ML20209G056
| ML20209G056 | |
| Person / Time | |
|---|---|
| Site: | Millstone, Seabrook, Haddam Neck, 05000000 |
| Issue date: | 12/31/1984 |
| From: | Ellis W, Ferland E NORTHEAST UTILITIES |
| To: | |
| Shared Package | |
| ML20133L294 | List: |
| References | |
| NUDOCS 8508120613 | |
| Download: ML20209G056 (56) | |
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NORTHEAST UTILITIES 1984 Annual Report HIGHLIGHTS 1984 lo83 % increase Operating Revenues $2,095,252,000 $ 1,889,081,000 10.0 Net income $288,938,000 $221,548,000 30.4 Earnings Per Common Share $2.85 $2.37 20.3 Common Shares Outstanding (Average) 101,398,235 03,497,945 8.4 Dividends Paid Per Share $1.48 $1.38 7.2 Sales of Electricity (kWh-Thousands) 21,418,000 20,357,000 5.2 Sales of Gas (Mcf) 29,682,000 27,661,000 7.3 Electric Customers (Year-end) 1,126,367 1,105,588 1.0 I Gas Customers (Year-end) 158,107 156,153 1.3 Construction Expenditures * $628,727,000 $586,483,000 7.2
*Euludes nuclear fuel i
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TO OUR further our dependence on SHAREHOLDERS imported oil. While our collective memory of the Northeast Utilities (NU) " oil shocks" of the 1970s is a stronger, better-performing company than it . may be fading, the was a year ago. possibility of similar crises We have strengthened n the future is ever-present the quality and reliability of and deserving of careful customer service while consideration in planning. making further gains in In July 1984, our dependence on oil was dealt productivity and efficiency. Our financial a blow when we began performance continues t burning natural gas at one improve, and our standing of NU's Montville electric m the investment generating units, using gas community has improved supplied by NU's own gas accordingly. distribution business. Much of our progress The gas business results from a commitment continued as a profitable to state-of-the-art planning element of NU operations. Late last year it began and from the establishment receiving gas under contract of goals and objectives that are understood, accepted, rom Canada for the first and believed in throughout time' the company. The result is an effective, purposeful Financial Performance organization witi a As the pace of economic Eamings/ Dividends sharpened sense of direction activity increased through and of the challenges ahead. most of 1984, so did the mas EARnmas an omoEnos PER SHARE PER SHARE Foremost among these demand for electric and gas challenges is the completion
. energy in our service area.
rs Driven by increased electric 3.0g of the Millstone 3 nuclear sales, NU's operating unit and its timely inclusion a.7s _ in ur rate base. revenues increased Concurrently, we have substantially, and per-share gy_ already begun to look earnings climbed 20 percent beyond Millstone 3 to assess to $2.85 per share, up from future capacity needs and t $2.37 in 1983. a.25 - explore the alternatives These gains also reflect a available m carrying out our rate increase granted in ) responsibilities as one of the Connecticut late in 1983, a rate increase granted by ( region s major energy . j Massachusetts regulators in suppliers-responsibilities that mclude helping t mid-1984, and strengthened 1 50 - control growth m energy cost containment measures g use through effective taken by the company. 125- Dividends totaled $1.48 conservation; encouraging
,,***,,,,,,s the development of per share, up from $1.38 in 1* 1o83, and were increased by cogeneration and small
! power production; ensuring o.8 percent on January 22,
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\bbNY\ protect the environment; NU's E. James Ferland, president and chief operating officer (left),
i and being progressively and William B. Ellis, chairman i 1980 1981 1982 1983 1984 ~ and chief executive officer, responsive to community needs and customer viewmg construction progress on expectations. the main turbine deck of Millstone 3. The M30-megawatt One basic continuing nuclear unit is scheduled to be 2 objective is to reduce stil[ completed in May 1986. j
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1985, to a new indicated cost increases caused by Construction Progress, Millstone 3 annual rate of $1.58 per delays resulting from cumulative w share. inadequate revenues, by CASH AND AFUDC EXPENDITURES This financial design changes, and by new, na BUDGETED M ACTUAL performance has brought more stringent regulations
$ Millions some improvement in our and controls.) The extent to 800 credit ratings and is giving which we can recover costs us greater flexibility in in excess of the legislative meeting our financing cap remains uncertain.
00 requirements. However, we Although it is widely have considerable distance understood that Millstone 3 600 yet to go in reaching our will be cost-effective over basic financial objectives: at its lifetime, there is a least strong "A" ratings for concern about the impact M our bonds, a market-to- that unit would have on book ratio of 1.1 for our electric rates in the short a common shares, and an term. To avoid the single, equity ratio upward of 40 large rate increase that percent. would result from placing M Achieving these goals is the entire Millstone 3 critical to our ability to investment in rate base all g attract capital in the at once, regulators may future-and to do so at the choose to " phase in" the lowest possible cost. This is investment in two or more 100- as important to our steps. We are examining customers as it is to our various phase-in methods to investors. The cost of determine their impact on 1st 2nd 3rd* 4th* money is as real as the cost customers and on the Quarter Quarter Quarter Quarter of fuel or any other
[;Z"gg"ps%7 o operating expense, and com$any's con tion. financial growth-especially if While we have renewed N PROJECT % COMPLETE aCCC!erated by a confidence that the mM TARGET M ACTUAL Continuation of the current Seabrook nuclear unit 1 Percent economic resurgence-could construction project is being 100 once again place sizeable properly managed, the capital demands on the project continues to be 95-ompany. financially troubled.
Regulators in a number of 90- # Nuclear Construction As of December 31,1984, Millstone 3 was more than New England states have found the project to be needed and worthy of 33 93 percent completed and completion, and we are 170 of its 235 systems had actively cooperating with been turned over for other joint owners to place 80- operational testing. We the project on a sound remain on target for the financial footing. We are 75 scheduled in-service date of concerned that Seabrook May lo86-a date set seven project difficulties may years ago. We estimate the financially strain certain of 70- final cost at $3.825 billion, NU's partners in the which will exceed the cap of Millstone 3 project. a $3.54 billion imposed by the However, even in such Connecticut Legislature in circumstances, we are 1083. (While we have fared confident that NU and the 1st 2nd 3rd 4th much better in our nuclear stronger of its partners will Quarter Quarter Quarter Quarter construction programs than be able to finance the many other utilities, we remaining construction of l 4 have not been immune to Millstone 3.
9 Nuclear Operations Demand and Supply NU is one of the nation's in 1984, both NU's and pioneering nuclear utilities, New England's peak and we have established an demand grew by more than excellent record of 4 percent. There were performance. In 1984, several occasions in the nuclear power produced 57 summer of 1984 when New percent of our energy England utilities needed requirement, and our every megawatt (MW) of nuclear plants operated available generating with a composite capacity capacity to meet peak factor of more than 78 customer demand. This percent-well above the situation raises basic national average and setting questions as to the future an all-time record for NU. adequacy of generating The Connecticut Yankee capacity in the region. (CY) nuclear power plant, Even with the additional operated by NU, set a new ca yacity of Millstone 3, a world record in August re atively modest rate of 1984 by having operated growth in demand-coupled continuously for 417 days with the eventual before shutting down for retirement of older plants-refueling. (That record was willlead to the full subsequently broken by utilization of our capacity in Duke Power Company's a relatively short time Oconee unit 2 on frame. A shortfallin energy January 30,1985.) supply could well be more NU's nuclear expertise is expensive in its impact on recognized by industry our customers and on our peers, by the investment economy than any energy community, and by surplus. regulators. We were To deal with the complex particularly pleased that the issues involved, NU i,as Advisory Committee on integrated its demand Reactor Safeguards of the planning and supply Nuclear Regulatory planning processes to help Commission (NRC) evaluate and apply the most recommended without effective conservation qualification that NU be measures and supply awarded a full-power technologies. The focus of operating license for this planning effort is to Millstone 3. broaden the options, reduce Recently the NRC dependence on any single penalized the CY nuclear source of supply, and plant for faulty design determine which review procedures that conservation programs will contributed to an be most cost-effective in equipment failure. We are limiting growth in demand. addressing those Among the early results deficiencies aggressively of our planning process is with an eye toward greater use of hydropower-retaining-and reinforcing- including the expansion of CY's standing as one of our own hydro facilities and the safest and best the purchase of electricity performing nuclear plants from small, independent in the nation. power producers. While the i potential of hydropower in 5 our region is limited, major
amounts of imported delay, and that they will hydropower from Quebec receive equitable rate will make an important treatment upon completion. contribution to our supply It is important, therefore, in the 1990s. that we find new ways to Cogeneration-i.e., power work with regulators, production in small, legislators and other scattered facilities, usually constituencies-including customer owned, where the adversaries as well as waste heat is used for space allies-to achieve agreement heating or other purposes- on future energy needs and and small power production how best to fill them. At have considerable potential that point, we can go and are being given close forward with less risk of attention and full intervention and delay. management support by One key to this consensus NU. At the end of 1980, is public recognition of NU 62 cogeneration and small as a responsible company, power production projects dedicated to progressive were contributing 58 MW. public service. The men and The life extension of women of NU are working existing oil-fired stations, hard to earn this further conversions to coal recognition by achieving and gas-where we have higher levels of already achieved positive productivity, by careful results-and the planning and the use of repowering of other units advanced technologies, by with more efficient being sensitive and equipment are examples of responsive to individual ways to add future cupply customer and community by upgrading our present concerns, and by delivering facilities. Additionally, we services that meet the needs continue to conduct and and expectations of fund research and customers. development in fuel cells, passive solar, photovoltaics, - and other emerging technologies for power d' generation. William B. Ellis Altogether, our planning Chairman and process has identified more Chief Executive Officer than 60 supply alternatives that are being evaluated for - their technical and economic - viability, and 40 separate E. James Ferland conservation activities that President and can provide meaningful Chief Operating Officer incentives to limit growth in demand. February 28,1985 Moving Forward The greatest problem facing most utilities today is the uncertainty of making capitalinvestments for new facilities without any real assurance that they can be o carried through without
THE YEAR IN REVIEW upgrading of CL&P securities in a decade.
- Dividends and Shareholders' Equity-Dividends in 1984 FINANCIAL amounted to $1.48 per PERFORMANCE common share, up from $1.38 Revenues and earnings were up the year before. The dividend significantly in 1984, giving us was increased on January 22, greater flexibility in our financial 1985, to an indicated annual planning and rnanagernent. We have rate of $1.58, the seventh been able to attract needed financing c nsecutive year of increased at lower cost, and we hare 05V50CDOS strengthened our position to rneet the Total shareholders' equity challenges and uncertainties ahead was $1.6 billion at year-end, with greater confidence.
up fr m $1.4 billion a year e Revenues and Earnings- ago. The average number of Total revenues for 1984 were c mm n shares outstanding
$2.1 billion,10.9 percent during 1984 was 101,398,235, greater than a year ago. A compared to 93,497,945 in rate increase granted in 1083. The increase reflects Connecticut m, late 1983, and common shares sold during an increase in Massachusetts the year and shares acquired m mid-1984, contributed to by our shareholders through the increased revenues, as did NU s Dividend Reinvestment renewed economic growth in and Common Share I urchase our region and the resulting higher demand for electricity ok value per share was
#" E# $15.07 at year-end, up from Net earnings amounted t $13.84 at the end of 1983.
$289 million or $2.85 per share, an improvement of 20
- Stock Price-NU's common shares traded in a range of percent over 1983 earnings of 10% to 14M during the year,
$2.37 per share. However,53 bringing us slowly closer to percent of our 1984 net our basic goal of a market income consisted of the price equal to 110 percent of allowance for funds used book value. NU's improved during construction financial performance, the (AFUDC)-a noncash item vitality of our service area, and representing the carrying recognized improvements in charges of capital being used in Our regulatory environments our construction programs. have been positive factors in Strong control of operating the investment community's costs also figured in our evaluation of NU.
improved operating earnings. Return on equity reached
- Capital Expenditures-Construction expenditures 10.8 percent, a record high and an important step forward- totaled $628.7 million in 1984 bearing in mind that for the and are expected to be $710.8 million in 1985. In 1086, such previous nine years NU's return on equity had been expenditures will be sharply consistently below the levels lower ($366.5 million) with the allowed by rate regulators. completion of Millstone 3.
In June, Standard & Poor's
- Financing-We continue to raised the rating of The seek innovative and lower cost Connecticut Light and Power ways to meet our financing Company's (CL&P) first requirements-a task j mortgage bonds from BBB- to facilitated somewhat by NU's BBB+ and its preferred stock improving financial health and from BB to BBB - the first upgraded credit ratings.
7
In 1984, we met our needs occurred on January 21,1985,and primarily through the sale of was 4300 MW. l
$76 million of additional
- Nuclear-The key to NU's common shares, the issue of outstanding reputation in the
$125 million of first mortgage nuclear power field is the bonds, an opportune $75 dedication and skill of the men million " interest rate swap" and women responsible for arrangement, and $97 million our nuclear engineering and of floating-rate, tax-exempt operating functions. Among pollution control bonds at them are more than 1,000 attractive interest rates. professionals, including A higher level of retained hundreds with advanced earnings enabled us to limit academic degrees.
the sale of additional common Our nuclear facilities stock to 3.0 million shares, operated with a composite rather than the 4.5 million capacity factor of 78.5 percent. originally planned. These were This is substantially above the i sold at an average price of national average, and we l
$12.64 and our selling cost, continue to rank among the once again, was one of the top performers in the frequent lowest in our industry. safety reviews and audits An additional 3.1 million conducted by the Nuclear common shares were acquired Regulatory Commission by shareholders through our (NRC).
Dividend Reinvestment and On August 1984,our Common Share Purchase Plan, Connecticut Yan: ee (CY) providing $38 million of new station set a world record for Nuclear Capacity Factors Capitalin 1984. More than 37 417 days of uninterrupted percent of NU shareholders operation. Subsequently, m g E,AST M US- are participating in this plan, during the planned refueling which makes it possible to outage, a seal failed, Percent reinvest dividends permitting mildly radioactive automatically and to make water to flow into the additional cash purchases-all containment chamber. The without any brokerage fees or problem was resolved without 80 - charges. any public hazard. Additional Looking ahead, we are safeguards were added, and confident of our ability to the plant returned to full-continue meeting NU's power operation, with NRC
/ financing requirements through the completion of approval, on November 0, 1984. Later, the NRC found Millstone 3. Given the 60- probable capital needs that lie Neither cold, nor snow, nor gg y ahead,it is imperative that we maintain our financial ice. . .NU's hydroelectric units generate electricity even in the strength. dead of winter, as long as there is 50-a flow in the river. The 11adley Y^N\bbMOV v v Y SYSTEM PERFORMANCE During I 84, we continued to Falls Station in Holyoke, Massachusetts, is no exception.
O Cornelio G. Cayode (foreground), 1980 1981 1982 1983 1984 '"Ni (4510'ner needs for reliable, instrument technician at Ifolyoke, quality service at prices wirich observes the thick crust of ice that taw m Nsign Electncal Rating of all U S. c0Fnf4Ue aMaj7fy WN7, f 3OW 0[ Of3U has formed from the overflow at
""**' P'** '" '*"'"'eraal operat>on utilities un the Northeastern United the first-level canal. In ihe Source Nuclear Regulatory Cornrnission gpgffs-background, carrying his toolbox, is pJul SUChJnek, also an At year-end, Nll's total electric instrument technician. A second capacity was 58t*4 rncgamalls generating unit was added to the (Af Wl. of which 1938 Af W Or 33 station in 1984, bringing its total percent was nuclear. Peal dernand Ren"ating JPacity to 31 3 megawat t s. ,
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n ML fault with the rocedures NU conversion by utilities used in origina.'y designing generally has slowed. the seal and, on December 13, Meanwhile, we are gaining 1984, imposed a fine and valuable operating experience ordered a detailed review of with our Mt. Tom Station in NU design review procedures. Holyoke, Massachusetts, We take this penalty and the which was converted from oil ordered review very seriously to coal in late 1981. Phase two and remain dedicated to of the conversion program-continue the consistently installing a new precipitator-above-average NRC safety was completed in early 1984, ratings earned by CY in recent and this unit is living up to all years, of our expectations for Millstone 1-which has also efficient, clean operation and set world records for to the commitments we made performance-operated at 74.7 to governmental bodies to gain percent of capacity for the their approvals for the year, while Millstone 2 conversion. operated at 87.7 percent. Some years ago, NU Our nuclear units delivered identified other oil-fired 57 percent of our energy stations as potential candidates requirement in 1984, saving for future coal conversion-more than 23 million barrels of Norwalk Harbor and Devon oil worth an estimated $695 (Connecticut) and West million. Springfield (Massachusetts). As noted, our Millstone 3 While recent studies indicate unit is on course for its coal conversion is subject to Energy Contrbution By Source scheduled in-service date in substantial economic and May 1986. This plant will add regulatory risk, we are M OIL M HYDRO an additional 746 MW to our continuing our review of M NAR M Co W GAS capacity and save an estimated possible coal conversions to Jdditional eight million barrels 1973 determine whether the future of oil annually. difference in price of oil and
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- Oil-Our five oil-fired coal will be adequate to offset generating stations provided the significant cost of 25 percent of our total converting these stations, jlp[I %hs;f[hp S;b kh; \ ' .
, . generation mix in 1984 and especially to meet today s strict MM ON O.'.M.4i i operated with remarkable environmental requirements.
8 8Q,kI. I,.( i Y 1., ef ficiency, given their
- Hydropower-Hydropower min r h _,_ advancing age. We benefited 4W.Cf, k F M ~.'.(
975.% ? % 1 7 provided the basis for New during the year from an NE nc6MM ' abundant supply of oil at England's early industrial leadership and has immense generally stable prices. appeal as a safe and self-
, Nevertheless, reducing still renewing energy source. While l
further our dependence on the potential for additional l g% ~ m . - imported oil remains a priority
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of natural gas to displace oil m Converting unit 5 at NU's LM . .. the generation of electricity is Montville Station from oil to 7 _
.7 natural gas was an operating
, discussed on page 14 and in highlight of 1984. A special
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on fuel availability and favorable price and supply of economics. Shown at the unit's oil-together with meter and regulator station are uncertainties about the costs Richard C. Mackay, manager, Gas of resolving environmental System Construction (left), and to concerns-the pace of coal Jan A. Bennett, superintendent of the Montville Station. d l Nw I N
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hydropower in our region is though smaller, facility is limited, NU is committed to planned for Springfield, making the most of it. The Massachusetts. Another recent addition of a second example of using waste for unit at our Hadley Falls energy is the woodchip Station in Holyoke, burning unit developed by an Massachusetts, brings our NU customer in Pomfret, total conventional hydro- Connecticut. generating capacity to 246 NU's cogeneration program MW, and we are studying is more than a passive further additions at Falls willingness to buy power from Village, Connecticut, and cogenerators. We estimate other locations. We buy there are about 100 potential hydropower from 15 small cogenerators in our service producers. area. Our intent is to contact A major activity in 1984 was them on a regular basis, offer the development of a set of management and technical agreements that will bring support in developing their some 2000 MW of hydropower facilities, and purchase their I to New England from the excess power at a price immense new generating sufficient to provide a stations being completed by meaningful investment the Hydro-Quebec electric incentive. company in the James Bay region of Canada. As a GAS BUSINESS member of the New England NU's gas business is providing Power Pool, NU has about a 24 reliable and economical gas service to percent interest in this new about 158,000 residential. source of supply, which, upon com mercial and industrial customers completion of additional in Connecticut. In 1984, NU agreements in 1985, will be delivered 29.7 billion cubic fut of expected to provide about 10 gas, a 7.3 percent increase over percent of New England's total 1983. Ourgas business again made electric power needs by the an important contribution to 1990s. earnings.
- Cogeneration and Small There continues to be an Power Production-NU is abundant supply of domestic committed to cogeneration and and Canadian gas, and the small power production-a New England states are an commitment reflected in the recent decision to appoint a Cogeneration, a fairly recent director of Cogeneration devel Pment in NU's service area, Development. At the end of 35aC nCePt that could have far-1984, some 62 cogeneration reachmg implications for New England's energy supplies. Hull and small power production Forest Products,Inc., of Pomfret, projects were contributing 58 Connecticut, burns woodchips and MW to the NU system, and we other byproducts to produce are working toward an en ush steam to heat their kiln sheds and generate about 25 additional 380 MW by 1990-
, The proposed refuse- percent of their electricity. When their electricity needs are low, burning facility of the Hull sells power to NU. Energy Connecticut Resources Management Services employees Recovery Authority at our in the NU Dam,elson District provided technical assistance on South Meadow Station in the project. Here, William B. Hull Hartford, Connecticut, will (left), owner of the company, add approximately o8 MW to reviews the project performance the NU system through with Albert B. Morgan, district 12 cogeneration, and a similar, y,ycer f NU's Danielson
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attractive market for gas other agencies with a role in affuting Connecticut Retail Rate increases producers. Through the rublic energy rolicies. All of us inust, Requested Versus Allowed Boundary Cas and CONTEAL to a greater extent, huome Partners HE REQUESTED HIIII ALLOWED programs, We and other gas rather than adversaries if we errut to companies in the region have deal effutirely with the uncertainties goo
* * *"* been able to increase and problems which are ahead of us.
substantially the amount of
- Connecticut-Since 1980, lower cost gas available for our we have been encouraged by customers. the consistent recognition by 25 As a result, use of higher the Connecticut Department cost liquified natural gas and of Public Utility Control propane has been drastically (DPUC) of the importance of 2* reduced, and use of financial health and of synthesized natural gas reasonable rate treatment for eliminated. These factors, CL&P. In 1984, the 150- combined with no evident combination of rising energy impact from gas price sales and cost containment deregulation, leave us in a measures, coupled with a rate 100- mumm. period of stable gas costs. increase granted in 1983, was Thus, natural gas is an sufficient to allow us to increasingly attractive postpone until 1o85 any filing 50- alternative to oil as a fuel for for additional rate relief.
domestic heating and The DPUC, in its legally continues to be popular for mandated triennial cooking and clothes drying. management audit, has chosen 1980 1981 1982 1983 1984* In 1984, we completed the to focus on a review of our
*No rate mcrease requested siX-mi!e pipeline ConneCIion Io Millstone 3 construction NU's Montville, Connecticut, program. This review, along genna ng a n, enabling with emerging criteria for Massachusetts Retail Rate increases Requested Versus Allowed one umt at this facility to burn reserve capacity requirements, mterruptible gas m place of oil, will no doubt have IIM REQUESTED HIlli ALLOWE This is already producing considerable bearing on future
$ Millions significant economies, and we rate increases and on the issue ea are studying f urther gas of how the cost of Millstone 3 conversions at NU's Devon will be taken into our rate and Middletown Stations- base.
NU's gas business is
- Massachusetts-The producing a healthy cash flow, Massachusetts Department of and its contribution to Public Utilities (DPU) granted consolidated earnings is almost Western Massachusetts 40 - entirely cash, with only a small Electric Company (WMECO) percentage of AFUDC. 73 percent of the traditional rate relief that was requested REGULATORY AND in a case decided in mid-lo84.
PUBLIC POLICY ISSUES This was the highest There has ban some improvement percentage received in a go _ in our region's regulator? number of years. However, environment in ruent years. At the the DPU rejected our request same time, antiutility legislative to begin the phase-in of activity is a matter of growinX Millstone 3 into rates and concern. To guarantee the area's raised serious concerns about energy future requires a focus on its standards for treating the long term planning often difficult to Mil l stone 3 project for rate achiere in the short term political making when the unit goes 1980 1981 1982 1983 1984 (0Hitif. operational. A mah,r wrorate obiative-e Seabrook-NU owns a 4.1 therefore, is to wod more closely willt percent interest in the our regulators, legolatire bodies and Seabrook nuclear project in
(; New Hampshire. There is still individual home audits for NU f NU-Assisted Customer significant uncertainty customers since 1980. An Conservation Performance concerning the future of effort is now under way to Seabrook unit 1, such as that encourage greater customer oit SAVED Caused by recent actions of implementation of audit Maine regulators. If the recommendations. M PROJECTED OVER UNIB FOR YEAR UFETIME OF MEASURES Seabrook project falters,it . Solar-We continue to could affect the ability of some encourage the use of solar Millions of Barrels systems of domestic water and 3.00 involved utilities to continue Supporting commitments to space heating. Four 2'75- Millstone 3. Our financial demonstration homes have Pl anning indicates that we been built from NU's Solar 2.50- Home Planhook and have
,s == would have the resources in 2.25- place to ensure the completion attracted thousands of of Millstone 3 in such an nterested visitors. NU was the 2.00- eventuality. recipient of a special award 1.75-On September 27,1984,the from the United States Connecticut DPUC imposed a Department of Energy for this 1.50 - $4.7 billion cap on the program.
c nstruction costs of e Wrap-UplSeal-Up-1.25_ Seabrook 1. NU has challenged Insulating water heaters and the constitutionality of the eliminating other obvious 1.ca-Seabrook cap and has taken sources of heat loss is one of
.75- legal action accordingly. the simplest and most effective NU has been ordered by the of all conservation measures.
.30- NU has, to date, helped more Connecticut DPUC to divest
.25- ,,, .wsu""" its interest in Seabrook unit 2. than 140,000 customers As of this date, we have been achieve energy savings in this 1984 unable to do so, but fashion.
1981 1982 1983 construction on the unit has
- Energy Efficiency-NU been halted, and the DPUC continues to work with oou ARs sAvro has concluded that unit 2 is architects, builders and
" ff vely, f n t technically, contractors to promote high
" Fo,RyR E OF EASURES standards f energy efficiency
$ Millions m construction. We also work ico CONSERVATION with dealers to identify and Effective conserration measures encourage the use of energy-ED- play a ley role in our integrated efficient appliances.
go. Jemand/ supply planning and are one
- New Programs-NU is of the most important ways we ca" currently studying more than 70 -
enhance the value of our service to 40 additional conservation
,,memus customers. The NU 805/90s alternatives and willinstitute 60 -
conserration program, launched pilot programs for those that following a Connecticut regulator? appear to be both feasible and order four years ago, continues to be attractive to our customers. 50 - one of the most comprehensive and We also recognize the need 40 - widely acclaimed efforts of its Lind in to develop appropriate the nation. In 1984 alone, this f nancialincentives in the form 30 - Trogram helped more than 190,000 of subsidies for conservation NU customers control and reduce measures and with new types their energy use land their utility of service contracts which 20 - hills) and save an etluiralent of share energy savings with almost 300,000 barrels of oil. customers. One such contract 10 -
===""""""" """"""
- Energy Audits-NU is a undertaken in lo84 was with major sponsor of the CONN the San Juan Center in 19M 1982 1983 1984 SA\ E and Mass-Save energy Hartford, Connecticut, where audit programs, which have the cover photograph for this resulted in more than 125,000 annual report was taken.
15
CUSTOMER AND fixed-income customers to COMMUNITY SERVICE conserve energy. Community Meeting customer and ammunny Outreach Representatives expectations for the quality and presented workshops on reliability of our service is a energy conservation; more responsibility shared by all NU than 50,000 kits of low-cost employees-including those teho have winterization materials were little or no contact ichh customers. In distributed; and, the quarterly 1984, a major effort teas made to llelp Line newsletter reached reinforce standards of exullena in 45,000 of these customers. service throughout the company. And, our Add-A-Dollar Additionally, ice continued to campaign-which enables NU encourage and support the personal customers to add a dollar to involvements of hundreds of their bill payments to help individual NU emplosiees in others-has raised more than community programs. $250,000 to date.
- System Reliability-Despite During 1984, ten employees a 4 percent increase in demand received NU Community and the addition of almost Service Awards for their 21,000 new electric customers, outstanding leadership in the NU system continued to community action programs.
function at a high level of More than 1200 employees reliability during 1984. were involved in community
- Customer Service-New service activities, including telephone systems at our p nsored programs such customer service centers and as Special Olympics and our more computer terminals at Run for Education fun runs.
our business offices are helping us deal with customer PUBLIC AFFAIRS questions and problems more AND COMMUNICATIONS efficiently than before. C### "* *""I'"N#"5 8# h""l~'. "- Customer complaints declined han a #h good rufumann in . steadily in 1984, and our '"'"I"S.pubh,c and ammunity regular surveys of customer ""# ""' # " # "* # """""# '# opinion are giving NU high n'n orenly and can.ht#y u'hl: the and improving marks for "'"? media an to be usronsin to quality service, die intrusts and unurns of our
- Special Assistance many other constituencies.
Programs-The particular
- EmployeeCommum. cations-needs of low-income families A particular eff rt is being and others experiencing "' ' C " ""' " kd ' "
hardship are a real concern. C mPany goals and obj.ectives l ! We make a special effort to to all NU employees, and to l identify hardship situations yec gnize their special and-despite an improving in ual accomplishmen ts. economy-the number of eotaped programs are used hardship customers known to us increased by 22 percent in At NU, service is much more than 1084. We are able to bring a a smile;it means being variety of assistance programs responsive, em athetic and to bear in helping them. NU efficient. Judy irschner, senior customer service representative at customer service personnel are the Western Region Customer also able to make special, case. Service Center in Waterbury, by-case arrangements for the Connecticut, exemplifies this i payment of overdue bills. s irit of service ever workday, as During the year, through s e handles one of i e more than ENERGY CARE, we assisted 8500 calls that are received at ! 10 each of NU's customer service more than 80,000 low- and centers each week. l
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to supplement employee others in the investment publications, and senior community. Senior management makes a special management made a well-effort to meet with groups of received presentation to the NU cmployees in the field. New York Society of Security
- Customer and Public Analysts late in 1984. In our Communications-We regular communications with continue to provide useful shareholders, we continue to information to our customers encourage participation in the via media advertising and bill Dividend Reinvestment and inserts. We are also working to Common Share Purchase refine and improve the content Plan-an important source of and format of our bills and bill new capital.
inserts.
- Regulators and Legislators-Our conservation efforts A key element in our require consistent public communications program is to exposure, and we continue to maintain close contact with support advertising and regulators and with promotion for the CONN community and state political SAVE and Mass-Save energy leaders, providing timely audit programs as well as our
, information about NU's own NU conservation operations and our positions activities. on issues affecting our future. Our linemen presented the important message of electrical ORGANIZATION safety to 36,000 fif th- and sixth-grade students in our AND MANAGEMENT Lesley C. Gerould, school safety program. Special advertising and previously district manager of printed materials on the Norwalk District, was elected always-important issue of regional vite president of the Southern Region. Harrie R. safety were prepared and put to use in 1984, and more Nims, previously system director, Transmission communications support was given to our gas business, Engmeering and Construction, Additionally, we reintroduced was elected vice president of ' in our television advertising Transmission an'd Distribution Engineering and Operations. the earlier theme of" Energy in addition, David H. Independence"-and the need , Boguslawski, previously I to reduce still further our use manager of Short-Term of imported oil. Surveys tell us Financing, was elected an this continues to be an issue of assistant treasurer. ! major public concern. New information materials on how to deal with power It's an education! students Jane outages were well-received by Roper (lef t), Vic, tor llayes our customers and were given (center), and Brian Fisher hear a significant coverage in the recorded message describing how the Connecticut Yankee nuclear media. A number of other power plant works. The exhibit, utilities have asked for including a scale model of the permission-which we have (lant,isg"
" art of the Connecticut gladly granted -to adapt these "
Cen erin l[a7d m Nec , materials for use in their own Connecticut. Each year, hundreds service areas. of children and adults visit the
- Financial Communications- center to Icarn about the i
'"* " "' " 8 "
We rest and promptly and fully on e to allinquiries from financial on,'[h ou h I splays, 18 computer games anf" hands on" analysts, shareholders and activities. 3
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Retiring from the company We note with sadness the 1 I after more than 31 years of passing, during the year, of l service with CL&P and NU Anthony E. Wallace, retired, was Emil B. Gross, regional who had been an executive vice president of the Southern vice president of NU and Region. Ralph O. Smith, vice president of CL&P; Frederick president of Purchasing and Panciera, retired, who was vice Materials Management, president of Gas of HELCO retired after 34 years of and vice president of Gas service with CL&P and NU; Operations of NU; and Russell and Walter O. Prelle, vice M. Lay, retired, who was president of Transmission and Financial vice president and Distribution, retired after 38 comptroller of HELCO. years with HELCO and NU. l 20
FINANCIAL AND STATISTICAL SECTION PAGE CONTENTS Management's Discussion and Analysis of Financial Condition and Results of Operations . 22-27 28 Company Report. Auditors' Report . 28 29 Consolidated Statements of Income Consolidated Statements of Sources of Funds for Gross Property Additions. 30 31 Consolidated Statements of Income Taxes Consolidated Balance Sheets. 32-33 Consolidated Statements of Capitalization . 34-35 Consolidated Statements of Common Shareholders' Equity. 36 Notes to Consolidated Financial Statements . 37-45 46 Selected Consolidated Financial Data. Consolidated Statements of Quarterly Financial Data. 47 Consolidated Operating Statistics: 47 General . 48 Electric . 49 Cas . 50 Shareholder Information . NORTHEAST UTILITIES ANNUAL REPORT 1984 21 i--____.
l MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANClAL CONDITION AND RESULTS OF OPERATIONS This section contains management's assessment of the cost for the unit of $3.825 billion. The company is not able at this company's financial condition and time to determine how much,if the principal factors which have any, of the totalcost of Millstone 3, an impact on the results of above $3.54 billion, would not be operations. This discussion recoverable because of this law. should be read in conjunction The Connecticut Light and Power with the company's consolidated Company (CL&P) believes that it financial statements and is constitutionally entitled to full footnotes. recognition of its prudently incurred investment in plants FINANCIAL CONDITION necessary to provide service to its customers. If ne assary, The company showed steady improvement in its financial management intends to pursue appropriate measures, which condition throughout 1984. The could include seeking legislative company's earnings per common change or administrative and share increased to $2.85 in 1984 court appeals, to obtain full rate from $2.37 in 1983. The increase recognition of its prudent in earnings is attributable to a combination of the effect of a investment in Millstone 3. higher level of sales from an Because the rate levels necessary improved economy and rate to support such full recognition increases, as well as cost will be substantially higher than CL&P's current rates, CL&P containment measures taken by expects that the Connecticut the company. Notwithstanding these improvements, the Department of Public Utility allowance for funds used during Control (DPUC) will consider construction (AFUDC), a noncash requiring that the costs associated item representing the estimated with Millstone 3 be phased into cost of capital funds used to rates over a limited number of years after the unit enters finance the system's construction service. program, continues to provide Management believes that a more than half of the company's reasonable phase-in plan over a earnings. Continued progress will relatively short period of time be necessary for the company to could be manageable from a fully regain and maintain financial point of view. However, financial health. Considerable failure to provide full rate uncertainties, such as the timely completion and rate recognition recognition for Millstone 3 upon of Millstone 3, still face the its completion would represent a com pa ny. break from traditional rate-making principles and could be Dividends paid on the company's common shares in interpreted by investors as 1084 were $1.48 per share. In symptomatic of an unsupportive January 1985, dividends were regula tory environment. This perception could result in increased to an annualindicated level of $1.58 per share. increased cost and/or decreased Legislation enacted in availability of funds for the Connccticut during 1983 could system's future capital needs, and could have long-term, negative limit the recoverability, with certain exceptions, of Millstone 3 effects on future electric rates. construction costs above the Untilits decision in the 1984 unit's 1o82 estimated cost of Western Massachusetts Electric I Company (WMECO) rate case,
$3.54 billion. In August 1o84, the company announced that the the Massachusetts Department of Public Utilities (DPU) had estimated cost of Millstone 3 was expected to exceed the 1982 permitted an electric company to begin recovering its prudently estimate of $3.5 ' billion. The company is now using a projected incurred investment in a new 22 generating unit after the unit
7 began commercial service. In new standards, and if those standards standards, first described in its are upheld, the consequences for July 1984 decisica, the DPU WMECO could be adverse. cautioned WMECO that it would CL&P has a 4.1 percent permit rate recognition of ownership interest in the Millstone 3 only to the extent Seabrook project. In 1984, that WMECO demonstrates that legislation was enacted in the unit is used and useful." Connecticut requiring the DPUC Under these standards, a unit to establish a limit on the amount would be used and useful only if of construction costs of Seabrook f unit I that may be made part of and to the extent that it is needed and economically desirable in the rate base or otherwise providing benefits to ratepayers. included in the rates of CL&P. The DPU stated that if the The DPUC established such a standards are not satisfied, the limit, with certain exceptions, at portion of the unit that is not 54.7 billion, of which needed or economically desirable approximately $191 million would may be treated as plant held for be applicable in the determination future use and not currently of CL&P's tates. This legislatien entitled to rate recognition or the also required the DPUC to disallowed portion of the plant determine the economic viability may be amortized over an of Seabrook unit 1, the ability of appropriate period in the manner the owners to finance the project allowed for abandoned plants. In to completion, and the probability its next rate case, WMECO will that the project would be attempt to demonstrate that completed and placed in service. these new standards are satisfied in its decision, the DPUC in the case of Millstone 3. If any of concluded that Seabrook unit I WMECO's prudently incurred was both economically and investment for Millstone 3 is not financially viable. The company permitted full rate recognition continues to believe that the because of the DPU's timely completion of Seabrook interpretation of its new unit 1 is in the public interest,in Construction Expenditures M ELECTRIC PRODUCTION M ELECTRlu DISTRIBUTION M ELECTRIC TRANSMISSION Ci 5 GAS
$ Millions 800 700 500 - -
400 ,,, 300 ,o 200 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 ACTUAL PROJECTED l l l 23
the best interests of ratepayers Seabrook unit 1 is estimated to be and investors, and economically $77 million for 1985 through more desirable than cancellation, 1987. but completion of the unit is not assured. In addition to construction expenditures, the system Construction Program companies estimate that nuclear The system's 1984 construction fuel requirements will be $312 expenditures of $628.7 million million for the years 1985 through 1980 were the highest in its history. . . Construction expenditures, Financmg including AFUDC but excluding It is essential that the system nuclear fuel, for the period 1980 companies regain and maintain to 1984 and projected their financial health to assure construction expenditures access at reasonable cost to through 1989 are illustrated in financial markets so as to acquire the chart on page 23. Annual the funds needed for their construction expenditures are ongoing construction programs. projected to peak in 1985 and Cash requirements in excess of decline to a lower level after internally generated funds are Millstone 3 begins commercial financed through short , operation in 1986. The intermediate- and long-term construction of Millstone 3 is the borrowings, the issuance of tax-most significant item in the exempt pollution control notes, construction program, construction and nuclear fuel representing about 72 percent of trust financings, leasing the program in 1984 and 57 agreements, and sales of common percent of the 1985 and 1986 shares and preferred stock. In Sources of Funds, programs. Millstone 3 remains on
. (percentage of total requirements) addition to construction and schedule for its planned in-service nuclear fuel requirements, the M INTERNAL M COMMON SHARES date of May 1986. The total system companies are obligated to estimated cost of the system's meet debt maturities and cash M LONG-TERM DEDT E PREFERRED dTOCK 64.85 percent ownership interest sinking-fund requirements
' OTHER in the unit (representing 746 totaling $320 million for the Percent MW), based on the analysis years 1985 through 1980 completed in 1984, is currently Although the level of internal estimated to be $2.48 billion of cash generation has increased in 100 the unit's projected cost of $3.825
, c ;e ,*
recent years, external financing
, ! ' billion. The constrrction of the continues to supply a substantial O unit was estimated io be 03 portion of total cash I, percent complete at December 31,
, f requirements and is expected to 80 a 1-1 1984.
4 The construction program also continue to do so until Millstone 3 is placed in service and reflected 70 mcludes CL&P's 4.1 percent in rates. In 1985, the company interest in Seabrook unit I. The willissue common shares i g company considers Seabrook unit 2 through the Dividend to be ef fectively canceled and, g therefore, no costs for further Reinvestment and Common Share Purchase Plan and might construction of Seabrook unit 2 issue additional common shares 40 are included in the construction program, although there are to finance the company's equity contributions to its subsidiaries,
'O
' some minimal expendit ures The system companies also intend
' included for security and other to issue additional long-term debt g measures necessary to preserve l and preferred stock and to utilize and protect any assets 10 represented by the unit. For their construction and nuclear fuel trust arrangements and financial planning purposes, the revolving credit / term loan f company is projecting that agreements. The chart on this 1980 1981 19'82 1983 1984 Seabrook unit 1 will be placed in page illustrates the relative service in the third quarter of percentages of all major sources 1987 and CL&P's share of the of funds for the five-year period cost will be approximately $210 from 1980 to lo84, including 24 million. CL&P's share of the financing arrangements under construction expenditures for capital lea ses. _J
(_ I During 1984, the company agreement for several years and received proceeds of $76 million in late 1984 added a new $150 from the issuance and sale of million revolving joint credit common shares, which included facility. There were no
$38 million from public of ferings borrowings under either of these and $38 million from its Dividend agreements during 1984. The Reinvestment and Common system companies also have $48 Share Purchase Plan. The system million of credit line agreements companies issued approximately with various regional banks, of
$311 million of first mortgage which $46 million was available bonds, pollution control notes and as of December 31,1984.
long-term notes in 1984. In addition, the construction trust arrangement was used to finance Rate Matters a portion of Millstone 3 Sufficient rate levels granted construction expenditures during on a timely basis in all 1984. CL&P and WMECO jurisdictions are key factors to continued to utilize a nuclear fuel enable the system to achieve trust to finance nuclear fuel satisfactory operating results, requirements for Millstone 1 and increase its internal cash 2 and their ownership share of generation and assure the ability Millstone 3. As of December 31, to enter the capital markets at a 1984, the trust's investment in reasonable cost. Therefore, the nuclear fuel was $345.4 million. system companies will continue Some of the Seabrook joint to evaluate the need to file rate owners experienced financial applications in their retail and difficulties in 1984. As a result, to wholesale jurisdictions. Improved better assure their ability to CL&P earnings made possible by complete the project, each past rate relief, an unexpectedly Seabrook joint owner was high level of sales, and effective required to establish a fmancing cost containment measures made plan and/or agreement to cover it unnecessary for CL&P to seek its portion of the cost to complete higher rates during 1984. The Seabrook unit 1. In September DPUC has scheduled hearings for 1984, CL&P obtained March 1985 to reconsider CL&P's commitments for letters of credit rate levels because CL&P is to assure it will meet its 4.1 currently earning an equity percent share of the cash return above that allowed in its requirements to complete December 1983 retail rate case t i Seabrook unit 1. decision. No date for completion The system companies have of the DPUC reconsideration has done considerable contingency been established. planning to help assure that In July 1984, and as later adequate cash resources will be amended in October 1984, the available to complete Millstone 3. DPU granted WMECO an annual That planning recognized that electric retail revenue increase of many of the Seabrook joint approximately $13.8 million, owners are also joint owners of which represented 73 percent of Millstone 3. If any of those joint its traditional rate request to owners do not meet their cover increases in service costs, financial obligations for the but denied $14.9 million of continued construction of revenues representing Millstone 3, CL&P and WMECO constreetion work in progress might find it necessary to take on (CWIP)in rete base to phase in additional obligations to complete the cost of Millstone 3. the unit. As a result of such in 1985, CL&P and WMECO contingency planning, and in expect to file rate applications in addition to the $400 million all their regulatory jurisdictions available credit under the to reflect anticipated increases in construction trust, the system the cost of providing service and companies expanded their credit the inclusion of Millstone 3 costs lines to $308 million. CL&P and in the companies' rates when the WMECO have had a $200 million unit enters service, as scheduled, 25 revolving creditIterm loan in May 198o, although the timing L _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _
1 e and the amounts of such filings Electric and Gas Energy Expenses , 1964 Revenue Douar have not bsen determined. Electric energy expenses, which I (cents per douar of renue) include fuel and net purchased l RESULTS OF OPERATIONS and interchange power, increased WHERE IT CAME FROM The respective size of the $76.3 milhon in 1984 compared OTHEH (1.34) system S electric and gas to 1983 primarily because of higher kilowatt-hour (kWh) (1
- operations and the relative magnitude of the various requirements and energy prices in expenses the system incurred are 1984. Electric energy expenses illustrated in the charts on th,s i decreased $26.6 million in 1983 compared to 1982 as a result of !
page. the matching of revenues and
)
Operating Revenues expenses under the provisions of the respective energy adjustment Operating revenues increased clauses. This decrease was
$206.2 million from 1983 to 1984 partially offset by increased kWh and $125.9 million from 1982 t requirements in 1983.
1983. The components of the Gas energy expenses decreased change m operating revenues for
$18.0 million in 1994 compared to the past two years are as follows:
Changes in Operating Revenues 1 Increasel(Decrease) 1984 vs.1983 1983 vs.1982 1 Miles of D.llud WHERE IT WENT ate nmases $ M.2 $ M.8 Fuel cost recoveries 56.7 (35.5) Sales increases and other 64.3 53.6 Total revenue increase $206.2 $ 125.9 In 1984, electric sales increased 1983 as a result of lower prices in 5.2 percent and gas sales 1984, offset partially by the effect increased 7.3 percent. These of higher requirements in 1981. } increases resulted primarily from Gas energy expenses decreased improved economic conditions in $6.8 million in 1983 compared to i the company's service area. A 3.9 1982. This decrease can be 1 ! percent increase in electric sales attributed to lower requirements i during 1983 was primarily in 1983 which were offset l i attributable to warmer than partially by the effect of slightly normal summer weather and the higher gas prices. improved economic conditions. Gas sales decreased 4.3 percent in Other Operation and l QER 1983 Compared to 1982 primarily Maintenance Expenses a a result of lower heating TAXES (17.78) Other operation and OTHER OPERATION Rquirements in MM and some maintenance expenses increased AND MAINTENANCE industrial customers switching $18.9 million in 1984 compared to EXPENSES (14.78) from gas to oil. The increase in 1983. Although inflation is at a
^
yENEF fuel cost recoveries during 1984 is l Sm lower rate than in previous years, ' COMMON AND PREFERRED primarily attributable to the it still continues to increase the i DIVIDENDS (9.34) combination of the recovery of costs for labor, materials and j EARNINGS RETAINED electric energy costs on a higher services. This increase was offset
' ' ' " " f i P[ECIAT INTE O E partially in 1984 by the effect of CHARGES AND OTHER energy costs from pri or lower nuclear refueling and j INCOME NET (6 44) years. This increase was offset maintenance costs.
l partially by lower gas fuel cost Other operation and l recoveries as a result of lower maintenance expenses increased j prices in 1084. The change in fuel i
$66.9 million in 1983 compared to l cost recoveries during 1083 1982 primarily because of higher ref!ccts the timing of when nuclear refueling and energy costs were recovered maintenance costs and the impact j through rates and the effect of of nflation on most expenses.
j 2d lower gas sales. The system companies also i i
-, - - - . - - , - .-,--w , ,, - - . - - .__-..me_.
experienced higher capacity costs Interest charges decreased from Connecticut Yankee Atomic $11.4 million in 1083 compared to Power Company and lower sales 1982 primarily as a result of of capacity to other electric lower short-term borrowings and utilities, lower interest rates during 1983. The decrease in short-term Taxes borrowings was a result of the Federal and state income taxes issuance of new intermediate-increased $57.0 million in 1984 and long-term debt and equity compared to 1983 and $44.8 securities during 1983. million in 1983 compared to 1982. These increases are attributable Allowance for Funds Used to an increase in income in both During Construction years and,in 1983, the effect of The increase in AFUDC of an increase in the Connecticut $3L4 million in 1984 and $32.5 Corporation Business Tax rate. In million in 1983 was caused by addition, taxes other than income higher average CWIP balances taxes increased $9.3 million in attributable primarily to the 1084 compared to 1983 and $7.7 Millstone 3 construction project. million in 1983 compared to 1982. The increase in AFUDC during These increases are primarily the 1984 was reduced partially by the result of the Connecticut Gross effect of including about 500 Receipts Tax on a higher level of million of CL&P's CWIP in rate Connecticut revenues. base. Interest Charges Impact of Inflation Interest charges increased See Note 6," Impact of
$23.8 million in 1984 compared t Changing Prices,"of Notes to 1983 primarily because of higher Consolidated Financial borrowing levels in 1984, Statements for a discussion on reflecting the need for additional the impact of inflation on the capital to finance the system compa ny.
companies' share of Millstone 3 construction costs. 27
Northeast Utilities and Subsidiaries COMPANY REPORT The consolidated financial statements of Northeast Utilities and subsidiaries and other sections of this Annual Report were prepared by the company. These financial statements, which were examined by Arthur Andersen & Co., were prepared in accordance with generally accepted accounting principles using estimates and judgment, where required, giving consideration to materiality. The company has endeavored to establish a control environment which encourages the maintenance of high standards of conduct in all of its business activities. The company maintains a system of internal accounting controls that is supported by an organization of trained management personnel, policies and procedures, and a com program of internal audits. Through established programs,prehensive the com aany regularly communicates to its management employees their intarna control responsibilities and policies prohibiting conflicts of interest. The Audit Committee of the Board of Trustees is composed entirely of outside trustees. This committee meets periodically with management, the internal auditors and the independent auditors to review the activities of each and to discuss auditing, financial reporting and the adequacy of internal accounting controls. Because of inherent limitations in any system of internal accounting controls, errors or irregularities may occur and not be detected. The company believes, however, that its system of internal accounting controls and control environment provide reasonable assurance that its assets are safeguarded from loss or unauthorized use and that its financial records, which are the basis for the preparation of all financial statements, are reliable. AUDITORS' REPORT To the Board of Trustees and Shareholders of Northeast Utilities: We have examined the consolidated balance sheets and consolidated statements of capitalization of Northeast Utilities (a Massachusetts trust) and subsidiaries as of December 31,1984 and 1983, and the related consolidated statements of income, common shareholders' equity, sources of funds for gross property additions and income taxes for each of the three years in the period ended December 31,1984. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered neces sary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of Northeast Utilities and subsidiaries as of December 31,1984 and 1983, and the results of their operations and the sources of funds for gross property additions for each of the three years in the period ended December 31,1984,in conformity with generally accepted accounting principles applied on a consistent basis after giving retroactive effect to the change, with which we concur,in the method of accounting for capitalleases as described in Note 3 of N.otes to Consolidated Financial Statements. ARTHUR ANDERSEN & CO. Hart ford, Connecticut, 1 , February 18, lo85 1
1 l Northeast Utilities and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 1984 1983 1982 iThoesnJ of IA,ilers. enes*
- bare mformatu>n)
Operating Revenues. $ 2,095,252 s 1,889,081 s 1,763,220 Operating Expenses: Operation - Fuel . . 567,114 355,852 464,654 Purchased and interchange power, net (6,707) 128,232 46,022 Gas purchased for resale. 122,859 140,882 147,637 Other . . . 443,888 417,314 378,358 Maintenance., 129,995 137,679 109,721 l Depreciation . 121,262 116,107 106,417 Federal and state income taxes (See Consolidated Statements of Income Taxes) 215,539 159,045 113,712 Taxes other than income taxes 156,952 147,683 140,031 Total operating expenses . 1,750,902 1,602.794 1,506,552 Operating Income . 344,350 286,287 256,668 Other Income: Allowance for equity funds used during cons t ruction . . . 107,351 83,739 52,096 Equity in earnings of regional nuclear generating companies . . 11,063 10,324 8,570 Other, net . (3,133) (3,638) (1,994) Income taxes applicable to other income - credit . . 48,999 41,984 37,898 Net other income . 164,280 132,409 06,570 Income before interest charges . 508,630 418,696 353,238 Interest Charges: Interest on long-term debt . . 212,521 189,271 175,866 Other interest . . 7,416 6,889 31,679 Allowance for borrowed funds used during construction, net of income ' taxes.. . (45,706) (37,003) (37,081) Total interest charges 174,231 158,257 170,464 Income af ter interest charges . 334,399 260,439 182,774 Preferred Dividends of Subsidiaries 45,461 38,891 31,532 , Net Income .. . $ 288,938 s 221,548 s 151,242 l Earnings Per Common Share. $ 2.85 $ 2.37 $ 1.76 Common Shares Outstanding (average) . 101,398,235 03,497,045 85,777,230 20 The assompanying notes are an integralPart of these finansial statements. L
Northeast Utilities and Subsidiaries t CONSOLIDATED STATEMENTS OF SOURCES OF FUNDS FOR GROSS PROPERTY ADDITIONS For the Years Ended December 31, 1984 1083 1982 IThmes4nd.of tMines Funds Generated From Operations: Net income.
$288,938 Principal nuncash items: $221,548 $ 151,242 Deprecia tion .
121,262 116,107 106,417 Nuclear fuel amortization and prior period spent fuel disposal costs. 7,999 12,434 48,305 Deferred income taxes, net 114,507 120,415 50,989 Amortization of deferred charges and other noncash items. 14,559 7,448 8,995 Amortization of energy adjustment clauses . 2,730 Allowance for equity funds used (11,889) 47,808 during construction . (107,351) (83,730) (52,000) Total funds from operations. 442,644 Less: Cash dividends paid on common shares. 382,324 361,eo0 150,205 120,035 110,650 Net funds generated from operations . 292,439 253,280 251,010 Funds Obtained From Financing: Common shares Preferred stock 75,827 113,150 111,276 Long-term debt . - 85,000 40,000 311,015 136,785 168,000 increase (decrease)in construction trust . (102,142) 21,847 Decrease in short-term debt. . 135,334 (20,500) (14,025) (168,110) Decrease in nuc! car fuel payable . - Increase in obligations under capitalleases. (20,000) 109,931 70,671 271,464 Total . 374,131 422,428 531,064 Less: Reacquisitions and retirements of long-term debt ar d preferred stock . 57,174 38,586 213,641 Net funds from financing. 316,957 383,842 _317,423 Other Sources (Uses) of Funds: Changes in components of working capital: Cash and special deposits. (10,398) (6,392) 10,823 Receivables and accrued utility revenues , (20,062) Fuel, materials and supplies . (23,167) (14,345) Accounts payable. (6,162) 9,888 (3,961) Accrued taxes (12,516) 23,343 (59,859) Other, net . 45,895 (10,862) 17,503 6,940 20,041 Net change . (2,930) 3,697 3,851 (43,769) I Energy adjustment clauses, net Other, net . 14,372 (54,576) 2,886 (2,211) (10,770) (4,680) Net other sources (uses) of funds. 15,858 (61,504) (45,563) Total Funds For Construction From Above Sources. . .... 625,254 Allowance For Equity Funds Used...... 575,627 522,870 During Construction. 107,351 83,739 52,006 GROSS PROPERTY ADDITIONS . $732,605 $oso,3o6 $574,o66 Composition of Gross Property Additions:
} Electric and other utility p! ant. $607,954 Cas utility plant $5o7,030 $4 75,294 Nuclear fucl. 20,773 18,553 22,088 103,878 72,883 77,584 Total .
$732,605 5659,366 $574,96o 30 The acco npanying notes are an integral part of these 6nancial statements
Northeast Utilities and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME TAXES For the Years Ended December 31, 1984 1983 1982 (ThouwnduJ rLil4,u The cornponents of the federal and state income tax provisions are: Current income taxes: Federal.. $ 15,942 $ (3,482) $ 4.634 State. . 36,091 128 20,191 Total cu rren t . 52,033 (3,354) 24,825 Deferred income taxes, net: Investment tax credits. 111,075 (11,583) 67,265 Federal . 2,192 106,367 (11,715) State. 1,240 25,631 (4,56.) Total deferred 114,507 120,415 50,980 Taxes on borrowed funds portion of allowance for funds used during construction (AFUDC). 46,188 38,6o6 35,139 Total income tax expense . 212,728 155,727 110,953 Less: Income taxes (credits) included in other income, net of the tax effects of the borrowed funds portion of AFUDC . (2,811) (3,318) (2,759) Income taxes charged to operating expenses . $215,539 $150,045 $113,712 Deferred income taxes are comprised of the tax effects of timing differences as follows: Investment tax credits. $111,075 $ (11,583) $ 67,265 Liberalized depreciation, excluding leased nuclear fuel. 18,914 18,865 12,521 Construction overheads . 19,019 18,424 11,131 Liberaliied depreciation and capitalized interest on leased nuclear fuel. 324 20,302 - Decommissioning costs. (5,268) (1,045) (2,398) Settlement credits-nuclear fuel (1,051) (2,160) (1,668) Unbilled revenues. (1,709) 1,720 (530) Energy adjustment clauses . (15,597) 38,270 (21,733) Spent nuclear fuel storage accruals. (5,221) 35,630 (8,449) Canceled nuc! ear project (2,306) (945) (1,534) Deferred unusual operating expense. (2,489) (2,637) (2,965) Other (1,184) (426) (651) j Deferred income taxes, net . $114,507 $120,415 $ 50,980 The cf fcctive income tax rate is computed by dividing totalincome tax expense by the sum of such taxes and income af ter interest charges. The differences between the effective rate and the federal statutory income tax rate are: Federal statutory income tax rate . 46.0% 46.0% 40.0% Tax effect of differences: Additional depreciation for tax purposes . 0.4 (0.3) (2.1) l Allowance for equity funds used during I construction-not recognized as income for tax purposes . (9.0) (0.2) (8.2) investment tax credit amortization . (1.6) (1.4) (2.1) { State income taxes, net of federal benefit . .. 4.6 4.2 2.9 lleversal of current tax reserves nolonger required - (2.3) - l Other, net . (1.5) 0.4 1.3 l Effective income tax rate. 38.9% 37.4% 37.8% 31 The accompanymg notes are an mtegral part of these fmandal statements-
I Northeast Utilities and Subsidiaries
~
CONSOLIDATED BALANCE SHEETS
\
i At December 31, 1984 1983 l
%,,.u. ..m .n-,,
Assets Utility Plant, at original cost: Electric . .
$3,264,414 33,160,103 i Gas , , . ,
256,968 238,674 Other . . 43,774 41,701 l 3,565,156 3,440,478 Less: Accumulated provision for depreciation . 1,188,010 1,090,716 2,377,146 2,340,762 i Construction work in progress (Note 4). 2,144,210 1,665,319 ; Nuclear fuel, net (Note 3) . 333,259 300,472 1 Total net utility plant. 4,854,615 4,315,553 1 Other Property and Investments: Investments in regional nuclear generating companies, at equity. . 63,065 62,973 Other, at cost 22,325 16,190 , 85,390 79,163 Current Assets: Cash and special deposits (Note 2) . 20,967 10,569 Receivables, less accumulated provision for uncollectible accounts of $10,270,000 in 1984 and
$9,860,000 in 1983. 224,334 206,830 Accrued utility revenues . 93,517 90,959 Fuel, materials and supplies, at average cost .. 126,295 120,133 Recoverable energy costs. . 8,265 1,079 Prepayments and other. . . 8,651 8,080 482,029 437,650 Deferred Charges:
Unamortized debt expense.. 8,349 6,226 Energy adjustment clauses, net. 36,033 60.159 Unrecovered spent nuclear fuel disposal costs . . 15,126 23,441 Other . .
. . 25,498 35,735 85,006 125,561 Total Assets. 55,507,040 $4,957,927 1
1 1 I 32 The anompanying notes are an integral part of these hnancial statements.
Northeast Utilities and subsidiaries CONSOLIDATED BALANCE SHEETS l At December 31, 1984 1983
,iw. ,,.s. ..e twii., i Capitalization and Liabilities Capitalization: (see consolidated statements of Capitalization)
Common shareholders' equity. 51,575,705 $ 1,361,724 Preferred stock not subject to mandatory redemption 291,195 291,105 Preferred stock subject to mandatory redemption. 185,892 187,393 Long-term debt 2,230,044 2,077,588 Total capitalization 4,282,836 3,917,000 Obligations Under Capital Leases (Note 3). 320,235 282,350 l Current Liabilities: Notes payable to banks (Note 2). 23,000 10,000 Commercial paper (Note 2) . - 24,500 i Long-term debt and preferred stock - current portion. 36,568 36,660 l Obligations under capital leases - current portion (Note 3) 72,358 55,277 Accounts payable 128,811 141,327 Accrued taxes . 116,214 70,319 , Accrued interest 65,536 47,243 Other 20,392 27,087 462,879 421,422 Deferred Credits: Accumulated deferred income taxes 206,839 207,494 Accumulated deferred investment tax credits. 218,940 114,383 Other . . 15,311 14.369 441,090 336,246 Commitments and Contingencies (Note 4) i Total Capitalization and Liabilities. 55,507,040 54,oS7,o27 l 1 I l , 33 The auompanying notes are an integral part of these finant-ial statements. L
Northeast Utilities and Subsidiaries CONCELIDATED STATEMENTS OF CAPITALIZATION At December 31, 1984 1983 Common Shareholders' Equity: m-~w ne Common shares, $5.00 par value-authorized 130,000,000 shares; outstanding 104,527,538 shares in 1984 and 98,393,896 shares in 1983 (a). $ 522,638 $ 491,970 Capital surplus, paid in . 417,198 372,618 Retained earnings (b) . 635,869 497,136 Total Common Shareholders' Equity. 1,575,705 1,3o1,724 Cumulative Preferred Stock of Subsidiaries:
$50 par value-authorized o,000,000 shares; outstanding 7,8o1,905 shares in 1984 and 7,894,102 shares in 1983 l
$100 par value-authorized 1,000,000 shares; outstanding 850,000 shares in 1984 and in 1983 Current Redemption Shares Dividend Rales Prices (x ) Outstandinn Not Subject to Mandatory Redemption:(d) -
$50 par value -
$1.90 to $4.80 $ 50.50 to 5 54.00 5,123,895. 256,195 256,195
$100 par value -
$7.72 to $0.00 $105.44 to $100.30 350,000. 35,000 35,000 Total Preferred Stock Not Subject to Mandatory Redemption 291,195 201,105 Subject to Mandatory Redemption:(f)
$50 par value -
$5.24 to $7.52 $ 54.14 to $57.52 1,738,010. 86,978 88,547 Adjustable Rate $ So.15 1,000,000. 50,000 50,000 5100 par value -
$ 16.00 $116.00 150,000. 15,000 15,000 Adjustable Rate $ 112.00 350,000. 35,000 35,000 Total Preferred Stock Subject to Mandatory Redemption . 186,978 188,547 Less preferred stock to be redeemed within one year 1,086 1,154 Preferred Stock Subject to Mandatory Redemption, Net 185,892 187,393 i
Long-Term Debt: First Mortgage Bonds- l Ma turity Interest Rates l 1984 2-3/4% to 3-118 % . - 22,960 1985 3-1/4% . 20,000 20,000 lo86 4 - 1/ 2 06 . 9,600 9,600 lo87 4-3/8% to 5%. 27,000 27,000 1088 3-7/896 to 4-3/895. 48,000 48,000 1089 17-6/10% . .. 20,000 20,000 1990-1094 4-114% to 17-3/4% 432,930 311,160 1905-1909 5-5/8% to 11-1/296. 204,804 205,18o 2000-2004 7-3/8% to 11%. 554,304 554,680 2005-2009 8-7/896 to 9-3/8?'. o 155,000 155,000 2010-2012 14-3/89d to 15+o. 190,000 100,000 Total First Mortgage Bonds . . 1,661,638 1,563,505 Other Long-Term Debt-Millstone 3 Construction Trust-variable rate (e) 55,039 157,181 Pollution Control Notes-1984-2007 5.00% to 10% . 38,650 39,650 2003-2014 Variable rate. 122,200 25,000 Notes-1984-1086 10.50% 20,000 30,000 1987-1901 Variable rate. ... 180,000 180,000 Fees due for spent fuel disposal costs. 82,164 82,164 Miscella neous . 110,518 30,490 Total Other Long-Term Debt. 608,571 553,485 Unamortized premium and discount, net . (4,683) (3,077) Total Long-Term Debt (h). 2,265,526 2,113,103 Less amounts due within one year. 35,482 35,515 Long-Term Debt, Net . . _2,230,044 2,077,588 34 Total Capitalization . $4,282,836 $3toi 7,000 The accompanymg notes are an integral part of these 6nantial statements.
North =t Utilities cnd Subsidiaries CONSOLIDATED STATEMENT 3 CF CAPITALIZATION (NOTES) (a) At December 31,1984, 1,348,331 (f) The minimum sinking-fund common shares authorized for provisions of the series subject to issuance pursuant to the Dividend mandatory redemption aggregate Reinvestment and Common Share $1,500,000 in 1985, $3.250,000 in Purchase Plan were unissued. 1986 and 1987, and $9,500,000 in 1988 and 1989. In case of default on (b) Northeast Utilities (NU, or the sinking-fund payments, no payments company)is restricted in the amount may be made on any junior stock by of dividends it may declare by its way of dividends or otherwise (other long-term debt agreement. At than in shares of junior stock) so long December 31,1984, approximately as the default continues. If a
$254.7 million of consolidated subsidiary is in arrears in the payment retained earnings were available for of dividends on any outstanding dividends. In addition, certain shares of preferred stock, the consolidated subsidiaries have subsidiary would be prohibited from dividend restrictions imposed by their redemption or purchase of less than long-term debt agreements. At all of the preferred stock outstanding.
December 31,1984, under the Changes in Preferred Stock Subject to respective agreements, there would Mandatory Redemption have been approximately $368.2 , ,, million of consolidated retained Balance, January 1,1982. $ 66,601 earnings available for dividends. 40,000 Issues Reacquisitions and (c) During their respective initial five- (2,140) retirements year redemption periods, each of these series is subject to certain Balance, December 31,1082 104,461 refunding limitations. Redemption issues. 85,000 prices reduce in future years. Reacquisitions and retirc .nents . (914) (d) There were no changes during 1984 Balance, December 31,1083 188,547 and 1983 in preferred stock not subject to mandatory redemption. In Reacquisitions and retirements . (1,560) 1982, $5,000 of preferred stock not subject to mandatory redemption was Balance, December 31,1984 $186,o78 retired. (g) At December 31,1984, there were (e) The Connecticut Light and Power 8,000,000 shares of $25 par value Company (CL&P) and the Western preferred stock authorized and Massachusetts Electric Company unissued. (WMECO) participate in a construction trust agreement to assist (h) Long-term debt maturities and cash in the financing of the Millstone 3 sinking-fund requirements on debt construction. Obligations under th.is outstanding at December 31,1984 for arrangement are initially limited to the years 1985 through 1o80 are:
$400 million. The trust was given a $37,128,000, $26,800,000, lien, junior to the liens of the $49,265,000, $115,558,000 and respective mdentures, on CL&I,,s and $64,583,000, respectively. In addition, WMECO s mterests m Millstone 3. there are annual 1 percent sinking-Once Millstone 3 is in service, but and improvement-fund requirements, beginning no later than 1o88, the currently amounting to $14,883,000, trust obligations are to be repaid over $ 14,830,000, $ 14,705,000, a four-year period. $14,032,000 and $14,588,000 for the Interest costs of $o.8 million durinM years 1085 through 1o80, 1984,$12.o million during 1083 and respectively. Such sinking- and
$8 million during 1982 were incurred mprovement-fund requirements may and capitalized, net of income taxes, be satisfied by the deposit of cash or by CL&P and WMECO. The weighted bonds or by certification of property average interest rate charged by the additions. -
trust was 11.5 percent in 1084, 10.8 Essentially all of CL&P's and percent m 1983 and 10.7 percent in WMECO's utility plant is subject to the liens of their respective first 35 mortgage bond indentures. L
Northeast Utilities and Subsidiaries CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY Capital Common Surplus, Retained Shares Paid in Earnings Total
%,,.., . . m u ,,,
Balance at January 1,1982.
$395,009 $254,1e5 $3o4,o31 $1,013,205 Net income for 1982 .
151,242 151,242 Cash dividends on common shares -
$1.28 per share.
(110,650) (110,650) Issuance of 10,495,896 common shares,
$5 par value . . 52,480 58,796 111,276 Common share and preferred stock issuance and retirement expenses . (5,375) (5,375)
Balance at December 31,1982. 447,48o 307,58e 404,623 1,159,oo8 Net income for 1983 . 221,548 221,548 Cash dividends on common shares -
$1.38 per share.
(120,035) (120,035) Issuance of 8,800,150 common shares,
$5 par value . ..
44,481 08,660 113,150 Common share and preferred stock issuance and retirement expenses . (3,637) (3,637) Balance at December 31,1983. 401,970 372,o18 407.136 1,361,724 Net income for 1984 . 288,938 288,938 Cash dividends on common shares -
$1.48 per share. . .
(150,205) (150,205) lasuance of 6,133,642 common shares,
$5 par value 30,668 45,150 75,827 Common share and preferred stock.
issuance and retirement expenses . (570) (579) Balance at December 31,1984.
$522,638 $417,108 $o35,860 $ 1,575,705 36 The auompanung notes are an integral part of these finanual statements
North:ast Utilities and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 1. Summary of Significant Spent Nuclear Fuel Disposal Costs:
Accounting Policies Under the Nuclear Waste Policy Act of 1982, the company is paying the United Principles of Consolidation: NU is the States Department of Energy (DOE), on a parent company of the Northeast Utihties quarterly basis, a fee of 1.0 mill per system (the system). The consolidated kilowatt-hour (kWh) based on nuclear financial statements of the company generation beginning April 7,1983, for include the auounts of all wholly owned the disposal of spent nuclear fuel and subsidiaries. Significant intertompany high-level radioactive waste. transactions have been eliminated in for nuclear fuel used to generate consolidation. electricity prior to April 7,1983, the fees
'" ' ' " " " '*"""' """*Y Public Utility Regulation: NU is extracted from such fuel." Fees due to the registered with the Securities and DOE for the disposal of nuclear fuel used Exchange Commission (SEC) as a holdq.ng prior to April 7,1983, are approximately company under the Public Utility Holdmg $82.2 million, excluding interest. The Company Act of 1035, and it and its company has until June 1985 to subsidiaries are subject to the provisions determine a payment arrangement for of the act. Arrangements among the these fees. As of December 31,1o84, system companies, outside agencies and approximately 567 million has been other utilities covering interconnections, collected through rates.
interchange of electric power and sales of The Connecticut Department of Public utility property are subject to regulation Ut lity Control (DPUC) and the by the Federal Energy Regulatory Niassachusetts Department of Public Commission (FERC) and/or the SEC. The Utilities (DPU) have allowed for the operating subsidiaries are subject to recovery of spent nuclear fuel disposal further regulation for rates and other costs in rate case or fuel adjustment matters by the FERC and/or their decisions based on the provisions of the applicable state regulatory commissions, Nudear Waste Policy Act of 1982. and follow the accounting policies prescribed by the respective commissions. Depreciation: The provision for Investments: CL&P and WN1ECO own depreciation is calculated using the common stock of four regional nuclear straight-line method based on estimated generating companies. These companies, remaining usefullives of depreciable with the system's ownership interests, utility plant in service, adjusted for net are: salvage value and removal costs as approved by the appropriate regulatory Connecticut Yankee Atomic agency. Except for major facilities, Power Company (CY) 44.0 % depreciation rates are applied to the Yankee Atomic Electric Company 31.5% average plant in service during the period. N1aine Yankee Atomic Ntaior facilities are depreciated from the Power Company 15.0 % time they are placed in service. When Vermont Yankee Nuclear plant is retired from service, the original Power Corporation 12.0 % cost of plant, including costs of removal, less salvage, is charged to the accumulated The system's investments in these companies are accounted for on the Pf"VI*I"" I"' .deprecia tion. The depreciation rates for the several equity basis. The electricity produced classes of electric and gas plant in service f rom these facilities is committed to the are etjuivalent to the following composite participants based on their ownership rates: interests and is billed pursuant to contract ual agreements. Revenues: Utility revenues are based on 4.1% 1984 3.5% authorized rates applied to each 1083 3.5 4.2 customer's use of electricity or gas. Rates 1o82 3.5 2.8 can be increased only through a formal proceeding before the appropriate regulatory commission. At the end of Nuclear Decommissioning: A 1483 cach accounting period, CL&P and decommissioning study indicates that WN1ECO accrue an estimate for the immediate dismantlement at retirement is 37 amount of energy delivered but unbilled. the most viable and economic method of l [
I Northeast Utilities i and Subsidiaries 1 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS i l decommissioning the two nuclear units funds used to finance the system's wholly owned by CL&P and WMECO. construction program. These costs, which The estimated cost of decommissioning are one component of the total capitalized these units is $270 million in year-end cost of construction, generally are not 1984 dollars. Decommissioning studies recognized as part of the rate base for are reviewed and updated periodically to ratemaking purposes until facilities are ref!ect changes in decommissioning placed in service. AFUDC is recovered requirements, technology and inflation. over the service life of plant in the form As of December 31,1984, CL&P and of increased revenue collected as a result WMFCO have collected through rates of higher depreciation expense.
$30.5 million for future decommissioning In its December 1983 rate decision, the costs. Although a substantial portion of DPUC allowed CL&P $19 million of the estimated total decommissioning costs revenues to support a portion of has been approved by regulatory agencies Millstone 3 construction costs in rate and is reflected in the depreciation base. AFUDC is not applied to those l expense of CL&P and WMECO, the construction costs.
companies believe revenues in amounts The effective AFUDC rates for 1984, higher than those currently being 1983 and 1982 were o.3 percent, o.2 collected will be required to pay the full percent, and 8.9 percent, respectively. projected costs of decommissioning. These rates are calculated using the net-of-income tax method and in accordance income Taxes: The tax effect of timing with FERC guidelines. differences (differences between the periods in which transactions affect income in the financial statements and Retirement Plan: The company's the periods in which they affcct the subsidiaries participate in a uniform determination ofincome subject to tax)is nonc ntributory retirement plan covering accounted for in accordance with the all regular system employees. It is the ratemaking treatment of the applicable policy of the subsidiaries to fund annually regula tory commissions. the actuarially determined contribution, The company did not provide deferred which includes that year's normal cost, income taxes for certain timing the amortitation of prior years' actuarial differences during periods when gains r losses over 15 years, and the applicable regulatory authorities did not amortization of prior service cost over a permit the recovery of such income taxes period of 40 years. Total pension cost, through rates charged to customers. The part of which was charged to utility plant, cumulative net amount of income tax approximated $28,723,000 in 1o84, timin); differences for which deferred $29,735,000 in 1983 and $25,o42,000 in taxes have not been provided was 1982. approximately $1 billion at December 31, The actuarial present value of 1o84. As allowed under current accumulated plan benefits and plan net regulatory practices, deferred taxes not assets available for benefits for the previously provided are being collected in 5Y5tC* S PI d" I5 customers' rates as such taxes become payah[p, January 1, 1984 1083 Investment tax credits, which reduce """" federal income taxes currently payable, llenefits: Vested $310,498 $283,24o are deferred and amortued over the usefullife of the related utility plant. At Nonvested . 41,244 33,100 December 31,1984, the system had $351,742 $31o,355 unused and unrecorded investment tax Net assets available credits of approximately $19 million, for benefits . $446,949 $377,723 which are available to offset federal income tax provisions through 1000. See Consolidated Statements of Income Taxes The assumed rate of return used to on page 31 for the components of income determine the actuarial present value of tax expense. accumulated plan benefits was 7.5 percent for 1984 and 1083. Allowance for Funds Used During in addition to pension benefits, the Construction (AFUDC): AFUDC company's subsidiaries provide certain 33 represents the estimated cost of capital health care and life insurance benefits to l l
Northeast Utilities and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS eligible retired employees. The cost of performance for the period June 1983 providing those benefits was through May 1084. Current performance approximately $4,293,000 in 1984, program goals for WMECO cover the
$3,790,000 in 1983 and $2,870,000 in period June 1o84 through May 1o85.
1982. The company recognizes health While a final determination cannot be care benefits primarily as incurred and made at this time, management believes provides for life insurance benefits that WMECO is essentially operating through premiums paid to an insurance within these program goals and that a com pa ny. significant performance program refund Energy Adjustment Clauses: CL&P's retail electric and gas rates include adjustment clauses under which fossil 2. Short-Term Debt fuel prices and purchased power costs and purchased gas costs above or below base CL&P and WMECO have joint credit rate levels are charged or credited to I nes of $350 million, pursuant to customers. As prescribed by the DPUC, revolving creditlterm loan agreements most differences between CL&P's actual with two groups of banks. The maximum fossil fuel and purchased gas costs and ndividual borrowing limits of CL&P and the current cost recoveries are deferred WMECO under the agreements are $350 until future recovery is permitted. million and $105 million, respectively. CL&P's retail base electric rates include The companies are obligated to pay a 70 percent composite nuclear commitment fees of up to three-eighths generation component. The DPUC has of 1 percent per annum on their approved the use of a generation proportionate shares of the daily average utilization adjustment clause which levels of the unborrowed portion of the the effect on fuel costs caused by aggregate commitment. At December 31, variations from a 70 percent composite 1984, CL&P and WMECO had no nuclear generation capacity factor. When borrowings under these agreements. actual nuclear performance is above 70 The system companies use bank loans percent, fuel costs are lower than and commercial paper to assist in amounts included in base rates, and when f nancing the system's continuing nuclear performance is below 70 percent, construction program on a short-term fuel costs are higher than amounts basis and to meet general working capital included in base rates. At the end of a 12- needs. The system companies have bank month period ending July 31 of each year, credit lines totaling $48 million. Terms these net variations from the amounts call for interest rates not to exceed the included in base rate cost levels are prime rate during the borrowing term. refunded to or collected from customers Although these lines generally are over the subsequent 11-month period. renewable, the continuing availability of Should the composite capacity factor fall the unused lines of credit is subject to below 55 percent, a public hearing is review by the banks involved. required before collection from customers Compensating balances are maintained in is permitted. connection with these bank credit lines As permitted by the DPU, WMECO which, at December 31,1084, amou n ted defers the difference between forecasted to $2.4 million. At December 31,1984, and actual fuel costs until they are the amount of unused available recovered quarterly under a retail fuel borrowing capacity under the credit lines adjustment clause. lievenues collected available to the system companies was under the WMECO retail fuel adjustment $46 million. clause are subject to refund pending Cash and special deposits at review by the DPU. December 31,1984, included $17.3 million i Massachusetts legislation requires the of restricted funds which must be used i establishment of an annual performance for future expenditures relating to the ) program related to fuel procurement and installation of pollution control equipment use. The program establishes at Millstone 3 and Seabrook unit 1. performance standards for plants owned j and operated by WMECO or plants in which WMECO has a life-of-unit contract. The DPU approved WMECO's 39
Northeast Utilitiee and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 3. Leases Future minimum rental payments, excluding annual nuclear fuel lease CL&P and WMECO have entered into payments, and executory costs such as a capitallease agreement to finance up to real estate taxes, state use taxes,
$530 million of nuclear fuel for Millstone insurance and maintenance, under I and 2 and their share for Millstone 3. long-term noncancelable letses as of CL&P and WMECO make quarterly lease December 31,1984, are approximately:
payments for the cost of nuclear fuel , consumed in the reactors plus financing Capital Operating costs associated with the fuelin the Year Leases Leases reactors (based on a units-of-production m w. a r m,,4 method at rates which reflect estimated kilowatt-hours of energy provided). Upon 1985. $ 4,500 $18,o00 permanent discharge from the reactors, 1986. 4,400 16,500 ownership of the nuclear fuel transfers to 1987. 3,800 10,700 the wiapanies. 1988. 3,400 5,700 The system companies have also 1989 2,000 4,000 entered into lease agreements, some of After 1989 20,600 16,100 which are capital leases, for the use of Future minimum substation equipment, data processing lease payments. 38,700 $71,o00 and office equipment, vehicles and office Less amount repre-space. The provisions of these lease senting interest . 17,900 agreements generally provide for renewal Present value of options. future minimum Commencing in 1984, the system lease payments [ companies classified their leases in for other than accordance with the provisions of nuclear fuel 20,800 Statement of Financial Accounting Standards (SFAS) No.13, " Accounting Present value of for Leases" and SFAS No. 71, future nuckar
" Accounting for the Fffects of Certain fuel lease Types of Regulation," which required Pd Y'"C" h - 371'80U balance sheet recognition of capital leases. Total . $392,600 The adoption of SFAS No.13 has been retroactively applied to the 1983 balance sheet. There is no effect on the 4. Comm.tmentsi and company's results of operations. Contingencies Following are the rental payments charged to operating expense: Construction Program: The system compames are engaged m a continuous Capital Operating construction program and currently Year leases Leases forecast construction expenditures (including AFUDC) of $1.7 billion for the 1984 $96,7o9,000 $18,571,000 years 1985-1080, including $710.8 million 1983 45,001,000 10,878,000 for 1985. In addition, the system 1982 7,845,000 14,320,000 companies estimate that nuclear fuel requirements will be $312.1 million for Interest included in capitallease rental the years 1985-1480, including $68.2 payments was $23,431,000 in 1984, million for 1085.
$14,545,000 in 1083 and $2,543,000 in The construction program is subject to 1982. periodic review and revision, and actual Substantially all of the capitallease construction expenditures may vary from rental payments were made pursuant to such estimates due to factors such as the nuclear fuellease agreement. Future revised load estimates, inflation, revised minimum lease payments under the nuclear safety regulations, delays, nuclear fuel capitallease cannot be difficulties in the licensing process, the reasonably estimated on an annual basis availability and cost of capital, and the due to variations in the usage of nuclear granting of timely and adequate rate fuel. {
relief by regulatory commissions, as well as actions by other regulatory bodies. 40
r Northeast Utilities ~ and Subsidiaries NOTES TO CONDOLIDATED FINANCIAL STATEMENTS Millstone 3: At December 31,1984, completion. The first phase review is construction work in progress (CWIP) expected to be completed in mid-1985. included an investment of $1.86 billion in Many of the joint owners of Millstone 3 Millstone 3. The unit is scheduled to be are also joint owners of the Seabrook placed in service in May 1986. The project (see "Scabrook" note followingL company projects that the construction Should any of the joint owners fail to cost of Millstone 3 will exceed the 1982 meet their obligation for the construction estimate of $3.54 billion. The company is of Millstone 3, the system companies now using a projected cost for the unit of have developed contingent financing
$3.825 billion. CL&P's and WMECO's plans to help assure that adequate shares would represent an investment of resources will be available to complete the
$2.48 billion, based on their aggregate construction of Millstone 3.
ownership shares of 64.85 percent. In 1983, the Connecticut Legislature Seabrook: CL&P has a 4.1 percent joint enacted a law limiting, with certain ownership interest in the two nuclear exceptions, the construction costs of units in Seabrook, New Hampshire. At Millstone 3 that may be included in a December 31,1984, CL&P's CWIP Connecticut electric company's rate base balance included an investment of to $3.54 billion. The company is not able approximately $135 million in Seabrook at this time to determine how much,if unit I and approximately $24 million in any, of the total cost of Millstone 3 would Seabrook unit 2. CL&P projects that the not be recoverable because of this law. cost to complete its share of Seabrook Should it be determined that the law unit I will be approximately $77 million, prevents CL&P from recovering its which is higher than the cost estimate prudent investment in Millstone 3, being used by the Seabrook project management intends to pursue management. appropriate measures, which could in 1984, the DPUC established a $4.7 include seeking legislative change or billion limit, with certain exceptions, on administrative an ! court appeals to obtain the construction costs of Seabrook unit I full rate recognition of its prudent that may be made part of rate base or investment. Otherwise included in the rates of CL&P. During 1985, CL&P and WMECO CL&P believes that a limit on prudently expect to file rate applications in all incurred costs would not meet their regulatory jurisdictions to reflect constitutional standards and has appealed appropriate rate recognition of Millstone 3 the DPUC's decision to the Superior costs when the unit begins commercial Court. operation. The companies believe that In April 1o84, construction of both they are entitled to full rate recognition Seabrook units was suspended shortly of their prudently incurred investments after the announcement of new cost and in Millstone 3 at the time the unit begins schedule estimates for both units. In July commercial operation. Because the rate 1084, construction of Seabrook unit I levels necessary to support such full was resumed. The DPUC conducted recognition will be substantially higher hearings on the economic viability of than CL&P's and WMECO's current Seabrook unit I and in November 1984, rates, the companies expect the applicable determined that Seabrook unit 1 is regulatory authorities will consider economically and financially viable, is requiring that the costs associated with more desirable than cancellation, and its Millstone 3 be phased into rates over a completion is in the public interest. limited number of years af ter the unit Uncertainties such as the outcome of enters service. pending regulatory proceedings in states As part of required periodic other than Connecticut, the ability of the management audits of utility companies, various joint owners to make necessary the DPUC engaged a management financing arrangements, intervenor consulting firm to conduct a challenges and risks attendant to the comprehensive audit of the prudence of licensing process could cause further the management and construction of delays. Completion of the unit, therefore, Millstone 3. The audit will be conducted is not assured. Construction of Seabrook in two phases. The first phase will review unit 2 has not been resumed. In a recent the conduct of the project through rate order for another Connecticut September 30,1984, and the second utility, the DPUC concluded that 41 phase will review the project to Seabrook unit 2 was effectively,if not
m Northeact Utilities and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS technically, canceled. CL&P will apply to prolonged accidental outage with respect the DPUC for recovery of its Seabrook to CL&P's and WMECO's ownership unit 2 investment. If Seabrook unit 1 interests in Millstone 1 and 2 and CY; and were to be canceled, CL&P would also (b) the cost of repair, replacement or seek recovery. decontamination of company property CL&P cannot predict whether and to resulting from insured events at what extent full recovery of its Seabrook Millstone 1,2 and 3, CY, Maine Yankee investments will be permitted. liowever, Atomic Power Company and Vermont CL&P believes that its Seabrook Yankee Nuclear Power Corporation. All investments are recoverable based on past companies insured with NEIL are subject DPUC practices and previous DPUC to retroactive assessments if losses exceed orders with respect to Seabrook. the accumulated funds available to NEIL. The maximum potential assessments flydro-Quebec: CL&P, WMECO and against CL&P and WMECO with respect llolyoke Water Power Company (fiWP), to losses aris:ng during current policy ) along with other New England utilities, years are approximately $18.1 million have entered into agreements related to under the replacement power policy and the financing and construction of $17.2 million under the property damage transmission and terminal facilities (Phase and decontamination policy. Although l} to import hydropower from the flydro- CL&P and WMECO have purchased the Quebec system in Canada. CL&P, limits of coverage currently available WMECO and flWP have a 23.6 percent from conventional nuclear insurance interest in such facilities and will be pools, the cost of a nuclear incident could responsible for their share of the total exceed available insurance proceeds. annual costs of the facilities when completed. The current construction Financial Arrangements for the Regional forecast is $167.9 million, of which Nuclear Generating Companies: The
$38 million has been expended as of owners of CY, including CL&P and December 31,1o84. A mid-1986 in- WMECO, have agreed to purchase their service date is planned for Phase I. pro rata shares of up to $40 million of CY's subordinated notes. CL&P's and Nuclear Insurance Contingencies: The WMECO's shares of the notes aggregate Price-Anderson Act currently limits $17.6 million. As of December 31,1984, public liability from a single incident at a there were no notes outstanding. This nuclear power plant to $620 million. The obligation will terminate in October 1985.
first $100 million of liability would be The owners of CY, including CL&Pand covered by the maximum provided by WMECO, have guaranteed their pro rata private pool insurance. The additional shares of $44 million 17% Series A liability of $460 million would be provided Debentures. The guarantees of CL&P by an assessment of $5 million per and WMECO aggregate $20.3 million. incident levied on each of the 92 nuclear The owners of Vermont Yankee units operating in the United States, Nuclear Power Corporation, including subject to a maximum assessment of $10 CL&P and WMECO, have guaranteed million per nuclear unit in any year. their pro rata shares of a $40 million liased on CL&P's and WMECO's nuclear fuel financing through the ownership interests in the nuclear units Vernon tInergy Trust. The guarantees of currently in service, the maximum CL&P and WMECO aggregate $4 8 liability per incident would be $15.1 million. million, limited to a maximum of $30.2 CL&P and WMECO may be asked to million in any year. provide additional capital and/or other Insurance has been purchased from types of direct or indirect financial Nuclear Electric Insurance Limited (NEIL) support for one or more of the regional to cover (a) certain extra costs incurred in nuclear generating companies. obtaining replacement power during a 42 i
Northeast Utilities and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 5. Segments of Business The following summarizes information relating to NU's electric and gas operations:
For the Years Ended December 31, 1984 1083 1982
%...a. a mi,,.i Operating Information:
Operatin,; revenues-Elect ric . . $1,870,822 $1,o50,082 $1,538,773 Cas. 224,430 238,900 224,447 Total . $2,095,252 $1,889,081 $1.763,220 Operating expenses excluding provisions for income taxes-Elect ric . .. $ 1,350,921 $ 1,243,481 51,194,841 Gas . . . . 184,442 200,268 107,999 Total . $1,535,363 $ 1,443,740 $1,392,840 Pretax operating income-Elec t ric . $ 519,901 $ 400,601 $ 343,032 Gas . 39,988 38,731 26 448 Total . . $ 559,889 $ 445,332 $ 370,380 Provision for income taxes-Elect ric . $ 199,933 $ 142,975 $ 106,200 Gas . . 15,606 16,070 7,422 Tot al . . $_215,539 $ 150,045 $ 113,712 i Operating income-Elect ric . . . . . . $ 319,968 $ 2o3,62o $ 237,642 Gas . . .. . .. 24,382 22,661 10.02o Total . . .. $ 344,350 $ 286,287 5 250.o68 . Depreciation expense-Elect ric . . $ 111,206 $ 10o,388 $ 100,623 Gas . . . 10,056 o,719 5,704 Tot al . . . . .. . . $ 121,262 $ 11o,107 $ 106,417 Gross l'roperty Additions: Elet tric . . . ... . . . . . $ 711,832 $ 040,813 $ 552,878 Gas . . . . 20,773 18,553 22,088 Total . . . . . . . .
$ 732,605 $ e50,3o6 $ 574,06o Investment Information at December 31:
Identifiable assets (a)- Ele .t ri . $4,695,549 $4,162,375 $3,600,o79 Gas . .. .. .. .. .. 207,944 105,018 180,483 Nonallocable assets. . . . . . 603,547 590,634 516,20o Total Assets .. . ... . $5,507,040 $4,o57,027 $4,300,368 (a) Intludes sonstruttion work in progress, materials and supphes, and alhxated sommon utihty plant. i 43
Northra:t Utilities - and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- 6. Impact of Changing Prices As a result of the adjustment to (Unaudited) depreciation, net income was reduced by
$147 million. The company will The following supplementary data was eventually replace its plant assets at prepared in accordance with the prices many times greater than the requirements of Statement of Financial original historical cost even though it is Accounting Standards No. 33 (SFAS No. unable to recover the replacement value 33)," Financial Reporting and Changing of these assets through dtpreciation. At Prices." December 31,1984, the current cost of The methodology prescribed by SFAS fixed assets, net of accumulated No. 33, as amended, involves numerous depreciation, was $7.3 billion, while assumptions and estimates and, historical cost, or net cost recoverable therefore, the resulting information through depreciation, was $4.9 billion.
should be viewed as an approximation of for 1984, the increase in general inflation the effccts of inflation rather than a ($273 million) exceeded the increase in precise measure. specific prices ($107 million) after As required by SFAS No. 33, the adjustment to net recoverable cost by $29 historical cost of plant, as stated in the million. system's financial records, is adjusted for During periods of inflation, holders of changing prices. This adjustment reflects net monetary assets suffer a loss of the changing prices of plant from the date purchasing power, while holders of net plant was placed in service to the present. monetary liabilities experience a gain This price adjustment does not because debt will be repaid in dollars necessarily represent the replacement having less purchasing power. As a result cost of existing plant because such plant of the substantial amount of debt which is not expected to be replaced precisely in was used to finance utility plant, the kind. Specific prices may increase more or company's gain from the decline in less rapidly than the general rate of purchasing power of net amounts owed inflation. NU's price adjustment was was $123 million in 1084. This " gain"is determined by indexing historical plant not realizable by the company and, using the liandy-Whitman Index of therefore, cannot be considered additional Public Utility Construction Costs. funds for reinvestment or dividend Nuclear fuel accounts reflect the current distribution. replacement cost of such fuel based on current market prices. Land was estimated by using the Consumer Price Index for all Urban Consumers. Depreciation expense was determined by applying the company's operating subsidiaries' depreciation rates to adjusted plant amounts. Other expense items were not adjusted because they were considered to be at average price levels for the year or were specifically excluded from adjustment by SFAS h 33. 44 f
Northeast Utilities and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Comparison of Selected financial Data Adjusted for Changing Prices ; (in Average 1984 Dollars, Except IIistorical Amounts) l Years Ended December 31, 1984 1983 1082 1981 1080
. wi .,. a m u, .. . .. .re .h,, . a . a., a.m l Operating revenues:
llistorical .
$2,095 $ 1,880 $ 1,763 $ a,655 $1,325 Adjusted for changing prices. .
2,095 1,ooo 1,807 1,800 1,o70
- Net income (loss):
Ilistorical .
$ 289 $ 222 $ 151 $ 05 $ So Adjusted for changing prices. 142 So (33) (78) (53)
- Income (loss) per common share:
ilistorical . $ 2.85 $ 2.37 $ l.7o $ 1.20 $ 1.31 Adjusted for changing prices. 1.40 .62 (.40) (1.05) (.77) Net assets at year-end: llistorical . .
$ 1,576 $ 1,362 $ 1,160 $ 1,013 $ 017 Adjusted for changing prices. 1,554 1,303 1,234 1,120 1,104 Amount by which the increase in general price level is greater than (or less than) the increase in specific prices after adjustment to net recoverable cost $ 29 $ (17) $ (109) $ 81 $ 235 Gain from decline in purchasing power of net amounts owed .. $ 123 $ 100 $ 08 $ 222 $ 308 Cash dividends declared per common share:
llistorical .
. $ 1.48 $ 1.38 $ 1.28 $ 1.18 $ 1.10 Adjusted for changing prices. 1.48 1.45 1.37 1.35 1.40 Af arket price per common share at year-en llistorical . . $14.25 $12.25 $12.13 $ 0.13 $ 8.00 Adjusted for changing prices. 14.05 12.54 12.00 10.08 9.o1 Average consumer price index 311.1 208.4 280.1 272.4 24o.8
'Iuluding ad ustment i to net rnoverable cost.
45
Northeast Utilities and subsidiaries SELECTED CONSOLIDATED FINANCIAL DATA 1984 1083 1982 1081 1980 Balance Sheet Data: """"""""*'"'""""""'"""~" Total Net Utility Plant $4,854,615 $4,315,553 $3,754,032 $3,342,600 $3,036,446 Total Assets .. . 5,507,040 4,057,927 4,309,368 3,940,144 3,641,960 Total Capitaliza tion 4,319,404 3,954,569 3,465,395 3,189,493 2,824,567 Obligations Under Capital Leases 392,593 337,636 286,603 14,563 14.218 Income and Share Data: Operating Revenues. $2,095,252 $ 1,880,081 $ 1,763,220 $ 1,655,057 $ 1,324,545 Operating Expenses . 1,750,902 1,602,704 1,506,552 1,428,278 1,132,278 Operating income 344,350 286,287 256,eo8 226,779 192,267 Net income 288,938 221,548 151,242 95,118 88,752 - Earnings per Share $ 2.85 $ 2.37 $ 1.76 $ 1.20 $ 1.31 Dividends per Share . $ 1.48 $ 1.38 $ 1.28 $ 1.18 $ 1.10 Payout Ratio (%) . 51.9 58.2 72.7 91.5 83.7 Number of Shares Ou tstanding- Average 101,398,235 93,407,945 85,777,230 73,783,201 67,555,006 Rate of Return Earned on Average Common Equity (%) . 19.8 17.8 13.8 9.9 9.9 Ilook Value per Share . $ 15.07 $ 13.84 $ 12.96 $12.83 $13.45 Market Price - High . $14% $13 3 $12H $ 9% $ ou
- Low. $10% $11% $ 8% $8 $ 74 Capitalization: (includes portions due within one year)
Common Shareholders' Equity . .
$1,575,705 $ 1,361,724 $1,159,698 $ 1,013,205 $ 917,244 Preferred Stock Not Subject to Mandatory Redemption . . 291,195 291,195 291,195 291,200 291,200 Preferred Stock Subject to Mandatory Redemption . . 186,978 188,547 104,461 66,o01 53,200 Long-Term Debt. _ 2,265,526 2,113,103 1,910,041 _1,818,487 1,562,o14 Total Capitaliza tion .
$4,319,404 $3,051,5e9 $3,469,305 $3,180,403 $2,824,567 Common Shareholders' Equity . . 36.5% 34.4 % 33.5% 31.8% 32.5%
Preferred Stock Not Subject to Mandatory Redem ption . . . . . 6.7 7.4 8.4 9.1 10.3 Preferred Stock Subject to Mandatory Redem ption . . . . 4.3 4.8 3.0 2.1 1.9 Long-Term Debt. 52.5 53.4 55.1 57.0 55.3 Total Capitalization .. 100.0% 100.0 % 100.0% 100.0 % 100.0% 46
Northeast Utilities and Subsidiaries , CONSOLIDATED STATEMENTS OF QUARTERLY FINANCIAL DATA (uneudited) Quarter Ended 1984 March 31 June 30 September 30 December 31 ns ,,J. of r>.nu.. m,re re, .hu, d...i Operating Revenues. .
$583,499 $482,085 $500,510 $529,158 Operating income . $105,302 $ 69,544 $ 88,804 $ 80,700 Net income . . $ 89,033 $ 54,368 $ 75,919 $ 69,618 Earnings Per Common Share.. .. . . $0.90 $0.54 $0.74 $0.67 1983 Operating Revenues. $503,561 $424,235 $466,261 $495,024 Operating income . . $ 87,430 $ 61,846 5 66,185 5 70,826 Net income . . .. $ 60,795 5 43,795 5 51,347 5 56,611 Earnings Per Common Share... ... . $0.77 $0.48 $0.54 $0.58 CONSOLIDATED GENERAL OPERATING STATISTICS 1984 1083 1082 1981 1080 System Capability -
M W (a) . . . . . .... . 5,869.0 5,066.9 5,946.1 5,504.8 5,984.5 System Peak Demand - MW. . . . 4,234.4 4,0o 8.8 4,063.9 4,126.6 4,050.4 Nudear Capacity - MW (a) . . . 1,937.8 1,037.8 2,008.8 2,008.8 2,000.4 Nudear Capacity factor (%)(a) . .. 78.5 02.7 70.8 67.0 61.6 Nuclear Contribution To Total Energy Requirements (%) (a).. 57.2 47.0 56.7 53.8 40.6 l Average Interest Rate j On first Mortgage ) lionds (%) . .... . 9.9 o.o 9.4 8o 7.7 Average Dividend Rate On Preferred Stixk (%) 9.4 9.4 8.1 7.8 7.6 (a) Intlude. company rntitlements in regional nuticar generating compames 47
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~ .
Northeast Utilities - and Subsidiaries CONSOLIDATED ELECTRIC OPERATING STATISTICS 1984 1983 1082 1981 1980 Source of Electric Energy:(kWh-millions)(a) Nuclear-Steam . 13,711 10,898 12,343 11,794 10,878 Fossil-Steam. . . .. 9,065 7,963 7,503 7,813 9,632 Hydro-Conventional 840 833 791 724 635 Hydro-Pumped Storage . . . 875 897 795 575 856 Internal Combustion. 34 13 15 19 57 Energy Used for Pumping . . .. (1,199) (1,244) (1,108) (807) (1,186) Net Generation. 23,326 19,360 20,339 20,118 20,872 Purchased And Net Interchange . .. (115) 2,798 883 1,999(b) 1,551 Company Use And Unaccounted For . (1,793) (1,801) (1,631) (1,560) (1,856) Net Energy Sold. 21,418 20,357 19,591 20,557(b) 20,567 Revenues:(thousands) Residential.. $ 754 075 5 668,794 5 633,124 $ 584,322 $ 468,543 Commercial . 589,698 515,750 479,976 433,276 336,719 Industrial . . . 381,289 332,460 314,418 319,531 244,132 Other Utilities . 62,540 57,748 47,863 75,477 71,365 Streetlighting . . 26,204 24,165 23,728 22,118 18,503 Miscellaneous . 29,340 28,413 23,114 21,971 24,848 Total Electric . 1,843,346 1,627,330 1,522,223 1,456,695 1,164,110 Other . . 27,476 22,752 16,550 17,094 15,051 Total . .. $1,870,822 $1,650,082 $1,538,773 $1,473,789 $1,179,161 Sales: (kWh - millions) Residential. 7,804 7,554 7,342 7,447 7,492 Commercial . 6,904 6,493 6,166 6,006 5,855 Industrial . . . 5,374 5,046 4,871 5,287 5,233 Other Utilities 1,168 1,094 1,035 1,638(b) 1,801 Streetlighting . 168 170 177 179 186 Total . . 21,418 20,357 19,591 20,557(b) 20,567 Customers: (average) Residential.. . 1,021,871 1,005,005 991,069 979,963 969,698 Commercial . . 85,658 83,955 88,315 87,480 87,055 Industrial . 5,022 4,979 5,004 5,036 5,016 Other. 2,992 2,976 2,398 2,315 2,301 Total . 1,115,543 1,096,915 1,086,786 1,074,794 1,064,070 Average Annual Use Per Residential Customer (kWh). 7,596 7,472 7,361 7,548 7,664 Average Annual Bill Per Residential Customer $ 734.00 $661.57 $634.71 $592.29 $479.26 Average Revenue Per kWh: Residen tial.. 9.66c 8.85c 8.62c 7.85c 6.25c Commercial . 8.54 7.94 7.78 7.21 5.75 Industrial . 7.10 6.59 6.45 6.04 4.67 (a) Generated in system and regional nuclear generating plants. (b) Sales to the Connecticut Municipal Electric Energy Cooperative, a power supply agency for three municipal systems in Connecticut, have been shown as sales to other utilities in periods pnor to October 1,1981. 48 Commencing on October 1,1981, these sales have been recorded as purchased and net interchange power delivered.
Northeast Utilities and Subsidiaries CONSOLIDATED GAS OPERATING STATISTICS 1984 lo83 lo82 1981 1980 Source of Gas: (Mcf-thousands) Purchased 32,099 28,438 29,263 20,158 28,342 Produced. . 318 352 464 573 410 Company Use And Unaccounted for . . (2,735) (1,129) (810) (702) (1,206) Net Sold . . 29,682 27,661 28,917 29,029 27,546 Maximum Day Sendout (M-Therms) 1,722 1,855 2,068 2,036 1,854 Revenues: (thousands) Residential. $ 98,799 $103,164 $ 94,115 $ 75,500 $ 61,472 Commercial 59,576 61,186 58,189 44,143 31,772 Industrial . 67,645 68,783 69,850 59,302 47,053 Miscellaneous . (1,590) 5,866 2,293 2,323 5,087 Total . $224,430 $238,999 $224,447 $181,268 $145,384 Sales: (Mcf-thousands) Residential. 10,159 o,515 10,294 10,532 10,174 Commercial . 7,822 7,207 7,722 7,103 6,075 Industrial . . 11,697 10,034 10,886 11,378 11,278 Other. 4 5 15 16 to Total . . . 29,682 27,661 28,917 29,02o 27,546 Customers: (average) Residential. 140,508 139,325 137,204 135,992 134,075 Commercial . 14,637 14,190 13,829 13,605 13,202 Industrial . . 1,307 1,293 1,29o 1,304 1,297 Total . 156,452 154,808 152,329 150,901 148,574 Average Annual Use l Per Residential Customer (Mcf) . 72.3 68.3 75.0 77.4 75.9 Average Annual Bill Per Residential Customer $703.15 $740.46 $685.o5 $555.18 $458.4o l Average Revenue Per Mcf: Residential. $9.73 $10.84 $9.14 $7.17 $6.04 Commercial . 7.62 8.49 7.54 6.21 5.23 Industrial . 5.78 6.29 6.42 5.21 4.17 4o
- _ _ _ . _. )
SHAREHOLDER INFORMATION Shareholders As of January 31,1985, there were 192,023 common shareholders of record of Northeast Utilities. Dividend Reinvestment and Common Share Purchase Plan The company has a Dividend Reinvestment and Common Share Purchase Plan under which all common shareholders may use their dividends to purchase additional common shares. The company absorbs all brokerage fees for purchases under the plan. The Connecticut Bank and Trust Company, N.A., One Constitution Plaza, Hartford, Connecticut 06115, is the company's dividend paying agent and administers the company's Dividend Reinvestment and Common Share Purchase Plan. Under federal tax laws, certain eligible shareholders may elect to exclude up to $750 ($1,500 jointly) of the taxable amount of dividends reinvested in the plan. Taxes on the reinvested dividends are deferred until the stock is sold or otherwise disposed of. This law will expire at the end of 1985. 3 Annual Meeting The annual meeting of shareholders of Northeast Utilities will be held at Howard Johnson's Conference Center, Windsor Locks, Connecticut, (on Interstate 91. . .take Center Street Exit 41) on Tuesday, May 21, beginning at to a.m. Form 10-K Available Northeast Utilities will provide shareholders a copy of its 1984 Annual Report to the Securities and Exchange Commission on Form 10-K, including the financial statements and schedules thereto, without charge, upon receipt of a written request sent to: Robert W. Bishop, Secretary Northeast Utilities P.O. Box 270 Hartford, Connecticut 06141-0270 Transfer Agents and Registrars The Connecticut Bank and Trust Company, N.A. Stock Transfer Department One Constitution Plaza Hartford, Connecticut 06115 State Street Bank and Trust Company Corporate Stock Transfer Department 225 Franklin Street Boston, Massachusetts 02107 Common Share Information The common shares of Northeast Utilities are listed on the New York Stock Exchange. The ticker symbol is "NU", although it is frequently presented as "Noest Ut" in various financial publications. The high and low sales prices and dividends paid for the past two years by quarters are shown below: Quarterly Dividend Year Quarter High Low Per Share 1984 First $13% $11% $0.37 Second 12% 10 % 0.37 Third 13 % 11 0.37 Fourth 14% 12% 0.37 1983 First 13% 12 0.345 Second 13% 11 % 0.345 Third 13 % 11% 0.345 Fourth 13% 12 0.345 I l 1 50 l l
NORTHEAST UTILITIES SERVICE COMPANY OFFICERS Chairman and Chief Executive Officer Harrie R. Nims William B. Ellis Transmission and Distnhution Engineering and Orrrations Leonard A. O'Connor President and Chief Operating Officer E. James Ferland John F. Opeka Nuclear Orrrations Richard A. Reckert Executive Vice President Walter F. Fee Walter T. Schultheis Engineering a,1 Orrrations Poicer Supply Planning and Research C. Frederick Sears Nuclear and Environmental Engineering Senior Vice Presidents John J. Smith Philip T. Ashton
""b '""'"# "" " ""' "" "
General Afanager-Gas Group Richard P. Werner ! William G. Counsil I Nuclear Engineering and Ornations Bernard M. Fox Chirl Financial Officer Regional Vice Presidents Leon E. Maglathlin, Jr. Charles S. Beach l Regional Administration Wntern l Lawrence H Shay , W. Lindsey Booth Administrative Services Eastern Walter F. Torrance, Jr. Thomas F. Brennan General Counsel and Assistant Suretary Central e Lesley C. Gerould Southern Vice Presidents Frank R. Locke
"'""^I"'#'^""'
Warren F. Brecht Aucunting. Taxn and Albert E. Magee intanal Audit Northern C. Thayer Browne Budget Afanagement and Financial Planning Carroll A. Caffrey Controller Human Resources George D. Uhl John P. Cagnetta Secretary Correrate and Environmental Planning Robert W. Bishop
~
Tod O. Dixon Assistant Secretaries Information Resources Cheryl W. Grise Douglas R. Teece Raymond E. Donovan Customer Services Assistant Treasurers
- Robert C. Aronson Albert J. Ilajek David 11. Boguslawski Corporate Performance Services and Organi
- ational Control Warren A. Ilunt Revenue Requirements Francis L. Kinney 51 Public Affarrs As of February 28.1085
A NORTHEAST UTILITIES OFFICERS TRUSTEES William B. Ellis *+s William O. Bailey Chairman of the Board and President Chief Gautice Officer Aetna life and Casualty Company E. James Ferland *t Edward B. Bates President and Chief Operating Officer Chairman of the Exautive Commatte Connaticut Mutual Life insurance Company Bernard M. Fox Vice President and Chief Financial Officer +# John McP. Collins Retired Chairman and Chief Exautive Officer Robert W. Bishop Springfield Institution for Savings Secretary t Donald W. Davis Leonard A. O'Connor Chief Exuutive Officer and Chairman Treasurer Ihr Stanley Works George D. Uhl "## " """""'# "" " F#'"' Controller +s Donald J. Donahue Chairman and Chief Executive Officer Cheryl W. Grise The Continental Group. Inc. Assistant Snretary (container manufacturer, financial services Walter F. Torrance, fr. and naturalgas development) Assistant Surrfary * + William B. Ellis Robert C. Aronson Chairman of the Board and Chief Executive Officer Assistant Treasurer E. James Ferland David H. Boguslawski Pusi ent an irf Ornahng Offiar Assistant Treasurer
- George B. Harvey Chairman of the Board and President ,
Pitney Bowes Inc.
, (mailing and office products and business supplitsi t Eugene D. Jones Senior Vice President Grenier Engineering Sciences. Inc.
Iconsulting engineers)
# Elizabeth T. Kennan President Afount Holyoke College t Chester W. Kitchings Chairman of the Board and Chief Exuutive Officer Coca. Cola Bottling Company of Soutkrastern New England
*+ Denham C. Lunt, Jr.
Chairman. President and Chief Executive Officer lunt Silversmiths
+# Burke Marshall
. John Thomas Smith Professor of law Yale law School
*t William J. Pape !!
Publisher Waterbury Republican and American inewspapers) t Norman C. Rasmussen Professor of Nuclear Engineering
- Enecutive Committee Afassachuurts Institute of Tuhnology
+ Finance Committee
- Lelan F. Sillin. Jr.
m t ee rganization. Chairman f the Executive Committee of Compensation and Board Affairs
*+# Albert E. Steiger, Jr.
President and Chief Exuurice Offiar Albert Striser. Inc. 52 As of February 28,1985 (department store chaint
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