* x. W.... w... G ,. :W,; *;_ -lY * ; ; 9.. '* ',.,. -. ** :':: ...'.',( , \\".%; ;... ~ Y ;. '. ;, ?.;. l -*! -* *[..'.- .," } '..]. d : .- '.. ~. '..* ', "..n.,',,;.,' '. , :.... :; ' .,.s.
~~f. '......t c~~
~~v. v.. ; -~~
..'*.r-

* :s,,
~~.vf:-i s,, y > ; ; D.' '.f.' Y ".'. ~ *. M '" " .'.'G .. - o.r ",.., y'. ...;,,...jn.,',., ..,.1,'**-;*.f .v. ,m..,. l lI_. - .g ... s';:. * \\'~~
~~l*: *, *+l l~~
~~.'6- -l. ~. r:, y...~ ~. - 7.... ' ' } f, '-Q q j'N. '..,.\\ g' ',, c') Q.s, ', ' 3.. f ,4~~
~~~....~~
~~s . -., :q f' ;.. s ..y 3,;..l; n.* .x. :r- - -,'.v..*.. .,;, :;',y ".y ..;Q[e-Q,- s: 9 r, '; :; ,; g.,*';,....~~~
..., 3.,

..
y- ..(Q ' ' }',... 4' $. ".. ",,';. ' ? *..,q,,,.,, ; ;, ' s. . y,., :.,.., *. ;, L ,, L i ..,...,...i*,.-[:*4 Q, .[..,,,. s q '. Q ?l.. ' '. ;,., _3 ,,N .*.-. ny".,, ;l,.'.,,p... .?'Y..c'.,.., .,,',* '.7; 's.i '. ' ' - r, q- -Ci..l..' ~- - >.:..'.. .,.6 S ,])':. ',: ';,,..,,);,,....,,; ..,2,,+: V, ' l^i. ';. '. '. '.. l '. >*r <... : : '.,,. ' L :.; ; ' ',' *p ' =,. ' ,,r':*'.,. " -
~~)* *. s o.~~
- : ','O " :
s * -..,, ',
~~v . f.,;g;,w*.t' {,%u. .,:,, g,.. '.h., !. ' {1 C... C. . '* :..- ~,. 1 -). i : ; v.,.', v ';.'.~~
~~t fl-Q ?.?;,. 4,,..,',,, ', l.,~~
~~G.> o ',.~~
z
's
g
~~.,,.e. c #g~~
(.E.,J, 9* /.,' ', ;'

',,.:. r G' '.,
~~.c v -.; e ; ; A'; *.,... 7, .c:,~~
v. .',.a,l ',,c'.e V
=,.. t,.,..,~;.;..~,.:;;*'..*,'....,...,.' q..f,,'!l,1;%,.y'.,, '.. : " 8 ', *.1..,.;. : ;...*. ' .,. - " f, ? ~'.',l-i.,.l*.,.'o,,.r'*'i...'.lL,,.i.3 1., .. ~.. ;t i .h... ,'4,,. x s +.f.Y, '.s-g.1,.,,,, ~. ~ h.\\.
~~i..l *... -.~~
~~i, '*{ l. ?, . p ' lu -,,n. /.' pg..:.;:. : ',., ~, '~~
~~:( :~~
~~,l> ,h<; ..t~~
~~..lr,~~
~~. G.. y '-*.,,,.,i e.,f,~~
~~.N... ,s .,j.,..'. 44,.P,~~
~~,.,. i~~
~~,...,7.;,s,,.,,,,$.%.,,..; ,.d--1 q. i,. .- ".+g. .r* / , ; :.'. f..~~
,',',%.s N'
3
.),',n=*,.. +
i.....~'.; -,.y,a.'*
~~'I v a, (.$ *'.,. ',~~
~~.'...7.,.... '..~~
~~,' :q,, <b. .,g +..r ....n. s.' *...,;..,, ' ;, o.~.0 f. .f..,,'.h'~~
+
~~,.p,..,...,s ..,,q , ' '..,'.,.c,,'l'.~~
~~,'c.s..'..,:.~~
~~2,,.'.. e,.,>~~
,..

u.)
~~,u a (... ,o.r., : ' g,,..]..,.~~
* + *, e
'., z' '- p ,.c, . f. ._f - - l,s., *,.. '. & -, ). v jst. ,,. '....'- K... .. ;, y M. ,v., y,, ; Q,..'.,.;. +. t. ' ;['. ' 3 ' g. , N..., s j.; '4 - m g c g ,. ;; ;., :x.,' V.,....... r ;, < ;. >, ; 6,,, /,. d',-,.....e; ,%,.,: 7. 'n '. :, ;., ( ', '., ; y.,,.,.. '. '., C.,,... . ; ;...,. ',' a 4,. ..., ; ( :- m .r 4 ..p s' s se, + ',',,..,y
~~e..*,,.~~
~~6,,..;..-. .,.<,.,} , b3.~~
~~,..,,, is,,.,~~
~~.s '. i : ..:,/,.,.., ..g', y,....i,.g %gJ,,. .k,.,- s , c, '...,.,. ] /, / j, <- y 1~~
. l

'
.,*". -.."s s f. .?. y, g'4',, '* ,1. -l:," ,. d., e-'$,s.. ",2p,'-', g. 3, f.f J., s -' ),: .i.,'.,'7,'.", ./ h,, . s j 1 *,,, "; ',.,...i..:,*/.,'....'.. ..M .,. j_ u - o F y S, .s-i.. f, ' j'.'f.f 4 '%. <'p.., *. m,: p c '*'f 4. %. '-' /. l. b, . 4', * ..'o t jw,".. ij, '.,, , v.'; 4 - ~,'l.'.- ' l.- '.*1};. f,.p,,..,\\ - =.' N-1.,,
~~4. s 'S'c' 4~~
~~./ q.. q. n io,' n , '. ',k.+,.,.'..., - - ", ;;. ;~~
~~c..~~
~~c',~~
;,

,.e ;.
~~g,(. '. p.. ' -,,,y;c,e,y, )');;,. o,s y, ', r,. s' n;,. e ,., 9 , V. g.. ;.. ', .y~~
~~b 'i ' '. '. ~ ' '.~~
3.y. j ., ' '.' l;, g r,.' ",$,. r' g,ig 4' ,, - l),%,.. '. -* {} Q ; ;.",[.'.rl, "_ \\ l_ t ' '!* s ',.., "' ',, 't .f.,_,,;.,,", :. f. a 'l l*';a --..i_ ','.). ::, ,.d.l Q ':, g O J '*, '.,, ; ),,' ':-T.i.,i.e ,,'s,' y '. ( ,,.. - ? '. : J.
~~s. < ^'K.y'.,f a;~~
..m -.,;;.i,';,y .e.' .r~ .,,.=.,a: '.. - .. L,.. ; '..* ",4 r il,d,[W 1,' ..u. ,-l.' e .2 -e p':..'..;'..',..:N.'-.,....,y'. '.s:'"..~~s.. , i,. '.. .',..+*:'.:'.. ,.g. .,>*u,. '+ ".: \\- p ' y; .t' i %,'+. r.T-' a
~~., 4,,.~~
.4 ': ; ) .4... .,. ;.. ;.~.'.-. '. - .'q .p.... '.a.: ' '. **h.'. -,*. s.- : 1 ...,e,..'. . -y.... M.....,y _. J ' V.- ',s y.. ': l :..,.., l_,..- .q ,c ,q. {' e.' ;.,.., '- ; - -. :, )y, s'_.~.r;, ' ',,, ',, ', ' _.'*/.f.". % '.C....7.c.,'._.,^,.h .g'r ,,,..r.y ::.:*
~~-.~, 4~~
~~.-l}.',_',,,, ..,, ': ' ' i, ; ;._ g l. cp- . - -:* :3 Q,,j,, '*','g..,; o ', **,,,.. f q. y e., _, -.. '....,i..',*. '.,/., '.. }; .b g ,,*f- 's 't "_",a,-~~
Q, y p,..,, '_., ',;
f Y q ?...l'. g'/ [, '. ' ' F ',,,, }~ ~. . - Ja p',.g.,fs, Q.,; ',;y ? d', ....V, , }J,; ,, /. ' 8 1,., q ',Mi , ~.. .. $ '. g',; M,,; ',. .x g. .e ,,.,.r..., f,. ,....,g.,.3'..i,y....,1 f,Q [ a. 'c.-,., ' ll.,) f :,S,y,... ', ;,g ', 4; V:, n t.. :y}d;,.,,: t :..- 4,,, u.
~~3.., _ g ',,.t. :,',~~
~~J .* <a. s M;.,., -,n 'Q'. .s .,f.,;.~~
~~_,&c,~~
~~.y. .o.,V.,.^. -.p.; q b.. :,.. '. * '.~~
. ;.

l
~~','y., j j*'.~~
~~.s ,' y ;. s~~
p
~~,..y, %,,.k.;, p,: t ..4 c', ':. c.'...:_ 3,;,....,. _,,,,,..... y.s* p. (ls f,,. _y <: ,;~..,,...~.:,.g,.. '_ ;;,,-.,., -y ,..,,;; o } r'.- ..r .t'...-..,. "., _, ";.; a s.~~
~~g. :,..i 4~~
~~,.,.T;*.,<<,'.,;...,,, u.s,,.. r. m~~
~~e(.g..~~
....

....,.,,c
.t, c..'.. ' ..L'* ,,'),,,. ~.'..s ',,t'..v , ',..:,c .a _,.: ,...; v,, 9*,,:,4;;y,,_f;. :i ;.:.. :.D N;@:t ,yr t v.,... u- ' :_;C.' .-l.. -...'3 n ~ '. y, s .:.- -.., o ..,r$_ .,-y .:.1 ' O., ~, L 'k. + , g... f ;l *. 1,...,' :..,' ~ *. ,.. ' @ ^Ty;y,;j'p,, .f.*.,, '_..,; a..; ,,q < *. ',' s 'l.,,;.;': l.,.,...,...,., ;, - 3.s.. j, f ,t,,,,'..- ,,n.,i,'...(.',';.I',k,*.'! 5 \\,.' ' N
~~:ll~~
~~,,. f. '.; 4 ;r.. '*. '.,'r,; - ; s' .y'Q y' .f. 1,.' ). T t ', ..,a...: 4.- -,~~
9
.,...,,y .fg .~.' ,2,-'....' , ') <,.e 1 ., g ,[ ..i'.', ; ];hI'[ ( f,,., ", j, $; ff f,I *, -[' tt N 3 e 4,..,. m., m a I,' r,. 6' 'M *,' ',.,,'-. '. ' ,o,.. l' \\ i' P' '. '., j ', I ',,..,'), ' f g i. ,..,. p ', $t '\\' li ? 2. $ I" ';' e '8 \\ ' ^' ' ' 4 .. '<['; ', ', ', ' _ '. i + [/. f' ( .E [j,..h,.,.*'*'...._,....'..;).k....f.,.,,* k' ? -[ [ h* N.','.I , h.. 4.,
O,,e,
~~...'.:l'y....'l g.;;,' 'I~~
~~[;;~~
~~[ i. s(, f~~
~~... ;q r '. '. ~. '.~~
~~je.,- y~~
~~s.,, ^.~~
b
~~4 d, :~~
~~i, m. ::.,,j:p:;[,',;.., y.,,,, '., r* L. ;.,z; >, ..t,., s ; . 3..c'f(.y,. .;. '-.... i. ;. ,: q. 3. "c. :., - c ..m. s. ;.. . *.Q ee 4 .a~~
~~., +~~
~~- n,~~
~~...) . s .,.,,3 h p..,..., gg;,.7.;.,.,. ; _. ; 7.... _ ;.. i. ;. j . p p. <nm~~
~~p..~~
~~' M,..,;g., :, -, p,.,;,., _.,r.,g '..y:.. -.,,,., ; c;., ;._.,; _ _.;Q K... * : s ',.;; lg.l.._ f,.;;. ': ;.;. !, , j.;. ~'.c ".% - tra .n.. .y~~
~~... ;3., u._..s~~
~~..g s;..,..,,, . s. .. - 4 .g. -4 x .g:,l,;?. l. ; ; ; <' t..:f.,. 'Q,3 ;, {._.. sN..'.'._ (.... s.-- wa .....<,;..v.. ,..e. ...,. c.. - j,~~
~~b.;,., l}, [,. '... _ \\; c,:j, l *;.,,,, L :' >. ; : "..~~
" ;:l.3.. (- '[,f. ' b g, r).y x,' };
s. ;,. W, : ;.,, _ : ', g i..*
~~,c< .p Y 1;[; :Q., M 9,..; '...... T h . '. g. dN.(y g;.(Q,' 1 /. ' y j.. 'y 3, .. - e : .g ^ ' r, i.; g ti,~~
~~l[ ' m.. ?,;,.,. q ". ;~~
~~p. i,'. l.'..,~~
~~T ; ','q~~
~~.r y. _c., ;,,:.g. ; ... ) ;,Y :l ; f.c V:l.. Y t.- g.; ;y ^'* 'jr. :w,p :;. G ', '.,,.;.. k,'. T; ;;.. < ;'..%, :' s. +.... :..; : - - s. ;f.\\ ). ,' m',.:'. .\\*'.~~
~~Ju.,.. :,. '. p., );~~
,\\.
~~j. :;,~~
~~s, N ),, : ' < ' ' : ';.'* ,...,.; n...r. s.~~
N.l* ? ' ;;':' l *f,. y... ? s..{
~~U:',Q.. -'., ; r G.*-~~
~~. ~...~~
~~3. :., M,,- .,.f,h)] b.Y,l'- 'f:. r $.^. .;.hf.. ' ? b ^& 'N.. y:: ?,k.f,: ) l N ; i..t., ?, %t.. ~ r, :~~
~~4.,.,'? ' Yo'f'l,y.},l;:,,.',!~~
~~^' ~.. . Nr, 'Y l4 'a* v r. [ ll,:l..;lhN 5 ,',~~
~~7. '[~~
~~1.,' ],,': Y,,, ' ' '. ll 'I. ~4,,. 5 f '. ' i N. l,h b't.' kj',; ' '. f. I i', y;j, l, !;.;.':,: l:h.0 * ' I.... ;;$ e,.;I. l*. _,, \\['i < j' ', * '[<* lN.U :' , y h, [*.~~
~~l..;.~~
~~. 6 .. Ifl,,, l lY..;.'i, / , f ',., h, ' ,,{,; (,. 7 "l,h. ;$h~~
~~f., " h' i f.y t ;h'e n'n. > "..? :g.. h::.., :g.!h f.~~
~~Yhk.; *.'\\,*. '..ef u !s ' m. t s'.,,- -t ?,, sh. ':.tY,fk Y h, .l 'Y~~
,^
~~t.{h ". );'f;. . }:;- l y;,l f, y.';, ' j.;. f.,. ':,' &.. }_ [s[ * ',: l,} ' \\.. ~.. (,L'.., l;~~
..

(
b.:f,g:C, .; l[ ~. ';\\ a;,;'_ l .;,* ', 'b -l, f, ,,l .I 'I ., [ 'e, ((., ^ : ' t [ . ll. .;f. .f. V'. f,, ';. ;},.. '. : i g &., ' j f ' ' 'l,; f., ),. ' p ;: ' ' ~ -Q,.,3. yj' l '.... p, g, l._/ ,, } f.l.,.. k* ). (. qp t,,;; g ..,.(%,.;',,.. j .g,...,,,, j 'i f
~~f,.,~~
~~I/p s. , '. l.. x ;,_;.m. %.m;. g +i;;; f.e /. p,! S.., 3, ..L.....,. ...:;.. : L, \\;_..,%:J. ;..? - [.',. ;% 1..lg L._ :; \\ _. y;; ~, ?, y .... a~~
_l

'I,f.., ;,_ '

A/_ %f, [f } ;. A,Y l '.},,Y<.. Tb.f f: *.l; '. :.: :. '.,.
~~J... ';.' !.f ~ ', l b ! '! -llf'?ff:$f .v b Y },, ^ ?;.l.rQ _ ;I 5-,. ', 'c '!st ' '. .;,'(~~
~~b W~~
~~'Z*, :;l V, /,. Q '-. ;:~~
.Y
,,:).,. ...:. gl,* h :.; ;'gl. L ' ] ' .W ' ;,. r * < ' ?. V'*g: '.,:'.,.,, ' M *3. ;.. ', ' 4.d w, ! ' 1:-.* Lf..'.',,'+g,..N. .r : j ...( W. y. ',k.. :.: Wl '.'s.*p.;' (,. L. f.. ;, ;,..' p' ; <!.u',',.' % ','v,....,. l y,Y3 '.. M.. ',. g ',,;; J * = ; o *v. +.'. l *l. ', L l' ' .i ... - ::.. ~'I., y ;-. l %?.:
~~,;,, i,.,'..'.,.f~~
.,..L.. :,. :.,,s.4. :'. 4 M.. ' ;' y,, l.3. ;." : .a ..',..,y,q. 4... -. /j, p,o,y, g,.,., 7. '!.,. ff, ?';,' ' n,.(fj L'y '. ;,.,.,r.. *,. ; / ',,, 3, .w. .- ;; p s i. ,,., -"*.,f;..*,. ,.g ' 4,$e,.1 .,. 3;- g. t 'g .,,....r..,,. 1 - ~.. ,., M.a;.: . ;ol.,...".;:,,.,"..f' -e. r .'.g;..e ?. 4.'; ,.S.;, ':.. - >.\\ ~" : ja. ;... ;..... p,7.., e,,:.' .s r ,.e c. s,
~~< ;;,., *,, ', ;, ;.., y ;t,,o.,..~~
~~a.'.. ':'.. -* .... ? :~~
h.
s?' .I',y,.,'?.;.,,.s 1 .'b, yr- ,*,.,,,..g.t . ;. ; t.. ,s..=,, s'.,,., - _..... ; _.nl i.O. 6,;(n,,.: ;,,,, y.. .'.,.e....*.w,....,.,... c-,n ,~e .~_. e, ',,.., ^ .,c'.,* n.- 3 ,,*,.,g.. y, "..D,<'y,, ,,,{,, .<.. i.. ', i A.n' - C .a ~. . n. ;, ;.. : l - y,,.;.,,..:,,,,..,.. -. ~ <.,v.,z' p ,,y .. v.c,. 5,. . + - u -. -'r.. s.. _ : ' ,;r : ; ;- ..w,_.,...; { * ;,, :.* ' '. - l%_ % ',K.. _' y _ g. g '_. s -,;. QJ...' '; y',;f -. y.;. g:4: :, l.:.. y ',: '. ' ',_, i ' ;, i. ;. . ~.. '. :..' s, .- ~.
~~f.mL.* u i**',~~
~~}..f s., . i ',.. '. ; ,.M '. ; W l. [. , :...}.t : ', ' 0 ' }:.. [4 ' '.: * ' f * ;.:. 3,; '.... _ '~~
.. l

,'.
L'
~~3.. '~~
~~l ,*v~~
l
~~..n. ' } ' l ', ' 1.- ',.[.., !..'.y ' lj. , Q,,/e ' i';bt. I Y.i. r;; [. Q^ I ' '. ;;:,:9. T L ':tr '. ~".., !..,, (.... 7 9,.',/. -..'~~
~~' j;~~
.( , l [, p ]; ' cl ',} <',,[.# ' ^ ,'f,,. M...".;.'.^".IN"...'.s. ,','.H h... s.'n ..>.'rt'.. r;k ;'. %'.s.. i.. f' ~ .s t y ~*<.'.:' i '.. i l ',.-s.v ?'.'a. ..y ,, r o p* j... ? , %.%..<..b,.'-- . ?.,.;,~','.,...-... c, v
~~,-...'.'.;g..,~~
"s,, :, .,,.,..1.,. .....,.',,....e. ., -.,,,'., ' ~ - n ...i.;... .,q.'..r...., j ..,,,.,.g,,.,;.y.,3.L.g:.. ;m...s... c e e .r..- s v. r. ;.. s v u .,g..,., '. g,R > W ).,,, :..,.';.",' sa,,., '. y - - ,.,,,;,i,' -,. -.. s 9.'. ' ',. ~ ' :.. .:.. : *% R
~~- ;; - Q~~
~~'.o. .., 3.. ' % .-:. -.. l' H.., L;~~
~~gv':l l;.~~
o,:" /. ~ ' '. '..,y4.y,..s;; \\.'y..;...l,';,'l; : ,,...f g, \\. ?., ;
+
,....\\ '. m. _.. ~ *. b, ; ' ~,.., a.. .. ~. ' ',, c;;.'.., ;4...L 'O '.~.? r - c'. .,,.v. ' -.... _.,...',. -.:. '. - q .. :s. ~.. -.y<..b...,....q,.- ^ - . y..., p. .~: ..z;;v s:_ ...', r f. ...it ::,
...:, '\\'

.m..:.
~~s.~- 4:.:,.. q.,..; ;. s.,1. J; &g; ;.G,. ; g.-t, i,... o .g .y..~..:;:~~
,

,.:.~
.. d,.,-.. W.".L." :.(.',,f.' l.'.e 9 7:.ll.};:.'s.,,.,.,: a. .....] ; .l j::.;.? ' ?.,. 4 (. ;w. .1 .s., .w ps : w v. A. r > ;< ^ k. l..: *., ; : : ;.. ,. -.e4 ^'~ ' "', f,,l.l..lx. l. :,.. _.l ; ;.
~~l ' l l'. '~~
'yQ y QY] kp ll r f ;_l'l..? L ' E ...'. ;I C {f: th&k-h4 +- ' f: $. n. -.. _.n. '- ' c Y.\\. f t.. )'. f., i..^l :.* .'! b ' Y I ' ! i ;.!$. ::..: 0 N,. f, 'l1_:_?,.{l' { -.. :-...- - f.:: : ....Q k.., d.. f,, ':. ; !l...'.I S. : - Q*.. a ~ .s - i-. v: A :. : :l ".. ;
~~Qo&,. T'Q(hyNV$Qh. r.,+~~
.~'s.. .t ' Y l-; ^ d;.r,,. f ' ' ' '... :,, f.,g 7'jg,.....:. ','. 1 ' ),',..' g..... ,:,I .. j f l,,. :,l f.i.; ' - l g ~ ' * ' ' ~ ; ,- f p., ..q. 'f,f f f,'.y ${c... ,,.., ;; ' G t i,,.< ".i.y,. ; ,g gg y f fr-,- ?l..',:.b.l: h.} ?' :7, Y ~ { {-' f ;; '.?' l i. ,l ;l,' ;'.' g (
~~- ; '- l.. Y l '~~
. :...'..'.]. y,'. h ,, ',. l#l l' ll} ll.., '. ~ ~ ' }}. Q 'Q,. _.. f :l; _ l, l? jif ll..,f,*.[ j[,~l', ' ' c.- ) M' ;] 5,.9fq.,..\\,.'[.:[ .f':' . f.(.[4[(;,i.()h,Tk,. U b. i.-(.[i ;;.l y t !, '. ,; [. ;.' i. j i, 2 ' h. 4 j,
~~q',f I $) ( [, j ) C. '.,[ id.~~
~~,y l:.((,',fiO 2,3 1 1, t . i.. , a.., f..._ e,.,.,9 .... - ;_ ~. ....._;.._.,t~~
~~e - -.,.....~~
~~,o .~ ~ v. ~.- g ,s ,g 'w,. ,q /.,,e ,gj ;5, +. _. _,t. ".p;f::;;yq. s ,.' s..- , ', _ %g., ', - ' ; 9 ; %r ';. a. . %m.~~
f.
~~a., '.. :) _,;. _,,. ;p.,. s.-~.. m g y. '..: : y 2 q..~. i - _,.., ',., q : _. q, ',..; V ip &~~
v. '. c q.. s n.

c. 1.,.; - _., " :....
_. 3,:
^ .... f. i&.l Y _' f' !. f.l. ^ ':Q- . n...,-. ; ;,. n ..f.fic. ' o, y. ._3 , j; f. y. + a.- g. 9-Q. - .. \\ f
~~s -.~~
~~..[..~,_., , b . _.7 l '.~~
y
~~~' ' ' g&h g* ,{& &4.' y' h ~ f 1 '. J - ) .i .[. -}.' c.~~
~~a. q w~~
~~..a m w. w a,e.. Y g:g.. c ~,.,. _ '. <,.!.) .. l & yg (yhb~~
~~l ;~~
~~c. J[ G 'fthinstitri6ity ".. f^5. ks.p MQM:N l f,.- ,.' (.' M".!;.r.. ol.....r._. [. f f gg ..h 4 ...; s. . ~ -. .g.qr,~~3.5 Ji .t:,, g.~~
.g,49,,.,

7., j.,.,,,(.
~~f' hD((d[ M {gje['ClM M'- -~~
' d; P. j i,.'.$:' '.'f ".:, ".. : };.,7 O..:a',[ W r *.' i di 5 J.,6. ~ 2 - }.' - h,,... N b g, w g ^ *:,. ',... -.' ;.. t- , - '( ..,p1', '.j,- '..'u, l' .s f g.c@h - - i c:... 4 ,v...) ., ~.,, s* ),{. .c .f,. _?. : I ' ' ~ ^ ' ' Y': I' c Q,; N;'.,., 'O i,.;.. [*, ( ? 7 .l&'&_;t:p.. .pg.r, '.- ./',- ,y;%g;.i. : i,- _ ' q4.. +... :;. 3.. .2 ......s v i.. .s%Qqgf ;,,. 5'$ i'.. ..; ;.. (. _.QQf .,?. W ?_ .o '49' :. $;,. - L .p N.. ./ ..,;.y s * (, I, ' "-( i....* ./ h . j s,'..' :, ; di :..'.
U.
g \\ - '., [ , '; i,.- t, i n g .g ; r ....a 3 .s k.. ~..,... - - *-..:. ' p.. a. /.. . ;4 9... _a'. y.,.c s.. b,;, t. f. l ,, '.g'- ,g.:.d j*. y .V - t.. .f- ] , gy - 4 \\" l G' u..... ', -,'l ?.'*
~~' 9~~
~~'. V h,. f 3'. 3;.f? 0 . \\ \\.g.' ,.l y.'~~
~~( l '.~~
~~.h e~~
~~'].~~
~~g. .i O j '~~
~~@.! ',., i U h M'..~~
j
~~-.5,' ..J.. '.. :. -' '[ [r I.~~
i.
~~h 'O.-~~
~~f..e..: '-.'~~
,3 ._.lY.. 't'. . " %.') . ;' : :( .g %'(.' :} [,. ,y fg* __ g;f_'. .m - :s .* :.l h .s 4 y. N,.jp,,...jy{l z. i av.... -.. ,,..c .. om + j,- ,y f., ' -, ,,' *.-[: _, ' - [ *i ,.j f j:':. " '~ ~ .5I',Mvh;Y. lt,%'._;d w.g' ' ' . ~... .c 1 ,.N. ' <s,* y', 'i . s '- ' ' i l, u.... - y y r. . '.2 1 ~ ~ '?. r;. . :.: '.C,.a: n ' ' V. ' y.-l' 5: b.--:.'^l':' ' M Y - - CM. UiI - ' ~ - ' 4. - ~ N.YYN'. k, .N 74s'. - 't . {Y(r]8 Y '? ^ hn ".'.,
~~'~ ~~~~
~~.? ': ' : g ' FJ.- '.... ' '. -- :.$,76l '\\'AI. [* ' . 'l :;.',,l ,.. f.':,p : .,: n~~
~~p..s~~
~~.uQ,lq,S . [ :'..;'. 7.l M. g'. ': [ _ .,,[py,'.n. v. t. 'h - t ..n. -q:: .% f'-~~
~~' ^~~
AC M N " ' .(.;;.[ p 3, - ap y w _~ n ' '+ ' g O = '. k ', i;# .) ?. g 2... ~ [, .-[ b %p...j; - e ? ...-v-. ,,p mp-h ,85 i.' ' i O e, 7 q p
U T I L I T Y O P E R A T I O N S mi > Cape Cod Mall expansion is planned for 1998 (PRP) that reduced our workforce by 264 peo-witlum estimated annualincrease of 5 million kwh. ple in 1997. The PHP cost in severance and other benefits is expected to result in savings > A new. $10 million marine Science of $20 million annually. Since 1990, the num-12boratory at University of Massachusetts - ber of employees has dropped by 33%. Dartmouth, which is expected to use 1.3 million Focus on S,ervice kwh annually and spur growth in the local marine While reducing our operational costs, we research, dustry. m have also kept our focus on continually improv-Consolidation of ine our service. Utility Operations ongoing instanation of our automated Clearly,1997 was a year of major change for meter reading system has improved service our electric and gas opera-by eliminating estimated tions. The restructuring of i bills and minimizing incon-the electric and gas utility venience for our customers industries has forever - while slashing meter changed our traditional way ~ reading costs. of doing business. = Approximately 98% of In anticipation of utility COM/ Gas meters and 30% restructuring and to further 6, ( of COM/ Electric meters strengthen our competitive . esM are now being read elec-position into the future, we tronically. combined the management We are continuing Dcburah A. McLaughlin. and administrat.ive functions work on our Trouble Call President and Chief Operating Officer of COM/G,as and C()MiGas and COM/Ekctric Management System COM/ Electric. Much of which will be one of the 1997 was spent consolidating our companies first integrated electronic trouble call sys-and, wherever practical, merging similar tems in North America. As we discussed in departments for dramatic improvements in lev-last year's annual report, this system will ana-els of efficiency. lyze power outage information from cus-Examples of the labor savings include a 25% tomers' calls and alert dispatchers where to reduction in finance and accounting; a 38% direct line crews. Activation of this system, reduction in facilities management; and a 26% which had been planned for the end of 1997, reduction in engineering services. To achieve was delayed as we focused our efforts on these savings in staffing levels, we implement. making the necessary changes to our System ed a voluntary personnel reduction program Control and Data Acquisition System in 7
U T I L 1 T Y O P E R A T I O N S t m1 preparation for the developing competitive Innovative solutions i ] power market and related changes required 3,o thrive in a restructured utility environ-3m by ISO New England (formerly the New ment, we have placed a renewed focus on England Power Pool). We now expect the developing creative solutions for operational new system to be fully integrated into our problems. A prime example of this is a series operations by the end of 1998. of collaborative union / management ( inunit-Our move in early 1998 to outsource our tees charged with revamping the pricing and information technology function is another services offered by our gas service depart-example of our service-based strategy. We con-ment. We used an innovative "open book" man-tracted with IBM Global Services, Inc., the agement approach by making management and largest information tech-union employees part-nology company in the ners in developing a ~ L' world, to provide us with financially responsible the staffing flexibility and solution. )\\ ,y skill pool needed to make ( ' Die result - \\~ f redesigned home heat-rapid adjustments for new i services and new oppor- [ ing protection plans with l-tunities. We feel these L different levels of service ? capabilities will be vital as ^ "l and market-based rate l we move forward in a ~ structures. ' Die program restructured utility world. ' was a hit, with sales COSIMnnds more in carly 19% to outsource the u. tionna-l "" '"* ""'""#'"d"" "*""" "'"^'d S'"i"" #'""'#" =di"x expect"ti""s-Service Excellence "thestcithngjcxibilityandskillpoolto make rapidadjust-Our commitment to ""'S/ "'"' 8C"I"5 ""# "'"' "pp,rtunines. mnnn Icf; ' Die same process is cur-firian E. Bossman. Director ofbzfirrmation l>chnolog and rently, be.mg applied to service will be seen in our John R livlliums. Viceltesider corporate Screices. other service areas such Service Excellence program making as rentals and warranty work. COM/ Electric the first utility in New England We continue with other innovative pro-to offer cash guarantees to customerr if we grams. Our " soft" shut-off program, eliminat-fail to meet specific customer service promis-ing the need to physically shut off the gas after es related to scheduled appointments, service a customer moves, has dramatically cased sea-connections, street light maintenance and sonal light-up efforts, reducing labor costs and billing. We will be conducting a pilot for this m king new service arrangements faster and program in the second quarter of 1998 and more convenient for our customers. anticipate rolling out the full program by the end of the year. Our intentions are to extend Max nizing Our Assets the program to COM/ Gas customers in 1999. One of the System's strategies is to maximize 8
~~., f R.,.. ':., :...,. :.z g:.'.. '. - Sy n g'1.^~~
~~\\...'u,".=: g' 4. _.. ..: - f. y .. ' " - J *.. ;~~
~~".,:,O ' ;;.. '~~
~~. ',. 1. - a ?:..' e ...... -{. j ' '. ~ ..g, j., .{: h[.W. ;l '.4@M.' ' ;[m.T: u.~~

~~i r-s.1~~
~~--u-.: ..., ;2 ..v.Y [y.[-l,s ,., ? s~~
~~h.. h......g- (.,y.~~
~~,'l,.^. g g. - - V. ~ ,T. +.~~
~~:. -... + n'.~~
~~, - }- y .. l m .4~~
~~u, -~~
~~. g.~~
~~. s~~

.; _ :9.;. _[ .. y,; ;;.. j. g;[ ' O f4 o 4 g,4 ?L" R ' ~ S&: .. E ':. [. .] ? '.... ......,..[J . y; f ;;[ '4jIl.g. '.'.(".%.{. ,,[4...... . [ " '.,. h@fg[ . hf. gpj .1,. { ..,,... e. ;.... e ,[: k k Yi!M5.. - [
~~h '.'~~
'l .f* '.'i ,-l.: k & & :h gwgf f gtq & W ' 4'. &. ': A j 's. '. N... _._ _. ' ) ;, f ' _[ _. [_ : _ ,;.h . f, d_. jor.ggjhl[ Ud' ' ~ '... 1:;.4 5 n... c h. e.. M*. .[. ' ~ ' [. -. . -..; E.l f, k - ..s- .m
.;f '

t..
~~( . ;} - ' '. ' ;- Q f t... .3%.*.- .../,. .Y. }._ .d.~~
?
~~l ' ~,, [. [.;~~
~~l, l~~
~~1 ..l , :' ;&Y ' ;l,.'- '.,.[ ?- ~ ;;. . 4:kf.. .%( y ; ;. .l: __6 u f* ' ft '. -,. :.,p;e..,y s.7.,. y: , ::; ;.., %. g: W . y... 4 - i.,..:...'..,..- _. - : .n c~~
~~::,.:.,. j, n, y~~
~~~.. a, _'.., -. 7.; Q.... ;,4.., . '.q...,~~
~~y. ; y~~
~~?.;.,*, s; ..g:y - * ' *k~~
". L _. > ' ' _..,.}

,,
~~_,. 3 [ ) :.. . [ -...~ f. '. ', y.. I g._ _,. _,,.$ .(.,;. _.., _ _, _; ?. ' ~~~
~~2..... y.~~
~~3: l_. ;;... [. 393[ (. : e M' p' . ' 'f... -' j~~
-..W '

s

9. g -
~~..g. . f.Y ' - ~. } Y:* h ^ h.f. :::;.,. ., ~ _ _ ~,.:,. _,... ,e e. l Yl ]'f '..? E .'] f_~~
~~t T?~~
~~l %. . M p'.i. '.. .r f.; {. L. l. 3. . j,. .-. '...:,.... '.' -,, '.,- ';"....,,. l 'J ;.,1 1 v 9.. '.., ';.T. ....~~
~~i;, _,~~
~~,'..? ', g ' a '. ' 4._,(. .C ,,. - f.l - ,e .e4 , ' h ;.'} _.,5 [...: ,. y y {* 3...,,,~~
V.
~~~ ' >.. - (_ . ~.. f : '... ' l " l ' *[. ', y* - I,',(. ?, Y -_ ' Y' ?, kh h .[, ?, ;. ' v . g;: .s .. s ; p.,~~
/_ i _.;[

[.. '
~~'.3 ' ', ;( ,,;,' - N. -..,;. f - ;, J~~
~~Q: '~~
~~^ ' ': - >; ' t > :. y' '. ',y 3,', f, _ V ' Of., ,, ;. ' [ '. _ ;.a W,f.t m, ..b W ':~ ' ', :. y. 5.. p.,b. s ;- . ;,c 3e z. ,.' ' ' L.g;&_ ;,1 :~~
~~r...%~~
~~' ;wh,R: Q., V.".XQIN.. ?f, D_'r, A.. . + ' a..~ ". - Q.Q ::. l;Q_ ; 'N.}:)q .s ,., l,',._;~~
- -

,a:..; ' ' :
~~n '*,,p .,.'.:l*- p - 1.t g,; 3m.,, L. -. .,; 2; - n _. ~~~
~~,,7.. :V~~
.. - -: ' - '..l V'-+'., C...e. [_. /\\l '. y A" 7. >7 ,.9'F.'.N ? l t...L', j.*'.'-@. . j. : U. f ' g e.#A.."' .i. s y.,. * . ;q. gm r ..c. . m, y.. 6 .n.- . g ~ j ',.,. y ' _, y, * ; . ;._. s,:... ,n ._'.c s..- f ' ' ..w..- . ;s .- ~_- s-
~~a -:..._;a~~
~~.. 4,, p,m;.,,.... p ~ ,s..~~
~~j, ~~~
~~- l' - * ' "g - , _ l.'( .,..c',. -/....,, .' 7. c: .;. ; $ fi - g,, 9[,j.. ( (.' .' i' - @,. i .w ,..< ;.1 e j'g*.. , f,, ' 'f',,,. g.' '. m i e' "*: e e,, R I ,pt. f [ " I ' [ '; (~~
~~p '~~
~~( '..'".,1 ,..i..,,. g .,. t j, l':;'?s# Q l. ....^ ,::m.. ~ :. uk.% s ,,, ; i-~~
~~'}.~~
~~-.. 'Y'V - 'y-. ' _,. _~~
~~W o.,-~~
~~Y~ a ' '. '.$ * '. l '.; ' > %; '.. ' ' l*,~~
~~[ '~~
'. l}lj.:{.":$ll'?.; U.'.' ... _. ' '.) :. ,..- i ' O - . ' ' a.-.. ; m ','2'. ,;...'.....:.A._.:... L e h. '; *. > { !' I. : i f l(ll'l:ll..'..t E; '.. ', % :.':. I* ..',.N,','.'"'?. ?.'.
~~i.. ' }.~~
~~s . - _...l ~. }. _, /. 'n.l. ;. ,s ,e se a., - s: . 87.';!~~
s.
~~.a .Y. .. ~~,-. gy. ..?,. L';,..' ' ym, -._'.'.1;_', s -%[ 4 ,*,g - :.,. ....,. '. [. f.4 '.- . g., ..;.,..,.q,..,._.,...,:._ _,,.,. +, 6 ,4,.g~~
~~7.. ;~~
~~.,...,..a...;,., g- .,. - ) ..g'jy.:y _,_ - :.;;., g...~~
.d
.W ' M . r. ..l>. 7, y^ M.:' e - ~* W . g;.; u _ ' ' N. f ", r .... '. I,}M.L.V,' ' q, ;h {, \\./ I):J ' ' ) _.g".. ~ _ ,,. L...,._ - j. y. .)l I,., " ':. ;;{. '.. :.'..#..* T 85 '. , p,..,/ J. s y,.. ..,0 i.. h,. [ ', ' ", '. - i . ',.'., 'j ~ D. gf .(( -.,. /;,, . :7 '. 3,,,_ ;. ;, _.... *, -,. (\\(, f ' j, ; 'W ,g .p / s, ...g
r w , y. ;.,g fr%Qf L L
~~4. :..?;~~
~~' u. 5f ; e' ' fr.'.. y. w,.x y: ; 3,.,+i - ~g ,s, v - w i % *' (' ' 13 f v.e, &n.m'..,...w...e., ' ; lI [h i.h i..,k i t,, j>p p:-.,.wy, .:v ~1 w .-,e 3~~
~~,.-q y~~
....~. '.. ~. , ' s ~ <'.e .,]. 1 e -..)<.. , ;s e. '.s ~:. y : *!.' 4 :; n* 4 le Q -. .... ~ ., g:l ~~~~. e i n C. }%.,,. ...; ;.,r. - .... / g .. i ,ev. v ,u, e.....th......-,,... .5 ,,.;.,,i:. e.g,Q ;:::';:'* h, - %.,*.'. n p > C. ? . g ; '.:. '.& ;.:,, . ;. /.., .y.,. 7.."[. 4 ~. c. l ,c .g
~~y,.M,~~
~~..>. ; ',. 4;;.. p:. ". *.,' t m..* e v - n..n. - :. s.- . ~.. ' ,.y -) ,3 Q ,6 9 8.l u n~~
.. _.. ', f..u l ; ','

. ;.;r f
~~. ;! ^N;,, ', '. 3., ',nf.. -: *. ' y,~~
~~f.. f. -.~~
~~.c.,- . _.,.,., - ~Q. '. _ %.':- .,g. ' - -4~~
p

~~.S.. v _ qq . B. 'f y 2, ?Q., v. i. ' '.: .r .z..,.,;~~

~~.- _. ~!~~
e ;.. 3..,; . s !.g y 4.p,,- [ ". : l ' l:'._t ' - ' '...::. ' p$ ].i j', ?;,,;;,...~_ ' -,.., f E } '..,_._..l;..-. '... ' _ ',.... _, __ '. *. '.. l .. i ,i - W:l3Y,' _rs.- l: ',U ^. _.,.. ( \\ *: ?,' l. _., f.$:9,.q.h. '(,.:].i'. ' ',[ l A" md
~~. b~~
.,, ;':. _u :.jp, *W;.u,. ,. ;p:.g *v _, r; r'z :,' - ' ' ',. [. ; - :._- .'_ { 'le. 'j y? .3- .7:.,'; - -,' " [: -"'... w*" 4.f.. : _- . _ _ ;.. l. -l. .' - '-, _.- 1 -l _ _.., .19 ;;.,, - 4 t
n, 0.

%._. _
.i.. ..... ;. y.: '.. ' : :. l ,4 v.. ...-r '\\...... '%,.J'..';,,,',','.'_~. 3 m j 's ;?. ..<.: ['.\\ &.'f y ^: .h.; ;h.l'{;W l' f,y.. ;. ' ':- ,'-A H.... a A f l q.E, ; ^' '...*.? l' }]gh-f[',.i ?., ... E.t '.M - .{.<. 77
~~. ~i,i~~
~~.',, '. ~ ' I.. ?* ' .,.,.; l..,-... 3~~
,p*

~~w. ,QQ t ...;.\\ ; _,._, :,..<.,,, :.;. _ ,,..,. * *...,.:__. *y l , r}' ...'.r- ', _ w.f;......,. t. f.. v. - e... - 9 -'.S,, -.,..-.-.. g....'.',~~
1.
~~o p,e~~
~~,.,,".,,.,,.,.'r j J c. ...7,,,.. - - n.c .i.. e -.;6:v.a:o )., e.. .. -,1 4: ~ .- r %", -- n 5 O.,y " ;*w;g,n t :[au,'f3' + '.,. ~ ' ' ' v .9, r,, I. . ', E~~
* ~ "
~~i s ..- ~ / q g ' ' - I- ';[ [. ,' l I.Y f- ,b ( -[3h ,.t.,,.l lN,)f,. 9 '. . ~ e,?, ? j. ',[ f,.. " [- i,'.,. e l T[7 f ~ J ^ ns..~~
~~v. :~~
~~( e 1* y; -l ' ;;.. *,- ~-.,. @. Fy 8 s ..?.'*., ,",r.-.... ;. dr;.. .:4 I ^ (. (. b..*.-... ;.. .,:., e - s - '... '** *.... s.- ..., -.. b., c.. 9 e. i.; . l;Y.l 4 v .^ ..'.'. N " 1,, ? !~~
~~d. 'l5 ?,' Edl,.. :'\\.~~
~~. ^ * '. . _,,?. 'i. ) ?!,- r L.~~
~~' j~~
~
p. f ~;,.... ' t . '..,l'. .%.:.l.. y ' J.. '. :.... : y.* :, *~e.. ; 3,,. : - .sn a , '.3(l, ;,,,,...,n r,.9 ,.n.. .s. . s.. 6,s I l .S...,.. . y h (-.,. f:. 2 ..... :.. J. . :' ', ;[ ;,.... ' ~ !..'s; ~.,.%:. '.......,. .m.p. - ty 1 .'i. g ',A.y*,,.h,,,.... ~ ~..,... i __,...a, 7. .p , " ' A. ;*.'l: '. .o.*
~~,g :[Wp ~,,,~~
~~l ::y.);; M} ' .'.p c v*' 3 s ,.N : p. t. - e. T,. 5[,y g ' : ..,,. ). ; Q}k l b. $;j^j,;y j .de Jf.i s '.: %) ,. a...... },'*=^,..,'f. ' ;~~
~~y U.;.' y 3; '... ;O ' ff - '~~
~~l-7: ';, ( *, }g ..; r c.. k s, lr, ' f L1.. y.e.. - [. T ,a , ??' f;*.' '. '.N ; .f l N l';. t l Y- ,. 'f; '*. . ;. _-...'f~~
1~
~~l $.. ' T :b :..(, k. i:~~
~~: ".1~~
~~? < J'.? '. '.;i. \\ ' : ; 3 y,. _ ' ')..),..l ..] } '. J. - l (-l G,6 q a:.. ':?., . _ j.,'. ;ll.l. ' ' [G. ib,,,. %m&&T?vswv.m ..:.(:~~
~~",C f; '_V ; f y. ~ ' ' ! ', -Q Q;....~~
~~q.-....,;'.'. ' \\. '~~
~~[. Jl~~
~~_; ' 'l3. ;4... : .R ' ;. y,.r.. n.:., n,s. z: s .,t; y, ^,,~~
~~l,; '.~~
~~M.., ,,_. ' ' f ! ;-{,. h.~~
.'... 1.'-

-.
~~'.-) [;g * ; . ' l.;4 pll:) - Q; v;'f.W.- .: / L. L.~ 0.';j '.[i. _'. r. %~~~
~~" Of\\, f ' :. ;~~
Y.W: f 37 ,e' .[ ~p...' }: .)l,; :..?;','..cf.. : :;; 4.. &g _t % {- Q ;;;,,9,l;g.Q j. ,s. {C.,,. .. l -' +... .A.>. . e, -..'.(.. > ;x -,f, ,.,v.- ' ' ' %. h.I. .' m ', i ', _, l 'I: ? ;i ' ^ s'?.,. ~ ' f'l.; 4:'.
m
.y.~.- ". ' s h $s :." ~ Q' V...p.;g* V.h.., 2 c. n ..?-l l...;'M ;d Q *:. *:;;f.;: s 1% i i.f. ; c. L.s. h > ; *;,l k', y f' Y s.... I '-.. ..,n. y. t... - '- :.. '. t.,,l. 4- ': }.' l % -. ' ;'. ' x : : "'
~~e. *,- e. '. '..i :~~
~~.hg g',..:l' :.,: [ t.. ' + \\ z.' 7)s. Y - ~ V. L (. .p '. y..[ k , ') , Qn t;lR o, [,v .:*kd L 1 '.... i. : ' '., [, '~~
~~f. l,~~
~~.p.. ;.y "..r..., Y .4 g . " _ _ ',.-; %..i.. g ':;. '"'%*s-~~
~~, ;.g.~~
~~,~ . f / ~;~~
~~s -~~
~~f ' k ;j:ll. ::".;i.1. +,'...%f f shn e y,,~~
~~~ /~~
b . QW,%l '.;.,.*. ^ .:"4.. f ' pipf... t .'.';.y.'..'.'.',~.n:),.e,;,'. :' ) " j:. s -;.5 T; ' '-', % L .E. f I' i
.' f '?* ' Y w esW *
~~.. ; " p.y _ ,. * <1 :' *.- - g?,_ s, '4 _..i', '. r .h q [ m._, k s q!u L~~
^ -

$'G
~~. 8*U,# q, Q' q.:;.'. ', '.' M '1;... h... v-s - [V;' s, ;. _. .: c ^: A '. ;. '*%,V '~~
~~gl>.~~
~~I: '.' L'., y9, ; ...-l.- ..o ,g .nl .',_f.. ,. ~ '.,.... ~.,,.,:. ' - n .;. -~.,..; ; : ' - i q :n l-. s s~~
~~w. q.,y t~~
g. s :- ?;. a w' i . v h. 4 e.. ' *.. n. : , % %. :M., ' *y %)...+ h. '..:',..,r; ; f.:- ~., '. ' 1,.lr :;a, '.l_'. .i it. q v e.- a .,Q, r .s.';.'*.- ^* :..-.,. q.y:,: w:. -.. '* k" ]: I...,A Q:k - -.f j :., ,H, k 3 -.. 4.. )... ,_t f.... t
. ' h [

)'p _ T

e. : :
~~r W v' b:..~~
~~:, '.,*.u,~~
~~. ' * : '.l. < - '3 7I :. M~~
~~g f~~
~~.f. I ?;".; :~~
~~b. I.~~
~~i -(. t. .k. a. ^ '.; I E.n,; . f e ~., b~~
~~,...... 6 ;.. ;,, '__...,~~
~~1. ..t,.:. ,... _. 'l' I' ' \\;' ;;. '.L: ' :' [..f'} ; ). % ;; *.l.. i - 1 -l:m. : '4 : ;).~,...~~
~~-['.s)mn4;~~

~~.r.t~~
~~s..,-.V.W._,..,..j._~~
~~\\*. .r..,....-a..~~
~~:... '. ;,9~~
~~.;., e.-.......~~
~~.. ; _ ;} > _.,f.,.~~
~~....... 'l 4~~
~~e r n. s - _.. g _~~
~~s y'.~~
~~.,.....tp., .:. t d.. '*'..-Qp- *. ' _,.-' }' g ^.;. V ll),.v y. i ' * ' . '. (:.,'?_' .'_._g" Wu. R ?~~
~~l,,~~
~~,.s, -._ y _t aj.o '.Q %,,, r k i.gl,.g.;; _, p.g%,;e,; g*d,,,..: l g.,~~
~~g ;. ' j,. ;~~
~~t ..s , _. ;, :. y,.. ,.'r. ; ' y;;n.,.;, 3., f,.._ . ;;..- : 7.,.,.~~
~~l-e~~
~~.4 9,b, !,.;.,t,- .;.7;: c..~~
~
~~3 y... v. " :..,. ; - ~~~
.._~

s. ;,J n[. ji 3
_y...._ f<.', -s -t } r-y;n* f. y ;;;.. - ......s ,.,..s.,,,...;- +. t. ~. .s,t_-t t 's . 'naxnnn-nn . _. +n D,.J )..J.. "J! r.s.? J 3 6. -Q: c . v.JV.c M M seememnesink%c@e s%+MW*eO .f.(: n ^, O,:.,. f.ll =.7 4.] '.} ; q!jgF., p (. (. 7:-l..pront%de@pesi pg wh&ws heathW,wp;applir y v. .~
9, - [, ; ;. ;

. y J s., g. y ; < ;
~~_ ' a.:ance g y p ppreganapren g b htfqan.gihe @gnpany..anQek.y @,,, j " q '. ! :,y (,: .. g, 7 7 is. s .r ven e ' V L:. y r - ,/. M.,. L :.'. '. f.. L.~~
~~6. M. + r :. ?::~~
~~mihd4wn pwnudrretirrip, irde c%mers.4 ix-k}W d h $t l.'. ';l a. ,L ~ ? i 1 .l '. 1 :.. - <- ~ : .k., - %:.?.. '.' -. -.. q ..-e ' Al ' bl'p.. ;%,:..[1l,~~
~~, C.'~~
~~.. "i-hth - -- t .. '.b'n ~. :.'<b' ~.. * ' . Y ~ - - -.. ?2' ( .;. ' [... '.' ; ;.l ;d, ? ' l~~
I ^f h ^ R Q

. L; '
.IO; "..:. -:
U T I L I T Y O P E R A T I O N S existing assets. An example of this is the result community groups, support for local causes ] of the recent growth in wireless technologies and employee involvement as community vol-that has created a huge demand for suitable unteers, we are committed to being the best sites for antennas and cellular towers. We have corporate citizen possible, found that in many cases, our existing towers, We are proud of our conununity outreach substations, and switching stations are desirable efforts in 1997 which included our " Season of locations and can generate revenue. We have Caring," through which 211 employees volun-completed lease agreements for numerous sites teered for a day to help out at one of 50 pro-with major telecommunications companies and jects for 23 United Way agencies. Volunteers we are actively negotiating with others. painted, landscaped, performed office work, We have sokl eights, nationwide, to our success-built sheds and took chiklren on field trips. ful work management infor-Our volunteers organized mation system (WMIS) our loth annual holiday designal by our employees to O~ 4 ~ /- party for 150 disadvantaged streamline our customer [ ' chihiren in the Worcester work dow. We are currently 97 trea and made contributions modifying the WMIS system to the COM/ Gas Children's to meet the needs of gas oper-My Christmas Fund, purchasing . M toys, clothing and food bas-ations, with newssary modifi-g g cations expected to be com- '~- kets for needy families. pleted in about 12 months. L Our Partners in Education COM/ Energy Steam progr;un sent 150 employee Company, a non-regulated operations contributed to co.ilmnergy's 51% volunteers to assist children total return to sharchulders in 1997.(From subsidiary, continues to Icf?> Iames D. Rappoli. Financial Iice by reading, tutoring and men-I'"id'"' ""# T""S""'i ""# hCh"#! I' achieve positive results with toring in 28 elementary Sullit'an, t' ice l'rcstdent. Secretary and revenues of almost $17 mil-Ccncral Counscl. schools in eight communities. lion and earninge of St.3 million. We continue to We are also committed to safety education provide high-quality steam service to 21 cus-programs where COM/ Gas and COM/ Electric ,omers in Cambridge and Ik>ston and are explor-employees teach children about electrical and ing opportunities to expand our steam sales into gas safety and conservation. In conjunction new markets. with this chool program, COM/ Gas received the American Gas Association's Award of Community Service - Merit for Consumer neiations for our video Being a Good Neighbor production sareguaraing your nome From Through our involvement with civic and Carbon Monoxide." 11 i
-R E S T R U C T U R I N G U P D A T E 79 Electric Industry > Electric companies will provide " default service" { 3 priced at market rates for customers who are either s .JM Restructur,ng new to the service territory or who have ieft standard i De opportunity for retail choice became a reality for offer service and are no longer served by a competitive electric customers on March 1,1998 under energy supplier. Massachusetts legislation that provided for the full > Re Department of Telecommunications and recovery of transition costs, rate reductions for con-Energy (DTE) is currently developing regulations that sumers, enhancements for the environment and will establish performance-based rates based on ser-expanded pro'ections for low-income customers. vice quality, customer satisfaction and facility upgrades. j %e electric industry restructuring bill, signed into he DTE also issued standards of conduct govern-law on November 25,1997, provides full recovery of trant,itiou costs provided utilities do everything ing the relationships between regulated distribution c mpanies and non-regulated affiliates. COM/ Energy's required under the legislation to mitigate the cost of the transition from a regulated to a competitive market. holding company status already provides our electric perations with much of the separation that is required his includes the divestiture of all generating facilities. under the regulations. As we discussed in last year's report, through our " Competitive Challenge" plan we were the first utility in Gas Industry Restructuring Massachusetts to propose leaving the power business The electric industry restructurmg bill also,nclud-i as a way of creating a competitive power market. Our ed many provisions for the deregulat, ion of the gas plan outlining the details of how we intend to imple-utility industry, which has been moving steadily ment the testructuring legislation was approved at the toward allowing all customers to buy their gas supply end of February. Included in that plan was our propos-I on the open market. i al for selling all of our 967 megawatts of owned genera-J In July 1997, the DTE directed the.mvestormwned tion and 17 power contracts as the biggest step in miti-Massachusetts gas utilities to.. iate a collaborat.ive nut gating transition costs. process to establish a common set of gu.d.l mg pnnenples Our auction is well underway and a short list of bid-and procedures for the separation of the various cost ders has been chosen. One or more buyers are expect-components (unbundling) of natural gas m, i ed to be selected in late spring. Proceeds from the sale Massachusetts. will be used to reduce transition costs we could incur. As a result, COM/ Gas has j..omed other utilit.ies and Other highlights of the restructuring law include: i has taken a lead role.m the Massachusetts Gas 1 > Beginning March 1,1998, electric customers are i Unbundling Collaborat.ive. The collaborat.ive meludes 1 able to buy their electricity in the competitive ) numerous stakeholders ranging from local distribuu.on t power market. Electric distribution companies will compames and gas producers to consumer advocates deliver that electricity to customers' meters and will and regulators. Its purpose is to make recommenda-continue to repair poles and wires and read meters. 1 tions on gas unbundling to the DTE, m.eludm.g the difli-They will also be able to handle the billing for both l cult issues relat.mg to p.ipeh.ne and storage the energy supply company and their own distribu-capacity / cost assignments. Also, related to customer choice, COM/ Gas will > Also beginning March 1,1998, electric distribution file, by April 15,1998, revised tariffs that will meet companies are offering a 10% discount to customers legislative requiremt nts to functionally separate gas who choose not to select a competitive supplier. merchant and distribution services. Assuming the Electricity supplied by the distribution company is capacity issues are resolved, we expect to have known as " standard offer service." The discount could unbundled rates approved for all customers by increase to 15% by September 1,1999 November 1,1998. 12
y ,..,,a,,.,......pf, \\ 14 e,.,u a ;.... s e, ...,;;'.c.,' 4... 1~ r.n,.. -. '. -. ;._3,. c'., g...... - .. -,. 7......,...... -,,, ;... - Q_ 4 ::,..;,.
,9 - -....

,-....,-..;.-
~~-s.~~
~~M;... ",..~~
~~i... ,.,(. j..- j fa ;, _.. f -f'.'; f. : [?; I '. ',,.. ;..; [- (.. %VI }J,~~
~~'~'L..qy r~~
~~h l, ', '.[: .;?. kgbQpf( tic'.)$ th } i. : h k} i),. l.. s l (( '- j. '?." c((. [ ' ' i. ' ' klgNl" ] ggggM h ';!':= ll l'l)l[;l.l;:.l.Q;..~~
~~I; [ ;[. [ l [ { & $f0%ies & t&,l,j,}.~~
yn .'hrh g;[,_.., ; m.SlQ.. kf[;'g['h:.h." hl,[.[g M.q...v.(, gg ; q f.c ; Lnggicppts, gi,Sg[.' h b #1 p$I.k hShlMtN$d 7 J. .,h. :!.. t CORI .? ny '.. ';:? ? :.. ' i _' '. _ [ ', g.. g ..$ F mit(@ f ' custbiners WlionttL l - 0 g c ...p, h l[ thek$h0hN..[dgihColdbiHAN0f('- ( ;... gs .A' gg,Q, .Q.. '._ ,':'. 7 .... g ' _. '. _ '. _ _i'.'..' y +. '. :... ; '._. l, ! a{ ;...- .. ' f:., ;i ,9.. -. y ;.?; [. i ' ' ' '.,.:l l... V g,..-j 1 ::.* ".m . ~. %- .., +. -
~~4.. ~.~~
~~u m :..~~
,s.

.};: !-
m.
~~t. ' * *:~~
~~.. ~.. y c..,' ~ .:s, c ,.7 ... ~....,......_ ....-;.~,,.., -. ~. m,. Y.. A g; ~,;..~~
~~e y,.~~
~~,3 -t ,; s.s.-: ';;a}4 8 ' j :.... n. a i ? gj,4 j rh i,.D ' ;. - ' ' +, ;., e.,. : 3.... ' a e-e q n, f. '.,.;.-l: }x ..'7'%~~
~~.;;(yll q~~
~~^* ' ; 4 ': )~~
. [

,... '.

-k-s..,;
~~f y.. -~~
Q

3.,\\,% :.
~~,.;,e 7, bf... ~ c. ...\\ ,9 e .,.l'lp p;y , Q;v Q :," ' ' ; - 'f,' ] l; M..g -' -.. l:. - w c .f l 3,*- -,. 't ., y.;).p.l2 1~~
~~, ;.i~~
~~_J.,n:.f 'K j. ' { &,.... '.. " - .. :.'.,. n '.. :l ' !:\\ '...b ..v. ~ ': ? '.c " h _.? L ?u l t u,,. l QM,%: e ,7 .g 3 ..k.!~~
~~l,,~~
~~~.h ' i ,.., k.., w _-' '~..'.,::n' .' I "'.l... k.. b'. ; 0^ ..mt:. *. Y t ' ':....,. '., ' ' ' ~~~
- l ' ~ !? -

$, -l. '._.-
~~?;lp T.J, .;Y .,,.,,'c' j@~~
~~c. 3 :,.~~
~~s *,.h'hd .i 1 i q, [ ; 4}%.,f N '., - h ' 0',. %. ' k..,.,.- L. ;. ~ t ., ":k. . t,isf. I'. -.' '. - ' '.' ~ j '. ;l, 7,r,' ic;. s.. L ;f V....,,.,, ...[ _ _~~
~~f P.~~
~~,', 5' ...;;j.... '.,..%. 9 ? U.y "f ' - I~~
.3

.. ~ 8 ;;.
~~.m.. ; c. L.:. - .c m. ......g:,f;.*' ': g, l .., ' i. h ;f:.h Y, k k l')G. h ;,'j. ?. ^ :. r.~~
~~' A b:..~~
~~I ?. *6 :i ( ' i - ' W -. ', d ' ;~~
~~l N [.fl'~~
~~.' )~~
~~. L N:; I,y. Qf;*'N 4,WUf., 'i~~
y..T ; "'.S?.?,'*
s',~. '.T : E "l:' i ' ';
~~L..,.' ).'."*";<' _, '~~
~~~) %.,. J.;.. - - a cd~~
l". s. W* a.y..,n:.hf'. s ?':*. *',. :. V. '

g; :s[i&? ';;l% "',,.., ',.

f ; *j '
~~A. w L' ?,. -'* c' .e. L v 4~~
~~7 : t- - <. ' ?.e,yk:, s~~
~~-;e' 4 p%j ' ' -,*'..6~~
~~'.g~~
~~.w W, M &%> v.~~
~~x. ~~~
~~n w;:,.... w.vw~~
w* w s'*
f.. ~; *
~~.- y ?....~~
~~g...,y '..-~~
~~...p ., ;,..g? ..,.. m,+....g - 3.q *.j g. ; f,-. g..c ... - ; i y.,"...\\' y .y t -. < v,$% _.7 1 .,.,<.p,.~~
~~n.._~~
u \\.. ;;. 3 %,; l _,*
_y
~~. '_ ; ; n~~
,fi'* ....'.F c :. '. gg 3/ ;. 'g '.~ ' 's ,g..,,.,. ( %.gg.,x.n. sibs..s.).W M.4M 8.+, ?. Y,, Y: _ ',Al x,. - 'l- _,l l. l' ', y, ~ ' ' ' N I.. *; ? ;, :: i. - I ,s ss,%,,,.Ngg&' n -..-> ~ ^ ?. ' l l? .'l.. ..l'.t ~ m. y ?- /.
I'
~~-' 'd .a~~
~~3. 3.~~
~~. f',',+* 'h..' . % y.%$}8+,9 .s q sm' _ l ~ i Js y nn ; 1 ,,,f 5~~
~~7 e.~~
s.. - 7. 4 .. ~ _ '[ _., _s t s
N E W B U S I N E S S l l lj Unregulated Businesses tomers. nrough the use of new technologies, .a]. Rapid and dramatic changes in the electric and gas Advanced Energy Systems will be positioned to utility industries have created a number of opportuni-provide these customers with dedicated energy ties for non-utility energy-related businesses. facilities designed to lower costs and emissions, % rough new business ventures launched in 1990 and while improving overall reliability. 1997 - COM/ Energy Technologies, COM/ Energy Neural Network Technology Marketing and Advanced Energy Systems - we have In 1997, Advanced Energy Systems established a moved to take advantage of these opportunities. Our joint venture with Charles River Associates - NeuCo stategy is clear-to maximize our stmngths, and - to form a company created to develop and market leverage those competenc.ies in energy-related bus,- i artificial intelligence process control. He integmted nesses, the arena we know best. softwan and hardwam product assists generating Advanced Energy to Purchase piant operators in increasing plant capacity, improv-i"" '"d #6""'7 ""d "d"d"" ""I'"i""" '" "' Harvard Energy Plant finst " live" test of this advanced neural network I On February 5,1998, we signed a purchase and J process control, we were able to boost production by sale agreement that will ,1 4., 4
~~20 megawatts while reducing enable Advanced Energy~~
= .i?* % [ j ' NOx and CO emissions. Systems,Inc. to purchase 4 NeuCo's cutting-edge Medical Area Total Energy - / t technology promises to have Plant,Inc. (MATEP) from enormous appeal to the $200 8 Y Harvard Um.versity. billion electric generating MATEP's pn.neipal asset.is a market as power producers chilled water, steam, and elec-l face new competitive pres-tricity geretating facility in i 1 sures to cut costs, improve Boston's longwood Medical x** efficiency, and meet increas-t M .1 area. He plant was builtin ~_: 4,y J mgly stringent environmental 1980 to serve Beth Israel e Deaconess Hospital, Brigham * - * "* " " * " * ""~ Advanced Energy Systems'pending purchase of abillty to improve fuel elfl-and Women's Hosp.tal, Ilarvant Univenity's total energy plant will pro-ciency without major capital i Children's Hosvital, Dana-vide thefoundationfor ourplans to offer a compre- ^#"#### ###A"## ###"#* "i"# ## ""# '""#' "*P"" ""*'"""""*"I Farber Cancer Institute, the s ofcommercialandindustriascustomen. Pictured where nearly 50 percent of Joslin Diabetes Center, and infront ofour newfacility is Leonard R. Devanna, 11arvard's medical, dental and Mdent o/Advanud Enew Sydm expenses am fuel Mad public health schools. We will continue to provide - all of the energy required by these customers. Energy Connect,ons i MATEP is the largest non-utility total energy Another example ofleveraging our strengths in system in New England and is a flagship operation energy-related business is the 1997 purchase of - a complement to our existing steam system and Energy Connections by COM/ Energy Te'chnologies. a strong entry into a major industry sect r Energy Connections is an energy infonnation technol-MATEP will be the cornerstone of our plans to ogy company offering a bmad range of highly sophis-provide a comprehensive package of energy ser-ticated, energy-related monitoring and control prod- ' vices to large commercial and industrial cus-ucts and services. Energy Connections technology 1 14
N E W B U S I N E S S Fin ancial.S'ectio n can measure timeof-day energy use, establish load profiles, det&t out- ' Table of' ages, read metem (electric, gas and water) and produce estimated bills. The potential market for Energy Connections is enormous, as C0ntents the Electric Power Research Institute estimates the market for these products to be $35 billion in the U.S. alone. In a competi- . p Management's Discussion and tive energy market, commercial and industrial customers need Analysis of Financial Condition and hsuhs o@ era @ns;. m f M detailed load and energy use information to negotiate the best energy prices. Power marketers need a tool for portfolio manage-ment. And, utilities need value added services to retain their val- > : Management's Report........ 21 ued customers. >1 eport ofIndependent Public. R Energy Connections began sales activities in September 1997 and already has an impressive list of premium clients in the pharmaceu. Accountants'............... 21 ~ tical, manufacturing, industrial, tourism / hotel and health care industries. . > ; Consolidated Statements t An important part of our strategy is to get our products -' f Inc me....,. - m.......' 22' quickly into major markets through the creation of well I ? p Consolidated Statements + planned strategic partner-of Cash Flows....... 2... 23; ships and alliances with 3 y' > Consolidated Balance'- industry leaders. We are cur-7 f Sheets......'........ ' 24,25 rently working on the devel-l opment of a number of these l ,y, partnerships with key mar-I g >l Consolidated Statements of 1 i ket players. Capitahzatio'n............ 26 : COM/ Energy I > Consolidated Statements'of ' F Changes in Common Marketing y_____i Shareholders' Investment.. c 27 1 Also in 1997, we estab-The potential marketfor Energy Connections technology-which can measure timewf-day >l Consolidated Statements oi lished COM/ Energy electrical use, establish load profiles, detect Marketing, an unregulated out ges, rwd meters and produce bills -is Changes in Redeemable estimated at $35 billion in the U.S. alone. L Preferred Shares... ;........ 7: provider of energy and ener-(From left) Robert A. Paul, Ivesident, l gy-related products and ser. COM/ Energy Technologies and COM/ Energy i6 Marketing: EdwardJ. Sayrs, Vice President. ' > Notes to Consolidated vices m the $17 bilh.on New Sales andMarketing, COM/ Energy ' Financial Statements..M. 28-36 ? England retail electric and Technologies;andRichardL Taylor, Vice m EYesident, Engineering and Production, gas market.. We are currently COM/ Energy Techologies. " p g g h d h -. M-domg busmess m five of the New England states and in NewJersey. COM/ Energy Marketing started selling in July 1997, and we currently serve over 600 cus. >. Comparative Statistical Data'- tomers. Contracts in place are valued at over $30 million for gas and 1993-1997 ' " ' " ' ' ' 7 " 38-39 wholesale electricity. We expect growth to accelerate in 1998 as we add resources and expand our markets geographically. 15 L)
7 1 <h" bMa,nagemeht's? Discussion and Analysis of a MinancialTCondition and Results of Operations [Commomoealdt Ertergvgstem andsubsidiary Companies ,p E Resuus of Operations? 1m a reserve <4 centsweiated to a wnservatim pmaram settlementin 1995.: l l /E rningsandDividehds/ increased the quarterly dividend rate per share 2A% h om' ; In March 1997, the Sys, tem's Board of Trustees - 3 Earnings and esraldgs per bommon' share by organizational ~ $ l element for the three year period here as follows0 "' '38% cents to 39% cents ($1.58 on an annualized basis)J A
~~This was the second consecutive year and the third time in 1~~
/ ,1997- '1996' '1995 . four years that the Board had voted to increase the quar. .l t ]j . Per ; J. .1 Per. .. Per. terly dividend rate. Dividends paid to ccmmon shareholdt ? Amount Share ' Amotmt-Share *, Amount Share ers in 1997 werd $34.1 million, representing a payout ratio ) 1(Dollan in thousands except per share amount % of 69% of1997 earnings per share. ' d
~~Electric : $34'8111$1.621$39,667 $1.85 L ; S32,247; $1.52; Electric Operations' 4~~
Gn~ 114,6815 :.68 J l16,229 .75 ? 115,352, 72 Dsetric operating revenues for 1997 increased $383 million LOther ' j(579)i(.03)2 2,229J0fi2,087,,12' ' (6%) due to greater wholesale sales reflecting ~ the changing. 3 Total ; $48.913 : $2.27; $58,125 ! 3170 D 850,286 $2.36 ' ' capacity needs of non-affiliated utilities ($11.7 million) and the L j .independentSystem Operator (ISO) New England (formerly 1 Wrent company earnings and diAlinds on preferred shares were. ' allccated among the electric, gas and other operations of the system.. the New England Power Pool that operates a centralized facih- ~ based on the Parent's equity Investment in each segment. u ty to ensure reliability of service and dispatch of economically.- } 11997 eersus 1996; available generating units thmughout New England) ($11 mil-Earnings per share for the year 1997 were $2.27 compared to ' lion) and higher retail unit sales ($2.4 million). Offsetting the record level of $2.70 achieved last year.L Re decline for the, these factors was the absence of a S4 million refund associated year was due to a one time'atter-tax charge of $10.7 million, or; with the 199G power contract settlement agreement and lower 50 centa per share, thht related to a voluntary personnel reducq ' revenues ($2.1 million) due to the return allowed on Canal's l '/ C tion progmm (PRP). Factors that had a positive impact on earnJ. declining investment base. ll E ~ ings for the year were lower operating and maintenance expenses - ' In 1996, electdc operating revenues increased $44.7 million . (25 cents) that resulted, in part, from the PRP, an increase in (7.4%) due mainly to higher fuel costs of $33.9 million reflecting ~l electric unit sales (11 cents) and the absence in 1997 of costs ' the increased availability of Canal's Unit 1 generating facility l associated with a labor dispute in 1996 (13 cents). Earnings for that was out of service during the first seven months of 1995 for 1997 wem negatively affected by the absence of a 1996 refund scheduled maintenance and repairs.%e remainder of the - associated whh a power contract settkant agreement (11 cents), : . change reflects the $4 mi! Don refund associated with the power I kruer firm gas unit sales (8 cents), costs associated with new ' contract settleacnGoe impact of higher retail unit sales ($3.9 1 business development (12 cents). the absence of a 1996 Ecogni. ; ' million), and the recovery in rates of $1.8 million for Canal's . tion ~of the recoverability of costs associated with Canal Electdc previously deferred postretirement benefits costs. L CompanyS postretirement benefits costs that were subsequently Unit sales (in Megawatthours or MWH) v'ere as follows: ^ recovered in wholesale rates (5 cents) and a lower investment - base on generation assets (6 cents); 1997 Change 1996' Change 1995 l 11996 versus 1995 ' l Residential 1,830,793 1.5 1,802,973 2.9 1,752,430 j In 1996, earnings per sham increased 34 cents to $2.70. C mmercial 2,506,215 3.1 2,430,188 (0.8) 2,450,390 I ! hirmt factors that contdbuted to the improved earnings. Industrial and other 459,104 2.1 449,844 1.1 445,020 ". included higher firm gas (18 cents) and retail ekxtric (14 cents) Total retail 4,796,112 2.4 4,683,005 0.8 4,647,840 unit sales. the refund associated with the power mntract settle" Wholesale 3,916,974 43.9 2,721,623 37.9 '1,973.543 1 / ment agreement (11 cents), knver intemet costs (9 cents), and - Total 8.713.086 17.7 7.404.628 11.8 - 6.621,M3 the recognition bf Canal's recovery of postretimment benefits costs (5 cents). Partially offsetting these factors were costs in 1997 and 1996, retail unit sales increased due to approximate.
~~i %related to thelabor dispute,(13 cents), storm damage imm ly 4,200 (1.2%) and 3,700 (1.(11) additional customers, the signifi-q r Hurricane Edouard (6 cents), a' customer refund (5 cents in :~~
~~cant majority of which are permanent year-round residential cus-t ~~~
1996 versus 1 cent in 1995) pursuant to a 1995 settlement tomers. De increase in the level of wholesale sales refkoal the agreement with the Massachusetts Department of increased availability of Canal Unit 1 (by 53%) and greater sales J
i ' Tektommumcations and Energy (IYlE) (formerly the., to ISO - New England (by nearly 43%). %e changes in wholesale E Massachusetts Department of Public Utilities) that limited. unit sales have little, if any, imjmet on net income. > Commonwealth Electdc Company's seturn on equity, as The $38.1 million increase in fuel and purchased power ' defined in a settlement that expired in 1997, and the reversal in ' costs in 1997 was due primarily to higher wholesale tmit sales y a 16 1 1
W 3:- V[jN m,,3 2 $. -.c
~~p. ~~~
a. 1 M M p<< >c c m.OQ ] ) Q I ^* h [@ahd hkhkAosts fd repla6ement power reflecting the perma-during the year, as compared to milder weather in 1995 the was V inent shutdown of both Connecticut Yankee during 1996 and - 1.4% above normalj Heating degree days were nearly 3.8% higher j N[f. % Maine Yanlise in 1997, the latterof which was taken out o e ,during 1996 as compamd to 1995 and 2.3% above normal. A - ) p$ service in December 1996. Inl1996, the cost of fuelincreased gmwing customer base, including customers formerly receiving My $33.9.inillidnidus primdily to thi availability of Canal Unit : . quasi-Grm sales service, somewhat offset the dechne in firm sales ' 31/while thschst of purchased ' power derreased by $9.8 mil- ! in 1997 and contributed to the increase in" inn unit sales in 1996. a yM lion [r)flecting'the' availability of Canal Unit I and the reduced Other Operdting Eifenses : s-l
~~M,(8"lu mmentfdiother mom cog surces df capacityi Other operation in 1997 increased $10.3 miHion or 4.8% due to i~~
a one tune charge related to the PRP ($17,7 million) as further ' Gas Operations t , 4Qg( _... t 7 WJ In 1997, gasLoperating revenues decreased $7.9 millioris f discussed below, costs associated with new business develop- ) @ Wm(2.3%) 'primarili due td a 5.fM decline in Arm unit sales'($11.1 ,J ~ ment ($3.6 mdhon), and an inemase in the provision for bad ~ l illido) and lower conseEva' ion add load numagement i debts ($1.4 milhon) that re6ected higher reserve nquirements. l t MN(C&LM) coEs ($1.8 millioh)', offset by an increase in tranaq'of L The impact of these factors was offset, in part, by lower operating []{ YportatioErevenues'of $1.8 million and mvenues from sales costs ($5 mHhon) that muulted, in part, from the PRP, lower pena
~~I gas to third parties of $3.9 millionfin 1996. operating revenEen.~~
sion costs ($2.7 mlBion) and the absence of costs related to the ~ linbrsased approximately S34.9 million ~or 11.4%'due to higher 1996labordispute ($4.6 miBion). i'D, 3 i j$g:s/ costs of $28.7 million reflecting both higher prices fromb The system initially announced the details' of the system-wide '{ j supphers and iscr$ sed unit' sales to customers.2%e ' voluntary PRP in May 1997. %e goal of the PRP was to achieve ' Q@k3nillion'due tsisider weather during 1996.- increased Arm' sales,locludngIransportationTequated to $6.9 ' a reduced, mofe efficient and more productive woddorce in 1 response to the sigm6 cant mgulatory changes facing the syt R MC Cdmmonweahh GidCdmpany also utilizes the off4ystem tem. In 1997,.wm 'meely 13% of system employees voluntari~ J 1 i sales an'd' capacity relenae markets ada means to sell eicess ly terminated employment as a mault of the PRP. %e one tune ' Yresourees7A' margin 2 sharing agreement for these sales was - charge of $17.7 million erferred to above excludes generation-l inpproved by the ETE 8n January 15,'1997 that allowed ; ' kelated costs, the recovery of which is being addressed as part i 2 Cominsnwealth' Gas'td retain 25% of the gross margins real. of the electric industry mtructuring pmcess. Dh payback"perF ~ W' izbd aboss a certdn thmshold' amount as set frdm year to year ' od for the cost of the PRP is expected io be about one year. @is ' M ' (with the remainidimargins^csdited to firm esstomersi ' action foHowed the consolidation of thEsystem's'eIecide and gas e i S1 J( through the dast of Gas Adjustment clauseIAs h result of thisl operations earlier in'1997 fin furtherance"of this consolidation ( ]y margin 2 sharing agreement! Commonwealth Gas" realized rey? Jeffort, the system,in March 1998/mached ' greement'with IBM a ienues of aphroximAtely$644,000in 1997.e, ( Global Services Inc. to offer employment to 40 system employJ h TUnit sales and transportati6n vslume (ih bhlions'of British eer.and 1o provide all of the system's'information technology,2 ^ , [ N thermal units or BBTU) Wers as follows?I itelecommunications and network services. ' m '/ ' %(([!ChangeLQ4 ^1996i Charge -1995 or 4.4% and reGected the impact of higher generalliability insur-M$- t in 1996, other operation, increased appmAlmately $9 miBion 1 hc I1997? [ResidentialM 222,0431 < (3.1); L22,759 t
~~6.7/~~
21,336 ance costs '($6.3 million), higher postmtirement benents costs : ' (Commerciali L J11,0776. -(4.2) - - 11,558 '7.9 ~ .10,710 - .($4 million), and the net impact of the labor dispute. %ese - 1 0 Industrialand other3 5.594 s a(16.2)i ; 6.676 -4.1:
~~6,412 t expenses were offset somewhat by lower C&LM costs ($2.4 mit :~~
~~~ 1 9Totalfirm? 438,714~~
(5.6)f

40,993:
16 38,458-lion), a $1.6 million decline in heahh benefits costs, a decline in - 6 ^ 7 Y Off-system? [2,673 c ; 10.5 12,420 (40.1)E '. 4,043 ' the provision for bad debts ($1.1 million) that re6ected improved i 3 J 51g95.2) j jQuasi-firmE'interruptible^ y ^ ^1,882 e c (0.1);, 21,066y - (44.'1) ^ 1,906 = coHection experience, and tl$ absence oflegal' fees ($800,000)1 1,883 - 55.0 - 1.215 T- . associated with the canceDation of a powercontract in 1995. ' 7 j 3Totalsale.a s w e 43320 (6.6) 46,3621 1.6 ' : 45,622 16, . Maintenance declined in 1997 by $4.1 million or 10% and ~ oTransportation " g,506; M, e4.1,, < 4.852 - 20.6 L 4,024-sq , resulted from a-reduction in transnu. ion and distribution ~- - < Tot'al1, ?. i 49.826 n a (2.7) h 51,214 ? 3.2 49.646-ss s .t ~sj> related proj,ects and, to a lesser extent, the PRP. Maintenance L whMhidNINEin flSn unlishleiin 1997 waE due to'decresses"
~~Increased in 1996 by $2.5 'million or 6.5% primarily'due to' f~~
kh Mth aH customer segmenth that aflect$d inilder weather experi- . storm damage costs related to Hurricane' Edouard '($2.1 milmi ^ $QQ[Onhed in (15 region 'durihk the)first quarter akcompared to(a ; ' ' ' ~ d$ lion), partially offset by reductions primar0y associated with) ', ~, colder period in 1996J DegrN days foFthe current year J. CanalUnit.1 ($1.5 million).1 $ Ntotaled 6,463,16% loNeE than last yhar'ahd 13% below the ' ors Depreciation increased $1.6 million add $3.6 million in. n e M[X "mallesiof 6,54N/Ihinignificantfldtuationsin'no$ firm < 1497 and 1996, reMtively, and reilected thisystem's sales"ref!ected the hnpetitive environ' ment that exists'in the. additiorito property, plant and ' equipment, that included.
~~fMdabral gaslndustrMA putiokof the margin realized on 1~~
- the costs associated with the completed conversion of Canal- $thbse sales reduced thEcost of gas sold to Arm customers. Unit 2 in mid-1996 to burn natural gas'as well as oil. %@f[m(6.610 ndlected signiacant impmvements for au custome The'increene'in imit sales to firm customers during 19960 Federal and state income taxes' decrea' sed by $5.1 million ~ N L during 1997 due'mainly to the' lower level of pietax income. M! bnts consistek withholder thAn normal weather experienced local property and other taxes were highdr during 1997 due Mk NNh@4 [ h d [ g (, y r 9A ROgn&p#%W* ,4 4,0 4 .17 M a
1 1 l4l . to higher property tax rates and assessments within the sys. (as further discussed below), $60.3 m u wing om L tem's service territory and an increase :n payroll-related taxes million in construction expendi-gj*- l l_ due to the 1996 labor dispute.~ tures, $28.8 million for debt and
~~oo,er _~~
~~l { h L Other Income ~ ' million related to new business sinking fund payments, and $15.6 Purchm of MATEP " N'" 8"i""" In 1997,'other income decreased $2.3 million due primarily.~~
~~to the absence of a 1996 recognition of the recoverability of.~~
development. Rese 1998 expendi - M 5 $$$$3 < < L costs associated with Canal's postretirement benefits (S1.8 tures will be met pnmanly through million) following Federal Energy Regulatory Commission. a combination oflong and short-approval, and the absence of a 1996 gain that related to the term debt issues (S186.8 million)' , g ? sale'of parcels ofland ($700,000). Rese two factors were also and internally-generated funds of, "the primary causes for the change for 1996 versus 1995. $67.9 miDion. Advanced Energy has reached L 1;[.terest Charges ? agreement to purchase the total ne $2 million decline in total interest charges for 1997 was . energy plant that is' owned and oper- . due to matunng long-term debt and scheduled sinkmg fund ated by Harvard University ? p yments partially offset by a slightly higher average level of -(MATEP) and provides the steam, short-term borrowings. The decline of $2.2 million, or 5%, in cooling and electric requirements of ' 1996 also reflected maturing debt and sinking fund payments. Harvard's professional schools and . Liquidity and Capital Resources five affiliated te ching hospitals in Boston. He closing for this transac, Financial Condition
~~tion is expected to occur during the f~~
~~3%e system's cash requirements are second quarter of 1998. It is project- ,c,,,,,,gy,,y essentially met through the generation of M rotameu ed that this new venture will~~
~~cash flows from the sale of ek.ctricity, nat; J Preferred Shares -~~
~~iincrease system revenues by jg;ggy23 and, on avenge, by approximately. 4 approximately $45 million in 1998 ural gas (including liquefied natural gas) (and steam. Cash requirements for current~~
g
~~= operations, construction programs, debt $65 milhon m the years 1999 .aun a.a-r service and other capital requirements are~~
~~through 2002, maintained through internal generation; ne System could also raise capitat through the issuance of and short-term bormwings made available -~~
additional Common Shares, a new series of Preferred Shares, through the system's credit lines with ' or through its Dividend Reinvestment and Common Share . banks. long-term debt issues are used to Purchase Pian., %e System's goal is to maintain a capital struc-permanently finance shor t-term debt when ture that preserves an appropriate balance between debt and deemed appropriate by management. equity. Management believes its capital resources and liquidity ' he system's 1997 net cash flowimm are sufficient to meet its current and projected requirements. operating activities exceeded funds L he system's capitalization structure is presented below: required to supp,rt additions to property,- 1996 1997 1 plant and equipment by $50 million or (Donars in thousands) 86.9%. Plant additions continued to be long-term debt $369,565 40,3% $383,311 41.7% l . funded entirely with internally-generated Preferred shares 13,020 1.4 12,200 1.3 ) funds. De year's cash requirements for Common equity 415,694 45.4 430,770 46.8 the payment of preferred and common div-Short-terra debt 118,475 - 12.9 94,075 10.2 ) . Idends ($35.1 million), the funding of Total capitalization S916,754 100R% $920,356 100.0% i maturing long-term debt and sinking fund Forward-Looking Statements requirements ($22.7 million), and the re, p"""lisesion This discussion contains statements which, to the extent it is payment'of short-term borrowings ($24.4 not a recitation of historical fact, constitute " forward-looking f
~~million) were provided from operations and proceeds from the i statements" and is intended to be subject to the safe harbor pro-i~~
. issuance oflong-term debt ($35 million). Other information on - tection provided by the Private Securities Litigation Reform Act , the sources and uses of cash for the past three years is includ-L of 1995. A number ofimportant factors affecting the System's ed in the Consolidated Statements of Cash Flows. . business and financial results could cause actual results to differ ' Capital Requirements and Resources materially from those reticcted in the forward-looking state- %e system's projectul capital expenditures for the years ments or projected amounts. %ose factors include develop-1998 through 2002 are $627.8 million, including S254.7 million ments in the legislative, regulatory and competitive environ-for 1998 that consists of approximately $150 million for ment, certain em'ironmental matters, demands for cap 51 and i Advanced Energy Systems, Inc.'s pending purchase of a total. new business development expenditures and the availability of <^ 1 energy phnt that serves the longwood Medical Area in Boston cash from various sources. j 18 .__.._m.__.m__m_ h
hlhhh*j & %a 'bh' M V , $$$ 3 hpW e;" 4 S$ , k?Q11/Y S wa m.. ya )lndtiStryReStructuring( for stranded cost recovery. A request for bids from interested N' y,> ~ parties was issued during August, and an Offedng ~ flecfric s. Memorandum was issued in October. Potential bidders exam-f< i ' f 3 On November 25,1997, the Governor of Massachusetts 1
~~ined all pertinentinformation related to the' system's generating signed info law the Electric Industry Restructudng' Act (the '~~
facilities and purchased power agreements in order to prepare _ ? Act)( Provisions of this legislation include. among other and submit their first round of bids in ndd-December. In - '^ o things; a 10 percent l discount on standard offer service and ~ January 1998, the system seksted a short list of potential bid-Mgretail choice of energy supplier effective March 1,1998, witO
~~ders, each of whom are expected to submit a final binding bid -~~
+ w Qa subsequent increase in the discount on standard offer ser ; ' in the decond quarter of 1998.1he entid process, including ^' ~ Wj vice of up to 15 percent uponjcompletion of divestiturepf ' regulatory approvals, is expected to be completed in 1998.. ~ inon-nuclear generating assets and securitization of et non-D ' L ' .N: y' ' pmitisable strdded chsts 6vhicli,forthe systsihtare primari s ~ 1 %)y the result of above4narket' purchased power contracts l ' On July 18,'1997, the DTE directed the ten M-husetts - Twith" hon-utilitigeder~at6r's)[and; recovery of stranded costs; >
~~gas utHities, including Commonwealth Gas, to initiate a collaboa t rative process that will establish guiding principles and specific (sabject to review and an audii~ process.~~~
Mefstem filed a compshensive elehric rsstructuring : < lprocedores for unbundling rates and services for all customers.( g ' UE IIsted six principles that it considers important to { th@e success of a competitive natural gas mark i plan"with the DTE ou NovembWr 1921997 that was thomugN ' ily reviewed in'fivesepsrate' hearings that' solicited public L
~~vide safe and reliable service at the lowest possible cost to cus-M / comment, And seved days'of evidentiary hsarings that were itomersTThe natsral gas market would: (1) provide'the broad?~~
~~' ' i ! [ McompletedinFebruary1998.i Consistent Mti; the Aht; the shstem s plan'4 ;provides,as of g~~
~~est possible choice; /2) provide all customerswith an opportu i~~
~ nity to share in the benefits of increased competition;'(3)( ' > " [MarchT 199k a rate reduction c.f 10 percent foi customers 1 f choosmg tNe standard nervice transition rate from the der. ; , 1 ensure full and fair competition in the gas supply market;'(4) ! $ age of Ondiscauided ratss in effecf during August 1997,] ' q ; 7 functionaHy seperate supply from local distribution services;S, .(5) support and further the' goals'of enviromnentai regulation: 4divesntum of non-nuclear generating assets and a restrue. {tunxl electds generation' market that is able to offer retail C ' Land lastly (6) rely on incentive regulation where a fully competr L' acIcesk tb aH customersc/1he system's plan also includes th$ : 'itive market cannot or presently does not exist.L J: .. ;ln addition, the DTE outlined several specific issues that ity Nfollowing provisiodsil) an estunate and detaded accounting of1 C expects the collaborative to address (1) services that can be : Y itotaltransition costs ehgible for mcovery through a nono #. j V bypassable iccess~or transition chargei 2) a description of thy f offeredyn a competitive basis; (2) termdad condi:ionsLof ser- . system's strategid to mitigate transition costs;3) unbundisd} nyice- (3) consumer protections and social programs; (4) mitigan N' 9 rates for genentionidistributioritransmission'and othdr ser... o tion of gas related and non-gas related transition costs; (5) third < s ykb; 4) prop' sed charges for the recovery 6f transition hosts J party supplier qualifications; and (6) curtailment principles. o t i thr$ ugh tlie nonbypassable transition charge; 5)' proposed N 'lhe DTE also suggested that the collaborative reconsider the progians 6 provide universal service to all customers; 6) pm ' pricing and provision ofinterruptible' transportation services. ~ ~ > { posed programs and mandatory charges to promote energy & ~ On August 18,1997, the DE noted that the developtrpnt of ' oonssrvation and demand side management; 7) pmceduress unbundling principles and pmcedures constitutes only'a p.et of ~ T foiensudng direct mtail access 16 aH electric generatidn aup : the effort necessary to develop full customer choice for gas ser- % plicis;8)'discuselons6f theimpactof theplanonth$ system's.c 'vice.ilhe DTE recognized that.each local distribution company ~ N emplopNs'and the" communities served by the systein;'and 7 wiu be 6 ling a comprehensive unbundling proposal at some later. 1
~~(9) a mandatorf chance per kwh for all consumem to suppdat" '~~
~~- date. In the interim, the DE directed those companies that do I thshMht and piomotion'of renewable energy pmiects i~~
~~not currently have unbundled rates, including Commonweahh "~~
l On February 27.1998, the IyIE approved the system's ? Gas, to have such rates in effect no later than November 1,1998.' N restructuring' plan'ssting that tlie^ plan complies with ths iCommonwealth Gas and eight other' gas utilities imtiated ~ $ I Act! Whils the system is encouragulwith the treatment L the Masachusetts Gas Unbundling Collaborative (the - M N afforded stranded di tfansitiodcostiecovery by the legisla. Collaborative) on September 15,1997, to explore and,devel-1 > l 4 tion and tNDTE,'ths mandated cust'omer discount couldi i J ' generic principles to achieve the goals set forth by the y %Mhaveasi dfutufe sash flowsd 4 ( DTEf Collaborative participants represenied a broad a~rray" - ' %g - g;gnificant impact o88 5 [4[= (- ~, j ', /of stakeholder interests including the utilities, natural gas <
~~N 3~~
marketers, interstate pipelines, producers, energy consapet OM l On Maich 31,'1997, the ' system submiUed a report EthSU D ants, unions, consumer advocates and representatives for R MN(DTE that detailed thspmposed auction process for s5Hing its C% t the DTE, the Massachusetts Attorney Genefal, and the ' 1 kg$ IelectricgeneratioEassetsandentitlements.LTheprocessinclud i
~~Massachusetts Division of Energy Resources.~~
led A standard,' sealed bid'aMbn for' generation aseets and purd ~ On November 15,1997, the Cotborative filed a status mport %[ chased power Mj 'Ths auction pro 6ess provides a thaF( L with the DTE that outlined its pmgress in moving the gas indus. ~ W kMesed appinach is maximizing stramled cost nutigation'and try to a more competitive structure that provides all customers - M k$minimiO thd acdess chargek that rat' payers wiB have to pay! with meaningful access to competitive markets consistent with e %ggpym m ' w> a' '~t- ,39}Sp ma my y -o -M &t - b l s M $hfh M N M 9 N P k Dl }; +,t w 7,;' JQ g g
Qg g 71'%'gf 3 g( <c- &g $$@$ay%.. k'kW ;% lg, yrw / w,W M D W % y@q w'MQ 7
~~] #ca %,~ e s e &r~~
.A m 4 < n mp -u r,, y, p m g u a NME Y fy ?? 1 ~1 i o.pMf ym 3: eo 4 shbkreportsummansed thbibh I to an increase in'the site clean-up cost estimate for an MGP - a i i J $f stNitive issuis that had besu theibiect 6f Collaborative' discus ' J r site for which Commonwealth Gas was previously cited as a - SWeig iMwthwf(1) tiih 4spoaltion ofinferstate pipehne capa* city;Nh Potentially Responsible Puty.L De DTE has approved r'ecov-Ms Cl) tida"Tof ratesj (3)"custosher enmilment, billmg, terd 0%y of costs associated with MGP sites.1 '~ hminatios and infonnation' exchange iidd dand/(4)cond (CAmmonwealth Gas and certain'otheisystem su'bsidianes % aunsr pmtections,ilow-income disc' unts,'and smpentivs adp? f are also involved inlother known or potentially contaminated h@k; plier registratio' JWidatus Apart also cidablished a"schedu o 5 sites'whem thd associated costs may noi be recoverable in - n IS idiplement s Gnal sobundling plan by Novembirl1[1998.h, frates and have recorded in pdor yeais an estimated liability 3 KCh in"accdrdance with'thit schedule lthd Collaborative submitU [(and a charge id operation' )'of $2 million io~ cover the expected ~ s $dEd[with th$ DTEh Rate Unbu'ndling Status Report oh Januaryj fcosts associated 'with'assessmest and semediation activities. ~ I $16,19984The Wport detailed'adoveiall' process fordevelop D ' ness estinia+5s am 'inieted and adiEsted'pedodically as fur 1 ^ W fing unbundled rates cMienfwith the DTE'date structure N ' (therinsestigation and assignment of responsibility occurs. %s. ~ i%n goals 6f elficiency, fairness, niinplicity,%ontinuitfand 'earnmgs 9 lsystem is unable' to' estimate.its'ultinate liability for future envi-j W Metabilitydidresponsejo the'Collab6rative's' prop 6aal,the DM N 'ron~ mental sensediation dontsiHowever,in' view'of the system's1 ofdersd Commonwealth Gaitdisubmit,$d'later than April 15,y 4 current' assessment ofits envirdamental fesponsibilitieslexiety 2[sd998[aconsensusbaseis6ttlementlorpartialmaebment,of1, 9nglegal~rsquirements'andregula I [$9[Usbssdled " rate'isriffs designed 'aEcoedinglo'tlie] general cod-$ ' %ffect on the system's re does not believs that these matters will have a matdrial adversel e (f '( ll @M inn fakth in th{ report.$g@haikegn finh $[Mpnia6/%2/rin.n
~~lon January 1l1997, the system adopted the provisions'of i q~~
d dStatAment of Pocilion (SOP) 96p'Envimnmental Remediation f y kSfkdards No37Q*Ef +% $ M g e l ~b #1 - ~ lIJabilities? = SOP 961 provides authoritative guidance for : Eydm ^ ~ r- ^ a... m - .I gm As described in Note Ab) of the Notes to Consolidated m s 2 %g :aancial Statements, the system follows'the provisions of c- ' ^. recogmtion, measurement, displa'y'and disclosure of envimn-1 v4 s Statement'of Finahelal Asunting Standa."rds (SFAS) Nddlb '. pntal remediation lisilities inl financial statementsL%e sysJ ^' u..ef; h Ef,fects o, f Ce.rtain Types of Resulation? In > m tem has recorded environmental remediation liabilities ne, t of - u x ~ ~. He adopi -i g4mo th~e_eventthe, ort e s-9 amounts paid of $2.3 mhlion at December 31,1907. - ~~* inystem is someh_ow ' nabb to m_eet the criteria'for; .u - ~- m, m . mpact would be an extra ~ ' : tion of SOP'961 did not have a materia'. adverse effect on the - n e-i w[inilowing SFAS No. 71; the accounting i.ordmary, nosdpsh' charge id operations in;an imouht that s-m a re s Moperadons ancial positione 9 be material. Conditions thaicould give rise to the'discontinuancel - < ear % ( E = _ f, Q[ dof SFAS No[711ncludell) increasinOorrMetition'restncemg thef, We syste j 1 I k@i sistem'$bilitj to establish prices to mcover speci6c custs, and i:' ' cy since 1996c A cotup j g '4'
~~2) n sigsi6 cant changiin ' he surrent manner in which rates are ;~~
t [W ' that the' continuing sppbcation of SFAS No 711e appmpriate.Yset by regulators.1%ebitem' O.information processing and deh,very systems has' been com.' y ~ pleted, and work contmues on computer systems wherever. " he { Based'on the current evaluation of the"various factors and cundic ~ necessaryqWhile some computer systems have already been ; updated, tested and placed in production l the system expects i ? tiuns that kre expected to impact future cost recovery, thA syndem u bebeves that its reail eleude util$ operations l excluding genera-to complete the balance of the modmcations by early 1999. M,& M M Mi M tidnklated hasets, fumairisubject to SFAS Nd. 71 and its regula-
~~Expenditures incurred by the system through 1997 to review 60 miaMelectdcWL,um existing computer systems and to modify existing softwam and o~~
p sw Py apphcations amounted tolneady $900.000, and it is estimated that O mbable of fuhire recoveiy "^ M lAs a r' esult of electdc indust 3y restructunng, the system % retail. . m--tely $2A n:Huon wiH be incuned h 1998 and 1999. electric mmpaniesldiscontinued appbcation of accounting pring .. yanagement leheves that, with appropn, ate modiGcations, j Eples' applied to their investment in elestricsa.4on facihties
~~the systein win be fully compliant regarding all Year 2000 j~~
~ ' effective March d998 De system will noj be required to viite issues and will continue to provide its products and services 4 Moff any ofits generatiomrelated assets, including mgulatary. uninterrupted through the millennium change. Failure to - C " mensts.inese assets wH1 be retamed on the Consolidated become fully compliant could have a significant impact on the a b Balance Sheets becauss the legislation"and the IylEs plan'for a q system's maults of operadons. mgg M ek;ctdcladustry specifr =Hy pmvide for their recov. " New Account, g Prm, c,ples) m i o, Miythrough'the non-bypassable transition charge., During 1997, the Financial Accounting Standards Boani issued b @N,,x%w.Amm pnytronmental MattersE.v M two.new accounting standards that the system will adopt in 1998. .3 ' ay 1Comnxmwialth Gas is participating in the assessment of a - ' SFAS No.130, " Reporting Compmhensive locome" win require MJnumber'of f6rmebnanufactured gas plant'(MGP) sites 'and ' disclosure oh comprehensive income and its components. SFAS $"nallegsd MGP waste disposallobatio'ns to determine if and to ' No.131, " Disclosures about Segnwnts of an Enterprise and ~ @what extent edch sites have been contsm'inated and whether : Related Informaton" wiH mquim disclosure of financial and ~ B JCommonwealth Gas may b'e responsible for remedial actions.. desenptive information on mportable operatmg segments. %e '- % in" April 191r/j ChmmonwealdiGasfecorded an additionallia : adoption of these standards is not expected to have a material % 4bility"and corresponding regulatory asset of $1.2 million 'due - impact on the system's w.alts of operations or Gnancial position. $p$p ] @m v' 1:
~~[g " j% 1 p%,62 MVW Q.~~
Q"gG %,. P G b us. % - w#1 e 4 'n~ ~ - ~. ~ -
wp ' Managemeilt'slReport: Zommonwealth Enemy System andSubsMiary Companies. G ) m, f < DThe consolidated financial'statsments presented ;
~~statements presented?The independent audtors are~~
~~, herein are representations lof the management of i ~ ' selected by the Board of Trustees and report their4~~
~~Commonwealth Energy System? Man' gement?~~
.' findings thereto through the Audit Committee, which a recognizes its responsibility for the preparation) lls comprised of three outside Trustees.' The Board of : t cnd presentation' of financial statements in1, 4 1 Trustees is responsible for ensuring that both the
~~conformityLwith generally accept'ed accounting. > : independent' auditors and management fulfill theirL principlesb To fulfill this" responsibility,; management 1~~
~~' respective responsibilities as they pertain to these 1~~
maintains'a system cf internal accounting controls,

consolidated financial statements. ~ ~
~~L including established policies and procedures ami a E comprehensive internal auditing program tb evaluate l the adequacy and effectiveness of accounting andi~~
~~operating controls, compliance'with system policies ;~~
~~James D;Ra' polih p - and procedures and the safeguarding of system l assets.L ?FinancialVicePresident? 4 The responsibility lof our independent auditors 9 V indTreasurerL,~~
~~examination is limited to the expression of an opinion '~~
as to the fairness of the consolidated financial : Mhrch 2,1998. F 4 RepLort of Indepen;dentLPublic Accountanti ~ ' To tlie Board of Trusteea of. disclosures in the financial statements. An audit als'o - Commoriwealth _ Energy System: - includes assessing the accounting principles used and significant estimates'made by management,~as We have audited the accompanying consolidated well as evaluating the overall financial statement ' balance sheets and consolidated statements of-presentation. We believe that our audits provide a. capitalisation of COMMONWEALTH ENERGY; reasonable basis for our opinion. SYSTEM (the System) (a Massachusetts trust) and
~~In our opinion, ths consolidated financial statements..~~
subsidiary companies as of December 31,1997 and - l referred to above present fairly, in all material 1996, and the related consolidated statements of - respects, the financial position of Commonwealth income, cash flows, changes in common shareholders' > Energy System and subsidiary companies as of investment and changes in redeemable preferred - . December 31,1997 and 1996, and the rbsults of their shares for each of the three years in the period E 9 operations and their cash flows for each of the three ended December 31,1997.5These consolidated - - years in the period ended December 31; 1997;in ' financial statements are the responsibility of the confor'mity with generally accepted accounting.- . System'and subsidiary companies' management. , principles. t
~~0ur responsibility is to express an. opinion on these consolidated financial statements based on our audits. L~~
- s-L " We conducted our audits in accordance with J Arthur Andersen LLP. generally accepted auditing standards; Those istandards require that we plan and perform'the judit to obtain reasonable assurance about whether Boston, Massachusetts the financial statements are free ~ of material February 19,1998 (except with respect to certa.a i misstatement /An audit includes examining, on a - matters discussed in Note 2, as to which thb date is
~~tbst basis, evidence supporting the amounts and -~~
March 2,1998). 21- ~ m
p ? T l-T E E o r,i.-soli'd at6dnStatsments~of Income sn LContinentotall/t Esteigy S) dent and Subsidiary Companies e a qs fr F , m. .1 % iFor th'eYears Endsd Decembh5th 1997 1996 1995 W* .-L Opsrating Revenues] , ~ , ' (Dollars in thousands except per share amounts) A Electric $ i S: ca8,508 $ 649,678 $ 604,980 - p# (Gas ', i 1. ~gy .g' U 's
~~Steam and otherC 2..~~
3 '. 333,9773 341,867: - 306,953 j 519,259 19,360 ' 17,355 ~ q q, w c p gg l1,041' 744 ~ ~ 1,010,905 ~ 929,2C8 Lj y \\ ( ' ;. ' ~0perating Expensesi J,- + A 3 Fuel used in' electric produ'etion', principalls oils l129,'021 - 91,690-57,820 - j "y lElectricitypurchased forresales ' ' ~' ~184,122 -187,530 : 158,835. V 265,805 : 265,0191 274,795 L ' ~ r l Cost of gas sold; at, c'
~~J Other operation 5~~
~~~ 225,658'- -215,319 206,280. ~ 4 g JMaintenance) % '36,838. 40,913 '38,414 ~ 3 Depreciationh 53,405~~
~~51,782 c48,170~~
~
~~: Taxes-~~
~~!!ocalpropertyi, '19,130-' 18.049 17,573 y cIncome -~~
31,040;

36,0991 24,574 -
~~Pa@llan'dbather[ ~ 9,075 ~ 7.839 - 8,284 > w.. -.: . 954,094 ' 914,240 834,745 1.O'persting Income" 's L 87,650 - - 96,665- - 94,543 - k E. ~ x /Othirlscomes m 2,601 4,878~~
~~1,461 m~~
w , hIncome Be/6rsinferest Charges $ s 90,251 101,543 - 96,004 y Y, <.L 3 .f. ' L htere'st. Charges 7 long4erm debt ' V J 33,572 35,586 38,581 >Otherinterest chsrgss - ' 40,350-42,368 -44,608 '6,778: 6,782-6,027 f
~~Net Income.~~
49,a01 . 59,175 51,396 = Dividends on preferred shares '. t 9ss 1,050-1,110 Ea@ings Applicable 16 Conimon Shares: -8 48,913. - S 58,125 - S -50,286 TAfsrage Numbsf of Common Shares Outstanding l T21,531,433 121.529,676 21,311,836- ' Earnings Per Common Share U m ~ '~ :82.27- $2.70 $2.36 I J M/.m h I + -.
~~4....~~
~~f The accompanying notes ake an integrbipad ofthese consolidatedAnancialstatements. ^~pg % ~ p:. w ,W. , an gy %l 3 1 s 2 .p~~
g
~~? ' g,i:- : lh, 4. ll$;l. .. ! i L i '( :h@g; ~ hijT(,, llA ,,= Ii . 1 &] ~, ';- y > ]g)g. D , p., _p -t y r ,h r e... ) 2 4 0 Ja; ,, "~, p,g.h g:. 1~~
~~s. ~~~
~~s , l .aw i }Qfy f y.: ; j. v% J~~
~~z. _~~
~~rp, o o- _ 4 e 4r v 3 ' lll l Y.~~
~~gi g~~
~~r l u ; 3.%.y, ".W l ,g;' r ~~~
~~;].~~
~~I q m L. 's ) M-i 4~~
~~' h t d~~
? ' i
4 7 l .%.x JConsolidat'e"d.Sta'tements1of Cash Flows Commentrealth Energy System and Subsidiary Companies : 4 . Forlth'e ears Ende'd December 31,L 1997 1996 1995 (Dollars in thousands)
Operating-Activitiesi i Net income.

S 49,901 L $ 59,175; ; $ 51,396
~~' Effects of noncashitems x y l Depreciation and amortization, 65,646- "63,3311 i60,555-- ^ Deferred income taxes, neti + j 2,542 - ?3,515, '4,182:~~
Investment tax cpedits, net '

.
~~y (1,278); c (1,285) T - (1A01) - Earnings from corporate joint ventures ? l- . (1,348) > (1,557) ? > (1,633) ! L Dividends from corporate joint ventures ) 1,272- ' 1,376 L~~
~~2,0671 o~~
~~Change in working capital, e :clusive of cash-f (9,446): (13,626) Accounts receivable and unbilled revenues. . (12,269) ; ' Income taxes c.... i 6,500~~
~~(14,097)'~~
14,353 c l Local property and'other taxes - "i'- l532 - (555) .. (950)\\ Accounts payable and bther. T 20,756: - (33,956)~ 425,199 e . Power contract buy-out ;. . 1-1 (25,500) ' Fuel charge stabilization deferral, net.. ? (5,543) .2,372 (3,44 /):
Deferred postretirement benefits costs

(2,126) '
.(2,157)1 ' (4,47 9), FERC Order 636 transition costs,' et - < 11,310 n c-All other operatingitems. .(17,034) (3,391) 6.565 Net cash provided by operating activities : 5107,551 63.325 t -124,671 .a ' LInvesting Activitiesi,
~~Additions to property, plant and equipment (inclu'sive of AFUDC);~~
~~Electric~~
~~(34,524) ' ((38,844) '.(61,643) 1 Gas M-~~
, (18,230) f (11,611) L (16,198)L s Other ~' i - (4,804): "(2,730)^ (3,659) - ' Net cash used forinvesting activities ~ (57,558) < (53,185)- '(81,500) Financing Activities ? Sale of common shares' ' 32. . 9,534' Payment of dividends - (35,056)- (34,205): (33,142)
~~Proceeds from (payment of) short-term borrowings, net ~~~
- (24,400) - '62,875 ; 10,750 Iongterm.debtissues. 35,000-z Retirement oflong-term debt and preferred shares : 1through sinking funds E (8,473) (8,436) - (8,716) 3.ong-term debt issues rohmded (14,260):. ;(33,230) (25,000) Net cash used for financing activities. (47,189)' -(12,964) (46.574) ~ ~ ' ' Net increase (decrease) in cashL ? 2,804' (2,824) .(3,'03) 4
Cash at beginning of period 1,4954 4,319'

7,722 Cash at end of periodi T
~~. $ : 4,2991, S 1,495 : $ 4,319 - j (Supplemental' Disclosures'of Cash Flow Information a Cash paid during the period for:: Interest (net of capitalized amounts) $ 38,201 $ 41,294 $ 42,051 -~~
~~income taxes -~~
'8 24,436 $ 46,563 $ 12,918 J The accompanying notes are an integralpart of these consolidatedfinancial statements. m% 23 s _ _ _m
y_ 3 qlC E,' [ O.. ,s o MConsulidated? Balance Sheets j
Common

vealth Energy System and Subsidiary Companies En 1.
~~7 s a:~~
~~o. f '~~
g c iDdcembdr 3I,1, i, 1997 1996-T ^ ~ ' ?y' - (Dollars in thousands) ' 1 idssets:L fh^- 1 iProperty, Plant anil Equipment, at$riginal cost 7 ..: $ 1,173,7973 . $1,150,818' af l Electric 1 ~ ' ' ' 357,403" m 373,541 S Gasi x
~~72,475~~~
~~66,365 Q 4 Otherl *, e 1,619,813 ~- i1,574,586 :~~
1
~~.. M IAAscumulated klepreciation and amortization 1 J 577,962 ' 536,011 - .c '1,041,8511~~
~~1,038,545 -~~
~~TL.1 L- ^ ' Construction work in progress e~~
~~7,864 l.~~
~~5,485 W. ) Nuclear fu'elin process -' " i193~~
~~1,597 '~~
~~1,049,908-1,045,627- , -1 : i~~
~~i H~~
~~? Equity in Corporate Joint Ventures 1.. l l Nuclear electric power co_mpanies (2.5% to 4.5%) 10,368:; 10,046 ~g '. Othsr investments'~~
~~3,399' 3,349~~
~~'4 .13,767 J 13.395.- a.~~
l3

'
~~% 1 Current' Assets? 4,299. .1,495; j (Cash 1,. . 4 1 f.,. ll 'i 4; { Accounts receivable,less reserves of $9,408 ; ':o~~
Iri 1997 and $8,324 in 19961.

128,946 117,008'.
~~l Unbilled revenues 1 '32,029 31,698 sinventories, at average costl~~
~~s. Electric prodtiction fuel oil '~~
~~- 1,902 '- . 2,221 :- + !Naturdi gas F -23,301 23,084 . iMaterials and supplies 7,441 -6,220~~
~~Prepaid taxesi 9,282 9,079~~
-:4 IOthere C 5,786 5,686 a 9. 212,986 196,491 .jDeferred Chargest ' ', Regulatory assets : 178,864, 154,291 29,525 19,151 Other? ' g , 4. 208,389. 173,442. s,; 7g. . $ 1,485,050 $1,428,955 x.. Ih.... a ] The accompanying notes are an integral part of these consolidated 5nancial statements. V m3 f Y .V-
~~p i.fi]~~
'A: [ h e ~w ).
+ gp Wons;olidate"dLBalance Sheets. TCommonuiealkh Enemy $ stem andSubsidiary Companies + r ,Q- ,_ k _,
~~~ DecembeE31[ '~~
~~. (Dollars in thousands) n 1997- .1996 ..W, L. ^" tb Capitalization and Liabilitiss;,~~
~~Capitalization,(see separats st4temeno i u~~
~~Common share investmenti ' 1.. $.430,770 $. _415,694 7 3 -l Redeemable preferred shsres,lesd.currenti,~~
13,020 L

1. sinking fund requirementsh j 12,200. -
Ieng-term ~debtiless current sinking fundy s m., ? 3quirements and maturing debt i ' 364,31 P ' 355,305 l V ^ 807,281 D 784,019 ? Capital Lease Obligations 1 12,272 L 12,34'6 ' 1 7 n " Current. Liabilities. J Interim Financing-L iNot6s payable to banks) F [ 94,075 = '118,475 1 Maturing long-term debt - 19,000 '114,260- '113.075' 132,735 : 7 Other Current Liabilities--
~~Current sinking fund requirements~~

~~- p- ' 8,473/ 8,473-~~
~~Accounts payable; V.~~
~~,107,157:. -:90,269 Accrued taices-/ N. Local pr6perty and otheri, 9,795:~~
9,060 I JIncome

14,410-7,910 ' ' >
< Accrued interest 6,778 . 6,267:: .i Dividends declared. - 8,517 c 8,289 d . Other ? '43,627' 39,279 j 198,757:- 169,547 311,832 ~ 302,282 ^ Deferred Credits::... ' Accumulated deferred income taxes - 176,354.
~~174,877 Nudear imits' purchased power contracts -~~
69,659 43,677. ~ Unamortized investment tax credits - ~ 25,340: .26,618' Other.; '82,312 85,136 a 353,665-330,308-. LComnttments and Contingenciesi:. - $ 1,485,050 '- 1 $1,428,955 : l7150 accompanying nbies' are an integralpart of these consolidatedfinancial statements. ' b r p ,!,t L I j i .m lh
~~i. i 1~~
25 -)
wu am w w%y,
~~s e~~
~~a y Wmw'w x MMMsblidhte@ Statements of Capitalization 4 w?C6mmdNwedith Ested)sfem andSukidiary'Companiei ~ a ~- ~. ~ y ~ p m, m n u - j > e4b n s n dmpe -. p, ~p p c.;, ~, vyp~~
~~f[ <~~
~~s i_ ma ,.--,g, y Nzc 1 g~gDecember31% y4t, jj W~~
~~7 W,.~~
~~1997'~~
~~1996 epygpf,Sh;E ? a;ipq,,~~
3 m, (Donarsin thouunds). 4 Common ~are Investmentr m m ~ vo M, ; 1 Common shares, $2 par vaineh *. 1 1 Authorized-50,000,000 sharesM '. 4 __ s J .a y" ( $NOutstanding-21,531,784 shares in -1997-and s S. ;. f R[$ 43,'059.; ./. 9'" ~ @G y S21,529,676 sharesin 1996 ^ s0 Amounts paid in excess of par valueV , a$ 743,063 l q ~ 4111,912 3 S 111,6851 4yJ /1 (' Retained earningsMM ^ ~~'.~a ' t 275,795 < 260,950-6 .4~ ~ 5 tTotalcommon. hare..inve_stmentW 4 -m m
~~u L 430,770' 415,694?~~
s WReilEemabisPreferfed Shares,Y , _~ f a JCu~mulative?$100 ParJaldeO ' i Series A,4.800 -, A* s m* c'4,520 3 E2,6401 x~,1 Series'11,8.100 C,,e 3,840 '4,000 d. G Series C,7.75%Cf,d requirementsi 6,660i 7,200 iIrss-Current sinking fun - _ ~f,
~~(820)~~~
'(820)! F, ' Wotalie' eemEble pr.efENEd shares 1 312,200 .13,020. d s, ~.~ .m N hiing-term Dhti, 5 ' 1:SystemM M / o b d 4SeniorNotesduec o t t ' 4% c S 1998,10,45% "Up1997c10,48%M M' w ,.10,000 .10,000. ) i 10,000 L %s e i 1999,10.58% % m.. g~~ 110,0003 110,0001 ~ 3 - Q,OTotal System long-term debtsilmssMaturinglong-termlebtf < ' / (10,000)" (10,000);
1 C ya 410,000

20,000:
~~% 3SubsidiarycompaniesA D ' ,;^f_.. t %~ WMortgage Bonds, collateralized by property'of opera'ing subsidiar'ies,'duei s t J ' i 2001, 8.99% f ' >,1' H ' ' " ~ ^ W 114,4501~~
~~18,100~~
~~.m C i2006l8.85% L, ^ i ^ ? 34,300 r 134,650 - e F2007,6.54%i 2 10,000 - 1 j 2017,7.04% l~~
~~W i25,000-1-~~
m i, 72020,7%%j ' '10,000; .10,000 N 22020;9%% b 1 W 40,000 - 40,000 a s 52020,9.95%V m o ' 25,000: ' 95,000L s , i., e., Notes nue-L . V2033,7,11%i W5,000i 35,000-s 2*4? 4, e(1997,6%%4 [.. ,L ..t., 4,260: m
1 1998, variable rate (6.391% in 1997 and 6.125% in 1996)?

9,000 9,000l q'
~~6 ' ; M L1999,8.04%i " ~~~
10,000

10,000.
y imf f: ' g? %:2002,7%%N ,W'~ . Nw .12,5001 2,600:L 2002, 9.30%i 30,000 e 30,000 : >'~ y, q42003,7,43% %,. ? y!6^ g i (15,000 > vl5,000 s ' Q@g $2004,9.50%i & .f ' '10,000-12,500 i t Q2007,8.70%i %l ' i 5,000 5,000 : 4 T TR2007;9.55%t. OL JT T ' ' 10,000 10,000-1 o 4
~~, ? " G 2008,7.70%M~~
~~+ 'w 10,000.~~
~~10,000?~~
~~H 1$$2012,9.37%ME 'm >1'?. ~ 125,000' i L 25,000 ; p[@Mdy: i16,842: 115,789 t 12013,7.98%h / 9 4W Wf ' W R 2014,9.53%1 %y p f, s~~
~~10,000'~~
.'10,000; y J N d2019;'9,60%? - %W - "v% ' i10,000? - 10,000 ' J @% JM#, 115,000 l 15,000 ' k ' M2023,8.47%3 dif7%k/ > b. W9,000) '. (4,260) i f WM@g $Less-Maturinglong-term'debti gg $ Unamortized discount,netf iCurrent sinking fund requirementsi W[
~~(7,6C3),~~
~ V _$" n' J } Total sub'sidiky conipanies'long-term debt ? (75) ' (7,653) L j '(734) l U -354,311 335.305 J iTotal1 g - kth. ~ ~ M, n -term dsbt.l < ;P>x: n y M. ' g" ~ 'n >5 ?8807,281 $784,019 l -364,311 355.305 i ,s yjTotal talizatimp f4 ? S M 4 c.m On 1 Qpp acconspany,ng notes are an iniegralpart)f these consolidatedfnantial statements, ^ Ek, JO '.$ s a, e y h4 ' ;j O'R-w=9 nr g %gyk ' u -M 4... b, q r s 9.. w e s* ~ it/ J"% c.p .j(._ i
w: my - ; n;
~~[([Y i~~
L iChnsoliddtsd Statement's of Changes in 1Gymm;onfSpreholders' Investment j [ Commonwealth Enemy System andSubsidiary Companies ) For the years ended Decembbr 31l1997,J1996 and 199S i g,oug7,. ? . Par ~ Paidin a.
~~Value '~~
~~Excess L $2 Per - of Par . Ret.ined ' '~ - ; Shares ; Share ValueJ . Earnings s~~
~~Tetal a;~~
. (Dollars in thousands)L s. t s . ~. Balance December 31,1994Y 4 , ' 21,051,7941 l $42,103 ' $103,168'- L $217,726:. ' $362,997 -- d t Add (Deduct)? ~ ' ' ~ 1 -' Net income ' m -1 51,3961. / 51,396? Sale of sharesi. i Cash dividends declarsdi (476,474 < 953' '8,581 '. :- e, 9,534 ; ~ N l Com' mon shares-$1.50 per sharei -i (32,032) (1,110). ~-(32,032)J t- ,, Preferred shares! '(1,110)i ' Balance December 31,1995 ; '
~~21,528,268:~~
~~.43,056 111,743 235,980 L 390,7851~~
~~Add (Deduct)O 1~~
~~1 a Net income' ' 59,175: 59,175 ' ' Sale of shares 1,408 L~~
3

29.
~~L--- 32 ' - Cost of stockiplit L J-(93)-, 7 (93). - Cash" dividends declaredh Common shares $1.54 per share ~~(33,155).~~
~~(33,155) ~~~
~~(1,050) s(1,050)? ] Preferred sharesJ~~
~~Balanc'e Decembes 31J1996i '~~
21,529,676 i ' 43,059 ~ !111,685: 260,950 ' 3415,694 a EAdd (Deducth f ' M01i 99,901Ib. - 3 !Netinconie g N 49 Shares issuhd pursuant to long-Term l ' (43f ~ 447l l Incentive Compensation Plan J "( / 2,108-L4L e's f a 4 " Amortization of deferred compensation ."c 1M 1-1184: Cash' dividends declared-1^ T l[. , iCommon shares-$1.58 per share 4'. ~ 1(34,068))..K;(34,068) ~ P; 1 Preferred shares : ~ ~ ~ (988); !(988): ' Balance'Decemb$r 31,1997 21,531,784s $43,063 $111,912 - . $275,795 4430,770 H ~ l iC.onsoli~datedLStatemen'tsEof Changes int
~~RedeemabMPreferrsd1Shar.es~~
~~.n + Commonwealth Eneay System indSubsidiary Companies l For theyears sidsd Decensber 31l1997;1996 and 1995l ' Authorized and Outstandin "-~~
Cumulative Preferred Shares-$100 har Va e

'Ws
~~. e W - Series A i Series B 5 Series C - TTo# - s'~~
~~4.80% e~~
- 8.10% i 7.75% " ?Sharn , 4; -:n a, ,,? ~ .,.ri ,.g 'y', -e j 82,900f. 1154,800i n ,J f.,.. y a ,.a -7 r s / Balance December.31,(1994b ' 528,800 ' 43,200f !Irss-Sinking fund redemptidnsh J1,200) '1,600 '5,400 ' ! 8,200; L I
~~146,600I ' q a.~~
~~,,N fBalaiice D$b0nibedl;-1995%'s? > y jlessSinking fund redemption~~
~~27,600; 41,600 -~~
~~77,400 i s 1,200 : .1,600- . 5,400 -8,2003 1~~
rs

T f Balahce December'31d996;
~, 26,400 -40,0001 72,000? "138,400 '1,200 1,600 - 15,400 J -8,200 L d 3 Iess-Sinking fund fedemptions 7 / .((BalAnceDecerhbN31}1997}, 25,200 t 38,400 66,600 - 130,200: q qus cm f %:. j'NThe acchtpanying notes are an'integrbipart of these consolidatedpnancial statements. 1 p<, i s s Q. 1 > .., fj@ q@ . s 7; s 27,E g e s p 4
we ca x h
~~!@ >, $n g' JjL w"_r sohd,ated *Einancial Statements g-epN,ote,sato,nCon.~~
~~k hwAwnned/KEkehgySywNntadd$$bbidiarybbinpania p"asmg(ypg,(; y] m ys y~~~
~~y-g.(~~
,3 f yg> - - a s 7 . p+ 'y "l [ H y /y ) sy mw m ~ A}['r.(1)1 General'J'Infe[mation$ # Ad? xV hl {e 'k; Qv ns .y f K $lld ezempt publicl utility holding company,withjavesti M "(Commonwealth Enefgy Sistem (ths SystRm) is anj ? WRegulatory Assets and Liabilities) ) %e system's operating utility companies are regulated as to ggments inJour, operating publi(utility companies located E Ojaths, accounting and other mattet s by.various authorities, g, glo central / eastern and southeastern Massachusetts.(g.gf.M neluding the Federal Energy Regulatory Comm%sion (FERC). gg%e System is'.the parent company and, together with E., Jand ths Massachusetts Department of Telect mications 3 l yltsjubsidiaries(is collectively referped to asJthisc iand Endrgy (III'E)lformerly,the Massachusetts Department (sy; tem.y System electnc5perations are involved in' thes
~~of Public Utilities.~~
- Qproduction; distributien and sale'~of electricity to.D W i f Based on'thi etirrent regulathry framework the system ~ - Q67,0g0 customers in 41 communities lucluding Ne9 7 ~ faccounts for.tlis ec6n'omic effects Of regulation in 'acesr-
~~Q f Bedford, Plymouth, Cambridge and the geographic f~~
[ dance with the provisi5ne of Statement of Finsncial-4 pea comprising [ ape. Cod? Gas operation,s serve U TAccounting Stridards' (SFAS) No. 71. "Acbounting for thee Sp", J 237,000 customers d49 communities ingludmg New ;, Effects of Ceftain Types af Regulation."l Regulated sub- ^ l ? Bsdford, Cashbridseplymouth and Worgesteiln addi< TsidiAries of the System have established various regulate [ tion to ths 'Utilitp conr/anies,' the'systs.n includes a{ . ry assets in cases wisre the DTE and/or the FERC have 4 KNgteam distribution ct;mpany, five rer4 estate trusts, a J
~~l permitted or are expected to permit recovery of specific -~~
l company engaged 11, the operatiot of LNG facilities and / J three new subsidiariesjhht are pursuing energy-related J ', Tessts over time.- Similarly, the regulatory liabilities estab- .~ lished by the system sre required to be refunded to cus-s
~~, (business opportunitiesJ ; ' [~~
~~f tomers over time.)ln the even' the criteria for applying - t g Q}jThe system has 1J27 regular employees likhiMng ;~~
~~SFAS No. 71'are no longer met,' the accounting impact 1,037j60%) represented by various collesthe bargaining:. '~~
Lwould be an extrsordinary, non-cash charge to operations ~ f Tunits(A' contract _with a dollEctive bargainmg unit reprei f Of an amount that could be' material. Q j sent,ing approximately 5%jof rsgular employees that wasi iCriteria that give rise'to the discontinuance of SFAS No. < 4 scheduled to expire in May 1997 was ratified uiAprilfW 171 include: 1) increasing competition that restricts the sys-gp1997 and ic effective through May 31l 2001',?In April :,, ~ item's aliility te establish prices to' rec 6ver specific costs,. W g998, a_' collective bargainirig contract representing;. i and 2) s significAnt change in the current manner in which - Tr_pproximately 5% of regular employees is scheduled tof i rates are[ set by regulators from' cost based regulation to - @% [ expire and twkadditional cgntracts (together repre _ sent-
~~another form of regulationf These criteria are reviewsd on~~
~~% slug approximately 7% of regular employees) are scheds~~
~~a regular basis to ensure the continuing application of SFAS g juled to expire m September 1998.~~
[ T No. 71 iA appropriate. Based on the current evaluation of ]p During ths second quarter of 1997, the system initiated a 0 ' + the various fcctors and conditions that a' e. expected to r ,Myoluntary personnelreduction programfAs'a result of this[ - impact future cost recover', the system believes that its y M Qprogram, the total number of regular employees has declined i regulatory assets l including those related to' generation, are - %approxirrmtely13%1s.19977E( W y$@$p%rsifMtAccou5tikiPolicieO m '$ I ; probaMe of future recovery.; Ms a resuk ieMaic indusey restructuring. the sys- - tem's retail electric companies discon!mued application of p w C. j _a y t (tJEPrincihle MCosiolidation and Accountin,gD Taccounting principles applied to their investment in electric m:M%Econsolidated financial statements include the Accounts ; generation facilities effective March 1,1998.- he system ?Mof the System'and all ofits subsidiary companies. All signifi-1 " will not be required to write off any of its generation-relat- %r4 stercompany acwats and transactions have been etiati-f i ed assets, including regulatory assets. Rese assets will 4 A, @Nnatedin consolidation?FIM prsparation of Aweial sta'Enientdin ceuformity with b fthe legislation and the DTE's plan for a restructured elec- .L 2 be retained on the Consolidated Balance Sheets because i t 7A $..JG accepted accountins principlee required manage / ( tric industry specifically provide for their recovery > [fMment to make estirdates and assumptions that affect the sWM reported ; ounts of kasets ' nd liab LEffective January 1,1996, the system adopted SFAS No. /through a non-bypassable transition charge. a STN htmgenOisnd lih"% dthe de.ts of the financial ? "12DAccounting for the Impairment of Long-Lived Assets ? statements add tMrepos ,.nounts'or enues and expens - ' and for long-Lived Assets to be Disposed Of." SFAS No. Y jes during"tidreporting period.? Actual renuits could differ ? 121 imposes stricter criteria for regulatory assets by
~~fu froth those estunaies:, h D '~~
~ requir* g that such assets be probable of future recovery m M hCErtaldhrioryearamouhisare# Nci ifrom time to at each balance sheet date. SFAS No.121 did not have an khgtime tS chefoim with the pressntation t. xd in the current.impact on the system's financial position or results of oper-h;Mgo', hycar's Snancial statements M . ations upon adoption. $p; Q 4, . 4, k', x ~ M ' ~, l
%I
.d .. (Y } 1 l ?
%e principal regulatory assets included in deferred the system will be allowed to recover and the market price of elec. charges at December 31,1997 and 1996 were as follows: tricity.. Management believes that the system will recover its 1997 1996-stranded costs. A change in say of the above listed factors or in , (Dollars in thousands) the current legislation could affect the movery of stranded costs and may result in a loss to the system. For additionalinformation Postretirement benefit costs ~
~~$ 25,475~~
.S 25,051 - Power contract buy-out: 17,009 - 20,794 relating to mdustry restructuring, see the " Industry Re<ructunng Fuel charge stabilization ; 29,655: 21,504 -Electric" section under Management's Discussion and Analysis . Deferred income taxes 13.089 ' 13.597, of Financial Condition and Results of Operations. FERC Order 636 transition costs: 7.3J6. ~ 9,680 -(c) Equity Method ofAccounting Maine Yankee unrecovered plant - 1 he system uses the equity method of accounting for invest- ~ Conne eu Y k unt >vered' Iments in c rporate joint ventures due, in part, to its ability to ; plant and decommissioning costs '28,566- ' 35,879
~~exercise significant influence over operating and financial poli ;~~
~~Yankee Atomic unrecovered plant -.. .cies of these entities. Under this method,it records as 3 and decommissioning costs - L 6,1841~~
~~7,798' income the proportionate share of the net earnings of thejoint S brook related costs :~~
ventures with a corresponding increase in the carrying value '. of the mvestment. The investment is reduced as cash divi- $178.864 $154.291f dends'are received. The system conducts business with the The regulatory liabilities, reflected in the accompanying.
~~corporate joint ventures in which it has investments, principal '~~
Consolidated 11alance Sheets and related primarily to deferred . ly four nuclear generating facilities located in New England income taxes, were $14.1 million and $17.7 million at L and a 3.8% interest in liydro-Quebec Phase IL December 31,1997 and 1996, respectively. (d) OperatingRevenues As of December 31,1997, $143.1 million of the system's regu-Customers are billed for their use of electricity and gas on a latoryessets, including the costs associated with existing power cycle basis throughout the month. To reflect revenues in the contracts with three Yankee nuclear power plants that have shut proper pedod, the estimated amount of unbilled sales revenue down permanently (see Note 3(d)), and all of its mgulatory lia- " is recorded each month. bilities are reflected in rates charged to customers. Regulatory ; - System utility companies are generally permitted to bill cus. t assets are currently being recovered over a weighted average tomers for costs associated with purchased power and tnms.s
priod of approximately 11 years. He fuel charge stabilization mission; fuel used in electric production, gas, conservation deferral was expected to be recovered over a six-year pedod

and load management and environmental costs. He amount 1 beginning in April 1998, pursuant to a yet to be detennined of such costs incurred but not yet reflected in'eustomers' bills recovery schedule and subject to final IYlE approval.
is recorded as unbilled revenues. In November 1997, the Conunonwealth of Massachusetts -(c) Depreciation' enacted a comprehensive electric utility industry restructurmg Depmciation is provided using the stmight-line method at rates bill. On November 19,1997, the System's electdc subsidiaries ! - intended to amortize the original cost and the estimated cost of filed a restructuring plan'with the DTE.:%e plan, appmved byJ removal less sah age of pmperties over their estimated economica the DTE on February 27,1998, describes the process by which ' lives. The average composite'depmciation rates were as follows: i . the System's retail electric subsidiaries will, beginning March ;
~~1997 t1996 1995 1,1998, initiate a 10 percent rate reduction for all customer Electric '~~
3.66% 3.65% ' 3.52% classes and allow customers to choose their energy suppher" Gas-2.95 = 2.94 1 90 As part of the plan, the D'IE authorized the recovery of cer ' . Steam 3.J0 3.89 3.91' tain strandable costs. He legislation gives the DTE the ' LNG-3.65 3.59 ' 120 authority to determine the amount of strandable costs that will, be eligible for recovery. Costs that will qualify as strandablef
~~(/) 'Allowancefor Funds Used During Construction~~
. costs and be eligible for recovery include, but are not limited Under applicable rate. making practices, system companies to, certain above market costs associated with generating facile are permitted to include an allowance for funds used during ties, costs associated with long-term commitments to purchase. . construction (AFUDC) as an element of their depreciable power at above market prices imm independent power produc. : property costs. This allowance is based on the amount of con-ers and regulatory assets 'and itssou.ited liabilities related to - struction work in progress that is not included in the rate base the generation portion of the electric businessJ on which utility companies earn a return. An amount equal to ' He cost of transitioning to competition will be ;nitigated,in ' . the AFUDC capitalized in the current period is reflected in j . part, through the divestiture of the system's non-nuclear gen-other interest charges in the accompanying Consolidated [ j emting assets in an auction process that is expected to be' ' Statements ofIncome a.id amounted to $368,000, $257,000 . completed id 1998. Any net proceeds in excess of book value - and $857,000 in 1997,1996 and 1995, respectively. rece'ved from the divestiture of these assets will be used to = While AFUDC does not provide funds currently, these amounts p mitigate stranded costs.' are recoverable in revenues over the service life of the constructed I / The system's ability to recover its stranded costs will depend on propeg De amount of AFUDC mcorded was at a weighted L beral fxtors, including the aggregate amount of stranded costs ave. age ate of 6.1% in 1997,624 in 1996 and 7.1% in 1995. y' 29
((g) Earnings Per Share Canal Electric and the otherjoint owners have established a Mhe System adopted SFAS No.128 " Earnings Per Share" fur decommissioning fund to cover decommissioning costs. De the year ended L)ecember 31,1997, SFAS No.128 requires the estimated cost to decommission the plant is $469.1 million in presentation of both basic and diluted earnings per share current dollars. Canal Electric's share of this liability (approxi-(EPS). Diluted EPS reflect the possible impact on EPS that ~ mately $16.5 million), less its share of the market value of the could occtir if securities or other contracts to issue common assets held in a decommissioning trust (approximately $2.5 mil-stock'were exercised or converted into coumon stock or result-tion),is approximately $14 million at December 31,1997. 3 ed in the issuance of common stock that then shared in the (c) Price-Anderson Ar;
~~earnings of the entity. The System granted potential awards in~~
, Under the Price-Anderson Act (the Act), owners of ) ' the form of common shares to certain key employees pursuant : nuclear power plants have the benefit of approximately $8.9 f to its long Term Incentive Compensation Plan (see Note 5(d)) - . billion of public liability coverage which would compensate 7 during the first quarter of 1997. He adoption of SFAS No'.128 1 the public for valid bodily injury and property loss on 'a no ' did not have a materialimpact on the System's EPS. - fault basis in the event of an accident at a commercial ~ nEINp SW plant. Under the provisions of the Act, each
~~-(3) ; Conunitments and Co'ntingencies -~~
. nuclear reactor with an operating license can be assessed (a) ' Capital Erpenditures, up to $79.3 million per nuclear incident with a maximum The system is engaged in a continuous construction program assessment of $10 million per incident within one calendar ' presently estimated at $248.6 million for the five. year period 1998 year. Nuclear plant owners have initiated insurance pro-through 2002. Of that amount, $60.7 million is estimated for grams designed to help cover liability claims relating to ' 1998. He program is subject to periodic twiew and revision. ' property damage, decontamination, replacement power and > Ihe system, through its Advanced Energy Systems, Inc. business interruption costs for participating utilities arising . subsidiary, tentatively agreed to purchase a total energy plant from a nuclear incident. located in the langwood Medical Area of Boston for $146.3 The system has an equity ownership interest in four million. His imnsaction is expected to be closed in the sec - nuclear generating facilities as well as a 3.52% joint-own-fond quarter of 1998. Revenues for fiscal years ended June 30, ership interest in Seabrook 1. The operators of these I 1997 and 1996 were $58 million and $53.9 million, respectively, units maintain nuclear insurance coverage (on behnif of (b), Seabrook Nuclear Poseer Plant. the owners of the facilities) with Nuclear Electric He system's 3.52% interest in the Seabrook nuclear power Insurance Limited (NEIL II) and the combined
~~plant is owned by Canal Electric Company (Canal Electric), a ;~~
American Nuclear Insurers / Mutual Atomic Energy wholesale electric generating subsidiary, to pmvide for a por-Liability Underwriters (AN1); NEIL 11 provides 82.25 { tion of the capacity and energy needs of affiliates Cambridge billionLof property, boiler, machinery and decontamina- , Electric litght Company (Cambridge Electric) and tion insurance coverage, including accidental premature . Commonweahh Electric Company (Commonwealth Electric), decommissioning insurance in the amount of the short-Canal Electiic is recovering 10(15 of its Seabrook 1 investment fall in the Decommissioc'ng Trust Fund,in excess of ' through a power contract with Cambridge Electric and the underlying $500 million policy. All companies Commonweahh Electnc pursuant to FERC and DTE appmval. insured with NEIL II are subject to retro' active assess-l ' Pertinent information with respect to Canal Electric's joint-ments if losses exceed the accumulated funds available. ownership interest in Seabrook 1 and information relating to ANI provides $500 million of "all risk" property damage, 2 .l operating expenses thet are included in the accompanying boiler, machinery and decontamination insurance. An financial statemen;:me as follows: _ additional S200 million of primary financial protection 1997 1996. coverage is provided .J (Dollars in thousands) for off-site bodily 1 ' Utility plant-in-service < ' $232,471. $232,183 Plant capacity (MW) 1,150 injury or property Nuclear fuel ; , 22,207-21,613 Canal Electric's share: damage caused by a
~~and amortization~~
'(64,379) Percent interest 3.52% nuclear incident. l Accumulated depreciation ~ .(57,359) - Entitlement (MW) 40.5 ANI also provides Construction work in progress - 1,036-844'. In-service date 1990 secondary financial - S191,335 : S197,281 Operating license expiration date 2026 protection liability 4 insurance which cur- ) 3997 1996- -1995 rently provides $8.7 bilh.on of retrospective insurance l . (Dollars in thousands) ? Operating expenses: premmm benefits,m accordance with the provisions of ' Fuel '~' -8 1,471 $ 1,727 S 2,353 the Act. Additional coverage ($200 million) provided by ) . Other operation . 4,206 .4,091 4,292 ANI includes tort liability protection arising out of radia-l 1 Maintenancei - 2,364 990 1,376 tion injury claims by nuclear workers and injury or ort alon ; property damage caused by the transportation or ship. ' S15.674 $14.671 S15.882 Based on its various ownersh.ip mterests. the five nuclear in 30 1 l
oj generating facilities, the system's retrospective premium lect from power purchasers (including system companies) could be as high as $1.9 million annually or a cumulative total decommissioning costs, unrecovered plant investment ana of $15.1 miDon, exclusive of the effect ofinflation indexing (at other costs associated with the permanent closure of these .five yearintervals) and a 5% surcharge ($4 million) in the.
plants over the remaining period of each plant's operating event that total public liability claims from a nuclear incident license. The system does not believe that the ultimate out-exceed the funds available to pay such claims.,
' come of the early closing of these plants will have a material (df Power Contracts adverse effect on its operations and believes that recovery of %e system has long-term contracts to purchase capacity frem these FERC-aprmved costs would continue to be allowed in various generating facilities. Genenlly, these contracts are for . its rates at the retaillevel. fixed periods and require payment of a demand charge for the . Costs pursuant to these power contracts are included in elec. capacity entitlement and an energy charge to cover the cost of -
tricity purchased for resale in the accompanying Consolidated

fuel. Information nlative to these contracts is as follows --
Statements of Income and are recoverable in revenues. - Range of. e estimated aggregate obligations for capacity under the Contract. long-term purchased power contracts and a life-of-the-unit con-Expiration Entitlement Cost ' tract fro n the one remaining operating Yankee nuclear unit Type of Unit : - Dates % MW-1997
~~1996 1995 (Vermont Yankee) in effect for the five years subsequent to~~
~ ~ ' ' (Dollars in thousands) 1997 is as follows: longterm ~ - Naturalgas 2008-2017 (a) 208.6 $127,580 $120,842 $121,636 - Purchased Equly Owned Nuclear 2012- .(b) 85.1-41,058.41,280 44,379 Power - Nuclear Unit. Total . Waste toenergy.- 2015 100 67.0 = 43,038 39,622 - 37,526
~~(Dollarsin t%usands)~~
Hydro - 2014-2023 - 100 23.9 10,952 ' 12,537 9,933-Total 384.6 $222.628 $214.281 $213,474 1998 $219,909 $4,957 $224,866 1999-223,490 5,001 228,491 (a) Includes contracts to purchase power from urious non-utility 2000 225,513 4,311 229,824 generators with capacity entitlements ranging from 11.1% to 1001 5' 99r . (b) De system has an 11% entitlement in the Pilgrim nuclear power plant and a 2.5% ownership interest in the Vermont Yankee nuclear. Due to changing conditions within the nuclear industry, power plar.t. %e estimated cost to decommission the Vermont Yankee-it is possible that the remaining operating nuclear plant in /' ' . hich the system has an equity ownership interest could w plant is $385.9 million in current dollars. The system's share of this lia. bility (approxienately 88.7 mihri,ler its share of the market value of be shut down prior to the expiration of that unit's operat< the assets held in a decommissioning trust (approximately $4.4 mil. Ing license, lion). is approximately $4.3 million at December 31,1997[ he costs associated with tl'ese power contract obligations are a significant component of the system's stranded costs - Pertinent information with respect to lifeef-the-unit contracts that are included in the system's restructuring plan approved with nuclear units that are no longer operating in which the sys. by the DTE.' . tem has an ~ equity ownership is as follows: -(e) Environmental Matters. The system is subject to laws and regulations adminis-Connecticut Maine ' ; Yankee tered by federal, state and local authorities relating to the Yankee Yankee Atomic - quality of the environment. These laws and regulations (Dollars in thousands) - affect, among other things, the siting and operation of elec- '.50 - 4.00 4.50 tric generating and transmission facilities and can require Equity' Ownership (%) - 4 - Plant Entitlement (%) ' 4.50~ 3.59 4.50 the installation of expensive air and water pollution control . Contract Expiration Date - 2007-2008 2000- . equipment. These regulations have had an impact on the Year of Shutdown
1996-

1997 1992-system's operations in the past and would continue to have
- 1995 Actual Cost ($)1 9,498 7,376 2,023. an impact on future operations, capital costs and construc-1996 Actual Cost ($) . 9,259 - 6,511 2,260 tion schedules of major facilities; however, the electric gen- '1997 Actual Cost ($) .5,760 8,928 - 2,238 ~ erating facilities are likely to be sold at auction in 1998 pur-Decommissioning, cost suant to thei restructuring plan filed with the DTE. For estimate (100%) ($) 437,270 386,046 137,428 additional environmental information, see " Environmental System's decommis-T Matters" in Management's Discussion and Analysis of slomng cost ($) c 19,677f 13,859 . 6,184 ' Financial Condition and Results of Operations.
~~Market value of assets (100%) ($) ~~~
209,448. 199,457 ' 134,143 (4). Income Taxes System's market value (of assets ($) ? 9,425 7,161 6,036 He system files a consolidated federal income tax mturn. For financial reporting purposes, the System and its subsidiaties . Based upon regulatory precedent, the operators of the provide taxes on a separate return basis. l Yankee units believe they will be permitted to continue to col- %e following is a summary of the consolidated pnrvisiona for l 31
y p s hxxnne taxes for the ymn ended Decunber r!,1997,1996 and 1995c such taxes. The following table reconciles the statutory feder-alincome tax rate to these percentages: 19971 1996 1995 1997 1996 1995 (Dollars in thousands) (Dollars in thousands). e ,n i ' FideW C Current 1 i $24,396: ;$28,375 - $15,954 - Federal statutory rate 35%- 35% '35% "P T Deferred 3 L 2,612 : _ 2J84 L ; 8,231: i (Investment tax credits,Lnet '(1,278)
~~(1,285)7 J(1,401)~~
~~. Federalincome tax's 5 25.730' = 29,874 " ; 22,784 : - expense ' t statutoryu a E dtats0 ' levels $28,332 $33,363 - $26,007 - R: Current 5 5,389 ; g 15,542~~
~~4,176 1 Increase (Decrease) from 1 l~~
~~/ Deferred : -316c ~ ?890: 1,115~~
~~statutory levels~~

l 5,705 - 6,4321 15,291 E State tax net of federal e 31,435' 36,306 28,075 ' - tax benefit - 3,708-4,181 = 3,439 - 7 Amortization of regulatory 9 J Tax versus book depreciation - 1,714-. 1,553 ' : 1,369 1
~~liability relating to deferred)......~~
~~L Amortization ofinvestment - . ' (1,368) -' d ,~ y.i i ncome taxes l l '(386)1 .(159): '(5,161) L tax credits : 1(1,278)! (1,285) - i S31,049~~
~~$36,147 $22,911 :~~
Reversals of capitalized - ~ Fidehl and st' tei ,- Dividend received deduction. (366) (381)- '(389). a expenses. "(654) .(654).- (652) j - income taxes charged to:-. $36,099i$24,574 fAmortization of excess
~~Operating expense <~~
~~. $31,040 g 6 Other.(income) expense ; ~ ' 48 z (1,663) ' deferred reserves (386). ,(159). - (5,164))-~~
];
~
~~$31,049.~~
.$36,1471 S22,911-Other (21)- . (471) ' .(331)' $31,049 ' $36,147 - $22,911' LDeferred tax liabilities and assets are determined based ? on the difference between the financial statement and tax, Effective federalincome . tax rate. 38% 38%= 31%- . bases of assets and liabilities"using ena'cted ' tax rates is feet the year in which ths differences are expected t (5)i mployee Benefit Plans-E t in May 1995, Canal Electric refunded certain unprotected " ' (a) Pension i Excess deferred taxe's to Commonweakh Electric and Cambddge The system has a noncontributory pension plan cov- , L Ekstde' resulting in a reduction to the 1995 tax provision.' ering substantially all regular employees who have " Accumulated deferred income taxes consisted of the follow- - attained the age of 21 and have completed a year of ser-ingin 1997 and 1996:_ . vice, Pension benefits'are based o.n an employee's years - '1997-1996: - of service and compensation. The system makes - - (Dollarsin thousands) : monthly co:#butions to the plan consistent with the
~~Power contract buy-outi~~
~~' c 6,853 - ~-$195,810 - ""*M'" tydelated 1 $198,183 - %me D unty Act of 1974. 10,002 Fuel charge stabilization '.. 12,241 s 8,124.~~
~~Components of pension expense and related assump;~~
~~, Postretirement benefits plan L7J42-~~
~~7,442 i tions to develop pension. expense were as follows:.~~
Seabrook nonconstruction-707 1,183 ' 1997 1996-1995-Allother 2 -16,140-20,018 (Dollars in thousands) 241,866 242,579 L Assets L, ' Service cost . $ 7,565 $ 7,663 $ 6,386 Investment tax credits' ~ .16,058 17,205 : Interest cost. 24,824 24,462 23,949' ? Pension plan? / ~ l 6,409 l - 8,528. Return on plan assets - t Regulatory liability. . 6,103 - 6,352 . (gain)/ loss (61,094) (45,961) (62,933) Personnel reduction program - 1,540 Net amortization s .iAll other-
~~.20,960 '~~
22,239 . and debrral 37,510 24,520 42.928 1 51,070 54,324 L Total pension expense - 8,835. 10,684 10,330 ' EAccumulated deferred income taxes, netL ' $190 796 $188,255 Irss: Amounts capitalized and deferred 3,017 2,203 1,842 .. The net year-end deferrdd income tax liability above-Net pension expense ' $ 5,818 $ 8,481 S 8,488 ' includes a current deferred tax liability of $14,442,000 and Discount rate 7.50% 7.25% 8.50% $13,378,i,00 in 1997 and 1996,l respectively, which are includ-Assumed rate of return - 8.75 8.75 9.00 Ted la accrued income taxes in the accompanying. Rate ofincrease in future ~ 3 Consolidated llalance Sheets L compensation ; 4.25 4.25 5.00 ?lhe totalincome tax provision set forth previously repre-Pension expense reflects the use of the projected unit i sents 38% in 1997 and 1996 and 31% in 1995 of income before credit method which is also the actuarial cost method used in -32 F
r-e ); determining future ftinding of the plan. Commonwealth 1997 1996 1995 Electric nnd Cambridge Electric, in accordance with current (Dollars in thousands) . ratemaking, are deferring the difference between pension' con- . Service e st $ 1,919 $ 2.211 $ 1,774 tribution which is reflected in base rates, and pension expense. I He funded status of the system's pension plan (using a mea-Return an assets (9 ) '(5, 76) (, ) surement date of December 31) is as follows: Amortization of transition obligation over 20 years 5,336 5,336 5,336 1997 1996 Net amortization and deferral 5.236 2,038 - 3,692 (Dollars 0: thousands) Total postretirement ~ Accumulated benefit obligatidn: Irssi Amounts capitalized. '12,231 13,761 -14,028 benefit cost. Vested ~ $(331,170) - $(254,888) and deferred 466 1,614 5,898 - Nonvested - '(40,822) . (30.604) Net postretirement benefit cost $11,765 $12.147 $ 8.130 $(371,992) - $(285.492) Projected benefit obligation ' ~ $(409,039) $(340,850)/ Discount rate 7.50% ' 7,25% 8.50% Plan assets at fair market value. --390,625 ' 343,884: Assumed rate of return 8.75 8.75 9.00-Projected benefit obligation less Rate ofincrease in or (greater) than plan assets (18,414)' - 3,034 future compensation 4.25 4.25 5.00 Unamortized transition @ ligation 6,429 8,036 Unrecognized prior service cost 11,922 13,357 Unrecognized gain (20,480) (43,918) ' The funded status of the system's postretirement benefit Accrued pension liability . $ s20,543) $ (19,491) plan using a measurement date of December 31,1997 and 1996 is as follows: 1997' 1996 - The following actuarial assumptions were used in determin-(Dollars in thousands) ing t!a plan's year end funded status: ' Accumulated postretirement 1997 1996 benefit obligation: ' Retirees. $ (102,485); $ (72,827) Discount rate 7.00% 7.50% FuHy e,ligible active plan participants (18,123) (11,468). Rate ofincrease in future compensation - 3.75 4.25 Other active plan participants - (28,756) .(41,352) (149,364) (125,647) Plan assets consist primarily of fixed-income and equity secu-Plan assets at fair market value 61,632 ' 45,967 rities. Fluctuations in the fair market value of plan assets will Accumulated postretirement affect pension expense in future years. ' benefit obligation (87,732) (79,680) greater than plan assets -- Unamortized transition obligation 80,033 - 85,368 Unrecognized (gain) loss (7,699) (5,688) (b) Other Postretirement Benefits Certain employees are eligible for postretirement benefits if _ they meet specific requirements. - %ese benefits could. include health and life insurance coverage and reimbursement, ne following actuarial assumptions were used in determin-of Medicare Part B premiums. Unt er certain circumstances, ing the plan's estimated accumulated postretirement benefit l eligible employees are required to make contributions for - . obligation (APBO) and funded status for 1997 and 1996: - postretirement benefits.' .-To fund its postretirement benefits, the system makes contributions to various rotuntary employees' beneficiary 1997 1996 - association trusts that were established pursuant to sec- - Discount rate ' 7,00% 7,50% tion 501(c)(9) of the Internal Revenue Code (the Code), Rate of increase in future The system also makes contrib'utions to a subaccount of _ compensation. 3.75 4.25 its pension plan pursuant to section 401(h) of the Code to. art H prenums ~
~~fund a portion of its postretirement benefit obligation.~~
- Dental care '4.50 5.00 ne system contributed approximately $12.2 million, $13,7 million and $14 million'to these trusts during 1997,1996 Eand _1995, respectively. He above dental rate remains constant through the year 2007, q He net periodic postretirement benefit cost for the years : Rates for Medicare Part B premiums and medical care decrease to ended December 31,1997,1996 and 1995 includes the follow-3.1% and 4.5%, respectively, by 2007 and remain at that level there-ina components and related assumptions: after, A one percent change in the medical trend rate wvuld have a 33'
g&$^, ' ;' ',e'2 Q WK_ +. ? A g p>W W } = m n %p, [w* ~ Q;& 3. ~,,m y n d $1.5 EdBio/. impact on tli_. system's'annudex, pense ind woukt i
~~uncommitted lines of credit for the short-term financing -~~
i IchandM4APBObyw,uJ,M$18.2milhon.!., c-of their construction programs and other corporate pur-F8WRTotissets consist pfinnarily of fixed-income and'equith (poses; As 6f December 31?1997, system companies had : E j{;nies. Flucinations'in thE fairinarket valuelof' lan asseti% ! $145 million of committed lines of credit that will expire : p S will affekt postretirement bene 6t expense in'futdre" years.2 L at ydying intervals in 1998/These lines are normally $2O 4 Effective May 1} 1995 the DIE appr6ved Esettlement pm ' . renewed upon expir'a'tlon and require annual fees of up to. ~~ k, ? Malsponsored.jointlyby Commonwealth Electrisand' thel .1875% of theindividdalline.5At December 31,1997, the .g Attornep GerD of Miseschusetts that allows (, 1sncominitted lines of credit totaled $10 million.; Interest, 77Commonwe / i Electdc to fully recover costs' relating'to ! 9 riites on the outstanding borrowings generally are at aii ; N, postretirement bSne6ts and'to' amortise its[$8.6 million f N adjEsted monhy market rate and averaged 5.8% and 5.6% < h@%FERC5ccepted for filing r$te'achedules that ' rokided for thEc deferied balance oder 4 ten-year perioddin February 1996,9 i in 1997 and 1996,"rsspectivelyf Notes payable'to banks - p itotalAd $94,075,000 and $118,475,000 at Dec' mbek 31 ' e hd['[ recovery bf Canal Elktric's expense hffEctiUe with its Marcid 1997 and '1996, respectively.:, 1996 ednirect biDh@s inbloding thi rvcovery)f previously?., l (b)?long-term' Debt Maturities and Retirements ;. Pdefesed costs over a six-month'periodf On April.15,1997, the ? M Under terms of vadous indentures a'nd loan agreements, the ; ' 5 DIE issued an'secounting ruling allowmg Commonwealth ?, ' w ~ L System ahd hertain subsidiary companies are ' required 10 1 9kj Gai Company to in61ude phstretirement benefits costs in costk i make periodic sinking' fund payments for' retirement of ouk 6f service and to amortise the deferred balance of $10.SinilE 8tanding long term debt. Rese payments and balances of ' ~ liiokat March 31,1997 associated with these cokts over'a perp
~~maturins debt issues for the five years subseqsent to ;~~
~~1 fod not to exc$d ten years that began in April 1997[ December 31,1997 are as foll6ws: ~ T; ? $je)1SavingiMbnf , ' ' '$Th'e system has an Employees Savings Plaithht provides'~~
~~Sinking Funds ' Maturing Debt Issues' l~~
~~ O Nor system cobtfibutions equal t$ contdbutions by eligiblf1 Year:: Subsidiaries ' Systen. Subsidiaries - Total ' A[ employees of dip to four perebnt of hach empidyee's dompen.) . (Dollars in thousands) - ~ ~ M, mea, tion rate and up t'o five percent for th'se employees no$ 653- $10,000 d u y longer eligible for postretirement hdalth bSnefitshThe iotal y19997 $7'653
~~1998,~~
~~~ 10,0001 <$26,653- . $ 9,000 -- -s -. s m 7 10,000 27,653-7ysystem' contribution was $4,173,000 in 1997, $4,053,000 in s2000: 17,653'. N3 7,653 : dh1996 and $4,393,000 in'1995.M I?~~
~~2001=~~
?9,010 w. V 3,500, 12,510 : i ~ M T (d):Lorg-Term incentivi Compenskti6n Plan L 2002-1 5,360 ' 32,000I ' 37,360 1 ' W M The longterm Incentive Compensation Plan. (tha Plan), < ~ 1 Cappfoved by'sharkholders'in 1994, was established io advance : .@. Redeemable Preferred Shares j i }; the intefests"of ths System by providing long-term financial.. ' ' Each series of the System's preferred shares was issued ' d incentives, primanly common shares of the Sy' tem l to select- ? at par value, $100 p' er share, anti is subject to periodic,. s 0:, Jed key employees of the system for achieving speedied objec6 mandatory sinking fund payments; The System can make 3 ~ g$g tiven.fne System, in encouragmg such share ownership,( l additional voluntary redemptions, not exceeding the S?jseeks to attratl retain and motivate employees Who hold 'posi"tions)f signifidant responsibility? Elig l required redemption, at par,'on a non-cumulative basis, on. @ju psee by the Executive Canpensatiod Committee of the Board 1 '"each sinking fund date.' 1 Preferred shares may also be' called for redemption,in whole - fof Trustees and are bresented grant share awards which i l of in part,'in excess of the requirkd and voluntary sinking fund ~ 4p mature after a three-year vesting period l Shares'are issued to i redempuons; ne obligation to'make mandatory redemptions is 3 d participants in March following the clase of the third plan 4
~~cumulative and the System is not allowed to pay' dividends tol~~
, $yearfAll shares are subject to forfeitureif specified perfor' (common shareholders'or make optional sinking fund payments - %g mance measures are not metJ Dudng the appheable vesting ? g if mandatory redemptions are in arreami Details of redemptions period, p.tl pats have all the voting,' dividend and other 3 ', ]related rights of a rebord holder except that'ths shares'are ' 'for sach sedes are contained in the followmg table: < Montransferablel Chmmon iharis granted under the Plan car i Sinking Funds ' - Optional - M_ Nnoiexceed isof the'totalsharedissued and outstanding;in
~~Dividend ;. '.1998 2002~~
. Redemption e o 91997[31,606 common' shares," valued it approximatelyk ' - . Rate - Mandatory Optional ~ Call Prices / / j $707.000,'were granted to system officers. Conspsnsatidu ? ' -(Dollars in thousands). ~ Mh, Gats'of spproximatelyL$. 231,000bere%cor' ed in 1997 kith) .. Sen. ' : A - d y m-a es - 4.80% - $120 $120 .$102 N the remamder to be.~recogm. d over the re~ma..mmg vestingi ae . Sedes B 8.10 160 160 101 h period Q amnQCommon shares granted ' pursuant to the ~ Series Cc - 7.75 540 540 101
~~WPlan had no materialimpact on earnings per share.=~~
%gggpy gggg g; Preferred shareholders have no voting rights except in n u a -, ; y < 1, _ . the event that six full quarterly dividends have not been y[a @~$NotesPuyableibBssksE. V 'dY A " i paidy In'this circumstance, the preferred shareholders - b ysiem'cumpanies maistain both"corhmitted an are entitled, voting as a class, to elect two of the nine %S43 e ~ ~ < $ TWf.ggg q MC N* n NhN.If bbg w4 [n[ h - - hh m>, " 34'- S md; i % 5, c "
~~t 1 J ~~~
i_r__o=_
o 9 n n Trustees of the System. He following is a breakdown, by major class, of property The preference of these shares in involuntary liquida-under capital lease at December 31,1997 and 1996: tion is equal to par value. %e shares are of equal rank and are entitled to cumulative dividends at the annual rate established for each series. No dividend can be declared 1997 1996 on any series unless proportionate dhridends are concur. (Dollars in thousands) rently declared on the other outstanding series and in the event that dividend payments are in arrears, the System Transmissi,on facilities $11,801 ' $12,454 may not redeem any shares unless all shares of all pre-
h"n#"d o 1,753 1,500 p"
, ; en er ferred series are redeemed. 13,554 13,954 less: Accumulated amortization 53 77 .(8) Disclosures Aboui Fair Value of Fin.ancial-s13.501 S13.877 Instruments . %e fair value of certain financial instruments included in the accompanying Consolidated Balance Sheets as of - . Future minimum lease payments, by period and in the aggre. December 31,1997 and 1996 were as foDows: -gate, of capitalleases and non cancelable operating leases con-sisted of the following at December 31,1997: -1997-1996 Carrying Fair Carrying - Fair - Value - Value Value Value Capital Operating (Dollars in thousands) leases leases (Dollars in thousands) / - Long-term debt $390,964 $444,970 $377,218 $417,411 Preferred shares 13,020 14,708 13,840' 14,601 1998 S 2,603 $11,000 1999 . 2,456 9,218 2000. 2,159 5.012 The carrying amount of cash and notes payable to banks I approximates the fair value.because of the short maturity of. these fmancalinstruments. Beyond 2002 - 17,128 11,672 %e estimated fair value oflong-tenu debt and preferred stock Total future minimum lease payments 27,604 $44.064 are based on quoted market prices of the same or similar issues less: Estimated interest element or on the current rates offered for debt or prefermd shares with included therein 14,103 the same remaining maturity. %e fair values shown above do not Estimated present value of future purport to mpresent the amounts at which those obligations minimum lease payments $13.501 would be settkxl (9) Lease Obligations ' Total rent expense for all operating leases, except those with terms of a month or less, amounted to $11,181,000 in System companies leasc property, transmission facilities - .1997, $12,922,000 in 1996 and $13,867,000 in 1995. rhere and equipment under agreements, some of which are capital
~~were no contingent rentals and no sublease rentals for the leases. Several subsidiaries renegotiate certain lease agree-~~
- years 1997,1996 and 1995. ments annually. These new agreements are for a term of one year and are renewable monthly thereafter. COM/ Energy - . Services Company has agreements in effect for office furni - (10) Dividend Restriction ture, computer and transportation equipment. Generally, these agreements require the lessee to pay related taxes, At December 31,1997, approximately $111,729,000 of con-maintenance and other costs of operation. leases currently in solidated retained earnings was restricted against the pay. effect contain no provisions which prohibit system companies ment of cash dividends by terms of indentures and note agree- ? from entering into future lease agreements'or obligations. : ~ ments securing long-term debt.- j, o 35.
+ $(11)' Segment Information Operating income of the various industry segments . System companies provide electric, gas and steam ser- . lucludes income from transactions with affiliates and is exclu- - vices to retail customers in communities located in central. sive ofinterest expense, income taxes and equity in earnings e eastern and southeastern Massachnsetts and,in addition,-. Jof unconsolidated corporate joint ventures, i sell electricity at wholesale to Massachusetts customers.. 'Ihe amount of identifiable assets represented by the sys- - 'Other operations of the system include the development and tem's investment in ' corporate joint ventures consists princi- ? operation of rental properties and other activities which do '. pally of a percentage ownership in the assets of four regional. .. not presently contribute significantly to either revenues or.
~~electric generating plants and a 3.8% interest in Hydro-~~
. operating income.; Quebec Phar,e !!.- q, U t 1997-1996 .1995 (Dollars in thousands) Revenues from - Unaffiliated Customers' Electric $ 688,508 - S 649,678 .$ 604,980 Gas 333,977 341,867 .306,953 Steam and other 19,259 19,360 17,355 . Total Revenues St 041,744 S 1,010,905 S 929,288 - l 1 i Cap:tal Expenditures (inchding AFUDC) Electric ' $ 134,524 S 38,844. ' $ 61,643 - l
~~Gas 18,230 11,611 L 16,198 Other -~~
4,804 2.730 3,659 $ 57,558 -S 53,185 S 81,500 . Operating Income Before Income Taxes Electric $ 84,828-. S 92,374 $ 78,817 -Gas 34,918 36,984 36,611 Steam and other ; 0,056)- 3,406 '- 3,689 Total Operating income Before Incot 3 Taxes __S 118,690 S 132,764 S 119,117 Identifiable Assets - ~ $ 982,384 . Electric : $1,049,094 ' $1,011,306 . Gas. 395,966 388,930 374,615 Steam imd other 74,298 58,081 57,269 1,519,358 1,458,317 1,414,268 - . Intercompany eliminations ; (48,075) ' (42,757) (35,140) ! Investment in corporate joint ventures : - 13,767 13,395 13,214 ? TotalIdentifiable Assets. 81,485,050 ' S1,428,955 - $1,392,342 ? Depreciation Expense = - Electric. ~ $.41,103 $ 39,977 $ 36,977 Gas - 10,482 - 10,061 9,656 Steam and otheri 1,820 1,744 1,537 Total Depreciation L S 53,405 S ' 51,782 S 48,170 i r 4 36
9 L. ', ' '.I, Sslected Financial Data Commonwealth Energy System and Subsidiary Companies 1997 1996 1995 1994 1993 . (Dollars inthousands except common share data) &.. Operating Revenues
~~Electric.~~
' $ 688,508 $ 649,678 $ 604,980. S 638,150 $ 622,039 ' Gas ' 333,977 341,867 - 306,053. 323,568 302,644 Steam aidlother 19,259 ' 19,360 17,355 15,867-14,035 Total? $1,041,744 $1.010,905 $ 929.288 - S 977.585 - S.938,718 Netincome ' i S-49,901 $ - - 59,175 ' S -51.396 S.48,968 S 45.834; J Common Share Data ' s Earnings per share . $2.27 $2.70 $2.36 $2.29 ~ $2.18 . Dividends declared per sha.re $1.58 . $1.54 41.50 t $1.50. $1.46 Average shares outstanding ~. 21,531,433 21.529,676 21,311,836 20.827,562 20,431,228 ~ Total Assets $1,485,050 $1,428,955 $1.392,342 $1,345,032 S1,318.940 long-term debt ' $ 364,311 $ 355,305 - $ 377,181 $ 418,307 $ 448,893 Redeemable preferred shares 12,200 ' 13,020 13,840 ' 14,660 - 15,480 1 Common share investment - '430,770 415,694 - 390,785 362,997 337,070 Total Capitalization S 807,281-S 784,019. S 781,806 $ 795,964 S 801,443 1997 by Quarter 1st 2nd-3rd 4th = (Dollars in thousands except per share amounts) Operating Revenues.- $316,190 ; . $221,944 - $222,115 $281,495
~~Operating Income 35,892 :~~
~~7,793 16,887 27,078 l Income Before Interest Charges - 36.541 8,774~~
17,227 - : 27,709' Net Income-

26,400 (1,334)
~~,7,147. .17,688 Earnings per Common Share 1.21 (.07) .32 .81 Dividends Declared per" - Common ShareJ ~395. .395. ,395 .395 Closing Price of Common Shares. High 24% 24 27 34L~~
~~Low?~~
20%' 19-23% 25 % 1996 by Quarter -1st 2nd 3rd 4th - (Dollars in thousands except per share amounts) 10perating Revenues ! $298,614 $222,667 ' $226,909 ' $262,715 sOperating Income .36,131' -18,608 17,601 24,325 . Income Before Interest Charges; L 38,622. ' 19,863 18,838 24,220 ' . Net Income : 27,907 9,463 8.360 13,445 ' Earnings per Common Shire' 1.28 .43 .37 .62 p' ? Dividends Declared per -. ~.385 .385 .385 .385 Common Share 1-f Closing Pride of Common Shares? u High ; 25 25% 25%- 24% low, 21 % 22% 21% 22% L 37
m, '.[ 7,,# n MlCbmmonwealth Energy Sistem andl Subsidiary Comp l ] @g g a p 1 My y pW, b W>
'W
~~+ 7 /d5 WW^< i" . FiveYear 1 '," 4 - ~- Compound er .W . a. 3 lJ..,* f' eh is g, 19972~~
~~1996:~~
~~'1995' 1994 ' Growth Rate 1 sq 1993 (%)- 'l + %o ~ WN. -Ojmistiorisf.L, 'fe - (Ddlarsinnousands) +' ,- /Revenuest.f < Js ' $$011;744Y$1,010,905~~
~~2$929,288 :~~
~~$977,585 $938,718 i 2.9 < s Operating Espentes. ,f ., [ i80 66065;" !759,558/ 4 f697,730h 0750,3522 ??]8',362 ' , ! 2.9I l MiOperations! ~Maintsnance% " I # '~~
~~36,838i L40,913L 338,414;~~
~~' 36,522: " 40,574: - (1.6) : ~ iDepreciationQ' 'i 53,4051 # 51,782 L $48,170 : 144,188-142,480 ? 4.4 ' y" ' ,i.Taxesc~~
59,245

61,987 i50,431'

54,708
~~' 51,947~~
~~5.7 '~~
~~l .g~~
~~954,094 914,240:~~
~~i 834,745 n 885,770 853,363.. 2.9 - 1 iOperatingincomel L 87,650 ;~~
~~96,665;~~
~~? Add-OtherIncomec~~
-2,6011 14,878.

,
~~94,543 : -.91,815 : . 85,355 ; -2.4 1,461; 627_ 4,430. .(6.1)~~
~~Irss-Interest charges -~~
~~40,350'~~
~~42,368-~~
'44,608 43,474 43,951. '(0.5)~ SNetincomei 149,901: 259,175 1 .51,396' '48,968 45,834 - 4.6 ' V Preferred dividends: 988' l1,050. L 1,110 L1,170 : 1,230 (5.2) \\ t Earnings applicable to :. $' 47,798 - ~ $ 44,604i 4.9 . common shares ( _. l8 E48.91'36$ 58,125 ? '.$ 50.2861 L LSonrces of Consolidated 3 e n b- ? Net Incomey L 9 Electric; x i $ ; ) 36,967 4 : $ i _'41,299 ;.' $ 34,739 $ i 36,473 ' ($ 30,301 - L J Gasi
~~15,443) 16,789~~
~~l16,229 :~~
~~113,568-~~
~~16,299 R Steam and other i (2,509)1 1,087'~~
~~~428? -(1,073) - (766)~~
~~; ?Tath!'~~
i8'49.901s L $ 59,175 ^$ 51,396 - 8 48,968 . $ 45,834l [ Financial! [ Property, plant and equipment ( ^i ~ i-7g - i '(inhludind constructi_on'workEh iln progress, net and nuclears 7. _, ' $1,540,9161 - $1,476,518; ; $1,434,951~:= ffuelin process). q
~~$1,627,870 ' [$1,581,668) 1 i Ac' cumulated depreciation andi T amortization,~~
~~!577,9621 1536,0411~~
~~497.712 J461,661 434,287 iconstruction Expenditures l t 52,928 L L 80,643 57,833 54,385~~
~~~ '...? (exclusive of AFUDC)i-3 57,190 a y m @apitsdzationt, m.. ilong-term debt (D L ' ,? -($ : 383,3111 $( 369,565i i$ 410,411.$ 443,307 > $ 458,893~~
~~Preferred shares;~~
~~!12,2001 _ ~ 113,020 : 13,840 14,6601 15,480-~~
~~Ny[iCrnunon equityi 1~~
~~- ~430,770 1415,694 390,785 362,997 337,070 , jTotal; J g; 781826,281- ' $ 4 798,279 L $ 815,036 S - 820,964 - S 811.443 x n IN P g ' l(1) JNINAe's matsring long-term debt.l~~
~~s s~~
<f ,s' v s i h g <; s i 38-I' g ; W' Oz
...u. LComparative Statistical Data Comnzonwealth Energy System and Subsidiary Companies Five Year Compound - Growth Rate .1997. 1996 1995 1994 1993 (%). Statistics and Ratios: 1 Unit Sales J. MWII-Residential._ .1,830,793-1,802,973 1,752,430 .1,770,095 1,744,181 . 1.2 ' - Y ' Commercial - 2,506,215. 2,430,188. 2,450,390 ~ 2,406,077 2,378,073 -
~~1.7.~~
t Industrial ' 434,666. -425,748 421,224 421,821 - 411,527 ~ 0.9. - Other 24,438 - 24.096 23,796 L -23,216 22.243 1.0 Total Retail' 4,796,112 .'4,683,005. 4,647,840 4,621,209 4,556,024 1.4 Wholesale 3,916,974 2,721,623 - 1,973,543 3,803,786 3,689,129 0.1 , Total 8,713.086 7,404,628 - 6,621,383' 8,424,995' - 8,245,153 '0.8 BBTTJ -Residential - ~ 22,043 22,759 21,336 - 21,515 22,252 ,(0.3) Commercial 11,077 11,558 10,710 16,728 10,931 0.3: Industrial 3,483 4,468 4,445-4,401 4,205' .(5.9) Other 2,111 2,208, 1,967 1,895 1,831 3.4' Total Firm 38,714 40,993 -38,458 38,539 39,219. (0.6) Off-system -2,673 2,420 4,043 . 6,401 Quasi-firm 51- . ?,066 -1,906 487 Interruptible 1,882 1,883 1,215 1,927 -1,896- -(5.3)1 Transportation 6,506 - '4,852 4,024 2,208-1,753 (43.0) ' '~ Total ' '49,826 51,214 49,646 ' 49,562 42,868 L 2.8 - Capitalization Ratios". 46.3% . 50.4 % 54.0% - . 56.6% - Long term debt 46,4% Preferred shares 1.5 1.6 1.7 1.8 1.9. ' Common equity = 52.1 52.1 47.9 44.2 41.5 Total 100.0 % 100.0 % 100.0 %- 100.0 % 100.0 % : Return on average common' equity ' 11.6%' ' 14.4 % 13.3 % 13.7%. 13.7% Common share dividend payout? 169.2 % 56.7 % 63.6%. 64.9% ' 66.8%. Average price / earnings ratio 14.6 8.7; 8.7 8.8 - 10.4 Common Share Data-
~~Earnings per share (1).~~
8 2.27- .$ 2.70 - ~ $ 2.36; $ 2.29 $ 2.18. 3.5 ' Dividends paid, ;. 1,57; 1.53 - ' 1.50 1,49 1.46 .1.5- .r - Annual dividend rate at ' end of year.: 1.53 .1.54 '1.50 1,50 1.46 1.6 Book value _ 20.01.? 19.31 18.15-17.24 16.37 5.2 ' -6 Closing market price. ' High' 34 % ~25%- 23% - 22% - 25 l Low. -19 21 % ' 17'%' 17 % 20% - Year-end ' ' 33 % 23 % 22 % 18 % 23 % (D Based on the average number ofshares outstanding. 39
nm 4 j1' ,.- p ,.5'j (.- c. '( '^ ' c +t 4 r sheWolder Informstion' sm. r ~ lCommentoealth Energy $3 stem andSubsidiaryCompanies w; s s ~, - b r 4 , s Tby the Board of Trustees. Common dividends are paid : MAnnual Meeting? ...-s-
~~on the first day'of February, May, August and 1~~
~~lAll shareholders arel$s, v.wa vited to attend the next Annual ' !N6vember. Preferred dividends are paid on the first g 4; Meeting which will be held on May 7,1998 at the System s1~~
~~day of January, April, July and October.~~
~~corporate headquarters at One, Main Street in Kendall LSquare, Cambridge l Massachusetts.! A formal notice of H T {the mesting together:with a proxyitatement and a c~~
~~Sh' areholder Services?~~
j ,, < j form of proxy is snelosed forluse by sharbholden enti? ' 1The System has a" dividend seinvestment plan i A J tied to vote at'the rneeting.; 1 MWN' % which provides holders of Common Shares with an eco-1 gg JM +
~~A T1 -~~
~~nomical and convenient method for purchasins addi-3[ mQbtb hkbhninoli?~~
j tional Cominon Shares of the System without paying L mkeg fees of savice charges. j b l Shares and Dividends Paid? ?The System also~ offers direct deposit to Common - 4 i - s s gggg w ?High ! Iow 1 Dividends - Shareholders so that dividends can be ' received faste' ? j r W List Quarter - $24%.k 5$20%: !$.385J. q Dividends can be electronically credited to a checking, 2nd Quarterf, ;31%- f18%; ' 3 95 s. savmgs, credit umon or thrift account. 7 (3rd Quarter 271 123W: l.395 / A seasonal mailihig address for your shareholder 4 t 4th Quarter i, l 34 % -.'. 25 % 1 1.395- - account (s).is also available for the period of time s requested. His can help avoid lost interest on delayed S E H'igh - Slow n - Dividedds - ? deposits caused by f& warded mail. j 1996L [1st Quarter / $25? i$21%) l$.375H, ? For more information about these services or any 12nd Quarterr p25% 22Mi ?.385: J25%y other inquiries, please contact a Shareholder Services ' 33rd Quarter [ 121%: 7385) a representative at the appropriate toll-free number 625%;{: ,x J4th Quarter 22% : .385'
~~listed below:i~~
+ .F., FK ~ ,s; ~. %e System's Common Shares are listed on the New :. 1-800-336-3773 (within Massachusetts) I York'and Pacific stock exchanges:I Il-800-447-1183l(outside Massachusetts) 1TickerSysbol"CESE IBond Dataf iDaily Newspape' Quotation "ComES" di - Nrustees under l$ dentures of trust are: r t M^ i M Citibank, NA% LCanal Electric Company Series B, E and F Bonds ' EThansfAr AksntS and Registrarst State Street Bank and Trust Company - x- .1 . ~. - - m hShareholder communications regarding transfer ofE. l f Other. Subsidiary' Companies' Long-term Debt ? TComnum Shares or lost certdicates should be directed to: a m ~' K Enmon Shares 4 Requests for Financial Inforniation ' a l ', iTransfer Agent and Rigistrar: : i T %e System files quarterly reports on Form 10-Q and j ' d BankBoston, NA4
~~an annual report on Form.10 K each year with the -~~
iEO; Box 8040 ;. = Securities and Exchange Commission. Requests for 3 t Boston lMA0229% ! these and any other reports as well as questions 1, .y : m.,. O P*
~~regarding financial information should be directed to:~~
, w Pre red ares-3 ~_ ' (TransferAgen6M, ' . (John E Gavin :. f 3 Commonwealth Energy System M. ?y' d ' ' ' Manager-Investor Relations M i EO. Box 9150 L _ ij W-9: - Commonwealth Energy System ' !!<y (Cambridge,MA.02142-9150)
~~EO. Box 9150 -~~
m 1 - Cambridge, MA 02142-9150 -s ae ,s jRegistraQ ~ Certain information requirements of Form 10 K are satis- .c D State Street Bank and, Trust Company 7 fied in the 1998 Proxy Statement. Financial and other p:t '
~~D information about the Syetem, including Forms 10-Q and wQ ividend Paymentsig 10 K, are also available on our web site~~

j
~~Dividends are paid by theLSystem subjec.t to. declaration.~~
http://www.comenergy.com. q g([ M J 4 mp p 7 g- .49 L:gWdB J w
p s.., Tr u s t e e s *a na10 f fi ce r s im;="r*""-' l. y.) .., 7.; - . '. f;a '+:... ', flc., {;ww } z.. e. l, t g '. m... . ;r <r'
~~g. :~~
~ j / t AS f. [ 8 s ) { 4 \\ h, ~ .Q - ~J (: (Standir.gfrosilef) Fmnklin M. Handley, PeterH. Omy. Gemld L isilson, Michael C Ruettgers, VilliamJ. O'Brien, Betty L Francis, Kevin C Bryant, t~ ^ (Seatedpam left) Sheldon A Buckler, WTiliam G.1%ist - 0)' Franklin M. Ilundley, ' f 0) Peter 11.Cressy, c) Gerald L Wilson, C) MichaelC.Ruettgeni, c) William J. O'Brien. ggy ofrounsel,. {$} Oancellor. llni"r'itri ' (S) VanaewrBud Pnknord (S) besident. Oldb".g,uts" c gy Partner.,,CentraFor M, Moy, Bitudean,. blamchnumiksrtmne, Enginnoint, Masuchuuth y,,,,4, pg,, gy (,,,,,,,,, yg,,g;p tg,c, trMeherry PC,Boden, North ikrtmewlk. . lastiMe tf Takmdog. ( y y;,, - Mantarhauto (AnmrM __. Nanachauto. . l'embridge, Mamacnuwta y,y,,y L U) Betty L Francis,. u) Kevin C.Bryant,. O) Sheldon A Buckler, William G. Poist, {4} Esentin Vice h*ddent end (4} Regionalhuid ut, Gairewn 4no Board el y,,y,,,g nggg,,i, Oi4 Credit t#cer. flameside BanhMton. ' Truttm 4&a ssrtew; p,yy,,4g, $,,,,,,,4 g _.,,,, .1.endung. iren }schsonrelle, Morida South Region,.
~~Formerly Vwr Gairaean dthe~~
~~,,4, yg ge m,, Felt Riur. Manachauth ki'd, Polaroid Corporation, Omkridge. Manachuunn - CORPORATY DMSION. UnuTY OPERAnG'S - William G. Poist.~~
~~Russell D. Wright, hesident and GiefExecutive Officer ChiefExecutive OfRcer James D. Rappoli,L Deborah A McLaughlin, Financial Vice hesident and Tnasurer.~~
~~^ President and Chief Operating offcer~~
~~Michael P. Sullivan, Samy IL Ibrahim, Vice President, Secretary and General Counsel Vice hesident--Gas Operations John R.Williann,(.~~
James J. Keane, Vice President-Corporate Services Vice P.esident-Energy Supply and Engineering Services 3 Charles W. Kiely, Non-Unt:rv OPERAnons Vice President--Customer Service ' f Kevin F. Roberts, [ g "g'." Vice President-Electric Operations hesident and ChiefOperating ofRcer Energy Smices and Technologies [ ,i
~~Robert A Paul,~~
.. g,,,,,, y 7,,,s,,,, g,,,,,,,,,,g,,,,,,,,, w,,,,,, g, p,;,, Pressdent and Gief Operating Offcer ", as 14esident and ChiefExecutive Offcer af Commonwealth Energy system upon Mr: 1sist's retirement on september 1,1998. r J-dn umuroa,r ca.,rario re m xemurstra tin comparati,e cm,rane ^ + l (S) Neber 4Mmmetiq Ommind (4) Mewkr4/kw>t/Rn4w homrinee 151 Menkr VS,'rahpr Rassione Conravsttu - The adrforher 4&is apart is kgin)*wwat murth haldas im6 ruta. tion abret thh fntam andla subsidirry conhuiar and ij . kis noe a sepwrewke. pngentes a risewlar m se@wt k ary sorriy 4 dis S.nten w Wik subndiary twerpanus, !b . The mtwo Tomarmavath Ewgr System
~~mens no husneerJnrk hm hdt far kunwe but sat indesdual&P andera Drderuska 4 Trust~~
- asku'unemkr31,1.9?ti as sawnded, sdxk is herdy r$romtk. anda tr$yfadkh har kesRaf urn de Skwtery fine GnrmewavnN 4 '. Manacharra Any servement. nWeetan aliseility madr, entramtiak orincurraf & ar av kA44mWSynn ne Nab only de past ente, and se deseMig $imbr, budre, aMeerasuvatnaums, eskaube ednf k, esy hebudy & weses desed .;..I e. .s
..i p,
'. '. ^n. Q t ~ '

,,,'y
,,%. N..,- ,.;W [. ' f. 's;.. l f.o. h j.f.'. V. 'h,.. '4 .G ; '.- ~,.. 3 s... g. 2 . f...y '.; ' ' f h', p:,,f f.., ','^? ?*h)e.L,.,,,.f $, .; h,,k,go . b 'I ' '.)4* l j,- o ,c F }- .r ~, :, - ...'i / n ,e
~~,, g!~~
~~.,* 1:..,.'l,.(,,;'\\~~
*'.}y ' '...g, *. ^
~~e.,?.g . 3:*l~~
~~.. g '.~~
~~...' u ?. ~. e- ), . _,y,.;.., . '.,,, L ',.~~
~~.** ] n;, -~~
~~y. p .:.. 5.1.:: y n ..,.s.(.;',<, .l .. h.a.. - Y.s, V. ';.,,,, - ..? I . A;.- v r,*; - A".~~
~~5.. :.~~
~~s h,. .c n.. i... -,2-a.: ,,T.. '. $.,s'.,'.... ' :e,' s ': *']',;,.U - n.,f..J,.%, n,' 4f. ',.% ? *.. :" *.,, y s...J. .[ ; :,. -..:p~~
t
~~. s e ' ..s 'le : ..u ;M ~,s ,. 7,, n \\. a ; 6,.... :.. T . ,f ~., ~ > ; r b :; f *,;'.. '. m s %.. R.....; V, '.. :. x L :~ :-l.. ?. ?'.n;p. :.. !~~
~~,9 $m 3,;',y.'m.1,41; A4.( ;.. s }!~~
~~.:..g :: a e.:t. e y. g... ..J 4 / [l. - J ' i',. '.,, /' .h. b.. '. e' ,t [., .. +;....', ',....~~
[
~~..,4y.,,,. ,h. ' 3%,,. h. 2- -. q.;, ;p. m d*. l.,. ;.. c..,&,*.,.,.: T ;;~~
I
p. p t. _..,... y _;: - _.,;. -.-.

9. I.- u,
~~';, 3 c ._. y., t.** c. s,,.y '. j,'[ ,, s.L ,', [l. h'.1.9 i ;, r :< g.. ' ( 'y,,. '.'y.. ; f. dl...'%-~~
~~.'..".';?,.~~
~~,.:.' s '.'.,} /.. y- '.4 L~~
~~'<\\~~
~~,;'., -a w..-~~
~~.*......?-. i,;'l,.'d,,",..*.l.~~
.' ph, 'v.
2r
~~.m. - p [,. L '.,t. s* ,'.. ',, ' *y. ;,~., ; h:y,1,5. qr. g: ,.. *,.:3l...- O...'...,"..,q..'l'.g '1l'..;. 'y b.. ; ,-;.i e. .. p~~
~~,).f* h.:: *,.Q,'. f. l.':~~
s-s ...*.,,.'.s.. v 4,, ;*. 3., V.y ' '. 1* .. ': k.. s \\ ' k: ' ,. ::, g ' ' ' lL.'> V l.h ',,: ; s, u ,.Y.,'.:' s '.': 0.,:,.,..f,.. L '., .6.,/, '. '. *.;.* g,~.; K f ' : , 'k 4.,. .,...,'.,.9 ..,,.,,.'.,'.'s';-l,';'.6~'.'".p ,. J. ::.' ' :l+ G s..- a9. ...t t. p,y
4
~~-..' e. h,3 - :, '{ .;g. . t. .'a.. . g ,'u >-o. p -l '. '> 'f - lJ %i 3g ,;,,.y.,. ~A,..'. a, Y. .,,,1.'.. ~.';...." 'e Q, ' '. -J.,'..',"? i,- s. i,... , 4 y/ s y %g, :.. ' - ;,~~
e. *
-, ;.g * '. V *- t,,.._.,:,,.',i:..';.,.".'...'.g.; '..o..,-.',;n.,..,l,..'ws,y t5 ,,.j,..',. ' ' g ', i, ' s ',$. 5, (; p;. c.4 ",s. b.,,n u 2 e . s'. < a .r. .. %. p.,.: y,. t.,. :- ~.';;,...~..* *.':. n ) , q< - W. t. .t,.*
Y
~~' [, -.s.<s..~'.,; L... - .-.e u {,,,',;',,'., ., ', [.l' g,,';1 , - f*f ';. - (. ,..j,,,"., (' y. y.,.s.,, (., ^ - .7~~
~~., c,y e/ *[~~
'..., !: f, ; ,'4 {,'l, 7.. Y !l':Y ^i.y ' .l !:.Ib'. 5.. f.\\. * ' l s,. ,. '...'f . ;l;, -.i..:. '.,,)l' ;, 'i \\,., ; s... s,' ..,.'e, c -g * ' ..: o -.' y., r.m- '***ce- .t. u. ', - _). w,w. '.' ..,. j%. ;,. 4.,' ;.. 2,f,'N b .%.'..b.','* .,sa".t.'.. .c r. .c ~ - :.,,f, ' ' i ,4 ,.n .,#~ .'.V ?'.; Y ~,. 2
~~'} l k., ^,4,~~
~~' $,'.. *; - h,., o, b. L * ^ l ". ~,. *:. I~~
.., l Y,.,*. 'i

' Y...
~~.I.' 5 .D,. '.'.I ',i Q. 'V .c \\ ..m. 'o(. A. ., &y..eh,. ;- ~,. :.,. 6 (< s. :.. ei e,c,., 9 \\,~~
~~, +:~~
~~e. s.*. ',,,' os.. g. ; - .r.. ~... v..- .p s. + ., - f%p. r s : '.,.. : 9, :. ' <y; .. ~. .n .y ;~~
~~i :.~~
~~g. ;.,.e,~~
~~\\,,,, ;, s,-~~
~~i;O.,(~~
~~,e,~~
~~.?. ?.i ". j ^ r '~~
~~, i-,~~
~~y;&, :3.p] '.'., p,..l;il,. ;...y-p. 9 Q. ' h;l)i; ',f>',,:; L' 3,'.; .i..r ,f. -. ' q 'y :' $ 4,# 4 b, , 6,, '. .'".,..,.,'W'.:lh.,,, A .:...Y~~
~~h '.' b ^...~~
~~'t A d A 4,;.: n. '... ' : i; ... s ::y.g,., ..'...,1'... t.% h ;.f;#. 4...,,. y. y."...s.;.:...,u...,- <y y.4 -s zn -~~
~~....,.D.e.~~
~~=,. fa..,.. T.:-. '.,..'s3 " ".,, +,..r.p.~~
~~j. -~~
~~i -~. ,p b.. .... + ',.:,...x~~
~~$.^~~
~~,( 0.y f *0. *:. _,7i,.,... f,f,, *;, q.,..s y.~~
g
~~...~.:,:.> .l [, ;, .c f.1;$ . ~ .r-e~~
~~h j l*,.,, f l.,~~
~~p, ....ldf*;f....f? .. f.,. ?., 'y,l. '). ... *... ' ': y .k 1 s~~
e
a
%..e ..v.. ,n - ). , 'I... f. A. ,,'.C',.,.7.'.'f,'b,.h c. :... ', ' '." # ~ Y..s, :.' j c . [.,, ,' Y'. ' '. ; p...6 ', ' h k, '.55 ;I ,l,", ',
~~.'j-.') 7', :# ' :g [~~
~~?.,' . Ub[s..? ',/l g.: :..... '. 6,j l-d '. '. ', If., [.~~
~~' b,"$:,.~~
~~. i; -/ f' h.,. '. f. l ",.h,',.,, i,,. 5, ",,,...,,;j.:,...,'*f...,. g'. ' '~~
~~[,.~~
'f ?..,, .\\.s.,, [ ,3..,*
~~.r..~~
~~4-s.- ,. l.,,.,(.. '..,z.a,g,,';. g ' u /: -,s.... ;, r~~
~~..',t,,,,..,;-- },, g7..Y,.4,3 [,q~~
~~.-?. .....,;l.. .,.g.... g,, P '.:~~
~~l%., " ;. ag',g~~
...f.,,, 2U.,"....,.. 3. } f'., *j;~- t r d . ',0;;, ;. N :.. . *,. ; ' y[.>':....:. >..: '? ' 5 ,,.,' 'y :- 'lM. ' f. '., '.y :...... ~} } f;;.*. ,.f: 4, {.. -lH p.,s,, ~; ,. /{ yl[,-], y...,., e .\\,- t, l,,.;, . (G ,.g'. (,'..[.:p '.' ' ',,,.;..,,.,. {, '. ' ;.. ' ', - ; ,e ] = t s.,
l
~~.., ';b,.~~
t.
~~..d....,. .. : ;*..,-,;., g'. y... .. = +*,'./.-. '. ,4.~~
~~s.. *. *,~~
~~,-'e*.* ..."..-l.1.,- 'nc.- p. :*,,.,, ,t-t ~ ? ,P,,,.,.,,.,:?'.,'.,..~~
~~"j.'<',:..,,.,,.1,".f y",. s r,. ;-~~
y>...: '., qv:.,e,... q, , + ..f '........,,,,.e i... ,r. ,2 . E,o:*'*p. g g /...f A,. ::.,'.,'. t l \\.i. N ..s...'.,',*;..,..,i.1.,,'.e,.,..9,. ^ E .. n r . '.. '.., f> '.?, ........'.s.s..h f,. -,' l. 6,;]..'I' . <., :.;9.3,.*.m,.*+- , e. -. '.]. 'li . ~ >.,. *,< l l ;'.' * ~. ~ u I,,.'.,. c .g.-., o. ,..,,.e.. .,; ~
~~a.. :... >~~
,a. s. e, g ;, *
~~p r.y... c....(~~
~~o. t-..,.,.;,>~~
.t q..'.',,..;,... ,o s ..,...~: .,r ... ',: ?.. -- ' n.,&,,.... ... ~ *, e.: .. m, a. ' ', .~s .v. ..e.* -':n,,.... r,. ....s .s .',...P,.,; .........n .,., -,:.....,,.i.,.Tp' p ,,,.... c '. 1,.- ?. .s; g".o. J,.,., > 9.:.,r':;y %. .-Q'..
~~.. -......~*:,.. -. <..; s..;,.~~
~~s.e.., -,. y..,:, ... i t. v..;~~
' j ; ). '.,..~ :.. '. :,,.r* : ".j*., y '6 ~.c y ;, '. - ); ;, '..,.'. -t * " Y -t. : :'...f ' ; ; ';e.,,': 1.~. * ;,l f.
~~'.,.:'.,<,\\.,, n. -b' s.w. ':, ? ', '..m, ~ J,'J 4,.. -, s- .. ~ c'- < >.. .-.n 0.y. l . ~. +. 6 ....m ^ h ~h ,Yt ,.'.4 :; '; ;*, .E'. .' l. L. .. :~~
~~4 '; =~~
~~I' l~~
~~f...U:~~
l.l. l-I ' l 'V., h ' ?. W h.L a'i. y;.f ~' ' \\ f ', Y : '...,l }., % ',':. ;;y:?..., h'.. {t..~# l:.' s.l' lV $' ', *, s '. . - \\,f.fy /;,,' l5. .g l ,l. . i . g;,,! '..".n .. P i Y. "'f ' ' ; ;'. g ' "* * %', Q.l%^ ')O.. ' '.., ':\\: ~; /.[:i... - )z o..::y ' $ 9,; y/ ,:, > l.e k. j:4
'Q
. + '4 q.. * g )" e.i:l'.e
p.
^l
~~-*?K ,k lde-p : *- ',' ~ '.3'.'.'...~~
~~,J z., yl,.'..*?q.,i, i.7,@6,...,;;.y < ^~~
.*.3; ~- ., ;.. J y*.';,1..;;. r,' %..; y W;.'s?:.,9 @l!:;s, : p, ' ;. yJ.,. y k, -:. ' e ,.,.-:-.t / ;; 'p.4 - a. e s. - ;,. 'f ? : ,;'.r -.. 4.(,n.. y." ,,i : 9,,;,. v; h,...< ' '...q.,y ;p. '.,.:. -..a.*. , :: g, M- - ~. . ~*7 .s: A.,
~~. - ';;.,,,. g -~~
3-- q.;. .c. ,r,, . :, : ^ ....-1,,..~ .:.p., 07, ..? '$..lg" lll I \\ E h.<N Y.h.s f f,,g.0l ' ' ' ;k.:::. $. ! q D. si,. h! '.. { f.I. ?..!... l f Nl1. O 9-' ' '. lk; . ' > < :,, ' 1 l ',., p.
-l :. l; j.','.'v,:: :
~~'.,. p b ;' n f llg)' q. : '#.l- .. '..;~~
~~b e:., '.'. - :T~~
~~- )..:.. f. R :, 4,~~
'.. Yy;.u _;..,'! ;

,.., '.& ^

n,: 4.... ' '.
E ',:, - b ;;z, :; /,3 :,.' e : y,.l j'{:,:'.(-.; g- . 3, t / s,9 ; ;.: r ya...:. 3 c ll'. ".1... < f w,,., ,n s ,,~: s ';.,,,;'.. ", !. -l r *.. .t.". .,.,w. - ... ; ;. z: q,; ~ f' ~ . h.c . : f..,.,.,n. 9v.. c.. ph..,..-..:... D. 8. - N'r..n......- , cf:, *.. < y,. ..e .,-t .k ). ,,..., n ,s jv l. }', [ Wg-Q.r..,.e. g...N{,.W.. \\W-i. W..H,Y f,M...,;..y;.. Q.R... @;s); W; %; S t ll C... .r - G&.. s,.?Q..N.:f y I.e-. :. < s,.. - -. s. . -,.,., es.., %...t ..ug a.'.. y ' e.s...., d b.< l a >.,. ^ g$,i. m.' 0 - 4-e } g '.f. ':,'. :n 't, .y ,I;'.. w;
~~".u.'.-~~
4.. a. . '..., e y.?,, .m 4.f -e r .$:h.;<s.f...,'.,.;,,',y,.,.,.,j..,.':.' '.Y J. s' . }. ? ', .' h '.U } L{... ' .".,a?. * ;l'. ',. 1;.... s' ..',y' c; s 3:: .,, y.. , y..; l. * * %.):.:s.. e 7..: $., , ff,*%r,4 4' :.t.:..gm.\\ g.: '. y '..>., *. :.%'.f. '.:....: ' b;g;L.f,,,',*:g,;... ' y :.. y,t.':. ' ". jy. z.k.H t '
3. ? *
~~~?, .s , q% -y ~ .,nj ..a'..< -..';.-, z.. 'f"... '. j* ". '.; ;'<. f,.9:g?' j "..~~
~~&,.? :h '. % '. ".~~
~~.'s... 4"p ;, A ft. :,,l M' f* ?~~
~~%. l;, -'... 'f.. V : ' '.;,':'.~~
~~A .t- .s q .? ".w, ? ! ,... :,* < :t~~
~~s y; a p *- * "- :n -y~~
e,. :ta~~- ..e i s.: 3. -.. L Y'- )g}- < * *. > >.. g. ? e ^! 2 & (? <.,.. '.. l u. ( -..,., .j',..'.... s ? }..,4u. C., i.*; ; (. j.f,. '..'.s%k.. ;.....-, -, ',',.;' g... .,v,., ,,,,,;,: ),: L,. 1,.. ..y
'*

c e's.
~~A ...c~~
f,.,h '.. '.. ':3 l 'v **
~~...,n~~
~~p. #, :m&,,..~~
~~,... - N ?g..%. _,5~~
~~f. ' 4. \\, *. f. '.. ' ;:.1.9.'i ', Li']* n.h ;,. h'., " :';::~~
~~' ', : y ;* '. i.g..~ _i.,: :. :... y. -!. * ?,~~
~~r,.l e,~~
~~w .,r..u n.. y ..; -.. :. a ......;.. t~~
. % s i.'- - k.,-. r? . ',: '. - \\%,' - ;.*
~~-....,,..~. .,.. l*.,~~
~~W, q,~~
~~.O Q)p, '0 4 +- tey i m.., . - Q:.. y.. -. T g. r T c'. ':~^ ', ii" ;,' ^.. %' \\ L, ;.~~
g
~~.. : O' ]W.) ' :)<...: \\' v,)),'..l..c ';$(' y,,.T,._ } l.. l ,..s-W.' "'s..' f ,3,. ' } . ;:,,f_ *,: l : - , ('t* * ,\\. :. : ',l. ' ., ].' ', ; ;.. '..'G ' * *.,~~
~~l V'.,.~~
~~," y .; ;t : ,..!..'t - '. N.e.4 - ' A, 5 '. -.. ' ' *n. t ' ' ' ' f ) < ',...'<," j..: ^.s< $..._';. ;,. ',~* v 'i...'.:El~~
).z

ll.:.l!l?e. ;:,,. y ;? '"; 'k i. ^. ')'.*
~~~. 'b..'. -l Q, s, i.t.: ~:l., 'l.~~
t
~~,,... r;. N.',ed.:~~
~~, ^ s..C.,;.&.,..:),. -' :' '... ,p *; ' l~~
4.
~~,' : ! i' < A.uV .A 4, ? '...' ; (", ' : ; 3,.:, '.' '? * '..?,,-,.H'.'$.',,'.. .-.^: l ,t .i.. t r..~~
~~nh-y ar,~~
~~,. -3 . " \\ t V 's ".J . t-O', * ' s~~
~~g s~~
~~F,, * ' " " ? ~'.L :T-1 ~.' O V, ' - '.. ,};. * ^ f,~~
~~. l'~~
~~?.. s d- ,. ll~~
* ' ;.' i
~~.:?,h. Yf. t '";,.\\; }, }..,f f..z \\.,.f.? f. ,,..),. F g..t - :', c. ;.'. ; c~~
~~7.. A,- <..*.~~
~~N...I,.,~~
~~a.,~~
~~A = A 1, . - c. s, - d., l. i. - -..A. "q t.,u,,-..-/..r,'. 9.., y..< 3.1, b.. *. *.,., :. : 7. ll.4'f l 6.. s. .a '.r ~ t . Ah .m-s \\'..~~
~~. A.):;Y' 2-.~~
gl.. s '; l 'y*.h.' , l',' 'fN.l. l. ..f.. 7 - 'h h ;'*, ;'.ym.g?.)_,.p, f..g,,.,' ~,: .e. _7 ,n. e ? ?. G,. };,.',. ,.,C., < 4 i. Q.. ?..h.;,. k f, * - L..,V. Q. ,.p ;,.. &; ; p.. y, p.,....,.,~._,,:.'v.-... '
~~. ;)~~
, <c, y .t b ' : e.o..g%.,i A <:, %.j : :,1 - 'a, r. ,,,...e f, y' ').,.,:,;. r's.,,.: yp ;, :',.,..,.y.f. e; .;5. .,;.,. sj.. ; p.;, ,, q,.. ,.. p,. ;. p,,,.,, g,. ;., - y c ,g (,,,... .a r .s q. t., O,A 3 4 r y., ,e 3.., Y ,'-[).\\ k. : N'. -k h'., s s. . h.' [/,k.'.,1), - $, $ '.?.s&:r, h I ,M.,.i C.. .I. '. .h.,.f. ;. l l %.h ,h'.' ' V ' N :.;;.',l',,5., ' L l. A ll .h. o :.", { il * !:5.... ' ' '. ;; ";. L ' '.; ) ). , E.*.,3A .i.. i. <.f :.$,g,..Y '*".,.'[ ..... \\.' *A e ?.,."..g.- N'*:q,, _ .' l .s s.y j. M y. ~.. y..,r./....~+....\\- .:...,-e.ay .h, ; :..s,, t e . g:. ' c.,,.- ?p, ~.< ; :..4,. p..s >.e..,s..,.. m-g .n,r,.. y r .. - 9.e,. y : c. . i n. ..s .s :.
9. *
~~....g,'.. .) , - g e 4..} y ;..,A,...,.~~
~~,..,g,~~
~~.* g: ,,1 .r a c, n u,gg s !..;,.,;. f e m ,-;,s. y .w ,s.; s s, .;. t. ,z I , / , s, +'d~~
~~s. ' 4 'I,~~
~~? *, 8.~~
* ' p 9 *j.f4 ', JA,*,
~~f y" * [' 5./,,b,* Q '~$". % <~~
~~g.4. ' ' ', ) 3,,~~
,./*").. . ". - ' 4.(' ' P f '/ - [,'i 5, '*,,;.v .? { d ', e!,,. 3 j . J f ' f*I A,* l my ., ', } ' $ '.. , 9p,, f. ' 'l .5 ^ ,.'*.,.i, (M... h,
~~e.,~~
' ', *
~~S ' ). - [l5 b,~~
~~?,.. *. f,,.,, *\\/ :M+. '..',.f bl$ [l *' '. ', " '., ' - +.. * '. .b ' kr $. 2.\\ ;3 J J,/ ;,- ), 5,'.f d k.. b' b ' g[]?..%co~~
~~u. f.5 :.'.~~
~~bc ,.. l.".'b,..' E . '% M:",, ,.? *.,, ..g-7, is.~~
+
.*.h.,9',",,.,, po.- .:,0 : y ..e p' % ".,, } g *
~~e,, * ' '.. *, ;Q+ *,,. g, *.'.,. - _,',;., j y',~~
~~, ;. % :t. *,,~~
~~,.;,.'*'..c~~
~~,;;..= e.,;f', p;;,. y~~
~~y i~~
~~5.$:,,a:qt ' Q J.~~
~~v.. y. ;;. :,.~~
~~,, j.s: .. ~^ ;%.: ..Q,,"'a, '.. $... ;;.:., ". s -4.~~
2
~~. q y,..;.., j~~
~~.n< s ;~~
~~p. it -:.~~
~~, 4 ;... :., \\,.. .s,: ,1.,. x +.. ; ;.~~
~~3... : %.ot v,.~~
~~u: . _e e., ( r. ;.. : . f.O.. ". o Q., }&_,.,... .e r..$., T ',.. v' y., ..M.. . ~, : O. a.~~
~~;*-. ',.e.g-~~
~~'*.m,..e.')- o , ;,. <- Q.' q :.,,.........I~~
~~% > :( s r, ~~~
~~...e, ,',,..,,Y>'-r. '.... +., j; .y r., =t~~
~~v. n' *'f..e(,,h, l l: :g~~
~~' ' '. v 1 Af, ;,,'c ..t; .i, 's- (n.m =,,..,,.;..',.,;~.'....,..s ..e ' '.,,M,,n.,'*.,- ,<>j' e ;'fdff '..,..j~~
~~..W.-~~
~~or ..,g~~
~~., *., ;..j, y.,~~
~~o 'e.,.- ugi... 's."s ,7 ../,.,, j, J~~
~~Y.n' l, '..., ;e.'. ': ". '.. l 4.'~.~~
~~4 '*., ;,v :.. ~ y ;c;. -.. v..:f.,'.:.**.9 y : ; ? '~~
~~g c s c1 h% i!. ' ' -,; j$ 4, A, -:l-... w :j '=. cl.l,. 3.: l. :. :. '%; * '.' ;*.l::,.V.......^ ;.J y :.. -: ?..%. e a.,. 6 ;,,.. ',,..; J.e.'.,. : ':' \\ '.:. . a y v m :.. ;.v~~
~~c..a y,~~
~~v. j a. v. .a. 5 . v _.- - i ',;,.,...4.:. e ",; '*_'- _, .. J. [y:-,n. 'n., ? &j s. fg ';.:_W 7., * #.Y 'jf f*., f s.j~~
~~i-#~~
~~, 'e';../ h..'. '.A.:. ',.' n]....~~
~~n.,.~~
~~',n'5 g N.'k'~'~'. .E4 N.* 'e ',a.o .'"..-e.e -n:.,,.4 .! p 1 ....c :,A !. s.., <.1,.,,'g e 3 '. .. '..n. r. i, * *'8.. u,' s -f h:S'h. ~ e A..,. s. u - : 3,j.Qhf,1:: :.,,l.'. h,. :, <r -.; $.i~~
..,.. ::u

'c.l.'
~~. !, _ - } '~ _,, _,; 5 l. I. f~~
~~.. ?.^ ffk, kh e *{ _ _'s[ '~~
~~_ 'f,,*{*<j - [ ..{.' ;',h[ ~ );,(' V ;. ', ll,,~~
}}

ML20204G410

Text

= =1= =

=

Navigation menu

Search