View source for BECO-92-040, Boston Edison Co 1991 Annual Rept, W/Securities & Exchange Commission Form 10-K &

{{Adams
| number = ML20100R485
| issue date = 12/31/1991
| title = Boston Edison Co 1991 Annual Rept, W/Securities & Exchange Commission Form 10-K &
| author name = Oheim H, Reznicek B
| author affiliation = BOSTON EDISON CO.
| addressee name = 
| addressee affiliation = NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
| docket = 05000293
| license number = 
| contact person = 
| document report number = BECO-92-040, BECO-92-40, NUDOCS 9204150131
| title reference date = 04-10-1992
| document type = ANNUAL REPORTS (COMPANY-FINANCIAL), TEXT-SAFETY REPORT
| page count = 80
}}

=Text=
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nt          10CTR50.71(b) 3.#          10CFR140.15(b)(1)
POSTON E0/ SON 05 & a rnee m!P:tx
                                   &&9trf e. PAwachuteN G2181 April 10, 1992 Deco 92 040 U.S. Nuclear Regulatory Comission Document Control Desk Washington, DC 20555 License DPR-35 Docket 50-293 Annual Financial Stateme.it In accordance with 10CFR50.7)(b) and 10CFR140.15(b)(1), Bostc1 Edison it submitting the 19L'l Annual Report anti the Securities and Exchange Commission (SEC) Form 10-K which corresponds to the 1991 Annual Report,
                                                            &s ly,b e//: VW4-,-
H. V. 0heim Manager Regulatory Af fairs Depertment GGH/ cab /6910 cc:     Mr. R. Eaton, Project Manager Division of Reactor Projects - I/II Office of Nuclear Reactor Regulation Mail Stop: 1401                                                                              e O. S. Nuclear Regulatory Commission 1 White. Flint North 11555 Rockville Pike Rockville, HD 20b52 U. S. Nuclear Regulatory Commission Region 1 475 Allendale Road King of Prussia, PA 19406                                                                   !
Senior NRC Resident Inspector                                                               1 Silgrim Nuclear Power Station A ' 0 ':    .i                                             .;
9004150131 911231                                                                         i     h PDR     ADOCK 05000293                                                                   j'     '
1                   PCR u                                                                                             _
3

SECURITIES AND EXCII ANGE COMMISSION Washington D.C. 20549 FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ FEE REQUIRED).
For the fiscal ye nnded Decemte 3L 1991 OR
[
                ] TRANSrrlON ACT OF 1934 [NO            REPORT         PURSUANT TO SECTION 13 OR 15(d) OF THE SFCURITIES EXCH ANGE FEE P,EQUIREDj For the transition perhi frem                                    to .              _
Commission file ntimber 1-2301 BOSTON EDISON COMPANY Wistt natM of initts rent as specirkd in its charter.1 Massachusetts 04 1278810 (State or oiler jun@cton of (t.lts. Employer mcorporanon or organizatior)
Idenuftcanon No.)
800 Umiston Street, lloston, hsachusetts 02199 (Address of pnNipal execuuve of fices)
(Ltp Cmic)
L Reginrant s telephone ne.mber, melueng area cale fil7-124 2000 Securtis registered pursuant to Sectmn I Ab) of the Act.
Title of each clan                                                                                          Name of each exchang:
on which recistred Cornnion Stock (par valo 51 per siwe)                                                                                           itoston Sud Etchange New York Sted Betunge Preference Stock-51.46 Series                                                                                                      Th>ston Stock Eschange (per value $1 per sham)                                                                                           New York Stml Eschanga Caulative Preferred Stock, 8.88't, Series                                                                                                    New ark Stock ExNnge (par vale: 5100 per share)
First Mangage Bends:
Series P,9-1/4% Duc 2007                                                                                          New York Stock Exchange Securiths registered purusant to Section 12(g; 4 the Act None Indicate by check owk tf dtsclostue of deh::quent filers purstunt to item 405 of Regulauon S-K ts not coraned herem, and will not be conta:ned, to the best of registrants knowledge,in eftnipir pre y or informaurns ratements incocpontt 3 tiy reference                               i m Pa 111 of this Form 10-K tc any amendmem to this Form ?O. K. S indicate by check nte.rk whether the registrant (b 'te ided r.ll reports required to be filed by Section t hr 13(d) of the Secunhes Exchange Act of 1934 durirg the preceumg 12 rnonths (at for such shorvir period that the registrant                                 i       we required to f le such and (2) ha been subject to such fihng requir:mems for the past 90 days. YES 1 NO _
Tne aggregate market value of the vutmg stock held by non.cffilntes of the regisuant as of Febnwy 28, lu92 computed reference                  to the last reported sale pr 2 of the Comrnen Sted, f,1 par value,of Consolidated Tape on that date: 5953.a3,243.
t     the regarant of he New York Stock Exchan Claw Common Stock, il par s alue                                                                                      'lutstattdinLaMyuary 2A, IW2 42,131.066 shares Documents incorporated ry Reference Pan                                                                       f Wunv nf
         ,11 and 111 Pomons of Artmtal Report to Shacholders for Year Ended Decembo $1,1991 Ill Portions of defimuve Proxy Statement dated March 2 ,1992 for Annual Meeting of Stedholders to be held April 28,1992.
Exhibit Listspecars on eage 34.

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    ....                                                                                                                   I i
I BOSTON _LEDISON COMPANY
             ~ 3NNUAL REPORf_ ON FDRM 10-K                .__      .
_          _,        j December 31. 1991                            __.___                  _ _ .
1 Page GR] 1                                    ___                  __
Item ~ 1. Business.
2 Item   2. Property and Power Supply.
i 17             i Item   3. Legal Proceedings.
23 ltem    4. Submiss'oni   of Matters to k Vote of Security Holders.                        24
[ ART II        _
Item   5. Marxet for Registrant's Common Stock and Related                                                '
29 Stocknolder Matters
.            Item -6. Selected-Financi.31 Data                                                       30                ,
item    7. . Management's Discussion and Analysis of Results of i
Operations and Fir.ancial Condition                                         30 item    8. Consolidated Financial Statements and Supplementary Data                       30 Item     9. Changes in and Di. agreements with Accountant; on                                               '
Accotatirg and Financial Pisclo:ure                                          31               ,
MRT UI              - - -
Item 10. Directors and Executive Officers of the Registrant                                  32 hem 11.        Executive Compensation 32 i
Itcm 12. Sectirity Ownership of Certain Seneficial Owners and l                           Hanagement                                                                                    '
32 Item 13. Certain Relationships and Related Transactions.                                     33 --
BRT IV -
l j        : l te.n 14. Exhibits, Financia'i Statement Schedules,~and Reports on                                         J l
Form 8 X.
i 34 l
1 l.
i m .                    ,   - _ _ _      _

g     ~_          . _          _                       _       __     _     _    __       ._   _ ._     __ __
PART I Item 1:      Billlh(M it.fLm_1_{A)1 jiENERA!EVELOPMEt{T 91,JURINHS I?.em 1 fa),(1): ._Q[jgRIpTION Of_EMSINESS i
Boston Edison Company ("the Company") is an investor-owned regulated public utility engaged in the energy and energy services business, which includes the generation, purchase, transmission, distribution and sale of electric energy and the development and implementation of demand-sloe                               !
management pr00 rams.          It war incorporated in 1836 under the laws of The Commonwealth of Massachusetts.             Its principal executive offices are located at           l 800 Boylston Street, Boston, Massachusetts 02199, and its main telephone number is (617) 424-2000.
Item i fb.): F[N_Af[QJ#,_LNrp3MT.10N A000T ISDj!11gLE[.0M[NIS September The Company operates solely in the electric utility business. On 26, 1991, the Commonwealth of Massachusetts Department of Public
 ,                 Utiiities (the "DPU") approved Harbor Electric Energy Company's ("HEEC")
financing plan and certain agreements necessary for HEEC's ongoing operations.                      ,
HEEC is a wholly owned regulated subsidiary of the Company. The subsidiary commenced Authority             the distribution of electricity to the Massachusetts Water Resource in 1990.
Lt1m 1 (c): NARRAT11E_ DESCRIPTION Q[._ BUSINESS Item 1 fci__{l) {i): PRINCIPAL PRODUCTS AND SEByl(H The Conpany supplier electricity at retail to an area of approximately 590 square miles within 30 miles of Boston, Massachusetts, encompassing the City of Boston and 39 surrounding cities and towns. The population of tiie territory served with electricity at retail is approximately 1,500,000. At December 31, 1991, the Company served approximately 645,000 customers.
The Company clso supplies electricity at wholesale for resale to other utilities and municipal electric departments. For information relating to the principal clar,ses of services from which the Company derives its electric revenues, see                         -
'                 selected consolidated _ sales statistics contained on page 38 of the Annual Report herein by     to Shareholders reference. for the year ended December 31, 1991, incorporated Item 1 (c) 11) flil l _ EXPECTED PLANT _ EXEENDITHRES AND RELAllD._[J3MEdhG for certain information concerning thn Company's expected plant
;_               expenditures and related financing, see Management's Discussion and Analysis contained on Pages 16 through 17 of the Annual Report to Shareholders for the l                year ended December 31, 1991, incorporated herein by reference.
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Elant Expenditurti. The Company's most recent estimated plant expend,tures, which are subject-to continuing review and adjustment, sinking fund requirements and long-term debt maturitiet for the periods 1992 through 1996                                              l are shown in the following table.
lH2(5 in 000's  192 in table and notes to table) 1921            1RH                  11M i
Plant Expenditures (1)                    $200,000 $190,000 $195,000 $200,000 5205,000 AFUDC (2)                                    8,000          9,000         9,000           7,000              6,000 first Mortgage Bond Naturities and Sinking Fund Requirements                              21,800          6,800         6,800       31,800                 9,935 Debentures                                          -             -             -
100,000                          -
l Medium-Term Note Naturities                          -
50,000        50,000                    -
Sewage Facility Revenue                                                                                                     i Bonds-Sinking funo (3)                            -             -             -
600              1,600 i
Mandatory Sinking Fund                ?.27%
Preferred Stock                                   -
2,000        2,000            2,000              2,000         ;
i (1) Excludes estimated nuclear fuel for the period 1992 through 1996 of
                        $15,000, 54,000, 523,000, $13,000 and 524,000, respectively.                                                     <
(2) Excludes estimated Allowance for Funds used During Construction ("Af uDC")                                             '
on nuclear fuel of $1,000 per year for the period 1992 through 1996. The assumed AFUDC accrual rete varies from 6.0% to 8.5%.
(3) -See also Note 6 of " Notes to Consolidated Schedules of Capital Stock and                                             <
indebtedness" contained on page 26 of the Annual Report to Shareholders for the year ended December 31, 1991, incorporated lierein by reference.
plant Funds      generated expenditures       in internally  represented approximately 89%, 73% and 62% of.
1991, 1990 and 1989, respectively. Plant expenditures associated with work at Pilgrim Station approximated $45,000,000 in 1991,
             $32,000,000 in 1990 and $30,000,000 in 1989. The remaining plant expenditures of approximately $166,000,000 in 1991 were primarily related to improvements in the Company's transmission and distribution systems and fossil units. It is expected that a portion of. future plant expenditures will be funded internally.-
Demand-SidtLEinaaement Proaram Excendjigrn. The Company plans to spend significant amounts as part of its energy conservation plan in its retail service area. Included in these expenditures is a portion of the $75,000,000 t
resulting from a Settlement Agreement effective November is 1989 with the Commonwe:lth of Massachusetts Department of Publit Utilities (the *0PU
           -Settlement Agreement"), for which the Company will not seek recovery as discussed further in " Rate Proceedings and= Pilgrim Nuclear Power Station and
'           Outlook for future" hereunder. In 1991, the Company spent about $37,000,000 in DSM programs and anticipates spending approximately 163,000,000 in 1992.
The Company is requesting approval from the DPU to charge its customers for about $10,000,000 and $38,000,000 of these expenditures, respectively, as weli
* at for lost base revenues and program incentives consi. stent with similar programs approved for other Massachusetts electrie utilities. The remaining 3

            .. - . - - . .             -,         . - ~ _ .          - .- -          -    .   .  -        - -    , -.~.
amouSt was written off in 1989 as a reselt of the previously discussed Retail Settlement Agreements.
Hearings on the Company's 1991 programs were concluded and a decision is expected shortly. Hearings on 1992 programs are scheduled for the spring of 1992. See also " Rate Proceedings, Pilgrim Nuclear Power Station, and Outlook for Future" hereunder.
Liquidity arti.hrxina Caoital_ Rtgyirement.n f_ taming. The Company's estimate of working capital needs for 1992 and 1993 is expected to be consistent with historical levels, except for the additional impact of approximately
             $32,500s000 of expected cash outlcys in 1992 related to the settlement agreements (classified as a current liability on the Cnpany's consolidated balance sheet at Scember 31,1991). Approximately $45,000,000- of similar payments were made in 1991, The Company meets working capital requirements, as well as the interim financing needs to cover its current program of plcnt expenditures, primarily witn internally generated funds, supplemented by the issuance of short term commercial paper and bank borrowings. The Company currently has s 't-term borrowing authority from the FERC of $350,000,000 which the Compu u selieves is adequate to cover its working capital and other liquidity requir ements.                       As of December 31, 1991, the Company had $210,300,000 of short term debt outstanding (which excludes $21,800,000 of long-term debt due within one year). Included in the $350,000,000 borrowing authority, the Company has available 1993.             a $200,000,000 revolving credf t facility which expires in february-As et March 1, 1992, the Company had not incurred any short-term debt under this agreement.
The Company also has arrangements with certain banks to provide additional short-term credit on ar, unco <mnitted and as available basis, in July 1991 the CPU aooroved the Company's financing plan to issue up to
           $400,000,000 of dact and/or eaulty securitles prior to December 31, 1992. In August 15, 2021,       1991  the  Company issued $125,000,000 of 0 3/8% debentures due August The net proceeds from the sale of these securities were used to reduce a portion of the Company's outstanding :,hort-term debt. On December 2, stock. theThe-proceeds 1991,              Company issued $50,000,000 of 8.0% mandatory redeemable preferred from this issuance were used to retire all of the Company's_ outstarding stated rate auction preference stock. On December 4, 1991, the Boston Industrial Development Financing Authority issued for the tenefit of the Company's wholly-owned subsidiary, Harbor Electric Energy                 -
i Company ("HEEC"), 336000,000 of long-term sewage facility revenue bonds. A portion of the net proceeds from this issuance was used to retire $21,000,000 of maturing short-term sewage facility revenue bonds. In November 1991, the l
Ccmpany amended its Restated' Articles of Organization increasing the                                            -
E authorized par     value from   common
                                  $5 tn $1stock perfrom comon   50,000    000 to 100,000,000 shares and reducing the s, hare.
2,600,000 shares of common stock.                                  k December 1991, the Company sold l
The net proceeds of $59,U 4,000 were used
,        to redeem $55,000,000 of our Saries X, 11% first mortgage bonds.
L The Company's 19?! year end capitall.tatio ratios were 54% long-term debt,10%
i        preferred / preference stock and 36% conwon equity as compared to 1990 year-end
_ capitalization ratios of 55% long-term debt,11% preferred / preference stock and 34% comon equity and 1939 year-end levels of 52%, l'2% and 36%,
respectively.
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Rate Proceedjpos. Pilorim Nuclear _ Power Sta(jn02_3pd Outloak for Future                  '
l On October 31, 1989, the Commonwealth of Massachusetts Department of Public utilities (the "DPU") approved a Settlement Agreement effective 1
November 1, 1989,'(the "DPU Settlement Agreement"), relating to cer'.ain OPU proceedings involving the Comparv. On November 5, 1990, the federal Energy Regulatory Commission (the "FERC") approved the purchased power contract settlement agreements (the " Wholesale S?ttlement Agreements") relating to i
claims filed by certain wholesale customers of the Company in conjunction with              '
the 1986-1988 outage at Pilgrim Nuclear Power Staticn (" Pilgrim Station"). As a result of the DPU Settlement Agreement and the Wholesaie Settiement
'             Agreements, the Company recorded in the fourth quarter of 1989 a before-tax charge of $178,650,000, with an after-tax effect of approximately $106,280,000 or $2.78 per share of common stock. This charge was included in the 1989 year end Statement of income as a component of "Other income (Loss)"
consistent with accounting practice end presentation applicable tc the elactric utility industry. The components associated with this 1989 r.on-recurrin Company'g      charge s retail     to earnings or wholesale       are not recoverable through rates from either the customers.                                                 ,
The non-recurring charge to earnings associated with all of the Settlement Agreemer.ts, totaling approximately $178,650,000 cefore taxes, included approximately 575,000,000 for retail demand-side management programs,
             $31,000,000 for certain replacement power costs, $41,000,000 for litigation, regulatory commission and other expenses and the write off of the remaining 331,000,000     of previously deferred incremental nuclear outage costs incurred prior to 1989. Prior to the October 1989 Settlement Agreements, previously deferred incremental nuclear outage costs were being aportized to expense (as part of normal operating expenses) over a five year period consistent with previous rctail rate orders from the OPU and wholesale contract pr) visions.
In connection with the DPU Settlement Agreement, the Company will file new retail rates in I,pril 1992 seeking approval for a rate increase to become effective Novembar 1, 1992. The Company agreed to limit its retail revenue increases prior to November 1, 1992 to approximately 2% per year, subject to adjustment based on P:lgrim Station's performance. Accordingly, the Company's ability to maintain or increase earnings through October 31, 1992, will depend               '
primarily on _its abil!ty to control costs and -:ncrease kilowatthour sales, as well as the efficient operation cf Filgrim Station. Effective hovemoer 1, 1991 annual retcil revenues increased an additional- $?5,000,000, subject to adjustment based upon Pilgrim Statica's perfermance. In addition, if the Company would not otherwise achieve a retail rate of return of 12.0% in 1992, the Company may make certain accounting _ adjustments-(but only to the extent                 '
that such adjustments do not result in the Company's exceeding such retail rate of return): i) by reducing defev red income tax by up to 523,000,009 in 1992 and (ii) by accelerating the amortization period of certain municipal oroperty-tax abataments totaling approximately $37,000,000 from six tc thce(
          -years. During the-poriod November I,1992 through October 31, 2000, the
'          Company has agreed to_ institute a new cost recovery mechanism, which is also tied to Pilgrim Station's perfornar.ce, for a portion of the Company's investment end costs rclated to Pligrim Statica. For further discus; ion of regulatory and other matters concerning Pilgrim Station, please refer to Item 1(e) " Additional Information", subheading " Nuclear" hereunder.
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A large portion of the Company's kWh sales are in the commercial sector as compared to the industrial sector. The New England area is currently experiencing a sluggish economy. While the Company does not anticipate significant r owth in retail kWh sales, the Company experienced a 3,1%
increase in retai* kWh sales over the same period in 1991.
Revenues commencing in Ftbruary and July 1991 included annual rate increases of $6,800,000 and $2,800,000, respectively, from certain wholesale customers; such increases are subject to refund pending the outcome of a              '
wholess.le rate hearing at FERC. The Company has settled with one wholesale customer and no refund will be necessary to that customer. The Company may also experience reduced future growth in base revenues as a result of                 e implementation of demand-side management programr.; see " Demand-Side Management Program Expenditures" preceding,                                                     ,
The Company may be further inpacted by the implementation of Statement of Financial Accounting Standards No. 106       " Accounting for Portretirement Benefits Other than Pensions"., which will De effective for 1993. While the Company may be faced with recording a larga increase in liability estimated to be approximately $200,000,000 (an expected additional annual cost of approximately $20,000,000), it has not fully determined the means of recovery of  such expensos through the rate-making process or of implementing this accr,unting pronouncement.
The Company plans to seek rate recovery of these increased costs.
The Company has a $2,000,000 investment (9.5% interest) in the Yankee Atomic Electric Company (Yankee Atomic), which owns and operstas the oldest nuclear power plant in the country. Dr. October 1,1991, that unit was voluntarily shut down in response to a Nuclear Regulatory Commission concern over the condition of the reactor vessel. On February 26, 1992, the Bnard of           -
Olrectors of Yankee Atomic voted to permanently close the unit and prepare for early decommissioning of the plant. Yankee Atomic w W be filing with the FERC to collect from its contract custor-ers between now and the year 2000 the costs associated with this shutdcwn and decumissionheg. The Company will he responsible- for its proportionate share. Yankee Atomic has a det.ommissioning estimate of approximately $98,000,000 as of January 1, 1989, nd is working on a new estimate whir,h is expected to be significantly higher. The Company expects to receive recovery from its customers for all of these costs.
See also Item 2:    " Property and Power Supply" subheading " Planned f acilities" following, regarding Edgar Energy Park. See also item-1(c)1(iii)
;   "Sourcas-and Availability of fuel Supply" and Itam 1(C)l(xii) " Environmental           i l
Matters" following, regarding an agreement entered into by the Company with              ,
the OEP and the South Boston, HA community to burn natural gas at certain of the Company's generating stations.                                                      ,
i Lism ! (c) (1) f111): SOURCES AND AVAILASILLTLQF FUEL SUPPil l
l-The Company's generation units, other than Pilgrim Station, are oil or oil and natural gas-fired. Fossil fuel related expenses (excluding net                  '
l   purchased power) accounted for approximately 16%, 21%'and 24%, respectively, of the Company's total electric operating expenses in each of the years ended 6

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December 31, 1991, 1990, and 1939, respectively, lhe Company's generation                      l (excluding net purchased power) by type of fuel since 1987 and the cost of fuels during that period are set forth below:
Percentage of Compiny                   Average Cost in Cents per Million Matral.1QILbv SourceA)                       HIV's on a Burnei Basis im 1991   1990 1E2 1933 011 .... 42.8 33.6 53.7 1 2.81  1M1          IM2     12fL9   12HB   1931 39.8   76.3    260.01       275.72 267.08 226.53 278.8 i
huclear. 24.9 33.1        14.6    --      --
56.18        59.05   56.79 Nat, Gas. 32.3 33.3 31.7         10.2   23.7 207.82 235.15 234.26 212.83 231.1 For ',nformation relating to alternative energy sources and the long-range
-          availability to the Company of purchased power alternatives from Canadian energy  resources and/or independent power producers, see item 2 " Property and Power Supply *.
Q11     The majority of the Company's residual oil purchases involve                    *
'          imported oil acquired primarily from internc;ional suppliers.             The Comoany has contiacts with major oil companies which can supply most of the Company's                     ,
estimated regions   of requirements,   assuming no major disruptions in the oil producing the world. Within    contract provisions, the Company retains the ability to purchase significant amounts of oil or natural gas in the spot market when it is economical to do so.                                                         !
Natural bat. The Company has the ability to burn natural gas, oil, or                    '
both simultaneously (depending upon the amount of natural gas available and the difference in price between natural gas and residual oil) at the New Boston generation units and the Mystic Unit #7 generation unit. Natural gas is supplied to the units on an "interruptible" basis; such a contract permits interruptions in deliveries by the supplier when natural gas pipeline capacity is needed to refill storage facilities or serve other year-round customers.                     ,
Deliveries of natural gas to the Company's generation units from suppliers may also be dependent on the availability of pipelire capacity to the New England region Ord/or on competitive forces prevallir.g in the pipeline industry. The                    '
Company has conmitted to burn natural pas at its New Boston generating station on a firm, year-round basis beginning in April 1995, and is currently investigating natural gas availability and transportation arrangements in order to meet Matters"            this commitment. See also Item 1 (c) (1) (xii): " Environmental following.
Eu.tnhased Power. See item 2 " Property and Power supply" for information                ;
relative to the availability to the Company of purchased energy from other                       -
utilities and/or the New England Power Pool ("NEPOOL"). Such sources supplied
'       30.6%, 16.3% and 21.8% of the Company's total. system kWh output in each of the years onded December                                                                              :
4 31, 1991, 1990 and 1989, respectively. A portion of the increase in 1991 is associated with the dispatching of participating units of the regional power poul. See also item 2 " Property and. Power Supply"
      ' hereunder for further information on potential transmission line cecess issues facicg the New England region in the near future, Company pisnned future                          ,
purchases of power: from cogenerators and/or independent power producers and
* the operation of the regicnal power pool.
c Nuclear. The cycle of production and utilization of nuclear fuel consists of (1) the mining and milling of uranium ore; (2) the conversion of 7                                                    -
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Y i                                                                                                                              -
uranium concentrate to uranium hexafluoride; (3) the enrichment of the uranium hexafluoride; (4) the f abrication of nuclear fuel assemblies; (5) the utilization of the nuclear fuel in the generation station reactor; and (6) the storage and reprocessing or disposal of spent nuclear fuel assemblies.
The Company's contractual entitlements for supplies of uranium concentrates are at the present time sufficient to permit operation of Pilgrim Station through 1998. The Company has also entered into contracts for other segments of the nuclear fuel supply cycle-which will satisfy the requirements of asPilgrim follows:Station   with respect to such segments tnrough the approximate dates conversion - 2000; enrichment - 2001; fabrication - 2012.
For information relating to the Company's . pent nuclear fuel storage facilities and disposal of spent nuclear fuel and the impact on the Company of the Nuclear Waste Policy Act of 1982, see Item 1 (c) (1) (xii) " Environmental Matters" hereunder.
Jiem 1 RLLLL[Ly}: FP4 Q11LS                                                                                         l The Company by virtue of its charter, which is unlimited in time, has the right to engage in the business of producing and selling electricity, steam                                         '
and other forms of energy, has powers incidental thereto and is entitled to all the rights and privileges of and subject to the duties imposed upon electric companies under the General Laws of Massachusetts.
The locattor.s in i
public ways for the Coepany's electric transmission and distribution lines are                                        '
such locations act as agents of the Commonwealth,obtained from municip authorities is in some cases subject to appeal to theThe                      action of such OPU.
These locations are unlimited in tire, but the rights obtained therefor are not vested and are subject to the action of such authorities and the legislature. See also item 1(c)(1)(x) " Competitive Conditions" hereunder, item 1 (c1 f 3L{y_).1_SIAS.QNAL NATURLQE,..MH1 1
The number of kilowatthours of electricity sold by the Company in its n        territory has historically been less in the sprirg and fall than during winter and summer as sales vary somawhat with weather conditions.                           The Company's electric revenues and operating income are also dependent on a variety of other factors, which are not necessarily seasonal, including contract sales of system end unit power to other electric companies, changes in the Corapany's rates general    and   chsrges,conditions.
economic     the extent and nature of transactions involving HEP 001., and The Company has been directed by the DPU to bill                          ~
a ' summer surcharge" rate to retail tustomers during the billing months of July annual    through   October, which is usually when the Company has experienced its peak load.
occurs in the Company's     Accordingly, third quarter. a significaat- portion of annual earnings In addition, the DPU has directed that large commercial and industrial customers be billed throughout the year pursuant to mar.datory time-of-use rites. Approximately'150 commercial and l
,     industrial'eustomers are transferred to time-of-use rates each year (an L
See Item 2 " Property and Power Supply" for information relative to Company's 1991-1992 winter and 1991 summer peak loads. For_further i     information on quarterly results, see Selected Consolidated Financial Statistics - Supplementary Financial Information, (Unaudited),1991 and 1990, 8
l

  .eT Quarterly Censoliciatad financial Data contained on pag? 36 of the Annual Report to SNreholders for the year ended December 31, 1991, incorporated herein by referenco.
Item 1 (c) (lLiyM: WDMLNMAPITAl. PRACTICES The Company has no special practices with respect to working capital that would be considerec unusual for the electric utility industry. For                     ;
information relating to the operation of the Company's retail fuel and                t purchased power adjustment clause, see Note A.3 of Notes to Consolidated financial Statements contained on page'27 of the Annual Report to Shareholders for the year ended December 31, 1991, incorporated herein by reference.
Item 1 (c) (1) (vii):     CQS,Qfilq5 T
No material part of the business of the Capany is dependent upon a single c1stomer.
11fa.l ic) (1) (vlilli. M(A 0G - No.1_Applic3A1_g                                       '
litLL(c) (1) (ixi GOVERNMENT CONTRACTS No material portion of the Company's businers is subject to renegotiation or termination of contracts at the election of the U.S. Government.
Item 1 (c) (1) (x): _QOMPETITIVE CQNDITIONS T e Company, like other Mr.ssachusetts electric companies, is protected to the following extent against other utilities offering service to retail customers in any of the municipalities comprising the Company's service area:
first, another electric utility may not-extend its service area tc include municipalities other than those nared in its igreement of association or
-       charter without the authorization of the OPU granted after notice and public hearing; second, another company may not obtain an initial lucation for its lines ir. a municipality served by the Company w;thout the approval of the raunicipal authorities, subject to the right of appeal to the DPU; and third, a municipality may not engage in the electric utility business without complying            '
with statutes which require (a) in the case of a city, a two thirds vote of its city council-(or a vote of a majority of the coumissioners if the city government consists of a ccmission) passed in each of two consecutive muricipal years and thereafter ratified by a majority of the voters at an annual or specific city election and (b) in the case of a town, a two-thirds vote at each of two town meetings held at intervals of not less than two nor more than thirteen months. Such statutes als require the municipality, if the Company elects to sbil, to purchase 50 mu n of the Company's property within the I'mits of such municipality as the parties determine by agreement or,. if the parties fail to agree, so much of such property as the OPU determines and at prices fixed by the OPU.
In 1987, the Town of Bellingham, MA petitioned the 1)PU to permit the transfer of electric service currently provided by the Company to another electric utility. Revenuas from Bellingham in 1991 represented approximately 1% of annual-total Company revenues. The Bellingham service situation is unusual in that two electric utilities currently serve different segments of the town. A public hearing was held by the DPU in August 1987. Except for 9

l certain correspondence in 1988 between loca' and Commonwealth officials and                     i
'                     the DPU,-the Company is not asare of any further action by the DPU to date.                     I i
in connection with the generation of electricity and toe sale of                        {
electricity for resale, the Company competes with other electric utilities,
'                    non utility power plant developers, and Qualifying Cogeneration and Small Power Production Facilities ("QF's")-as defined in the Public Utility                            '
'                    Regulat .ry Policies Act of 1978 ("PURPA"), as amended .               PURPA requires the Company to purchase electric energy offered for sale by Qi's at a price equal                    :
to the (c'npany's avoidcd cost. Amounts of electric energy currently purchased                   '
by the Company from QF's and the amount of kWh sales permanently lost to                         i former customers, including certain hospitals, now utilizing their own generation facilities are not material te the financial statements whkh are                      i part of the Annual _ Report to Shareholders for the year ended December 31, 1991, incorporated herein by reference. See also item 2 (a) " Property and                       ,
Po.ict Supply" and (c) " Independent Power Producers /Cogenerators" hereunder.                  ;
The Cor.pany also competes with natural gas and othe' energy service companies-for market share of new and existing construction in the Company's servicepurposes, cooling            territory as it relates to providing energy Srimarily fcr heating and item 1-(_q) (11 fxil: RESEA Q ACTIVITIH The Company actively participates in several industry-sponsored research activities; however, such amounts incurred for research and development actisities were not material to the financial statements which are part of the Arnni Report to Shareholders for the year ended December 31, 1991, and aru incorporated herein by refer ence.                                                                *
,                  item 1 (q)_L1) (xill:                ENVIRONMENTAL MATTERS The-Company, like other electric utilities, is subject to local roning and sinilar c.ontrols and to developing standards administered by federal, state and local auth* ' ties with respect to siting of f acilities and air                         , '
                 -quality, water qualita, waste disposal and otner envirunmental considerations.
                 -Such standards =and controls may require modification of existirg facilities or curtailment or cessation of operations at such facilities, ny delay ccnstruction of new facilir.ies and increase capital and operating costs by substantial amounts, and may in some cases result in the administrative
                  .mposition of monetary civil penalties. The Company believes that its operating facilities are in substantial compliance with presently applicable st0tutory .and regulatory requirements relating to such matters.
The Company estimates that its capital expenditures for environmental                       '
!-                purposes during the five years 1987 through 1991 totaled cpproximately                             L
                  $94,000,000, and such capital apend-itures for the period 1992 through 1996 4
are presently expected to be wpprovimately 5101,000,000, including approximately $38,000,000 for the year 1992 and $32,000,000 for 1993.
+                Substantial addi_tional expenditures may be requirad as a result of changes in environmental requirements, or any decision to construct new facilities.
The Company is subject to regulation by the Massachusetts Energy Facilities Siting Council ("the EFSC"), which must approve the Company's inng-10 l

       ~ - - .-            --            .. ~~.--         - - -         _ - .        --     . - _ _ -   . .
1 range forecastr. with respect to the electric power needs and requirements of the Company's service area. Such forecasts are required to be filed with the            ;
EFSC every five years with supplements required in intervening years, To approve a long-range forecast or supplement, the EFSC must find, among other           j things, that plans for certain new generation or transmission facilities are consistent with Massachusetts policies regarding health, environmental                 ,
protection, and resource use and development. Construction of such generation and transa.ission facilities is prohibited unless such facilities ar e approved
,                   by the EFSC as consistent with the most recently approved long-range forecast or supplement. The Company's most recent filing with the EFSC of its long-range forecast and resource plan was made in May, 1990. Hearings were i
conducted concerning thir, filing during 1991. The Company is currently awaiting a decision. As a part of such filing the Company seeks approval of the Edgar Energy Park Project. For further information concerning this proje:t and the proceedings iNfore the ETSC and other regulatory agencies, see Item 3 " Planned f acilities" hereunder.                                                ,
The Company is subject to regulation by the United States Environmental            '
Protection Agency (" EPA") and the Massachusetts Department af Environmental Frotection ("DEF") with respe:t tn discharges of effluent from the Company's power plants into receiving waters, Tne federal Clean Water Act and the Massachusetts Clean Waters Act. require dischargers to receive permits limiting discharges in acccrdance with applicable effluent discharge limitations and water cuality stcndards. The Canpany has received discharge permits as required by the EPA and the DEP for each of its electric generation plants, Pursuant to Massachusetts ar,6 Federal clean air laws, tnc Company is subject to regulatior, by the DEP and EPA relativa to air emi;sions fram the              ,
Company's fossil-fired plants. Such regulations require the installation of varicus emissions controls and, in certain cases, the utilization of low sulfur content fuels. During 1991 the Company entered into a consent order with DEP to undertake certain improvements in the emission control systems at the Company's New Boston Station in South Boston, MA. The anticipated rest of these capital improvements is included in estimated capital expenditurea for environmental purposes discussed atuve.
Furthermore the Campany has recently agreed in discussions with DEP and South Boston community leaders to operate New Boston Stction utilizing natural gas as fuel for a minimum of nine months per year beginnirg in April 1992 and to operate New Boston Station utilizing i
i only natural gas as fuel beginning in April 1995. However, the unit; may operate      using oil in emergency situatinns to maintain electrical service to the Coinpeny's customers.
To the extent that such regulations and agreements require the use c# morc expensive fucis, the Company believes that fuel adjustment clauses in its retail and wholesale rate schedules continue to prov'.de for recovery of any resulting increased costs. The 1990 Clean Air Act Amendments will require a significant reduction in naticnwide emissions of sulfur dioxide from fossil fuel-fired generating units. The reduction will be
,'-             accomplished by issuing allowances to emit sulfur dioxide, measured in tons per year, to each owner of a unit. The regulation would require each ur,it owner to hold sufficient allowances each year to cover the emissions of sulfur dioxide f om the unit during that year. These allowances may be bought and
;               sold.
'                         Based upon the Company's anclysis of the 1990 Clean Air Act Amendments, the Company believes that it will not be materially adversely impacted by the requirements of thnse amendments. The analysis also indicates that the Company has emission allowances issued to it under the 1990 Clean Air Act I
1                                                               11 I

1 Amendments that are in excess of its needs and which may be marketable.         See also item 1(c) (1) (iii): " Sources and Availability of fuel Supply" subheading " Natural Gas", preceding.
The Company is subject to regulation by the EPA pursuant to the provisions of the federal Toxic Substances Control Act cnncerning the use,            '
storage and disposcl of polych!orinated biphenyls ("PCBs"). The Company has substantially completed the removal of all PCBn from certain Company facilities in accordance with these regulations.
M e Company is subject to various federal, state and local laws snd materials. pertaining regulations                 to the haridling and disposal of asbestos-containing At preseht, a program is being undertaken to systematically remnve-1 all asbestos from the Ccmpany's generation stations and underground transmission and distribution system. The removal of this material will be performed over an unspecified period and is subject to annual review and authorization.
4 The Company is subjer.t to various federal, state and local laws and regulations pertaining to the generation, treatment, transport, storage and disposhi   of cert::in hazardous substances and to the clean-up of locations where such substances have either been spilled or disposed of. Among such laws of principal importance to the Company's operations are the Federal Resource Conservation and Pecovery Act (" RCRA"), the Federal Comprehensive Environmental Response Conservation and liability Act (" CERCLA"), the Federal Superfund Amendments and Reauthorization Act (" SARA"), the Massachusetts llazardous Waste Mansgement Act ("MHWMA"), and the Massachusetts Oil and Hazardous Material Release, Prevention and Response Act ("M0HMRPRA"). Under the requirements of RCRA and NHWMA and applicable regulations adopted thereunder, certain facilitics which treat, store or dispose of hazardous wastes must be licensed and the Company is required to meet other applicable requirements of   the Company'sregarding    the generation and handling of hazardous wastes at cil facilities. Pursuant to r.uch requirements, wastewater treatment syster.3 at the Company's Mystic and New Boston Stations which were formcrly operated pursuant to interim status regulations under RCRA and MHWMA are now being closea in accordance with those laws and have been replaced by facilities that do not require licensing under such laws.           In addition, the Company has applied for licenses under RCRA and MHWMA for the treatment and storage of mixed wastes at Pilgrim Station. Such treatment and storage has currently received interim status approval under those laws and regulations.
Under the requirements of CERCLA, SARA and M3HMRPRA and applicable regulations adopted thereunder, the Company and others are exposed to potential joint and several liability with respect to the clean-up of-sites where hazardous wastes may have been spilled or disposed of in the past. The Company has had claims asserted against it related to clean-up costs at approximately a dozen such sites in Massachusetts and other states. Such sites include Company-cwned facilities which have been the loc 6 tion of spills or leakage crdinary       and which course          the Company is in the process of cleaning up in the of business. Other such sites include disposal sites with numerous pari.ies and involving cnmplex litigation or negotiations among the parties and with regulatory authorities concerning the scope and cost of                   <
clean-up and the sharing of costs among the potentially responsible parties.               <
At several of the larger of such sites the estimated total clean-up costs for 12

l 1
i the site is in the range of $50 to $100 million depending uo9n the remedy ultimately selected; however ir; each such case the Comnany is but one of many
         . parties, the Company's alleged percentage share of waste contributed to the        {
site is in the range of 1% or less and the Company is- an active participant        t with other parties in negotiations with regulatary authorities. While the Company is unable at this time to predict the ultimate totai clean-up costs for all of such sites nr what its share of costs will be for each such site,       !
on the basis of the infernation presently available regarding each site, the        '
Company believes it is remote that it would incur any material liabilit.y in connection with such sites.
9 The Company presently disposes of low-level radioactive waste ("LLW")
generated at Pilgrim Station through arrangements for decontamination and disposal with licensed orakers and for disposal with licet. red disposal             ,
t facilities located in Barnwell, fouth Carolina and Richland, Washington.
Pursuant to the_ Federal Low-level Radioactive Waste Policy Act of 1980, as ac. ended by the Low-Level Radioactive Waste FM icy Amendments Act of 1985, the Company's continued access to such disposal facilities may not be available after Decenber 31, 1992. In the interim, such access is restricted in volume and is condi :oned upon the payment of surcharges es well as upon the meeting by the Commonwealth of certain milestones involving the establishment of alternative disposal facilities accessible to Massachusetts waste generators.
Legislation has been enacted in Massachusetts establishing a regulatory scheme for managing the Commonwealth's LLW including the possible siting, licensing and construction of such a facility within the Comr'onwealth. Pending the coastruction of a disposal facility within the Commonwealth or the adoption by the Commanwealth of some other LLW management scheme, the Company continues to monitor-the situation and is investigating options which are available to it, including the option involving on-site storage.
The Company presently has spent nuclear fuel storage capacity at Pilgrim Station 1995.
sufficient to stora spent nuclear fuel generated through the year Pursuant to the Federal Nuclear Waste Policy Act of 1982 ("NWPA"), and through a contract entered into with the United States Department of Energy
(" DOE") in accordsnce with that Act, 00E will be responsible for the ultimate disposal of spent nuclear fuel generated at Pilgrim Station, in accordance with this contract, the Company pays the DOE on a quarterly basis for the cost of nuclear fuel depleted. The Company is recovering these costs through its i
fuel and purchased power adjustment clauses. Under the contract, DOE is to take delivery of spent nuclear fuel beginning in 1998. In order to fulfill o      its obligations, DOE is presently engaged in scientific studies evaluating a l
potential spent nuclear fuel repository site at Yucca Mountain, Nevada; however, such effort has encountered substantial public and political i
opposition and litigation and DOE has publicly stated that it may be unable to j     construct such T repository by 1998. In addition, DOE has been authorized to construct, foll uing licensing by the NRC, a monitored retrievable storage facility which would_ provide sturage and packaging of spent nuclear fuel and high level raCloactive waste prior to shipment to a permanent repository;
}
     -however, no site.has been identified for such a facility.          The Company is unable to predict Mhether and on what schedule DOE-will eventually construct such a repository or monitored retrievable storage facility and what will be the effect upon the Company if a delay should occur.. The Company is L
L investigating all options which may be available to it, including the
!    expansion of existing spent nuclear fuel storage capacity at Pilgrim Station.
13 I

11em 1 (C1j,jl ixilib NUMBER.0F.ffRSONS EMPLOYED The Company had 4 the employees are repre,554 sentedfull-time    employees by two locals   of theasUtility of theWorkers end of 1991; Union2,997 of of America, AFL-CIO. The current four year labor contract in effect wf th the locais is scheduled to expire in May 1994.
Item 1 idh F I NgJALIN FORMTION ABQ1!LEQF E 1 GN RQ_D@ EST 1 : R[LA,UQRSj&
EXPORT SALES See item 1 (t) (1) (1) " Principal Products and Services" for information relative to the geographical wec served by the Company.
1Lej_[e): ADDITIONAL INFORMATIQB REGULATION-RitaL Accountino ated Securttj n The Company and its wholly owned subsidiary operate primarily under the jurisdiction of the DPU, which jurisdiction includes supervision over retail rates for electricity, accounting, the issuance of bonds, capital stock and certain other securities, and the investment by the Company in nther entities.
The Federal Energy Regulatory Commission ("FERC") has jurisdiction over various phases of the business of the Company including, amung other things, regulation of the system of accounts, certain issuances of short-term debt, rates for power sold at wholesale for resale, and facilities used for the transmission or sale of such power.
In 1989, the DPU implemented regulations which require electric utilities subject to its jurisdiction to obtain pre-approval for both investments in new generation     capacity and for major ir.cremental investments in existing generation capacity.        Under these regulations, prior to making such generation investments the Company must file with the DPU an agreement which defines the revenue amounts associated with the investments which the Coapany will be allowed to recover thrcegh rates.
to bear the risk of changes in the majority of project costs.The                  regulations require t b Co Customer 3 bear the risk of unanticipated demand reductions and fuel price changes, in 1990, the DPU adopted rules concerning the acquisition of future supply and demand resources by Ma:sachusetts electric companies. The DPU regulations require electric companies to use an all-resource solicitation prtcess     to establish a mix of resources to guarantee least-cost, reliable service. These regulations also specify the rules by which electric utilities i
would     receive solicitation       costwecovery for the resources acquired under the all resource process.
The Company is recovering through depreciation an annual provision for the cost of decommissioning Pilgrim Station at the end of its useful life.
Funds collected for decommissioning are-restricted in their use; such funds callected in rates are based upon a 1985 estimate of $l22,000,000 to decommission the plant (immediate dismantlement method) as approved by the DPU.
The Company will request approval in its April 1992 retail rate filing of its most recent estimate of decommissioning cost (approximately 14 L
l l
l u

_.         ~_ . _ .
      ,4-5325,000,000). Securities held in the nuclear decommissioning fund are stated at cost, which approximates market. The Company also collects a provisjor for the cost of decommissioning Pilgrim Station from contract customers.                   ,
The Company is required each year to submit to the DPU performance standards applicable to its generating units and to other units from which the         ,
Company purchases power pursuant to long-term contracts. The Company also              '
provides quarterly progress reports to the DPU with respect to generation unit performance. The DPU is empowered to conduct a review of such performance and has the right to reduce subsequent fuel clause billings if it finds that the Company has been unreasonable or imprudent in the operation of its gererating units or in the procurement of fuel.
The Company's most recent generation unit performance program covereo the period November 1,'1990 to October 31, 1991. As in prior vears, the Company did not meet all the DPd performance goals. On January 2ft, 1992, the DPU initiated a 'iinety day investigation of the performance of the Company's ttnits and the other units from which the Company purdased paw r under long-term contrccts during that period. While the Company ce?ieses it was prudent in the operation of its generation units, the ult mate re solution of certair replacement power costs already billed to customers c.nnot be determined by the Company. No provision has been made in 1991 for .ny amounts that may be refundeble as a result of the foregoing. However, in the opinic of management such amounts are not expected to be material.      The hea ugs began March 3. 1992, with an order expected in the spring of 1992. On r arch 23, 1992, the'0PU issued its order for the Company's generation unit performance program for the period November 1. 1989 to October 31, 1990. The order found the Company's actions to be reasonable and no disallowances of fuel costs were ordered.
Nuclear The Federal Nuclear Regulatory Conrrission ("WC") has broad and continuing regulatory jurisdiction over the siting, construction and operation of nuclear reactors with respect to public health and safety, environmental matters and antitrust considerations A permit or license granted by the NRC may be revoked, suspended or modified by the NRC because of conditions revealed by the application therefor or any report or inspection which would
'-         warrant the NRC to refuse to grant a license on an original application or for failure to construct or operate a facility in accordance with the terms of a construction permit or license. The Company currently holds an operating license for Pilgrim Station which was issued in 1972. .In January 1991, the NRC extended the expiration date of that license from the year 2008 to 2012, an extension of approximately three and one-half years.
Evolving NRC regulatory requirements, resulting in part from continuing
!=
NRC review of existing regulations and certain operating occurrences at other nuclear _ plants thr%ghout -the country and the world, have periodically resulted in the imposition of additional requirements for all do.nestic nucleo plants,-including Pilgrim Station. NRC inspections and investigations may on occasion result in the issuance of notices of violation of NRC regulatory
._        requirements. Such notices of violation may, in tccordance with the NRC's l
Enforcement Policy, be accompanied by orders directing that certain actions be taken or by the imposition of monetary civil penalties. In addition, the                    :
15
                                        ,        e.s        *

     -           - - -_.-                  .. - . - -.         -   --        - . - . - - . - - - ~ .          --. -
t F -
Company might_ undertake certain actions in reg;cd ic Pilgrim Station at the request or suggestion of its insurers or of the Institute of Nuclear Power Operations ("INPO*), a voluntary association of nuclear utilities dedicated to the promotion of safety and reliability in the operation of nuclear power plants.
On August 4, 1987, the Fcderal Emergency Management Agency ("FCMA")'
issued a report identifying certain deficiencies in.the offsite emergency preparedness plans for Pilgrim Station and withdrawing FEMA's previous interim finding of adequacy concerning those plans. In response to this report and
                           -other public concerns-regarding offsite emergency plans, the Company has worked     closely with federal, state and local official in an effort to imprese all asoects of those plans. In May 1991, a joint FEMA /NRC task force completed a detailed-review of the status of offsite emergency plans for Pilgrim station.- In June 1991 FEMA issued a finding that adequate protective measures can be taken offsite to protect the health and safety of the public in the event of a radiological emergency at Pilgrim Station and in July 1991 the NRC Commissioners found that thtre continued to be reasonable assurance that the offsloe emergency preparedness program is adequate. In December 1991, an exercise of the emergency plans was conducted with participation by representatives of the Cumpany and state and local governments. Prei i ninary assessments of the exercise by the NRC and FEMA were positive and noted no deficiencies.
i As the Company has previously reported a 1990 Massachusetts Department of Public Health ("MDPH") study that has purported to show a correlation between increased adult'leuker.ia and living near Pilgrim Station. The Comoany strongly disputes the MOPH study findings which are contrary to tne large body of scientific _information on the health effects of ionizing radiation and the findings of studies by the National Institutes of Health and the American Cancer Institute. The Company and MDPH have begun a joint review to resciva questions concerning the validity of the study.
Nuclear power continues to be a subject of poiltical controversy and public debate wnich is mcnifested from time to time in the form of requests for various kinds of feceral, state and local. legislative or regulatcry a: tion, through direct soter initiatives or _ referenda, or threugh tre institution of litigation. The Company cannot predict the extent, cost or timing of any modifications to Pilgrim Station which might be required in the future:a3 5 result of additional- regulatory or other requirements nor can it determina the effect of suth. future requirements on the continued operatio.1 nf l
Pilgrim Station.
v 16                                                   -
1
       , ,,.,g-(            ,e                         #*~   "

   *1 liLm 2:   PROPERl( AND POWER SUPPLY
: a. Company owred facilitiet Existina facilitics. The Company's total installed electric generation capability as of January 1, 1992 is as follows:                                             ,
installed Capacity                    Year ibil               Location                    (KM          lytt     Installed Pilgrim Nuclear          Plymouth, MA              678,000         Nucitar   1972 Power Station New Boston Station       South Boston, MA          717,740        fossil   1965-1967 Units I and 2 Mystic Station           Everett, MA Units 4-5-6                                      468,750        fossil   1957-1961 Unit 7                                           617,040        Fossil     1975 Combustion Turbine       Various                   238,944        fossil
* 1965-1971 Generators (ten)
The Company participates as a 5.888% joint owner (36,462 kW) in W. F.
Wyman Unit 14, a'ull',250 kW (NEP00L year-end maximum capacity) oil-fired unit which commenced operations in 1978 and is operated by Central Maine Power Company, located in Yarmouth, Maine.
All of the Company's fossil-fired electric generation units are located at tide water and have acces; to ample fuel oil storage (and/or natural gas or oil pipelines from nearby suppliers) and ccndensing water. Additional electric generation capacity is available to the Company as a result of it; contractual arrangements with other utilities, which it negotiates on a year round basis, and its participation in NEP00L, which are described below. For additional information~ regarding long term power contracts, see Note f of Notes to Consolidated financial Statements contained on.pages 33 through 34 of the Annual Report to Shareholders for the year ended December 31, 1991, incorporated herein by reference.
As of December 31,.1991 the Company's transmission system comprised approximately 362 miles of overhead circuits operating at 115,000, 230,000 and 345,000 volts and approxiinately 154 miles of underground circuits operating at 125,000 and 345,000 Folts, The substations fed by these lines consisted of 38 transmission or combined transmission and distribution substations with a transformer capacity ~of 9,340 MVA, 63 distribution substations with 'a transformer capacity of 1,150 MVA and 18 primary network units with 81 MVA capacity. InJaddition, high tension service was delivered to 240 customers' substations. The overhead distribution system covered approximately a,630 miles of ctreets and the underground distribution system extended through approrisately 880 miles of streets.
The' icportant items of property comprising the Company's electric generation stations, substations, and certain service centers are generally located on land owned by the Conpany, with certain exceptions as set forth in
,                                                         o a-

r-- '
''            the Company's first Nortgage Bond Indenture or Supplements thereto. The Company's high-tension transmission lines are generally located on tand either owned by the Company or subject to an easement in itA favor, with crossings of public ways, tide waters and water courses, railroads and public domain when                              .
encountered. The Company's low-tension 6istribution lines and fossil fuel
'            pipeline; are located principally in_public streets and ways under permission granted by municipal or Commonwealth authorities. They are. however, also located to some extent in private ways and on private property pursuant to easements, leases, licenses or permits.
             " Franchises".                                     See also item 1 (c) (1) (iv)
PlanneJLLafilit iet As the Company previously reported, it has made regulatory filings at the                                 !
Commonwealth of Massachusetts Energy facilities Siting Council (EfSC) and the Dpu and FERC regarding the Edgar Energy Park project, a 306 MW combined cycle                              i generating station. Through the proposed subsidiary, Edgar Electric Cnergy Company, the Company plans to construct this unit on the site of the retired Edgar Generating Station located in Weymouth, Massachusetts.
The Company concluded hearings before the EFSC, which will address the issues of need for additional power and the environmental _ effects of the unit.                                 <
Additionally, the Company made applications for other required permits and
'           approvals, including in particular many environmental permits, before a number of other federal, state and local agencies.
Because of the number and scope of regulatory proceedings that must be completed prior to beginning construction of a project of this magnitude, the Company is not able- to predict-with certainty whether it will proceed with this project nor on what date. Assuming receipt of the necessary aoprovals, the Company uticipates that construction could begin by the middh. of 1993.                                ,
!.        The Company has spent approximately $5,600,000 on this project which is included in " Construction work in progress" on the December 31, 1991 consolidated balance sheet'and was committed to spend an additional $/00,000 as of December 31, 1991. If the Company does not receive the necessary regulatory approvals or if it elects not to proceed with this project, and if 1
l the Campany is not able to charge its customers for these costs, the Company would be required to write off its' investment in this project.
See also Item 1 (e)_" Additional Information", subheading " Regulation" preceding.with respect to promulgated DPU regulations requiring pre-approval of new investments _in generation capacity.
: b.        Purchased ouwer/ contract sales steements i
The Company _ owns 9.5% of the common stock of the Connecticut Yankee                              '
Atomic Power Company, which operates a nuclear generation unit located Haddam, CT with net capability of 591,000 kW (NEP00L year-end maximum capability).
Until the expiration of the power contract relating to this unit (June 2007),_
the Company is entitled to receive 9.5% of the output of the unit and is obligated to pay to the company 9.5% of-such amount as will provide such company with operating revenues and other income from all sources including                                  :
power revenues) equal to.its total operating expenses plus an annua (l return on 18 l                                                                                                                     >
\               _,     __    ,           ,              . . - - - -            - - ~ ~ -           - ~ ~ ~ ~ ~ ~'

investment. The contract billing rate includes a provision for the ultimate decommissioning of the unit and spect nuclear fuel disposal costs. Other New England electric utility compsnies with varying percentages of participation have made similar arrangements. See also item 1 (c) (1) (11         " Expected         5
'                                                                                        Plant Expenditures and Related financing" - subparagraph " Rate Proceedings, Pilgrim Nuclear Power Station, and Outlook for Future" preceding, regarding the permanent thutdown of Yankee Atomic Huclear Power Station.
The Company has entersd into a contract pursuant to which the Company, a subsidiary of Cormonwealth Energy System and two other utilities are sharing in four equal oarts the output of a 572,000 kW (NEP00L year-end maximum capsbility), oil-fired ele.tric generation plant located at the Cape Cod Canal in Sandwich, Massachusetts. The unit is owned by a wholly-owned subsidiary of          !
Comenwealth Energy Systen and wcnt into comercial operation in July '968, at which time the Company became obligated to paj over a period of thirty-three and one-third years 25% of the unit's fixed and operating costs.
The Company has entered into sgreements with Montaup Electric Company, a subsidiary of Es; tern Utilin es Associates, and with Commonwealth Electric Company, a cubsidiary of Commonwealth Energy System, under which Montaup and Commonwealth ea.ch purchase 11% of the capacity end corresponding energy of Pilgrim Nuclear Power Station, and pay 11% of the Unit's fixed and operating costs. Montaup and Commonwealtn have also agreed to indemnify the Cumpany to the extent of 11% each of all loss, liability or damage (not covered by insurance) arising out of the operation, condemnation, shutdown or retirement of the Unit. The Company has similar egreements with certain municioal clettric companie.*, for a total of 3.7% of the capacity and corresponding energy cf the Pilgrin Nuclear Power Station. The term of tha original agreements with Hcntaup, Cormonwealth and the municipal electric companies extended until the year 2000, The Company signed an amendment to the original agreement with Montaup on Jaruary 1; 1985 which extends the term of the Pilgrim Unit Contract from twenty-eight years to a period equal to the full
* operation 11 iife of the Pilgrim Unit and makes certain other revisions. The agreement has been accepted by the FERC.       In November 1990, the FERC approved, as part of a settlement agreement, extending the term of the agreement with Commonwealth to the life of Pilgrim Station, for information with respect to settlement of litigation concerning these agreements, see " Rate Proceedings and Pilgrim Nuclear Power Station" preceding. See also hote F.2 of "Nrtes to Consolidated Financial Statements" centained on page 33 of the Annual Repot t to Shareholders for the year ended December 31, 1991, incorporated herein by reference.
On June 1, 1986 an agreement between the Company and the hassachusetts Bay Transportation Authority (*MBTA") was implemented whereby the MBTA's 35.5 MW jet turbine at 0 Street, South Boston, MA was made available for Company dispatch through the year 2005. The MBTA retains the right to start up the jet for its own emergency use and for testing purposes, but the Comoany retains NEP00L credit for its capacity and output.
MW) Contracts terminated with   Point in 1991      LePreau (100 in accordance  withMW)   andprovisians.
ccntract Northeast Utilities (*HU") (250 The Company has entered several agreements with NU which provide for the f                                                                                 purchase of a mix of NU unit entitlements known as a " base / pumped storage 19 Y
_ _ _ _ _ _ _ _ _ _ . _ _ _ _ - - - - - - - - - - - - - - - - ~ - ~ ~ ~ ~ - - - ~                                             ^

1 slice of system", The current agreement for 300 MW began November 1, 1991 and expires October 31, 1993.
Effective August 1,1990 and terminating October 31, 1992, the Company has agreed to purchase unit er.titlements from United illuminating Company (Connecticut) of 18.3445% (currently 82 MW) Unit 1 in New Haven Harbor and                                                        .
l.5371% (currently 18 MW) in Millstone Unit 3.
Effective December 31, 1990 through 2010, the Company tgreed to purchase approximately 120 MV from the Ocean State Power combined cycle project located in Burrillville, Rhode Island. The Company's entitlement represents approximately 47% of the output and obligates the Company to pay that proportion of the operating costs. This entitlement consisted of 47% of the first unit until the second unit went into connercial operation in October 1991. The Company's entitlement currently is 23.5% of each of the two units.
Effective September 15, 1991 the Company has agreed to purchase approximately 219 MW from the Northeast Energy Associates combined cycle project located in Bellingham, Mas;achusetts. The 219 MW is supplied to the Company pursuant to a 135 MW agreement which expires in 2016 and an 84 MW agreement which expires in 2011. The Ccmpany's entitlements of this uait represents approximately 75.5% of the output.
The Company has entereo into other agreements with several other utilities for varying periods fcr purchases of system and unit power, for sales of Cotpony system and unit power, and for transminston services. The Company's of preceedings    rates  andthe before   charges FERC.under certain of these contracts are the subject See also Note F cf Notes to Consolidated financia) Statements contained on pages 33 and 34 of the Annual Report to Shareholders for the year ended December re ference.                                         31, 1991, incorporated herein by
: c.        Non-U,lility Generation The Company must periodically seek Requests for-Proposals and purchase 5%
of its power needs from independent power producers.
issued its Third Request for Proposals (RFP #3) in October 1991.As             Thisa result,    latestthe Company solicitation is seeking 132 MW of electric capacity and energy through a competitive bidding process from Qualifying Facilities-("QF") and Independent Power Producers. The RTP has been approved by the DPU and is expected to be completed by the end of 1992.
To date, the Company has in service signed contracts with non-utility generators representing 525 MW of capacity from seven (7) different projects.
Five of these, becoming               totallingin alate operational          capacity 1991. of 343 MW, are operational with the latest Of the' remaining two signed contracts, the most recent, Masspower, has received financing and is under construction with an expected on line date of late 1993. During 1991, non-utility generation represented approximately ten (10%) percent of cur total generation,
: d.       Eq,mArtd Side Managsfnt Peosts duringThe      Company will continue to pursue the installation of OSM programs 1992.
Savings from the installation of measures during 1992 are 20 J
I

i expected to reduce tht summer peak demand by an additional 70 megawatts and               I will save an additional 172,472 megawatthours annually above existing DSM level s, lhe implementation of DSM programs has the potential of reducing the summer peak by 297 megawatts and saving 1,268,100 megawatthours by the year i
2000. Savings from measures installed during 1991 are expected to result in 117,283 megawatthours annually and reduce the sunner peak by 92 megawatts.
See also item 1(c)(1)(ii) " Expected Plant Expenditures and Related Financiag" subparagraph " Demand-Side Management Program Expenditures" preceding,
: e.      NEPEX In June 1970, the Company an:I other utilities activated a computer controlled dispatch center for New England (New England Power Exchange -
       "NEPEX"). Also, the major utilities in New England, including the Company, and certain municipal and cooperative utilities executed a New England Power Pool-("NEP00L") Agreement (dated September 1971) which provides for the joint planning and operation of generation and transmission facilities and also incorporates generation capacity obligations and provisions regarding the use of major transmission lines and payment for such use.
As a result of its participation in NEP00L, the Company's operating revenues and costs are affected to some extent by the operations of other participants -n those arrangements. The table below sets forth certain information as of the date of the Company's 1991 summer and 1991-1992 winter peak loads:
January 16, 1992          July 23, 1991 NCPEX utilities installed capacity (Seasonal Max, rating): ....             25,648 MW               24,616 MW (Seasonal Normal rating):       ..       25,285 MW               24,307 MW
;     NEPEX peak load . . . . . . . . .              18,885 MW               !9,742 MW Company adjusted territory peak load            2,381 MW                2,674 MW The sumer peak load for NEPEX and the Company noted above wcs an all-time seasonal peak. Tne Company's net capability at its summer peak was 3,695 MW, and its, net capability at its winter peak was 3,728 MW. Its corresponding-NEP00L capacity obligations were estimated to be 3,311 MW and 3.426 MW, respectively.
The New England region's previously tight energy supply situation continued to moderate during 1991 due to the comercial operation of Ocean State hwer tJnit 2 in-Burrillville, Rhode Island, Northeast Energy Associates in Bellingham, MA, and Hydro Quebec Phase !! achieving its full 2,000 MW rating. Relatively flat load growth combined with these capacity additions added to NEP00L's reserve margins. The regional supply situation is expected to remain good through 1992 into 1993.
As a result of the 1990 and 1991 additions to New England generating capacity, and decline in energy requirements, the dispatching of Company-owned '
e    generating facilitiet by NEPEX may be affected. While the Company is monitoring the situation closely, it currently does not expect any material adverse effect upon the calculation of the rever;ue increases as permitted by 21 3
y          a =W

  .- .-       _ . _ _                  -=,    - - - . .         .      --     - - . . -.--                 - . . _ _ -
l l
the DPU Settlement Agreement (to the extent such increases / decreases are adjusted based upon the performance of Pilgrim Nuclear Power Station).
In_ March 1983, NEP00L participants signed an agreement with Hydro-Quebec of Canada.          The arrangement, which is designated Phase I, is designeo to provide up to three billion kilowatthours of electricity (hydro-electric) annually to NEPOOL from Hydro-Quebec           a 690 MW interconnection), and includes an eleven year (1986-1997)          energy purc(hase arrangement and energy banking agreement. Construction of transmission and conversion facilities required to
'           transmit the power under the terms of this agreement were completed in 1986, and power deliveries to NEPOOL under Phase I cor.nenced in October 1986. Due to low water levels in certain Canadian provinces, Hydro-Quebec has not been able to deliver to NEP00L previously projected levels of electricity since 1988.                                                                                                      ,
In October 1985, an agreement was finalized between NEP00L and Hydro-Quebec to provide an additional seven billion kilowatthours of hydro electric power annually for ten years. This agreement, designated Phase 11, required expansion of the existing 690 MW Phase I interconnection. The Company. along with other New England electric utilities, entered into an agreement to expand the 690 MW Interconnection with the Hydro-Quebec system or Canada to 2000 MW.
The Phase !! agreement provided for power deliveries to commence upon commercial operation of the facilities. The price of this energy is set based on the average New England cost of fossil fuel for the previous year. The first five years the contract price will be 80 percent of that average, the second five years the price will be 95 percent of that average. The Phase 11 facilities 1991.
began full commercial operation, up to the 2000 MW level, in July The Company receives capacity credit through NEP00L for approximately eleven percent of the generation equivalent of the total Hydro-Quebec Interconnection.
The Company has approximately an 11% equity ownership interest in the two companies which constructed the Phase !! facilities. This is included in the accompanying financial statements. All equity participants are required to guarantee, in addition to their own share, the total obligations of those
_ participants not meeting certain credit criteria. The equity-participants are conipensated accordingly. Amounts so guaranteed by the Company are approximately $25,000,000 at December 31, 1991.
f.
Transmission Line Access to the New Enoland Recion in 1989, Northeast Utilities became the apparent successful bidder for the ownership of Public Service of New Hampshire, an electric utility serving a large portion of the State of New Hampshire. Completion of the transaction is subject to various regulatory approvals. The FERC approved this merger in January 1992. At the request of the Company and other utilities, the FERC
;        imposed conditions on this takeover on the basis that the new combined entity would control most of- the excess generating capacity in New England and most of the available electric transmission facilities entering the Southeastern New England region.             FERC's order has been appealed to the Federal Court of i
22 l
[                                                                                    __    __    _ __.. _ _.___ _

SA Appeals by numerous parties. The merger is expected to be consummated when          i Northeast Utilities files its compilance tariff filing with the FERC.        lhis filing is expected to occur in the spring of 1992.
: g.      Insurance The federal Price-Anderson Act, as amended by the Price- Anderson Amendment Act of 1988, provides that liability from a single nuclear related accident at a U.S. nuclear power plant shall not exceed approximately
              $7,807,000,000. The first $200,000,000 of nuclear liability will be covered by the maximum provided b3 commercial insurance. Additional nuclear liability         '
insurance up to $7,245,000,000 is provided by a retrospective assessment of up to $63.000,000 per incident which can be levied on each of the 115 units licensed to operate in the United States, subject to a maximum assessment of
              $10,000,000 per reactor per_ accident in any year. This additional nuclear liability insurance amount of approximately $7,245,000,000 is subject to change as new commercial nuclear units are licensed and existing units give up their license. In addition to the nuclear liability retrospective assessments discussed above, if the sum of all public liability claims and legal costs arising from any nuclear accident exceeds the maximum amount of available financial protection, each-licensee can be assessed an additional 5% of the maximum retrospective assessment ($3,150,000).
Insurance has been purchased from Nuclear Electric Insurance Limited (heli) to cover certain costs incurred in obtaining replacement power during a prolonged accidental outage at Pilgrim Station and the cost of repair, replacement, decontamination or decommissioning of utility property resulting from insured occurrences at Pilgrim Station. The maximum potential assessments against the Company with respect to losses arising during current policy years are approximately $2,292,000 under the replaceme..; power policy and $6,702,000 under the excess property damage, decontamination and decommissioning policy. All companies insured with NEIL are subject tc retroactive assessments if losses exceed the accumulated funds available to NEIL.
While assessments may also be made for losses in certain prior policy
'          years the Company is-not aware of any losses in such years which it believes are likely to result in an assessment.
Item 3: LEGAL PROCEEDINGS For'further information concerning other Company legal and rate proceedings,-see also Item 1 (c) (1) (xii) " Environmental Matters" in this form 10-K and Notes A.3. and D of Notes to Consolidated Financial Statements contained on page 27 and pages 30 through 31, respectively of the Annual Report to Shareholders for the year ended December 31, 1991 incorporated herein by reference, and Item I (c) (1) (11): " Expected Plant Expenditures and Related. Financing" subheading " Rate Proceedings, Pilgrim Station and Outlook-for future", preceding.
On February 10, 1982 the-Boston Housing _ Authority (" BHA") filed an action
         . against~the Company in the Massachusetts Superior Court seeking approximately
          $10,000,000 in damages for alleged overcharges for electricity and steam furnishedtoover pursuant               a six-year M.G.L. c. 93A. period, together with a claim for treble damages On December 15, 1983-the Massachusetts Supreme l
Judicial Court affirmed an order of the Massachusetts Superior Court 23 l

e dismissing the BHA's claim of unconstitutional and unfair electric rate discrimination and romanded the claim for steam overcharges (approximately 54,000,000) to the Superior Court for completion of the pleadings and trial.
On March 8, 1991, the Company was named in a lawsuit brought in the                                                          ;
            -United States District Court for the District of Massachusetts alleging                                                               i discriminatory employr:ont practices under the Age Discrimination in Employment                                                         i Act of 1967 concerning forty-six employees af f ected by the Company's 1988 reduction in force. The Company and legal counsel are currently analyzing the                                                           {
l allegations made in these actions and intend to defend the Company vigorously.
Based on the information presently available, the Company does not believe it will have a negative _ impact on the Company's financial condition.
Item 4            SUBMISSION OF HATlERS TO A VOTE _JF SECURITY HOLDERS fourthThere         were quarter    no matters submitted to a vote of security holders during the of 1991, e
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EXECUTIVE OEFICERS OF THE REGISTRANT The names, ages, positions and business experience during the last five years of all the executive officers of Boston Edison Company and Harbor Electric Energy Company (the Company's wholly ownea subsidiary) as of March 1,1992 are listed below. There are no family relationships between any of the officers of the Company, nor any arrangement or understanding between any Company offirar and another person pursuant to which he/she was elected as an officer, The expiration ci cach term of office is the next annual meeting and when successors are ouly elected and qualified.
Business Experience Hane. Act and Posit 1Qn                    Qy.Ciu d ut Five Year _s Bernard W. Reznicek, 55 Elected Chief Executive Officer President and Chief                        effective December 1, 1990.
Executive Officer                           Elected President and Chief Operating Officer effective October 1987.
Director since 1937. Was President and Chief Executive Officer of the Omaha Public Power District from 1981-1987. President and Director of Harbor Electric Energy Company since 1989 and Chairman of the Board since 1991.
Thomas J. May, 44 Elected Executive Vice President Executive Vice President                   effective December 1,1990.
Elected Senior Vice President ef fective June 1987.        Director since 1991. F :s responsibility for              '
financial, accounting and information services. Assumed added responsibilities for energy planning and business planning effective February 1989 and resource and corporate planning, customer service, marketing and human resources, effective December 1990. Had responsibility for customer service from June 1987 to February 1989. Was Vi ? President (from 1983-1987) and
                                                ' (1 surer (from 1983 to February
                                                     >2 1    Treasurer and Director of
                                                .o>';,    '
Electric Energy Company since
                                                 .;J9.
Vice President of Harbor Electric Energy Company since 1991.          '
25 I

{                                                                                                                                               - -- !
L                                                                                                                                                    '
I Businest Experience tithAF._L!d.httih11                                                        E E h it.h 1 Lf.h t_Y H U Geotge W. Dav's SB Executive VI, President                                                     Elected Executive Vice President ef fect ive J.inuary 1,1992. Dilector since 1%). Elested Senior Vice                                           i President                          Nucinar effective December 1, 1990. with re.oons 4ility for all nuclear activities. Since January 1, 1992
'                                                                                 responsible for all power delivery                                        '
and supply operativns. Elected Vice                                       :i President offective September 1989.
Pricr to election was Comander Naval Surface force. Oacific 1985-                                          -
88.
Charles E. Peters, Jr., 40 i                                                                             riected SenMr Vice President Senior Viet President - finance                                          effective April 15, 1991. Has responsibility for rinuncial, Accountin9, Infomation Services and Investnr Relations. Was Chief Financial Officer and Senior Vice Presid
* of Genrad, Inc. (1985-1991).                            ice President and Director of Harts, Electric Energy rompany since 1991.
Cameron H. Daley, 46 Elected Senie* Vice President SeMor Vice President - Power S'Jpply                                    effective february 1989. Has responsibility for 90wr supply.
Prior to February 1989, was Vice President                               Power Production, L. Carlisle Gustin, 48 B
Senior Vice President - Marketing                                      i.lected Sen er Vice President effective February 1989. Has and Customer Service                                                   responsibility for marketing,
                                                                            %stomer ervices and enrporate relations. Prict to election was Vice President - Corp & ate Relatione, since September 1986.
26
_ _ _ _ _ - _ _ ---      - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~ - ~ ~                                 ~   ~'

           .s Business Experience Ntme. Aae anif011110D                                            EVf_la9 Past F1vL1 tan John J. Higgins, 59                                              Elected Senior Vice President Senior Vice President - Human Resources effective December 1,1990.
Elected Vice President effective July                                 i 1988. Prior to joining the Company was Director of Construction for the Massachusetts Water Resource Authority in 1988.        Prior to that was                           <
Senior Vice Pren1 dent - Personnel and Industrial Relations, for the Eastern Associated Coal Corporation.
Ronald A. Eedgett. 53                                           Elected Senior Vice Presi6ent Senior Vice President                             Power         eff ective December 1,1991. Has                                          .
Oclivery, Stores and Service                                                                                                             i responsibility for Power Delivrry and                                  '
Stores and Service. Was Director,                                       J Special Projects for Nuclear r
Business and Strategic Planning -
Self-assessment and Organizational Refinement, and for Nucleer Business Regulatary Af fairs (1990.1991).
Special Projects Engineer (1988-                                       '
1990). Prior to that was a Nave.1 Reactors Representative and Senior                                       <
Nucl:4r Manager 'vith the United _
5tates Navy.                                                           _
Roy A. Anderson, 43 Elected Senior Vice President -
L Senior Vice President - Nuclear                                 Nuclear effective January 1,1992.
Elected Vice President                Nuclear Operations and Station Director                                          ;
effective October-1, 1990. Prior to election was Plant Manager Pilgrim huclear Power Station (1988-1990),
Planning and Outage Manager - Pilgrim
,.                                                                                                        Nuclear Power Station (1987-1908).
President, Quadre.c Energy Services Corporation (IP86 1987).
John J. Desmond, 111, 58 Elected Vice President and General Vice President and General Counsel                               Coun:cl in April 1985. General Counsel of Harbor Electric Energy                                       i Company.
i l'
27 p
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                                                                                                     ,    I Business Experience lisL% ll.gt and .PH1110fa br.inglas t . .fiye..Yun Hare 5. Alpert, 47                          Elected Treasurer of the Company
                                                                                                          \
Vice President and Treasurer                offective March 1988, in adjition to              '
his previous position as Vice                       l Presiden'. Head of the treasury                     l Organization effective March 1, 1988.               <
Was Vice President      Rates from 1983              '
to 1988. Assistant Treasurer, Harbor Cicctric Energy Company, since 1991.
* i Robert J. Weafer, Jr., 45                   flected Vice President
* Vice President, Controller and Chief        effective February 1, 1991, Accounting Officer                         Designated Chief /ccounting Officer in April 1988 while holding the position of Controller. Assumed                    !
responsibility for Purchasing Department in April 1988.
Controller and Department Head, Accounting, Budgeting and Control Depsrtment since 1985.
l Theodore S. Convisser, 44                  Elected Clerk os who Corporation                   '
Clerk of the Corporation                   effective September 1986. Assistant Gaaeral Counsel aince 1985. Clerk of Harbor Electric (norgy Compary since 1990.
L t
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i
                                                                                                                       ' am litm 5            li6!ELLLQLlllLf101.SIRANT'S COM30N_SJEK AND_ RELAIE.0R(Kt101EE Ball:RS
: a. BAR.KET INFORMAL 1QS.
The Company's comon stock it licted on the New York Stock Exchange and                                                                                                                      !
the Buston Stock Exchange.                                                                                                                                                                               l See Consolidated Financial Statistics (Unaudited) - Quarterly Stock Data contained on Page 36 of the Annual Report to Shareholders for the year enaed December 31, 1991, incorpor ted herein by reference.
i be
* i                                    As ot' December 31, 1991, the Company had 44,687 holders of record of its                                                                                                                    1 i
Common Stock (actual count of record holders),
r
: c. DIVIDEND.S.
r
                                    -For_infctmation as to the frequency and amount of cash dividends declared per comon share Jarino the past two fiscal years, see Cohsolidated financiai Statistics (Unaudited) - Quarterly Stock Data, contained on Page 30 of the                                                                                                                                '
Annual Report to Shareholders for the year ended December 31, 1991, incorporated hert.in by reference.                                                                                                                                                                        '
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  ._        _                 _ _ _ _ _ . _ _ _ _ . _ _ . _ . . . _ _ _ _ _ . _ _ . . .                                                              . _..       ._-___._.m.
l Item 6 - SEM11Q [lMRCJAL DATA The following table summarizes five years of selected consolidated fintnetal data of the Company.
($ in 000's. gatent for ner sharlf)A!JL1
                - Opersting Hal                 1922                   HB2               110.0                       HD1 Revenues                                    $1,319,714 $1,258,546 $1,269,345 $1,202,655 $1,181,097 income /(!oss) from Continuing Electric Operations                                          $94,670             $95,440*           $ ( 16,13 *,) * * $84,212 1
Earnings /(Loss)                                                                                                                                 $86,721 Per Comon Share from                                                                                                                                                                   ,
Continuing Electric                                                                                                                                                                      '
Operations                                                  $1.96          $2.0l*
Total Assets                                                                                 $(0.88)**                    $1.86                    $1.97
                                                                  $3,119,508 $3,014,169 $2,878,271 $2=817.050 $2,702,960 Long Term Debt                                    $1,D6,545 $1,074,025                         $948,839               #965,534                   $B22,659 Redeemable Preferred /
Preference Stock                                  $100,000               $100,000         $100,000                $100,000                    $50,000 Cash Dividends Dec11 red Per                                                                                                                                                                   ,
Common Share                                             $1.505             $1.535                $1.745               $1.82                    $1.80                           t
* Jacludes $0.41 per comon share for an accounting change; See Note 11 of Notes to Consolidated Financial Statements it.cluded in the Annual Report to                                                                                                       -
Shareholders for the Year Ended December 31, 1991, incorporated herein by                                                                                                          '
reference.
               ** See item 1(c)(1)(li): "Lxpected Plant' Expenditures and Related Financing" subheading " Rate Proceedings, Pilgrim Nuclear Power Station and Outlook for future" preceding.
Item 7 - MAN %Rilt(T'S DIStVH10RRD ANALUIS OF REStiLIS OF QPfaI10M.EI FINANCIAL COND111Q8
                         - See Management's Discussion and Analysis contained on pages 14 through la of the Annual Report to Shareholders for the year ended Deceinber 31, 1991, incorporated herein by reference. See also item 1 (c) 1 (11):                                                                   " Expected Plant Expenditures and Related Financing" subheading " Rate Proceedings, Pilgrim Nuclear Power Station, and Ntlook for the future", preceding.
           - litm 8 -- CONSOLIDATED FINANCIAL STATEMENTS klD EVEP.lfttfNTA8LQala See list of Consolidated Financial Statements contained in Part IV, item 14 incoroorated hereili by reference.
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EABIJ1l lim 10 - ole (10MJQ_Ul[,QllyE OFFICER; 0F TH( REGISTRA31                                       '
(a) 10ENT!fl M UON Of D MECT.QR$,
Seo " Election af Dire: tors - Infonntion about Nominees and incumbent Directors"       cor.tained on pages 2 through 7 of the definitive Proxy Statement dated March 19, 1992 incorporated herein by reference.
D) 10fJillfl[A110tLQI E&LC.VilVL OfflCIRS The information required by this item is set forth at the end of Part I                 '
of this form 10 K ur, der the caption "Executi'.e Officers of the Regt;trent",
pursuant to instruction 3 of paragraph (b) of item #11 of Regulation S K.
(c) 10ENTirit'AT10))_QF EERTAIN 116! fill (#ff EMPLOXf1S_.140J APPLI ML(,
(d) fAdlLLR[LA.ll0R$31PS            NOTRPt.1C41L (e) M51!Ifl$.13.l'lEIEf                                                                 [
i for inforuitic, relating to the buriness experience durino the past five years and other directorships (of companies subject to certain SEC requirements) held by each persnn nor,trated to be a director, see " Election of               .
Directors - Information abott' Nominees and Incumbent Directors" containea on pages 2 through 7 of the definitive Proxy Statement dated March 19, 1992, incorporated herein by reference.
for information relating to the business experience during the past five yearc of each person who is an executive o'ficer, see Part 1
* Executive Officers of the Registrant".
(f) Jhy0LVEMENT IN CLRTAIN LEGAL PR0(((01NGS                            ffQlRPLICABLE, (9) ERQMOTERSE.I0illEDLffl5_QIf5 - NOT APPLICASIL                                         ,
ll.M_ll.:.161CWilVE COMPER$All03 See par.tgraphs entitled " Director Compensation *, " Executive Compensation", " Pension Plans", 'Saving; Plans', '' Key Executive Benefit Plan",
           " Recognition and Retention Program", "Jncentive Compensation Plans", " Deferred                  .
Ccmpensation Agreernents" and " Performance Share Plan" contained on p&ges 7 through 11 of the definitive Proxy Statement dated March 19, 1992, incorpcrated herein by referente, Iier 12 - SECUR)TY OVERS 31P,,_Q1_(JJJf]3 BENEFICI AL _0_WNERS AND MANAGEMfNT y
(a) SICURITY OWNERSHIP OF flRIAlfLENEflCIAL _0WN18.5 See pages 3 through 6 " Beneficial Ownership of Securities'' of the definitive Proxy dated March 19, 1992, incorporated herein by reference.
32
    ._ ._   -                       _-._._u.._

,_ . . . _ . _ . _ _ . . . . _ _ . _ . ~ _ . _ . . _ . _ _ _ -                            _- _ _ _ _..___._ _.-.-_ _-._.__ _ _..-. _
(b) 1((vRITY INNERSHIP 07Ef, MENT.                                                                                                                                                  i See "Clection of fairectnrs - Information about hominees and incumbent Of rectors" contained on pages 2 througi. 7 of the definitive Proxy Statement                                                                                                              :
dated March 19, 1992, incorporated here'n by reference.
l (f) f.llMG11.,,1N CONTROL                    NOT AEPLi1MLI ItcM 11 + CERTAIN RELATIOG R!dS AND RELAlfA.lBANSAclL01s                                                                                                                                   I i
Not applicable.                                                                                                                                                                     :
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l IELLY                                                               i itfM.14:                   EXHIBITS. CON 1QL10Al[0 FINAE,jAL11ATEMENT SCHEDieLES AND Rif0k1S 08 EQFM fLd                                                                                                                              l han l
anau.nl                                   r i;
Shareholders EtRDit               form 10 d Item 14(a): Exhibits and Consolidated financial                                                                                        l Statement Schedules:
'                                    Consolidated Statements of Income for each of the                                                                               i Thret Years in the Period Ended December 31, 1991                                      19                                       i Consolidated Balance-Sheets as of De: ember 31, 1991                                                                            '
and 1990 20-21 Consolidated Statements of Retained Earnings for each of the Three Years in tre Period Fnded Decemhtr 31. 1991                                                                      21 I
Consolidated Staten'ents of Cash Flows for each                                                                                  !
of the Three Years in the Period Ended
,                                   Decenter 31, 1991                                                                                                                ,
22                                         -
:onsolidated Schedules of Capital Stock, as of December 31. 1991 and 1990                                                             23                                         -
t Consolit oted Schedules cf Indebtednes/. as of                                                                                    I December -31,1991 and 1990 -
24                                         -
Notes.to Consolidated Schedules of Cspital Stock                                                                                  :
and Indebtedness                                                                       25-26                                      '
Notes to Consolidated financial Statements                                              27+3A Report of Independent Accountants 50            3 Selected (onsolidated Quarterly Financial Data                                                                                     .
(Unaudited)                                                                          36                                           -
* elected Consolidated Statistics (Unaudited)                                         37-39 Schedules for Years Ended December 31, 1991, 1990 and 1983                                                                                                                             .
V_            t       Property, Plant and Equipmert_                                             S-1 to S-3                   -
VI            -
Reserves for Depreciation and Amortization of Property, Plant                                            S-4 to S 6 and Equipment 34
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,    ,-                                                                                                                                                                            t I'
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Guarantees of Securities of Other                                                               S-7 Issuers if    -
Short-Term Sorrowings                                                                           S.g t
X     -
Supplementary Inome Statement                                                                    S9 Information All other schedules are omitted since they are not required, not applicable, or contain only infumation which is otherwise provided in the financial statements or notes thereto listed above.
.                                                                                                                                                                                  I.
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A .
4 Exhibit      SEC Docket Exhibit 3                                    Articles of ineo,poration :nd Dy-Laws incorporated nerein by reference:
3,1                           Restated Articles of Organizatien        2(a)4     2 58581 3.1.1                        Amendment to Restated Articles of         2.4       2-649)s Organization dated May b, 1977 filed Herewith:
3.1.2                         Amendment to Festated Articles of        -         -
Organization filed Hay 26, 1978 3.1.3                          Amendment to RAstated Articles of        -         -
Organization filed May 6, 1980 Interparated herein by reference:
3.1.4                           Amendment to Restated Articles of Organization filed May 4,1983           3.1       1 2301 form 10-Q for the Quarter Endec
;                                                                                                                                            March 31, 1983 3.1.5                           Amendment to Restated Articles of        3.1 i                                                                                                                                             1-2331 Orgentration filed April 28, 1986 f orm 10-Q for the Quarter Ended March 31, 1906 3.1.6                            Amendment to Restated Articles of       3.5       1-2301 Organization fi'ed Augurt 27, 1986               form 10-K for the Year Ended
:                                                                                                                                           Dec. 31._1986 L                                                       3.1.- 7                           Amendment to Restated Articles of        3.1      1-2301 i                                                                                         Organization filed February 19, 1987 p                                                                                                                                           form 10-Q t                                                                                                                                           for the
!-                                                                                                                                          Quarter Ended l-March ?),- 1987
* Refiled pursuant to SEC record retention rules.              -
36 L
L

           \
Exhibit                 SEC Docket 3.1.8       Amendment to Restated Articles of             3.1.8             1-2301 Organt/ation filed May 5, 1987                                  form 10 K for the Year Ended Dec. 31, 1987 3.1.9        Amendr'ent to Restated Articles ,f            4.1               33 24271 Organization as filed May 27, 1988                              Registration Statement dated Sept. 22, 1988 3.1.10      Certif;cate of Vote of Directors            4.2                  1-2301
'                                   Establishing a Series of a Class of Stock, filed March 9, 1987                                      Form 10-Q for the i                                                                                                  Quarter Ended                         t Sept. 30, 1988 3.1.11     Certificate of Vote of Directors            4.3                  1 2301                               !
Establishing a Series of a Class of                             form 10 0                             -
Stock, filed October 4, 1988-                                    for the
~                                                                                                  Quarter Ended Sept. 30, 1988 filed Herewith:
3.1.12    Amendment to Restated Articles of            -                    -
L Organization as filed November 7, 1991.
3.1.13    Certificate of Vote of Directors             -                   .
estabilshing a class of stock.                                                                          ,
filed November 26, 1991.
i incorporated herein by reference:                                                                                        '
3.2       Boston Edison Company Bylaws                3.2
-                                                                                                 1-2301 April 19, 1977, as amended January                              form 10-K 22, 1987, January 23.-1989 and                                   for the May 24, 1988 Year Ended December 3.5.,                          .
3-                                                                                               1988.                                   4 3.3       Boston' Edison Company Dylaws               3.1 1 2301 April 19, 1977, as amended form 10.Q
                               ~ January 22, 1987, January 28, 1988,                             for the May 24, 1988 and November 22, 1989                             Quarter                                  e Ended June 30, 1990                                !
,.                                                                     37 k
  ,- N +0  r , w,-   v     ,ne p .e-w., r-r-n ro.,-- .g 2 <wev me.m s,    ,e  rw -     o cuem        r..w-g .,we.- .+s-a, -4 s-  -
a ,en *

                        . . - ~ .               - - . . .-
                                                           . . - . . ~ - - - - . - . -                                                  . - . . - . , . - . . - . . - - .
i Exhibit              SEC Docket 3.4               By Laws of Harbor Electric Er.er9y                                                      3.4        1 2301                            '
Company form 10 K                         '
for the Year                      i c                                                                                                                                        Ende<*                            1 December 31, 1989                              it 3.5               Articles of Organization of Hart.or                                                      L3         . 2301 tiectric Energy Company dated                                                                      form 10 K December 22, 1989.
for the Year                        '
Ended
,                                                                                                                                      Deceruber 31,                       !
1969 3.6              Amendmerit to Articles of Organization                                                   3.6       1 2301 of Harbor Electric Energy Company                                                                  form 10 K filed Decerrher 14, 1990                                                                                                               .
for the Year Ended                                !
I December 31.
1990 filed Herewith:                                                                                                                                                ;
3.7             Amendment to Articles of Organization                                                     -         -
                                                                                                                                                                          .t i
of Harbor Electric fnergy Company,                                                                                                       i filed November 4, 1991.                                                                                                                 ,
Exhibit 4              Instruments Defining the Rights of Security Holders, including indentures incorporated herein by reference:
f 4.1              Indenture of Trutt and first Horigage                                                    B2        2 4564 dated December 1, 1940 nith                                                                                                                .
State Street Trust Company                                                                                                                r
;                4.1.1          Tenth supplemental indenture dated                                                         7.5 April 1, 1950                                                                                       2 8349                                 .
4.1.2          Twelfth supplemental indenture dated                                                       4.2      2 80748 l                               Noven.ber 15,_1951 4.1.3          Twenty-fourH1 supplertental indenture                                                      4.1.3
;                                                                                                                                   1-2301                                 !
i dated June 1 1962                                                                                   fore 10 K for the ' lear Ended L                                                                                                                                   Dece;nber 31                           !
1990 l
L
                                                                          'i B                                                                                             ,
(.

  )
         ,a l
Exhibit                          SEC Docket 4.1.4'                Twenty seventh supplemental indenture                                                              4.1.4                     1 2301 ddted 'lovember 1,1955                                                                                                       form 10 K          !
for the Year       ;
Ended Decew/oer 31        l
.                                                                                                                                                                                      1990 r
4.1.5                Twerdy ninth supplemental indenture                                                                4.1.5                      1 2301
;                                                        dated June 1, 1967                                                                                                           form 10 K           L for the Year       i Ended               !
December 31
'                                                                                                                                                                                     1990                '
i 4.1.6.                Thirtieth-supplemental indenture 4.1.6                     1-2301 dated November 1, 1968                                                                                                                           ;
form 10 K for the Year Ended Decexher 31 1990 4.1.7                  Thirty-first supplemental indenture                                                               4.1.7                     1-2301 dated December 1, 1969                                                                                                       form 10-K for the Year         ,
Ended December 31          !
.                                                                                                                                                                                    1990                 1 4.1.8                  lhirty second supplemental indenture                                                               4.1.8                     1 2301               4 dated July 1, 1970                                                                                                           Form 10 K for the Year         '
Ended t                                                                                                                                                                                   December 31 1990                  I
                                -4.1.9              . Thirty-third supplemental indenture                                                                 4.1.9                     l-2301 dated May 15, 1971                                                                                                           form 10 K for the Year          '
Ended December 31 1990 4.1.10                Thirty-fifth supplemental indenture                                                                 4.1.10                   1-2301 dated April 15, 1977                                                                                                         form 10 K for the Year Ended             '
December 31,-       --
1989.
l l
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1 f
I Exhibit          SEC Docket                                                ;
4.1.11          -Thirty sixth supplemental indenture                                          4.1.11       1 2301                                                        ;
dated December 15, 1978                                                                   form 10-K                                                      !
for the                                                      '
Year Ended December 31,                                                   I 1989.
4.1.12          Thirty-seventh supplemental indenture                                         4.1.12      1 2301 dated October 31, 1979                                                                    Form 10 K for the Year                                                  i Ended December 31, 1989                                                          '
filad Herewith; 4.1.13          Thirty eight supplemental in.ienture dated January 1, 1982 I
Ir.corporated herein by reference:
,                                                                                                                                                                                                         i i'
4.1.14          Thirty ninth supplemental-indenture                                           4.1 dated April 15, 1983                                                                      1-2301 Form 10 0 c
for the                                                        -
Quarter                                                        .;
Ended Ma(ch 31, 1983                                                  l 4.1.15           Fortieth supplemental indenture                                                                                                                          !
'-                                                                                                                             4.1        1-2301 dated April 1, -1984                                                                                                                                      i Form 10-Q for the                                                         ;
Quarter Ended March 31, 1984 P
4.1.16          forty first supplemental indenture                                            4.1 dated April 1, 1985                                                                       1 2301                                                          '
form 10-Q                                                        -
for the                                                          l Quarter Ended March 31, 1985 4.1.17           Fe ty-second supplemental indenture                                           4.1 dated July 15, 1986                                                                      1 2301                                                           ;'
Form 10-Q e                                                                                                                                        for-the Quarter                                                          ;
                                                                                                                                       - Ended                                                            !
June 30, 1986
_ Refiled pursuant'to SE0 record retention rules b
'I 40 t-                                                                                                                                                                                                        -
ve, w, ,- ,v..,-,w,,h.-,        ,.v,-e,-m,    ,-w-,,- c e r ,r ,,mv.,..,w,..,w.,m-,-  ..--.-r __.~m.%
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                                                                                                                                                     ~ _ . -- .--- _ _ . - - . , , - --, . - - _ _   -

l Exhibit                  SEC Docket 4.1.18                  Forty third supplemental indenture                              4.1                 1-2301 dated September ;5, 1987 Form 10-Q for ite                                   !
Quarter Ended Sept. 30, 1987                            '
4.1.19                 Revolving Credit Agreement dated                                  4.1                1-2301 as of May 25, 1988 Form 10-Q for the Quarter Ended June 30. 1988 4.1.20                Amendment to Revolving                                            4.1.20              1-2301 Credit Agreement, effective                                                          Form 10 K March 10, 1990                                                                                                                  ,
for the Year                               7 Ended                                       ,
Dec. 31, 1689.
4.1.21                Medium Term Nales Series A - Indenture 4.1                                           1-2301 dated as of September 1, 1988. between Boston Edison Company and Bank of                                                    form 10-Q Montreal Trust Company for the Quarter Ended September 30, 1988 4.1.22                Series 8 Medium Term                                                1.1 1-2301 Notes Distribution Agreement                                                         form 10-Q for the                                      -
Quarter ended M-irch 31, 1990 4.1.23               First Supplemental Indenture                                        4.1               1-2301                                       '
dated as of June 1, 1990 to                                                          Form 8-K Indenture dated as of September 1,                                                 dated 1988 with Bank of Montreal Trust June 28, 1990 Company - 9 7/8% Debenturer due June 1, 2020.
4.1.24               Votes of the Pricing Committee of the                                4.1 i
1-2301 Board of Directors of Boston Edison                                                  Form 10-Q Coinpany taken on December 11, 1990                                                  for the re: 8 7/8% debentures due                                                            Quarter ended December 15, 1995                                                                    March 31, 1991 4.1.25              Amendment to Revolvin9-Credit                                    -4.1
'                                                                                                                                 1-2301 Agreement effective April 1, 1991                                                 -form 10-Q
'                                                                                                                                 for the Quarter ended June 30, 1991 l
'                                                                                                41 l
         . .- . - - . -           _ , . - . _ . _ _                _ , _ _         - . . . , . - -  ~ . . - _ - ,                .- --              . . _ - - . . _ . - _ . , ..

        - . . ___                .m._           . . _ _ . . _ _ _ _ . . _ _ _ . - . _ _ _ _ _ _ . _ _ . _ _ . _ _ _ _ _ . _ -                                   -
t Exhibit       SEC Docket Filed Herewi.h:                                                                                                                                      1 l
4.1.26               Indenture of Trust and Agreement among                                                          -
the City of Doston, Massachusetts (acting by and through its Industrial Development financing Authority) and 1
Harbor Electric Energy Company and Sha wut Bank, N.A., as Trustee, dated November 1, 1991.                                                                                                        ,
j 4.1.27             Votes of the Pricing Committee of the                                                           -           -
Board of Directors of Boston Edison                                                                                    i Company taker. August 5,1991 re: 93/8'4                                                                                  !
debentures due August 15, 2021 lQII:               (Other Supplemental Indentures are Mt filed herewith since they constitute L
only conveyances of additional property                                                                                  I to the Trustee under the Indenture and do not amend the Indenture or relate to outstanding series of first Nortgage Bonds.)
                            !@II:              (The registrant agrees to furnish to the Securities and Exchar.ge Commissicn, upon                                                                                 -
request, a copy of any other instrument with respect to long terra debt of the registrant. - Such other debt instruments are not filed herewith since they do not                                                                                  ,
relate to I.uthorized debt in an amount
                                           . greater thin 10% of registrant's total assets.)
Exhibit 10                     Material Contracts incorporated herein by reference:
10 1.1         . Form of Deferred Compensation
* Agreement, as Amended April 26, 1984                                                            10.1.1    1-2301 form 10-K for the
;                                                                                                                                                     Year Ended December 31, l                                                                                                                                                    1984 i
10.1.2          form of Deferred Compensation                                                                    10.1.2 i-                                                                                                                                                   142301 i-Agreement, as Amended November 27,                                                                        ft,rm 10-K         ,
1985                                                                                                                         ;
for the            '
Year Ended December 31, 1985 42
   , ..       . .. _ _ , -             ._ - ,, ,_. ,. _ .__                _ ..-.,.__ ._,~. _ . _ _ ._ _ _ . _ _ __ ._._ _ . _ _ _ _ _ __ _

                                                ...      _ _ . ~ _ _ _ .
C Exhibit                       SEC Docket 10.1.3             form of Deferred Compensation Agreement, as Amended                                           10.1.3                   1-2301 November 27, 1986                                                                        form 10 K       '
for the Year Ended December 31, 1989.           ,
10.2.1              Form of Deferred Fee Agreement, as Amended April 26, 1984                                          10.2.1                   1 230)
Form 10 K for the Year Ended December 31, 1984 10.2.2             Form of Deferred Fee Agreement as Amended November 27, 1965                                   10.2.2                   1-2301 Form 10 K for the Year Ended        ,
December 31, 1985 10.2.3             Form of Deferred Fee Agreement, as Amended November 27, 1986                                  10.2.3                     1 2301 Form 10 K for the iear Ended December 31, 1989.
10.3          Key Executive 6enefit Plan                                      10.4                   1-2301 Form 10-K                 '
for the File Herewith:                                                                                               Year Ended December 31,            '
10.3.1       Key Executive Key Benefit Plan                                                            1981 Standard Form of Agreement, May 1986, with modifications, applicable te Bernard W. Rcznicek, George W.
Davis, Thomas J. Hay and Ralph G.
Bird incorporate herein by reference:
10.3.2      Amendment to Key Executive Benefit c
Plan dated February 1, 1986                                       10.4.1                    1 2301 Form 10 K for the Year inded December 31, 1985 43

   . _ - . _            . - - _ ~ _                                    - - -
                                                                                  - - _ _ - - - , -                                . . - - - . .                              - - . ~ . - - - ,           .- .
t
 ,                                                                                                                                                                                                            l <
1 r
Exhibit                        SEC Docket 10.3.1          Amendments to Key Executive Benefit                                                                                                               i 10.1                      i-2301 olan dated May 9, 1986                                                                                                                             :
for the                                           '
Quarter Ended June 30,                                           ;
1986                                               i 10.3.4          Key Executive Benefit Plan Agreement                                  10.4.3                     1 2301 dated as of January 1. 1987 for                                                                                                                    ;
r Ralph G. Bird                                                                                   form 10.K                                          ;
for the                                             '
Year Ended December 31.                                       i 1987                                             ?
10.4            Description of Supplemental fee                                         10.5                      1 2301
.                                                          Arrt.igement for Certain Directori                                                               Form 10 K for the                                            i Year Ended                                          '
December 31,                                        ;
1983                                                 '
10.5                                                                                                                                                                  i Executive Ar,nual incentive                                            10.5 Compensation Plan                                                                                1-2301                                              !
Form 10 K                                           i-for the Year Ended                                          i December 31, 1988.
10.5.1             Executive Long Term incentive Compensation Plan                                                       10.5.1                  1-2301                                                ;
Form 10 K for the Year Ended December 31, 1988.
                                .      10.6               Description of Nuclear Restart ano                                     10.6                    1 2301 Manugement Continuity Plan, effective January 26, 1989 - Ralph G. Bird                                                             form 10 K I                                                                                                                                                       for the Year Ended December 32, I
1988.
10.7                Recognition and Retention Program                                      10.7                 1 2301 form 10-K                                                   i for the Year                                                -
Ended
* December 31,
* 1989                                                        i i
1 44                                                                                                        i 4
   ,    y   <v %--t, e w v <e-.r vew,r---rm,---e   er, .+   -=--m~;we+    e  v,w.      , , , .  .e~~.e.-w=r --.we.-, . . --,o--.         -w.-,   . -. . - ,      . - - . - - . - - . = * ~      - - - + -

     . ~ - . .              - -      - ..__ - - ..          . - - -         .      - - - .._~ - - - -..- ,           -. .
Exhibit                      SEC Docket 16.8       Deferred Campensation Plan               10.8                 1 2301 fonc 10 K for the Year Endad December 31, 1989, 10.9      Performance Shere Plan                   10.1                  1-2301 form 10 0 for thu Quarter Ended September 30, 1991.
filed Herewith:
10.10     Agreement with Stephen J. Sweeney        -                    -
dated September 27,1990 t
10.11     Agreement with Ralph G. Bird dated       -                    -
December 18, 1991.
Exhibit 13       Ccaputation of Ratio of Earnings to fixed Charges Irscorporated herein by reference:
12.1      Comuutation of Ratio of Ehrnings to      12.1                1-2301 fixed Charges for the year endtd                             form 10 K for December 31, 1989, the Year Ended December 31,                ;
1989                        >
Exhibit 33       Annual Report to Sharebelders filed herewith:
13.1      Boston Edison Company Annual Report to Shareholders for ths Year Ended December 31, 1991, which, except for those portions thereof which are expressly incorporated by reference herein, is furnished for the information of the Securities and Exchange Commission and is not deemed to be " filed" as part of this report.
L          ' Exhibit 18         Letter re: Change in Accounting Principle
!             Incorporated herein by reference.
L                     16 1      Letter of Independent Certified          18.1                1 2301 i
Pubile Accountants                                           form 10-Q for l                                                                                            the Quarter o                                                                                            Ended March 31, 1990 45

i i
f Exhibit                                         StC Docket Exhibit 22                     Sub:,idiaries of the Registrant                                                                               -
22.1            Harbor Electric Energy Company i
(incorporated in Massachusetts) is                                                                                                                                  ,
a wholly owned subsidiary of Boston                                                                                                                                 '
Edison Company.                                                                                                                                                     ,
N Exhibit 24                      Consent of Independent Accountants.
F11ed herewith:                                                                                                                                                                                     ,
24.1             Consent of Independent Accountants to incorporate, by reference, their opinion included with this form 10 K in thn form S 3 Registration Statements filed by the Company on July 15, !986 53 T10);. September 14, 1990 (file No.(File                                                             33-36824),No.
July 12,1991 (file N. 33 41698) November 22. 1991 (file No. 33-44157) and in the Form S 8 Registration                                                                                                                 l Statements filed by the Company on 0;tober 10, 1985 (file No. 33 00810)-J91y 28, 1986 (file No. 33 7558) and December 31. 1990 (file No. 33 30434).
Exhibit 28                       Other Exhibits incorporated herein by reference:
28.1              DPU Settlement Agretment with                                                                           28.1                              1-2301 Boston Edison Company dated                                                                                                                                            ,
October 3, 1989                                                                                                                           form 8 K dated Octcber 3, 1989
                                      '28.2                Settlement Agreement between Boston                                                                     28.1                              1 2301 Edison Company and Commonwealth form B K Electric Company, Montaup Electric                                                                                                      dated Company and the Municipal                                                                                                               December 21, Light Department of the Town of                                                                                                          1989 Reading, Massachusetts, dated                                                                                                                                         -
January 5,1990.
                                    -28.3                 Pilgrim Outage Case Settlement between 28.?                                                                                              l 2301                        -
Boston Edison Company and Reading                                                                                                       form 8 K Municipal Light Department triarding                                                                                                    dated Contract Demand Rate, dated December 21, 1989.                                                                                                                               December 21, 1989                       .
28.4                Settlement Agreement Between Boston                                                                     26,2                            1 2301                         '
Edison Company and City of Holyoke Gas and Electric Department et. al.,                                                                                                   form 10-Q i-                                                        dated April 26, 1990.                                                                                                                  for the Quarter Ended March 31, 1990 46
{
L l-;
_ _ . , _ . . _ _ , , . , . . . _ _ . . _ . . - - . .                     _ _ _ . . . ~ . . . . _ . _ _ , . _ _ _ . _ . . . . , . .                              _ _ . . . . _ . _ . _ _ , _ . _ . _ _ _ . _ . _ _ -

     . . _ _ . _ _ _ _ _ _ . _ . - _ _ . _ . . _ . . _ _ . . _ . _ . _ _ _ _ _ ~ . _ _ _ ..
r      .'
i Exhibit     SEC bocket    i 28-5      Information required by SEC Form Il K k
1-2301 form 8 -I for certain Company tmployee benefit plans                                          Amendment to for the years ended December 31, 1990 and                                                            '
1989. Pursuant to the currant rules and                                              SEC Form 10 K for the years regulations of the Securities and Exchange                                           ended Commission this information may be filed                                             December 31, as an exhibit to SEC form 10 X, via a form                                           1990 and
'                                      8 amendment, subsequent to +,he Company's                                            1989, dated     '
filing of SEC Form 10 K.
June 28, 1991 and April 30, 1990, res-pectively, item 14(b): REPORTS ON FORM 8.K                                                                                       f i
There were no Fcrm 8 K's filed by the Company in the fourth quarter of 1991.
* A Form 8 Kby Commission      dated   February 26, 1992, was filed with the Securities and Exchange the Company.
This report contained information regarding the permanent shutdown of the Yankee Atomic Nuclear Power Station, b
a
[
?
i L
I                                                                                                                                           1 s
47 i;                                                                                                                                          .
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_ . . _ _ - _ . _ . . - _ . _ _ . . ~ . _ _ . . _ . _ _ _ . _ .                                                                           . _ _ _ _ _ . . _ _ _ _ _ . . _ _ . _ _ _
l 4 -
                                                                                                                                                                                                  ?
ElRBIELS                                                         l Puesuant to the requirements of Section 13 or IS(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed                                                                                                   '
on its behalf by the undersigned, thereunto duly authorized.
B051DN [DISDN COMPANY By 41/._ChAL.fLL. l              fttfua_.)L.
Charles [. Feters, Jr.
Senior Vice Pret,ldent - Finance (Principal financial Officer)
Date: March 26, 1992                                                        L Pursuant to the requirements of the Securities Exchange Act or 1934 this report has been signed below by the following parsons on behalf of the registrant and in the capacities indicated on the 26th day of March,199?.
               /.1/ 0.ti.9ard W. Reznitf}u.                                                                                         Presideat Chief Executive Bernar;: W. Re;nicek Officer and Director
              !s/ Tho n LJ._Mav_.,
lhomas J. May Executive Vice President and Director
              /c/ 6eorae _W, J3yls George W. Davis                                                                                             Executive Vice President and Director f.il lphtti 1.W nfer Jr.                                                                                              Vice President, Controller lad t
Robert J. Weafer, Jr.                                                                                      Chief Accounting Officer U/ Steoben J. Sweeney Chairman and Director Stephen J. Sweeney
            /M.31111iLm F. CQmpell                                                                                                 Director William f. Connell
           /.11. Gary I. Countryman                                                                                                Director Gary L, Countryman i
           /s/ Thomas G._Digno. Jr.                                                                                               Director Thomas G. Dignan, Jr.
l 48 L                                      ,                     _ _ . _ , _ . . - - - - . . - - - - - - - - - - - - - - " ~ ~ ~ ~ ~                                                        ~ ~ ~ ~

4
                   /s/ Charles K. Gifigrd                                                                           Dirtetor Charles K, Gifford
                  /s/ Nelson S. Gifford                                                                             i,irec tor Nelson S. Gifford l
U L fanDeth 1. Gustott                                                                             Director Kenneth 1. Guscott                                                                                                                                                                          i Director Natina S. Horner S/ William D. Manly                                                     . . _ _                      Director William D. Manly Director Sherry H. Penney b / Herbert Both. Jr.                                                                               Director Herbert Roth, Jr.
b L f ul E. Tsoncas                                                                                 Director Paui E. Isongas                                                                                                                                                                              '
b/ Charles A. Zraket                                                                               Director Charles A. Zraket 49 i
           ,  , . - . - . . .                                                     .m        -.,., . - ..- ,, .-.c.,   , , , , . , - - - - - - -.--e--,-   vm.-,m,         - .mw.,. - . - _ , . , - - , ,   .,, _my -,e   ,

k Coo 3ers                                                               * " * " " " ~                                                        '
                   &Lyarand REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Directors of Boston Edison Company We have audited the consolidated financial statements of Boston Edison December    31, Company and subsidiary (the " Company") an of period ended December 31,1991                 and 1990 and for each of the three years in the 1991, included on pages 19 through 34of                             whichthe 1991      financial           statements Annual   Report toare Shareholders of the company and incorporated by reference herein.                                                                                  ;
We Itemhave14(a)also of this  audited Formthe 10-K.financial statement schedules listed in These consolidated financial statenents      and         financial     statement responsibility of the company's management.                        schedules are the                                                               7 is to express an opinion on these financial statements andOur responsibility financial statement schedules based on our audits.
eccepted auditing standards.We conducted our audits in accordance with generally Those standards require that we plan   and whether thn perform              the audit   to obtain               reasonable assurance about misstatement.financial               statements are ' free of material An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
principios used and significant estimates made by managementAn aud                                                        as well-as evaluating the overall financial statement presentatkon.
We believe that our audits provide a reanonable basin for our cFinion.
In our opinion referred to above presen,t fairlythe consolidated                 in all materia)                 financial statements respects,     the 1991 and 1990 and the consolidated results of its operations and its cash flows December     31 1991,    for each of the three years in the period ended accounting p,rinciples.in ccnformity with generally accepted In addition, in our opinion, the consolidated financial statement schedules referred to above, when       considered takeninasrelation             to the            basicfairly,       consolidated              financial i
statements                             a whole,          present                                      in all material respects, the information required to be included therein.
Financial Statements",-Asindiscussed          1990 the Compa      in Note H of " Notes to Consolidated unbilled mathod of recognizing revenues.ny changed to the Boston, Massachusetts January            1992, except as to the21[nformation Qh                                   /MV presented in Item 6 of                                                 COOPERS & LYBRAND i
i Note D for which the date'is February 26, 1992 50 l
  ._   .                   .-                         ..       , . _ . . - -             -          ._ . . _ .         -  . _ . . -    , - . - . _ _ . _ ~ - ,

00STON EDISON COMPANY               SCHEDUL.E V PROPERTY, PL ANT AND EQUIPMENT DECE MBEH 31.1991 (IN 1HOU5 ANDS)
Column A
_ Co!umn F Balance at Close of period Elecinc Plant:
Land and Rights of War 538,495 Generating Station and Substation Buildings und Misc. Structures                                                                               408,249
                          - Electric Generating Equipment 1,475,395 Ts ansmis pon, Distribution.
Street Ughtsng and Other trolization Equipment 1.58(,,792 Transmistoon and Distribution-Herter Electrt Energy Company 23.120 Total Electric Plant                                                                               3,532,0bf r
Nucieat Fuel 256,199
,                          Non Uhhty propony 950 Construction Work in Psogrdtis 99,216 Construction Work in Progress-                                                                                                                   .
Harbor Electr6e Energy Company Total                                                                                            654 gf89J1{
Noten (000's)
(1) The informal <on called for by columns B. C, D and E for 1991 is om:ned as neither the total additiont not the total retirements during the year exceed 10% of the balance et the end of 199t. Total additions and retirements, at cost',- were $210,885 and $30,333, resp #ctevely (2) Physical property (electric) was depreclated on a straight-kne oat,is at various ratos ranging from 2 'v4*4 to 4 59% in 1991.
Fo* 'urther information relating to the Company's pokcies regarding oep eciation and amortaation, reference Nct t A,
* Summa'y of                                                                                    ,
SignAcant Ac. count.ng Pohcies' of Notes to Consolidated Financial Statements, incorporated herein D/ reference (Annual Report to Snarcholders for the yest ended December 31,1991, page 27)
(3) Aperoximately $87.000 of additions, at cos*, in 1991 rotated so vancus mod:fications made to the Company's trensmission and d4stnbution system dunng the year, approximately $99,000 f 9 presents an increase m generating
                          . equipment and the remaindJr meludes addit.ons to generating titehon and other plant
                      ! Reference is made to Note A," Summary of Significant Accounting Pokcies*- Allowance for Funds Used
                     - Dunng Constructicn of
* Notes to Consohdated Financial Statements *, on page 27 of the 1991 Annual                                                     -
Repon to Shareholders, incotporated herein b/ referer ; t,
                                                                  - S-1 5
f
  -,       . . ., , . . . - , . . , - , , . . . ~ . ,
                                                           ..,--,...,-_._._.m._-.-,_.--..                   ..__,.-..m..-..       , . _ . . , . . . - - . _ . _ - . . _ _ .

__.-_~._.._.____-__.m.._-                                                           _ _-            - . - .
,                                                                                         BOSTON E DISON COMPANY                 SCHEDULE V
'                                                                                       P_ ROPE RTY, Pt. ANT AND EQUIPMEN1                              ;
DECE MBER 31,1990                                            i (IN THOUSANDS)                                               '
poiumn A                                                                                                           -r Column F Balance at Close Electric Plant:                                                                             of penod
[
Land and Rights of Wat Generating Station itnd                                                                    $38.326 Substation OLitairigs                                                                                             !
and Misc. Structures                                                                                              i Electric Generstmg Equipment                                                               388,804 Transmission, DistribWon,                                                                 1.363.937 Street Ughting and Other                                                                                            !
Utilization Equipment 1,502.641 Transmission and Distribution-Harbor Electne Ens'gy Company Totat Electric Plant                                                                         23 032                  ,
3,316. 7a0 Nucleat Fuel                                                                                                         !
Non Util.ty prnperty                                                                       248,595                   "
Construction Work in Progress                                                                    956 Construction Work in Progress a                                                             142,211               '
HarDor Electric Energy Company                                                                                     .
Total .                                                                                    22                  l j33[2f i
Notes (000's)                                                                                                          !
(1) The information called for by columns D, C, D and E for 1990 is omitted t
as neithJr the total adattior's nor the total retirements dunng the year exceed 10% of the balance at the end of 1990 Total acc,tions and retirements, at cost', were $243.884 and $27.181, respectively.
(2) Phy6 scal propony (electric) was depreciated on o straignt-line basis at vanous rates ranging from 2.84% to 4.59% in 1990.
For funhet information relating to the Company's policies regarding                                                 i 2
depreciation and amorta2ation, reference Note A ' Summary at Significant Accounting Pohcies'of Notes to Consolidated Financial Statements, incorporate:f herein by reference (Annual Report to Shareholaers for                                                 ,
the yeaf ended December 31,1991, page 27).
(3) Approximately $107,000 of additions, at cast, in 1990 relatea to l.
* vanous modifications made to tne Company's transmission and distc;but:on                                               *
'-                               System dunng the year, approximately $58,000 represents an increase in construction .
work in progress, and the remainder Mcludes additions to generating station, t
electric generatmg aquipment and other.                                                                               ;
Roterence is made to Note A,
* Summary of Significant Accounting Pohcies'- Allowance for Funds U
;                               Dunt'a Construction of ' Notes to Cont,olidated Financial Statements', on page 27 of the 1991 Annual                   ,
Report to Shareholders,incorgorated herein by reference._                                                               ,
i S-2' i
i 1
                                                                                                                                                      'i L
u  , .       _              s._                                     ,    .__._ - .- - a

_ _ . _ _ _ _ _ _ _ _ _                                . . _ _                                .                   ________.m_..-                                                                 ,
         ,'                                                                                                                       00STON EDISON COMPANY                                  SCHEDULE V PROPERTY 3 ANT AND EQUIPMENT DEct MBE R 31,1989
                                                                                                                                                                                ~
                                                                                                                             "~~{iifTMDTidlTl63)
Column A                            ,
Column F           !
e                                                                                                                                                                                  Datance at Close
_ _ o. je ne d      i Electric Plant:
1.*nd and Rights of Way
                                                                                                                                                                                      $37,0$0
,                                        Generating Station and
,                                        Substatiort Buddings and Misc, Structures 360,447
(
Electric Generating Equipment                                                                                                               1,*)43,837 Transmission Dist'Ibution, Street Ughtmg and Other titilsation Equipment -
1,4 39,P3 e j
Y                                       Tota! Electric Plant                                                                                                                       3,171,176 Nuclear Fuel                                                                                                                                   236,862          ;
Non Utihty property 9b6        ;
Cunstruction Work in Progrees                                                                                                                   83,827 Totat                                                                                                                                                   v g i,' . ,            ,
0 ffotes {000is)
                                  . (1) The information casoa for by columns D, C, D anci E for 1989 is omitted as neliner 1,.e total addmons not the total retirements dunng the year exceed in% of the balance at the end of 1989. Total additions                                                                                            ,
and retiremt . ,a, at cott*, were $234,128 ano $14.043, respectively,                                                                                         '
l'                                                                                                                                                                                                     ,
(2) Physical property (electnc) wall copreciated on a stralght-line basis at various 'ates rangittg from 2.84% to 4.59% fn 1989.
For funns r information relahng to the Coi*ispany's p*,licies regarding depreciuttun and amortization, reference Note A,' Summary of S}gnifcant Accounting Policies'of Notes to Consohdated Financial Statements,                                                                                '';
incorporated h9teln by aforence (Annual Report to Shareholders for                                                                                             ,
the year endeu Decomtier 31,1991, page 27),                                                                                                                     '
(3) Approximately $170,000 of additions, et cost, in 1989 related to                                                                                                '
~                                      various modifications mede to the Company's transmission and distribution system dur;ng the year, (4) included in construction work in progress is 83,430 relating to Harbol Electno
                                      - Energy Cornpany, a w5ony owned iogulated subsidiary of the Company.
* Boterence is made to Note A, ' Summary d Signthcant Accounting Policies'- Allowance for Funds OSed
'-                                   Dunng Construction of ' Notes to Consohdated Financial Statsmants', on page 27 of the 1991 Annual Report to Shareholders, Irworporated herein by reference, S-3
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t Boston Edison Company                                                Schedule X Supplementary income Statement Infonnation Year ended December 31.~~                           ~~
(in thousands)
Column A                                                                          Column B Charged to Costs ite m                         and Expenses                 _
1991       1990         1989
: 1. Maintenance and repairs                                             __ $99,.246_ $102d59 ..M326
: 3. Taxes other than payro'l and income taxes:
Municipal property
                                                                            $51386__,. S41 J18_ _ S45, j 11 The above arnounts are net of capitalized expenses, For information relating to item 2 " Amortization of Deterred Cost of Cancelled Nuc!aar Unit'' and " Amortization of Deferred Nuclear Outage Costs", see " Consolidated Statements of income
* for the years ended December 31,1991,1990 and 1989 on page 19 of the 1991 Annua! Report to Shareholders, incorporated herein by reference.
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Abodt the * -            .
                                                                           .y Boston Edivviis an operating public utility engaged principally in the generation. purchase. trane                                                                       -
mission. distribution and sale of electrie energy. We were ine.vpor.ited in 18% We supply eler-                                                                            ,
J tricity at retail to an area of approximately 590 square miles within .40 miles of Boston.
enconpassing the City of Boston and 39 sunounding cities and tount The population of the terri-                                                                                     ,
I iory we sen e at retail h approtimattly 1,$00f00.                                                                                                                                  !
I We ako supply electricity to other utdcties and municipal electrie departments u. u holesale for resale. About 88 percent of our <vsenues are derised from retail electric sales, ten percent from                                                                                  !
w holesale electric sales and two percent from othe r sources.                                                                                                                      !
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The growth of the Besten skyline marks the eq. anum; of our cemrnercial sector. h aho repre-                                                                                       ,
sents the crown jrw(! of our setsice territor). In the moreground is the F.udential Tower in Boston's Back Bay, which ha+ sencd as our headquaner+. since it first opened back in 19M.
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;1                                           Finangialidghlights                                                                                                                                                       '
i                                                                                                                                                     Years ended De:en''acr 31 1991               1990W % change                                                  i Operating tevenuesiO90)                                                             $1,319.714             $1,258.546              + 4.9%                                         ,
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                                          - income available for common stock (000)                                                 $77 Ob9              577.788            - 0.9%
Common shares cutstanding - waighted average (000)                                        39,348              38,779             + 1.5%
Commot'st 'd tiata-                                                                                                                                                               ,
!                                                 O,,arating earnings per share                                                          $1.96              $1.60            + 22.5%
Net earnings por share                                                                 $1.96              $2.01           - 2.5%
Dividends declared per share                                                        $1,595              $1.6J5             + 39%
Payout ratio.                                                                            81%               76%             + 66%
Book value per snare                                                                $17.90              Si7.20            +        4.1%
Market value per share                                                              $21.75              520.00             + 23.8%                                          ,
(                                          Return en average common equity                                                              li 3H              113 %            - 4.2%                                            ,
i l-                                          Find charge cowage(SEC)                                                                      Im               - 2.13x                 17 7%
(aHedades a gain of $15 rN:tio t or $0 41 pe share attw tax e5 fect hem an sau. tory change.
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I_
                                                                                                         ' ACCOMPL!SHMENT February 20,1992

==Dear Shareholder:==

I have just completed my first full year as your Chief Executive Officer, and I am                                 ,
pleased to report progress and accomplishment in 1991. We increased the value of your investment in Boston Fdison, we set new opermional accords .it our power plants; we engaged in meaningful partnerships to promote etr.ciency and econmnic development with govemment and our largest customers; we made progress in
,               developing new management infom1ation systems to guide us into the next centuiy; and we began the pro ess of positioning lloston Edison ahead of emerging demands.
Looking at your Company's financial perfonnance in 1991, earnings from operations reached $1.96 per share of common stock, compared to $1.60 per share in 1990. We increased your dividend by 3.8 percent or six cents per share.
The price of common stock
                            ' andsner 3                             y are the reaIchwe an -    increased from $20 per share to o,estA6 5 $d           kthe . f4 . idence oW the 4 -                                  $24.75 at the closing bell on msoinnust '         tpr.', - I andag sweesin a                                    -
December 31. Combined, these Esi'AhMEhT
:       sound               ,.( gagt edsble manner ms , .                        increases provided you with a ofesetiace         pwuS                           indchieving our misses '* ] c i total retum on your investment of 33.8 percent, which means car the thira consecutive year, your Company outperformed the electrie unlity industry and the overall ma,.Ket.
Nevertheless,1991 was a difficult and challenging year. Actual electricity sales declined by L3 peccent, largely due to the recession's impact on the local economy. Still, we ma6 financial progr:ss with the aid of new revenues from the 1989 rate sentement and, most importantly, the participation of all employees in reducing operations and ma.intenance costs.
There were many employee accomphshments in 1991. The Pilgrim Nuclear Power Station set a new record for consecutive days of operation and safely and successfully cotnpleted the shortest refueling out - /
pge in its lhy: Tne generating units of Mystic and New Bostor. Stations achieved new records for availali.lity and                                   l*N consecutive days of operation, and the 13 peaking units in                                q'l             #
the Comt>ustion Turbme Division were available for ser- ' i,                                              [
viec 92.2 percent of the time, another new iecord. Employee                                   "y a         i l
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                 % totai return                                    response to the damage caused by llurricane llob was                                                                                                            i e                                                  extraordinary as we restored service within 24 hours to 91
                                                    ,             pement of the 150,000 customen. w ho lost power and to f              all customers within three days. And, I am pleased to n _. . .__               __.          ._
repon th/.t in an independent survey conducted by First i
1               Market Research of Boston., e percent of our residential 1
ic                                     -
customers have a fevorable or very favorable opinion of i                                 i                                                                                                                                                                                                !
h f;                             Bo, ton Edison, our highest rating ever. As you can see, l
1'                                          o.ir emp!ayees accomplished higher levels of individa,J l            ao l                                                 achievement and performed very well as a team.
l ;-                                                                     As a corporate citizen, we initiated eff orts in 1991
             %-                                                   to increase our role as nartners in poh,ey-makm.g with l.
,            .n_ _-                                               the new Governor, William Weld, his Administration, L                    "E"""                                        the Legislatute, our regulators and the Greater Boston Totahoturn to share-                               business vommunity. We adopteil an ambitious Envi-
;-             holders has exetedr,3                              ronmental Policy and implemented significant initia-Industry and madst                                 tives to support it. We also developed a corporate t.
averagas for the pan                               Energy Policy that seeks to ensure least-cost, reliable
!              three ywrs.                                        and enviro:. mentally sound futute suppli:s of energy for our customers.
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Another initiative, our Ecoitomic Deselopment program, was introduced in 1991, offering a new incentive discount electricity rate for new or espanding rnanufacturers, Along with other business exec nives, I am serving on the Gover-nor's Council for Economic Growth and Tuhnology, and I am chairing a task force whose mission is to promote Niassachusetts as a good place to site new businesses. The sationale for supporting economic development is simple and logical; just as a reliable supply of electricit3 is important to the econo.nic vitality of Greater Boston, a healthy economy is indispensable for the future financial health of Bostoa Edison.                                                                           -
Looking to the future, we have assembled a strategic marketing team to assess the value of new electrit technologies and other business opportunitici that are related to our core Lusiness, And of course, we wish to remain the best at provid-ing the traditional services of an electric utility.
Results in 1991 demonstrate that customer satisfaction is high, employees are performing well and shareholdss are reclizing ieturns on their investments that exceed industry m erages.                                                                         $
We are in untial of our business, and we are creatinc our future.
                                                                                     /
8      /
                                                                         ,h" ' gyu.A- -
                                                                       /               h Bernaril'VCNe/nicek President & Chief Executi"e (Xticer i
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GTEADY IMPROVEMENT lll 1111 A reported in the President's Letter, our Lompany cominued in 1991 its pattern of financial progress. Earnings per share from operations                                                          g increased 22.5 percent; we increased your dividend by 3.8 percent, outpacing the industry average increase of two to three percent; the price of our common stock increased by nearly 24 percent; and we successfully controlled our budgets, reducing costs of opetations by f         1.2 percent ar.d holding capital expenses $42 milb below the previ-ous year's spending.
=             In a move to strengthen the Company's financial structure, we issued 2.6 million new share: of conimon stock at $23.75 per share.
Proceeds from the offering were used to retire honds Prelvtred ed             willi an ]I percent interest rate and, therefore,                                               '
pretammtv -               .
unprove our debt to equity ratio, 4W                        in 1992, we espNt modest inflationary increases in                                          -
operations and maintenance expenses, substantially increased property taxes and a continuing sluggis 4                              .
economy, vhich will likely tesuk in a fuither decicase in electricity sales. However,1992 camings wdl benefit                                         e from $25 million in additional revenues, the last install.
The capitel structure            ment of . ~e 1929 rate case settlernent, and from an at the rod of 1901              additional $15 million in after-tax accounting adjust-includes the sale of            ments allowed unden sat se: dement to help the Conipa-2.6 million shares              ny achieve a 12 percent return on equitj. We also
   .       of common stock                 expect 1992 earnings to be positisely affecteti through whkh improved our               the corninuation of cost centrol efforts by our managers financial strength,             and employees.
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i Looking beyord 1992, earnings and our allowed rate of return on equity will depend on the outcome of the Company's request to the Massachusetts Depart.
  ,        ment of Public utilities (MDPU) for increased base rates. As part of our 1989 rate settlement agreement. we are required to Gle by April 15.1492 for new rates which will become effective on November 1,1992.
          . SERVICES AND OPERATIONS                                                                                              -
ln 1987. we initiated a quality improvement program called Service Escellence; n program that will develop and maintain Boston Edison as a premier employer and a high quality provider of energy sersices. Service Excellence calls upon all                                     ,
employees to create the future through inaovative problen'-solving, participative decision-nnking, sharing information, strategic think-                                                 3 ing, goal setting and calculated risk taking.
A companion program, called Operational Excellence, is i            defined as doing the right thing: doir's it effectively through gosl-                                                a setting and doing it efficiently by controlling costs and reaching our goals, A total employee ef fort, Operatione.1 Excellenc, is a                         b.
thorough review of all aspe:ts of our operatiota and is a vehicle for l
reptioritizing the services we prov&.
Examples of excellence include our General Test Division
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Chemical Laboratory, which has received state certification to analyze metals,~ minerals and cils, eliminating the expense of                )      !
7 outside laboratories to fulfill reguiatory requirements. Employ-ees in out General Ten Division, v.ho n.e respoasible' lor the                                                        l testing, repair and calibration of all portable test equipment, are                                                   l l
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now saving the Company tens of thousands of dollars annual' by se vicing                                            -
(in house) pieces of equipment that were previously sent to the manufacturer for repair. And, design engineers in our Electronics Division have designed and specified a new microwase connuunications sys-
                         $ paid per share           tem that will use Ober optics to Unk all Company facil-2 00                        ities together and create our ow n it. dependent system-wide telt conununications network. This will eliminate the cosis associated with leased telephone no s -          --
                                            ;--     lines except for those used for long distance and mea-t sured business charges.
To achieve excellence, our managers and employees nw _      __       _ . _ .
must 'aave infonnation, and we are investing in the sys-tems and processes needed to provide it. They include a og        , _ _ .  . _ ,
revenue collee' inn program for tracking delinquent cus-tomer accounts: an Executive Infoimation System (EIS),
which allows ns to monitor key corporate and depanment om __ _..--                 performance indicators, including sales, earnings, stock s7 ea e a rn 1         perfonnance and budgets, a new payroll system that inte-Dividends per share        grates human resource and payroll functions. provides increased $0.06 in         better infonnation on new-hires' skills and work histories each of the last two        and offers empioyees more information about their pay years,                      and benefits; and a work scheduling system for field con-
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structior, tean.s, which is based on work studards required to complete typical underground and overhewt transmission and distribution work activities. Future
    ,                              systems changes include improvemerts to our electronie distribution monitoring and control system (SCADA) and i prototype demand side management tracking system to monitor and ev.duate the energy efficiency programs being implemented by the Cempany.
O t.ONG. TERM BENEFITS To help the Massachusetts economy turnaround, we initiated and received j                                   approval last fall from the Massachusetts Department cf Pubhe Utilities for a l                                   special Economic Development discount electridif rate designed to emice l                                   raanufacturing firms to expand or move into the Greater Boston area. Our pro-gram offers a four-year discount period arid a 40 percent reduction off base rutes dming the first year.
In cooperation with the City of Boston and the State of Massachusett>. we offered this discoent rate to Genzyme Cospo;ation, a Cambridge-based biotech-                          ,
nology firm looking for sites to build a new $75 million manufacturing facility that will provide about 200 jobs. In December 1991, after being courted by several other azeas in and out of tne state, Genzyme announced that it woulJ site its new facility ir, Boston.
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The disco'mt rate is one element of a mose comprehensi'.e Economic Development progrnm sponsored by our Company. We have appointed a full-time Economic Development manager, and we are fortning a part-rarship with other Massachusetts utilities to offer a site-finding service to companies thinking of locating in the rtate. We offer .nisting business customers, such as Bull liN, cost-saving measures through car Energy Efficiency Partnership program; and we are providing assistance to non-profit Communi-z om,r 2
ty Development Corporations (CDC) to help neighborhoods with chronic economic prob-                  'NvwW us
,                         lents turr things around. In Somerville, for instance, we provided advice and assistarice to the local CDC in their negotiations to purchase a buihiing.
                ' Partnerships are the key to our success. To para-phrase an editorial aired on Boston's WBZ TV on Jan-uary 10,1992.. " progress wi!! occur o,.ly when city                  The stability of the officials and business people break old patterns and                  commercial aml begin to work together. ...Take a page from the book of               Residential sectors U    Boston Edison, which has offered a dist:ou.H rate to                 in out 1991 retait
.g promote short-term economic grow:h and has devel-                    customer sales mix e'           oped an energy efficieticy program for long-tenn gains.              helps minimize the Boston Edison has demonstrated a willingness to do                   efects of regional what others have not; become a booster f or the city.'               economic swings.
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The wahh,m we ion umpim; and siedia cen,e- inswneo energy enisem lighting measutvs and is projected to reduce its anneal energy usage by 1.3 milliot.
Li'owatthours (LWh) and s:-         more than 51(K)/XX) a year, Raytheon, makers of                                                  \
the scud-busting Patriot hiiss. ', will upgrade lighting and install new energy ef0-cient equipment in its Microwave and Power Tube Division in Waltham. When combined with work completed to date, estimated energy savings will exceed 1,300,(XX) kWh per year and annual cost savings will be foout SlfK),(KA). And, a0 er installing a state-of-the-art system to centrol energy usage in two of its build-9 ings. Boson College, a renowned coeduca:ional school in Chestnut Hill, will save nearly S36,(XX) in ar.nual energy costs and some 554,(X41 LWh.                                                                         ,
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grams, we are able to help customers swe money and use energy more efficiently, Our annual ret.idential lighting promonon, offering instant
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rebates and Sve energy etficient light bulbs as incenti' es, recruited over           r                %          .
28,(XX) new residential customers to the program. The Energy Fitness                Expected to bqys the                               .
Van provided nearly 19,300 households with services such as efficient            Jocat economy. soston's                             s light installation, water-sasing measures, electric water heater wraps              Thwd HarbW TImpl and and pipe insulation, collectively reducing these customers' electric bills         CeWrih Artog Pro 6ects by some $500,(XX) over the life of these measures,                                  are underway These                              ;
The major objectives of DSM are to help cu:,tomers be energy effi-           .fuon door pro;1                       ,
cient and to stretch existing energy resources to meet a.s many needs as possible. We expect to begin recosering our DSM cests for 1991 and                pEd6se w(ill/agsire t,qgeksate                      hostC i
1992, as well as base revenues lost as a result of the programs. We have           pows N eah. hm-tiled a request with our state regulators to recover these costs associat( d     r eiectnca(egmpment -
with DSM through customers' 1992 bills.                                           'ove the next an vows '
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The potential also exists for the Company to cara incentives above and beyond program costs. The incentives would be based on real kilowatthour savings and would be collected the year after the savings occur. With approval from state reg-ulators, we could collect up to 53 million in incentises in 1992 based on kilo-warthour savings realized in 1991.
AGGRESSIVE t.EADERSHIP Tne ituauen we needea ie repiace sa agin; .,voeden ses supperung a usom volt transmission line over Hobbs 11 rook Reservoir in Lexington. The challenge:
how do we install the new 65 foot steel tawers and remove the old ones without disturbing the sensitive environment? The answer: we pre-assen: bled the steel towers oft-site, flew tiiem by helicopter to the islands on which they would stand and removed the old poles by Dying them back to the assembly site. Any neces-sary digging on the islands was done by hand, no heavy equipment was necessary and the envi onment of Hobbs Ilrook Reservoir was not disturbed.
This is just one example al how the employees of Iloston Edison are imple-menting the new Environmental Pohey adopted by our Company in 1991. As a l
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p major energy supplier in Wssachusetts. we have a special responsibility to pro-vide our service. in an eriviromnentally sound manner. It is our goal, therefore, to become an aggressive leader in protecting, preserving and improving the natural en zitoament.                                                                                                                                                       $ per share To demonstrate our enmmitment, we have implemented 2 so ---..-.----. .-
programs to remos e polychlorir ared hiphenals GCB's) f rom om electncal system, and asbestos from our facilities. Our                                                                                                                                                                                                                                                     l 2 oc .             - . . - _ . -                                                                                 1 demand-side management programs, which b:Ip our cus-                                                                                                                                                                                                                                                           l i
1 tomers use electricity morafficiently, an also good for the                                                                                                                                                                                                                                                   !
environment. Operations at our facilities already meet the                                                                                                                                    "-                   -        -
t                                                               j strict air quality requirements c,f the recentis enacted Clean                                                                                                                                                  ,                                                                                             !
i Air Act, and, in 1989 we were the only major utility in the                                                                                                                                   tx                            -       -             -
state to already meet the Commonweahh of Massachusetti l
new uid rain suindards. For the future, we wdl no . longer                                                                                                                                    e so _              _. . .               _   ..;.
use chem:cals to control vegetation growth on our tr.utsrus                                                                                                                                                                                                                                                   ;
sion rightsmf-way. Like other utilities. Boston Ikhsou used                                                                                                                                   a..j                                              _
to apply govemment approved heri>icides, but our neighbors                                                                                                                                                     87 " " 90 9'                                                                                   )
expressed concerns about the heahh impacts of the herbi-                                                                                                                                      Earnings per share                                                                                               l cides used. To respand w e now mechanically perform selec-                                                                                                                                    from operations                                                                                                 :
tive cutting to connul growth and pmtect reliab2ity.                                                                                                                                          rose 22.5% in 1991.                                                                                             :
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g fll i llll 1 Your Company's environmental record is a good one. Through bal-anced fuel mixes, research and deselopment of cleaner fuels and renew-able resources and a hurt of other initiatives, Boston Edison will continue to limit the environmental impnt of its operations.
i NEW OPPORTUNITIES "The beu way to predict Ihefuure is to create it " Al Kay our Company is constantly lookmg for new business opportunities that are related to our core business of providing energy and energy services. We have established a Strategic Marketing Project Team that is developing a Marketing Plan to incorporate demand-side managem-nt, traditional mmket analysis and the
  ;                                      potential for investing in and marketing electric technologies. The team is focused on makir.g electricity the preferred choice of regulators, customers and the general public for both efficiency and the environment.
In 1911, Boston Edison was a recognir.ed leader in promoting electric vehi-cles. In fact, our enthusiasm led to the opening of a 25. car garage on Atlantic A/enue in Boston to re-charp and 3ervice our own fleet as well as privately-owned vehicles. Today, 81 years later, our interest and insolvement in the promise of electric vehicles is reborn. We have purchased two electric vans for s
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                                                                                                        ,m testing and piumotion m 1992. These limited produc-                      :
44 a tion vehicles are the firr of what promises to be a line 4 Naciwg
  .                        of future electric schicles that will compete for cus-                         N tomers on the open market.                                              Y     y                ,
Another new business opportunity is the liarbor                           2%
Electric Energy Company (llEEC). a wholiy-owned                                               @
subsidiary of Boston Edison establisited to provide ener-              1991 company gy and related services to new wastewater treatment                    generated fuel facilities being constructed on Deer Island by the Mas-                mix was balanced sachusetts Water Resources Authority (MWRAL A sub-                     because out three       _
marine cable across Boston liarbor and temporary                       largest fossil units interconnection facilities on Deer Island are in service               can burn either oil and producing about $5 million in annual revenues for                  or gas, whichever th: Company. A permanent substation and 50                             in cheapest.
megawatts of standby generation for the Deer Island facilities are due to be operational in 1994, and are expected to produce some SS million in annual revenues.
g                                Finally, we will continue to look for reasonable opportunities for new power generation. One exar cle, a preposal to build a 306-megawatt, primarily pas-fired power plant on the site of the former Edgar Station in Weymouth, Massachusetts, faces many lll l regulatory challenges. We are moving forward through the g
licensing process with the state's Energy Facilities Siting Coun-cil, the Massachusetts Department of Public Utilities, the Federal Energy Regulatory Commission and several other environmental
                                               .and regulatory agencies. Approval by these agencies is required for project completion; their decisions are due in 1992.
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       .. ReguMory Pr:,ceedings _                                 _                        _
        -On October 31,1989, the Commonwealth of Massachusetts Department of Public Utilities (our state regulators)
        ' approved a Retail Settlement Agreement effective November 1,1989, relating to certain of our proceedings before                                           ,
them; On November 5,1990 the Federal Energy Regulatory Commission (our federal regulators) rpproved the
         -Wholesale Settlement Agreements relating to claims filed by certain of our wholesale customers in connection with the 1956-1988 outage at Pilgrim Nuclear Pcwer Station (Pilgrim Station). Through December 31,1991, we made cash                                           .
        . payments of $57,687,000 to the wholesale settling parties as discussed further below
                . As a result of the Retail Sett'ement Agreement and the Wholesale Settlement Agreements. we record 0d in the fourth quarter of 1989 a before-tax charge of $178,650,000; with an after tax effect of $106,280.000 or $2.78 per share
         .of common stock. This charge was included in our 1989 year-end consolidated statement of income as a component of *0ther income (loss)'' consistent with electric utihty practices and methods of presentation.We are not allov d to collect the costs of this 1985 onesime charge to earnings from either our retail or wholesale customers. The chargo
       --to earnings for all of the settlement agreements included about $75,000,000 for retail demand side managenwnt                                                ,
        - expenses, $31,000,000 of previously deferred outage-related nuclear expenses, 541,000,000 of litigation, regulatory                                         -
commicsion and other expenses, and $31,000,000 for costs to replace the power that would have normally been generated by this unit. Monies spent on'our den,and side management activities (not directly associated with the settlement agreements) are normally charged to customers through our rates in accordance with regulatory guidelines. Deferred outage related nucleai costs (not directly essoc;ated with the settlement agteements) are
         .normally included as part of our operating expenses (" Amortization of deferred nuclear outage costs") in the consohdated statement of income. We expect to charge custoraers for similar costs incurred in the future, as we have
        - been allowed to do in the past by our state regulatort                                                                                                      ,
Results of Operations 1991 Versus 1990 Our earnings per common share amounted to $1.96 in 1991 and $2.01 in 1990. Results of operations for 1990 included $0.41 per common share due to the cumulative effect of a change in accounting principle effective January 1,1930 (accrual of unbilled revenuesk
,                Our 1991 total operating revenues amounted to $1,319,714,000, which represented an increase of 4 9% over the prior year broken de.vn as fellows:
1.3% decrettse in retail electr;c sales billed                                                                                     $ (3,567,000)
Increase in performance rate revenues
* 23,401.000
* lncrease in fuel and purchased power revenues #                                                                                         21.144,000 Chance in wholesale sales, interchange, and other                                                                                     20,190,000 increase in total revenues                                                                                                         $ 61d68A00
       ' W As part of the Retail Set %nwnt Agreement, we were permmed to meresse our retail rates by appronmately $72.s00.000 during ihe period
              - November 1,1990 to October 31,1991 and effective November 1,1991 to October 31/1992, by an addition # M5,000.000 which is subject to ad}ustment based upon the operation of Pilgrim Station. No significant adjustment was made for the performance year ended October 31 1991.           .
       ~ W increases in fuel 'and purchased power revenues are pnmarity ofhet by incroses in toe; and purchasad power egenses. We tud increased
             ' purchased power costs associated with new long-terrn contrar.ts and a 16% dechne in output from our fossil umts. This dechne in our output i was Immarity due to the order in which the New England Power f'ool, of which we are a memtsr, has its partic: pants run their generating usts.
The mabr po' tion of fuei and purchased power expenses are codected from our customers through fuel and purchased power rates with the balance recovered through our base rates.
            ' Other operation and maintenance expensos declined $4.523,000 from 1990, This was primarily due to reduced .
maintenance and pension expensos. which were partially offset by increases in labor, certain employee benefits,                                             ,
       ?research and development. costs, bad debts, and nuclear operations expense. Through December 31,1991, we deferred $22,871,000 (net) of costs associated with the recently completed refueling outage at Pilgrim Station We
       ' evpect to receive approval from our regulators to charge our customers for these costs as we have in prior reta;l rate orders (excluding the October 1900 rietail Settlement Agreement); Similarly, about $4,300,000 of our non-cash gnsion costs, $3,600,000 of storm r%ts associated with damage caused by an August 1991 hurricane, cnd $9,200,000 of certain oemand-sbe management program costs have been dferred. Since we expect to receive approval from our state regulators t ) charge our customers for the amortization of ti ase costs over time, we have included these items in "Other deferred lobits* on our consolidated balance sheet at December 3 t,1991.
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Property and other ten expenses increased $10,362,000 due to increases in local property tax rates. Our provision for income taxes declined $12,527,000 as a result of the reversal of certain deferred taxes associated with settlement
    . related issues. Our effective income tax rate was 16.5% in 1991 versus 30.4% in 1990 (including the cumulative effect                              .
    - of a change in acenunting principle), Based on the terms of the Retail Settlement Agreement, we added back into mcome certain municipal tax abatements (S13,000 ^00 in each period) and certain deferred income taxes of
    . approximately $13,000,000 and $2,000,000 in 1991 and 1990, respectively. In addition,1991 income reflects a reduction in federalincome tax expense of $3,700,000 arising from the deduction of certain payments mandated by the Retail Settlement Agreement,
  -         Allowance for funds used during construction (AFUDC), which represents our financing costs for constructior,,
totaled $8,984,000, an increase of 2% from 1990, due to an increase in our construction work in progress base, partially offset by a lower AFUDC rate. Our total interest expense increased $1u,010,000, pr.marily related to increased interest expense on new long terrr' debt partially offset by a decrease in short-term interest expense, increased long term interest expense resulted from the issuance of $100,000,000 of 9 7/8% debentures (due 2020)in June 1990, the issuance of $100,000,000 of 8 7/8% debentures (due 1995) in December 1990 and the issuance in August 1991 of $125,000,000 of 9 3'8% debentures (due 2021). The decroce in our shor0 term interest expense was thv result of a decline in short tenn borrowing rates in 1991. The increase 'n our average total t'orrowings has been to cover the cost of our plant expenditures.We finance a portion of our plant expendturee, through funds generated by our busir. 7ss with the balance through external financings.
1990 Versus 1989 Our 1990 eamings per common share amounted to $2.01 as compared to a IJss of 50.88 in 1989. The 1990 results included $0.41 per common share due to the cumulative eifect of a change in accounting principle effect;ve January 1,1990 (accrual of unbilled revenues). Excluding the cumulative effect of the change in accounting principle,1990 earnings amounted to $1.60 per common share as compared to a loss of $038 per common share (a loss of 50.84 per common sham had e's been accruing unbilled revenues) in 1989 The 1989 results included a S2.78 per common share charge relating to the cettlement agreements and a 50.14 per common share gain from the taking of certain of
     . Our property by eminent domain.
Our 1990 total operatin0 ravenues amounted to $1,258,546,000, which represented a decrease of 0 9% over the prior year broken down as foltows:
02% increase i>1 retail electric eales billed                                                                              S       266,000 increase in performance rate revenues
* 20,582,000 Decrease in fuel and purchased power revenues                                                                                 (23,460,000)
Decrease in wholesale sales and interchange                                                                                     (4,608.000)
Other changes                                                                                                                   i3,579,000)
Decrease in total revenues                                                                                                 $110,799,000)
(a) As part of the Retait Settlement Agmement, we were permitted to increase cur getail rates by approumately $20.000.00G danna the penod November 1,1989 to October 31,1990. anii ny an add tionat $22.500.000 da eg the penod November 1,1990 to October 31,1991.
           . Fuel and purchased power revenues and fuel and purchased power expenses decreased by O't,460,000 and S20,328,000, respectively, primarily due to an increase of 9% in electricity generated from our facilities in 1990 as compared to 1989, coupled with a 24% decline in electricity purchased from other utilities. The increase in our output was primarily due to increased generation from Pilgnm Station. The major portion of fuel and purchased power expensos is collected from out customers through our fuel and purchased power rates with the balance recovered through non-fuel related rates.
Other operation and maintenance expenses increased $24,770,000, primarily due to increases in labor, employee benefits expense and bad debts, which were partially offset by decreases in regulatory corumission and research and
       ' development expenses. Amortitation of deferred outage-related nuclear costs decreased S19,876,000 due to cur write-off of.substantially all deferred outage related nuclear costs in the fourth quarter of 1989 as part of the
: 5178,650,000 charge discussed previously.
Property and other tax expense decreased $1,118,000 primarily due to lower property taxes resulting from a 1988 settlement of a tax dispute with the City of Boston, Massachusetts. Our provision for income taxes increased $3,416,000 over 1989 primarily due to higher pre-tax income. Oar effective income tax rates for 1990 and 1989 were 30.4% (including the cumulative effect of an accounting change) and 26.7% (excluding the settlement agreements), respectively. The lower figura in 1989 is related to the reversal o'r certain prior years' deferred income taxes. The original accrual was based upon a rulemaking by our federal regulators egsidy AFUDC. Because our state regulators had not adopted this method, we added these amounts back to incorne. In accordance with the terms of the Re,ai! Fettlemer t Agreement, we added to income in 1990 certain municipal tax abatements (approximately S 7000,000), and deferred income taxes ($2,000,000).
Our other income in 1989 includes a $0.14 per share gain on a taking of certain of our property by eminent domain.
15

w                         .                            .                              -
                   - AFUDC totaled $8,833S00f a decrease of 16% from 1989, due to decreases in both our average construction work In progress base and our AFUDC rate. Our total interest expense increased $$,356.000, primarily related to an increase in our avurage short term loan balance outstanding (which is necessary to support our ongoing program of plant expenditures), our June 1990 issuance of $100,000,000 of thirty year ; 7/8% debentures and $100,000,000 of five year 8 7/8% debentures issued in December 1990. We finance a portion of our plant expenditures through funds generated by our business with the balance throuch external financing 3.
Fmancial Condition. Outlook for t . Future and Liquidity                                                                         .
Financial Condition in connection with the Retail Settlement Agreement, we agreed to limit our retail revenue increases prior to November 1,1992 to approximately 2% per year, subject to adjustment based c,n Pilgrim Station's performance. Accordingly, our ability to maintain or increase earnings through October 3!,1992 wit! depend primarily on our ability to control costs-and increase electric sales, as well as the' efficient operation of Pilgrim Station Effective November 1,1991 our annual retail revenues increasnd $25,000,000, subject to adjustment based upon Pilgrim Station's performance. in addition, if we arc unable to achieve a retad rate of return of 12.0% in 1992, we may mako certain accounting adjustments (but oaly if they do nnt result in our exceeding a 12% retail rate of return) by taking in'o income b) deferred income taxes of
              $23,000,000 and (ii) $13,000,000 of certain municipal property tax abatements. During the period November 1,1992 tStoach October 31,2000, we agreed to institute a new cost recovery mechanism, which is also tied to Pilgrim Station's performance, for a portion of our investment in Pilgrim Station and related operating costs. We will file for retail rate relief in the spring of 1992 with a decision expected by November L 1992.
Our electric generating units, other than Pilgrim Station, are fossil fuel-fired (using oil or natural gas). Fossil fuct related expenses (excluding net purchased power) accounted for approximately 16% 21% and 24% of our tural operating expenscs in each of the years 1991,1990, and 1989, respectively. The majority of our fossil fuel purchates involve imported res%al fuel oil acquired primarily from international suppliers, and natural gas which is supplied to us on an "interruptibic" basis, We currently charge our customers for fossil fuel costs incurred thrt.uun :,ur existing fuel and purchased power rates in both our retail and wholasale rate schedules.
Expected Plant Expenditurcs, Future Generation Capacity and Outlook for the Future Our current estimate of plant expenditures over the next fiva years (which is subject te continuing review and                        ;
adjustments),-is approdmately $1,000,000,000 (excluding AFUDC and $79,000,000 :n nuclear fuel expenditures). Our long-term debt and medium-term note maturities and iiinking fund requirements for our debt, preferred stock and sewage facility rev9nue bonds total $287,335,000 in the next five years A large portion of our electric sales are in the commercial sector as compared to the mdustrial sector. Since New England continues to experience a sluggish economy, we do not anticipate significant growth in our retail electric sales in the near term. Retail electric sales billed for 1991 were 1.3% lower than 1990, We rnay also exponence lower growth in electric sales because o; implementation of demand-side management (DSM) programs which are designed to assist customers in conseiving their wie of electricity. As part of the Retail Settlement Agreement, we committed to spend
            -575,000,000 in DSM programs during 1990-1992, of which approximately $26,500,000 remains to be spent as of December 31,1991. la 1991, we spent about $37,000,000 in DSM programu and we anticipate spending approximately -
              $63,000,000 in 1992, We are requesting approval from our state regulators to charge our customers for about
              $10,000,000 and $38,000,000 of these expenditures, respectively, as well as lost base revenues and program incentives.
The remaining amcunt was written off in 1989 as a result of the previously discussed Retail Settlement Agreements.
Hearines on our 1991 programs were concluded and we expect a decision shortly. Hearings on our 1992 programs are
            - scheduled for the spring of 1992.
Beginning in February and July 1991, our. billings include annual rate increases of $6,800,000 and $2,800,000, iespectively from certain wholesaia customers. Certain of these increases are being collected, subject to refund, pending ths outcome of wholesale rate hearings before our federa: regulators. We have settled with one wholesale customer and no refund will be necessary to that customer.
We are continually studying various energy alternatives in order to meet our customers' electricity needs. Due to the demand for electricity in the region and regulatory emphasis on least rost options, a!ang with environmental considerations, a growing share of how we rneet those needs is expected to come from DSM, Pursuant ta !, tate regulation, the selection of least-cost options is subject to advance approval by our stata regulators, in 1991, we continued to seek proposals for purchases of power from cogeneration facilities and/or private power producers, l           - increase emphasis on customer use of our DSM programs, seek the regulatory approvals nemessary to begin bdiding new generation capacity at the Edgar Energy Park located on our propaty in Weymouth, MA, and explore other least-cost power generation options.
16
  . . . , ,           . ,_ _.          -_.      , - __            ,   _ ~ _ ,m ,_ ,_ _.      -       - , _ _ .. .. _ . . _ _ . . . . ~    .__

Liquidity cnd Financing Our schedu!ed repayments of deu principal in 1992 are $21,600.000. We expect to fund the estimated $120,000,000 o' interest on long-term debt outstanding in 1992 through normal cash flow from our operations. The funds wo generated internally through operations (excluding the effects of the settlement agreements) represented approximately 89% 73% and 02% of our plant expenditures in the years 1991.1990 and 1989, respectively.
(      Our estimate of working capital needs for 1992 end 1993 is expected to be consistent with our historest levels, except for the additionalimpact of approximately $32,500,000 of expected future cash outlays in 1992 related to the settlement agreements (classified a3 a current liability on our consolidated ba!ance sheet at December 31,1991L
 + Approximately $45,000,000 of similar payments were made to the settling parties in 1991.
We meet our working capital requirements, as well as om intent, financing needs to cover our current program of plant expenditures, primarily with internally generated funds, supplemented by the issuance of short term commercial paper and bank borrowings. We currently have short-term borrowing authority from our federal regulators of S35G,000,000 which we believe is adequate to cover our working capital and other liquidity requirements. As of December 31,1991, we had $210,300,000 of short term debt outstanding (which excludes
   $21,800,000 of long term debt due within one yearL included in our $350,000,000 berrowing authority, we have avadable a three-year $200,000,000 revolving credit facility which expires in February 1993. As of Decemt>er 31,1991; we had not apphed to our stato regulators for approval to incur long-term debt unr'er this agreement, nor had we incurred any short-term debt under it. We also have arrangements with certain banks to provide additional short term credit on an uncommitted and as available basis.
in July 1991 our state reguistors approved og financing plan to issue up to $400,000,000 of debt and/or equity securities prior to Decemiser 31,1992. In August 1991 we issued $125,000,000 of 9 3/8% debentures due August 15, 2021 We used the net psoceeds from the sale of these securities to reduce some of our outstanding short-term debt.
On December 2,1991, we issued $50,000,000 of 8.0% mandatory redeemabin preferred stock. The proceeds from this issuance was used to ret to all of our outstanding stated rate auction preference stock. On December 4,1991, out wholly-owned subsidiary, Harbor Electric Energy Company (HEEC), issued $36,300,000 of long term sewage facdity revenue bonds. A portion of the net proceedc from this issuance was used to retire $21,000,000 of maturing short-term sewage facility revenue bonds. In December 1991, we sold 2,600,000 shares of our common stock. The net proceeds of $59,774,000 were used to redeem $55,000,000 of our Series X,11% first mortgage bonds.
Edgar Energy Peri As we previously reported, we have made regulatory fitings at the Commonwealth of Massachusetts Energy Facilities Shing Council (EFSC) and our state and federal regulators regarding our Edgar Energy Park project, a 306 MW combined cycle generating stat!on. Through our proposed subsidiary, Edgar Electric Energy Company, we plan to construct this unit on the site of our retired Edgar Generating Station located in Weymouth, Massachusetts.
We have cencluded hearings before the EFSC, which will address the issues of need for adddional power and the envenmental effecta of the unit. Additionally, we have also made applications for other required permits and
,   approvals, including in particular many environmental permits, before a number of other federal, state and local ager cies.
Because of the number and scope of regulatory prcceedings that must be completed prior to beginning construction of a project of this magnitude, we are not able to predict with certaiaty whether we w;ll proceed with this project nor on what date. Assuming receipt of the necessary appronis, we would anticipate that construction could begin by the end of 1992.
We have spent approximately $5,600,000 on this project which is included in " Construction work in progress" on our December 31,1991 consolidated balance sheet and we are currently cornmitted to spend an additional $700,000.
If we do not receive the necessary regulato'ry approvals oi if we elect not to proceed with this project, and if we are not able to charge our customers for these costs, we would be required to write off our investment in this project.
Pilgrim Nuclear Power Station During 1991, Pilgrim Station continued to meet operational purformance targets established by the Retail Settlement Agreement, in January 1991, the Nuclear Re0ulatory Commission (NRC) extended Pilgrim Station's operating license from the year 2008 to 2012.
Iri May 1991, a joint Federal Emergency Management Agency (FEMA)/NRC task force completed a detailed review of the status of offsite emergency preparednecs plans for Pilgrim Station. In June 1991 FEMA issued a finding that adequate protective measures can be taken offsite to protect the health and safety of the public in the event of a radiological emergency at Pilgrim Station and in July 1991 the NRC Commissioners found that there continued to be reasonable assurance that the offsite emergency preparedness program is adequate. In December 1991, an exeruse of the emergency plans was conducted with participation by over 1,000 reptesentatives of our Company and state and local govemmena Pre!iminary assessments of the exercise by the NRC and FEMA were positive and noted no B
                               ~_          .

deficiencies. Also in December, the NRC issued its most recent Systematic Assessment cl 1.icensee Perform 3nce
   - (SALP) Report for Pilgrim Station which evaluated all areas of the plant's operations and management. In its report, the NRC found that a superior level of performance was achieved in the areas of emergency preparedness, radiological controls, and security; and a good level of performance was achieved for all other areas. Final!y, for the sixth consecutive ti ne Pilgrim Station's class of operator candidates achieved a 100 percent pass rate on the NRC licensing examinWon.
Notwithstanding these generally favoreble developments and findings, the subject of nuclear power, and related issues such as emergency planning, continues to be a matter of public concern and subject to close regulatory            ,
scrutiny. We closely monitor all such issues and concerns that may affect the safe, economic and reliable operation of Pilgrim Station and are of the opinion that the continued operation of Pilgrim Station is in the best interests of the Company and our customers.
Income Taxes in December 1987, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 96 " Accounting for income Taxes", which, as amended by SFAS No.109,is now scheduhd to become eh'ective in 1995. We anticipate that due to the impact of regulation, the primary effect of this statement will be reflected on our consolidated balance sheet and will result in no significant impact on our net incomo.
Post Retirement Benefits Other Than Pensions in December 100, the FASB issued SFAS No.106 " Accounting for Postretirement Benefits Other than Pensions" which will be effective for the 1993 fiscal year SFAS No.100 requires use of an actuarial basis for computing the liability for benefits (other than pensions) for retired employees and future retirees. We are currer.tly recognizing these benefits pri narily as claims are paid. While we may be faced with recording a large increase in liability
{ preliminary estimates are in the process of being prepared by our actuaries) we have not yet fully determined the means of recovery of such expenses through the rate-making process or of implementing this accounting pronouncement.The adoption of this proroun':ement is not expected to impact our cash flows in the near future.
Other Matters We are affected by inflation with respect to our operation and maintenance costs. We are also affected by inflation in the form of higt et construction costs for improvemants at our generating stations and for new transmission and distribution equ pment. Our level of depreciatian expense is based upon the historical cost of our plant, We believe that depreciatio i expense calculated on a " replacement cost of facilities
* basis would be significan!!y higher.
We have bon named as a potentially responsible party by certain envircnmental authorities with respect to the cleanup of son e hazardous waste sites. However, we believe that the likelihood of incurring any material liability with respect to thes 3 claims is remote                                                                                         ,
in November 1990, amendments were made to the federal Clean Air Act. Wo have performed a preFminary analysis of th ese amendmems and have determined that thers are no major obstacles for us to be able to comply with them. Moreover, our analysis indicates that we have emission allowances in excess of what we will need and that these may be marketable.
We have a $2 million investment (9.5% interest) in the Yankee Atomic Electric Comoany (Yankee Aromic), whicri owns and operates tne oldest nuclear power plant in the country. On October 1,1951, that unit was shut down ir; response to a Nuclear Regulatory Commisaion concern over the condition of t% reactor vesset On February 26,1992, the Board of Directors of Yank 9e Atomic voted to permanently close the unit . ,1 prepare for early decommissioning of the plant. Yankee Atomic will be filinD with federal regulators to collect the costs associated with this shutdown and decommissioning between now and the year 2000 from its contri.ct customers. We will be responsible for our proportionate shara. Yankee Atomic has a decommissionirig esumate of approximately $98,000,000 as of January 1, 1989, and is working on a new estima:o which is expected to be significantly higher We expect to receive recove;y from our customers for all of these costs.
:g-

                                .                                    . -     - -.        . .              -           .. ..       -~,.                 _-
CensolidatedStatements of Anqome (Loss) years ended December 31.
        -(in thousands, except earnings (loss) por share)                                     1991                       1990                  '1989
        ~ Operating revenues -                                                      $ 1,310.714              $ 1,258,546               $ 1,269,345 O'   Operating expenses:
Fuel '                                                                    200,912                    276,333                277,274 Net p: rchased power                                                      293,742                   -187,801                207,188 Other operations and maintenance                                          376,897                    381,420                356,650        ,
Depreciation and amortization                                             126,151                    121,881                120,759 Amortization of deferred cost of cancelled nuclear unit                    24,381                      24,351-                 24,381 Amortization of deferred nuclear outage costs                                 2,443                       1,500                21,376      ;
Taxes - property and other                                                 66,216                      55,854                  56,972      ,
Provision for income taxes                                                  17,111-                    29,633               -26,222 Total operat ng expenses                                          1,133,853                 1,078,808               1',090,8h Operating income                                                                205,861                    179,735 -              178,523        '
Otherincome (losst Rete and contract settlements                                                       0                         0            (178,650)
Income taxes on rate and contract settlements                                       0                         0                72,370 Allowance for other funds used during construction                                  0                         0                 1,362 Other, net =                                                                  5.684                      6,294                 11,041 Operating and other income                                                      211,54-                    186,032                   84,646 laterest charges:
Long term debt _                                                          108,912                      93,706                  91,674 Other.                                                                      16,947                     21,543                  18,219      '
Allowance for borrowed funds used during construction credit -            - (8,984)                    . (8,833)               (9,112) i,                  Totalinterest charges                                                116,875                    106,416                 100,781 income (loss) before cumulative effect of accounting change                       S4,670                      T9,616                (16,135)
Cumulative effect of accrual for unbilled revenues, net of taxes of $9,819                0                   15,824                       0 94.670                     95.440               __(16,135)
Net income lloss)_.
Preferred and preference cividends provid;n                                       17,611                      17.652                 17,653      ,
Balance available for common stock
__ _$d7J59_$_77,786                                       $ j33fB8)
Common shares nutstanding (weighted average)                                      39.348                     38,779                '38,246 Earnings (loss) per share of common stock:
Before cumulative effect of accoanting change                        $        -1,96           $            1,60       $          (0.88)
Cumulative effact of accrual of unbilled revenues -                                 0         $            0.41                      0 Total                                                          6          1 96          3            2.01       $          (0.88)
Dividends declared per common share                                                1.595           $           1 535       $          1.745 The accompanying notes and schedules are an integral part of the consolidated financial statements.
h E

yeaa ended December 31, fin thousand:,)                                                                 1991                            1990 Assets Property, plant and equipment, at original cost:
Utility plant in service                        5 3,533.007                       5 3,317,696 Less: accumulated depreciation              1,097,991      $ 2,435,016   ~~1,015,371       $ 2,302,325
                                                                                                                 --^
                                                     ~
Nuclear fuel                                         256.199                          248,595 Less: accumulated amortiration                 180,137            76.062        163,694         84,901 Construction work in progress                                           99,870                       142,233 Total                                                          2,610,948                      2.529.459 investments in electric companies, at equity                                  27,309                        25,793 Nuclear decommissioning fund                                                  43,661                        37,765 Current assets:                                                                                                            i
         - Cash snd cash equivalents                              4,279                            1,667 Accounts receivab!s                                  167,307                          163,648 Ar., rued unbilled revenues                           23.632                           28,772 Fuel, materials & supplies, at average cost           93.817                          106.533 Prepaid expenseu & other current assets                7,240           301,275          6,116        306,736 Deferred debits:
Deferred cost of cancalled nucledt unit               43.665                           64,777 Delerred nuclear outage costs                         22.871                              809 Other                                                 69.860           136,396         48,830        114.416 m__Jotal assets                  _ ,_ _                              _53419 g , _ _ ,$ g 1Jg169 The accompanying notes and schedules are an integral part of the consolidated financial statements, E
< ._                    ~    .-     _           _. _      .               _                                   _.      ._.

Consehdeted lance 8 - en                                                                                                                                                    ,
years ended December 31,               l fin thoutMds)                                                                                                      1991                                         1990          t Cepitallration and Lis.bilities tm uomo.nong set +ouw cr cas.ihk .nd usmodnu                                                                                                 l 4                Qmmon stock equity                                                                                         S 753,490                                  $ 671,362 Cumulative preferred stock:
Non-mandatory redeemable series                                                                        83.000                                     83,000
                               - Mandatory redeemobie series                                                                             100,000                                     50,000           !
Cumulati s preference stock No> mandatory redeomable series                                                                       38.333                                     38,333           l Mandatory redeemable r.erler,                                                                               0                                    50,000           l Cirst mortgale bonds                                                                                            090 425                                    774,025           ;
21,120                                                      :
Gowage facihty sevenue bond',                  a r'et                                                                                                                  0 Deben %es                                                                                                       325,000                                    200,000 Un$ecured medium-term notes                                                                                     100,000                                    100,000           :
Curttot liabilitv:                                                                                                                                                           !
Sewage facWty revenue bonds                                                      $           0                             $ 21,000                               .
L mg twm debt due within ons year                                                   21,800
[                                                                                                                                                                    56.600                           ;
i                                   _ Notes payable                                                                    210,300                                     153,530 Accout:ts payable                                                                  112.354                                     132,211 7,270
    ')'                          . Income, ptoperty and other taxes accrued                                                2.229                                                                      ;
i L,                               , interest accrur:d                                                                    23.205                                       21,878 F                         D:videndu payable                                                                   20,193                                       18,073                           ,
s4                                  Othez                                                                                12.458                                        6,376 fit,te and contratt W.tlements                                                      32,538           435,137                     53,784         470,930           i Daferred credits:                                                                                                                                                           l Accumulated deferred meume tatea                                                   436,810                                     405,895 Accumulatwl defoif ed investment tax credats                                        79,510                                       89,27i                           '
                                  . Nuclear dNMmmi$$loning ieterve                                                      48,054                                       41 'IP                           :
y                           Ante settlemnt                                                                               0                                   L>
i,                                  l)ther .                                       .
10,103         573,077                    ,$pb            576.519           !
   ,,'                    Commitments and contingencies                                                                                          -
                                                                                                                                                              ~~
                                                                                                                                                                                                 +
                                          . Total ca
                          =w- -~w.=pitalization and liabihtica.==w:i: =.w=.n===ww=uz=                           =r= z=c== =,$3.119,568a= ==w==. u.r .= .:.===Nw=14        -
6~~
                                                                                                                                                                                      =.== 1 E
..                        (@E atements of Retamed Eemings'                                                                                                                                            ,
      . . =                                                                                                                                                                                           h 12                                                                                                                                                      year 9 ended Deccmber 31,               )
(in thousania) -                                                                                                  1991                         1990            1989         .
y                                                                                             .
,                         ualance ut heginning of year                                                                               $ 161,143 ~            $ 14?,952          $ 243,509 6                      1             Not income 00ss)                                                                                     94,670                     05.440          116.135)         ,
n                                                                                                                                                                                                     '
Q-
&       i
                                      . Subtotal -                                                                                       255 $13- .                238.392         '227JN
'                         C,wh disdands declared:-
W l                                    Profwrod                                                                                              9,476                        9,147           f. ' 17
                                  ' Preference -                                                                                           H.135                        8,603           8,506         ,
,:                   1               Cominon                                                                                              63,725                      59,591          66,6/9          ,
*'                                                                        ~                                                                                                                           '
d1I336                     77,.'' 49
                          .'""'"'~5Eb.t.otal
                                                                                                                                                                                 .. 8 _4,482
                                                                                                                                                                               $ 142,952 lblance at end of year                                         -                                          $ - 174,477          -5 161,143 mammmwamam em.=mw=m.m.=                                                            . -._ .           . u=-. n=w=ama=ma===~.m
                          .The accompanying notis and schedules are an integral part of ir e consolidated tinancini statements.                                                                       ;
e p     i    3 g..,u...m.._-._._._._.,m._._...._.__._...___.                                    -

                                                - . _ ~ . - ~ . - - . . - . - - . - - - .                 - . . _ . . ~ . . -                    - . -
Consphd6ted Statematits el f aab Ffews                                                                                                                               l
,v                                                                                                                                                                                         i
;.                                                                                                                                             years ended December 31,                    ;
(in thousands)                                                                                                 1991                    1993              1999 Cash flows from operating activlties:                                                                                                                                   i Not income (loss)                                                                            $ 94.670             $ 95,440             $ 416,135)       '(
Adjustments to loconcile not income (loss)                                                                                                                   l to net cash provided by operatin0 activities:                                                                                                         .l Cumulative effect inet) for years prior to                                                                                                            )
1990 of chsnge for unbilled revenues                                                         0              (15,ba)                    0          l
                                  ' Rcto and contract settlements, net                                                        t 44,546)              (68,070)           98,630 l
Depreciation                                                                             113,756                101,659            106,727            i Amortization of nucleer fuel                                                                19.869                25,913             10,614 7
Amortiration of deferred cost of c3ncelled nuclear unit (net)                              21,112                 19,967             18,898           r Other amortization -                                                                         9,904                12,92P             12,159           -
Allowanco for funds used dWng construction                                                  (8.984)                (0,833)         (10,474)
Increase (decreate) in deferred income taxns                                               24,675                 29,028             (7,795)
(Deferrnll amortiration of nuclear outage costs, =t                                       (22,062)                  1,500           21,376 Net changes in:
Accounts receivable.                                                                        13,519;               21,173           (27,515)           ;
Fuel, materials & supplies                                                                 12.710               (16,890)             (1,536)          ,
Accounts payable                                                                          (19,857)                16,320            - 5,602 Other current assets and liabilities                                                         1,626                    (105)         14,7C3 Other, net                                                                                (27,469)              (23,832)            11,681 het cash provide 1 by operating actMtivs                                                                 171,691                196,368            230,895 Cash flom provided (used) by investing activities; Phnt experidnutes (excluding ATUDC)                                                           (214,213)             1255,784)           1235,946)            ;
Decommissioning fund '                                                                              (5.896)               (6,679)            (6,983.1
                         . Investments in electric cornpanies                                                                   (1,515)               (3,367)         (11,207)            .
Proceeds from esset dispositions                                                                         0                         0          9,145 Get cash (used' by investing activities                                                                 (221,624)             (265,830s           (244,991)
Cat,h flows provided (used) by fmancing activities:
Is.uances:                                                                                                                                                    r Common ctock                                                                           08,800                  L,623            10,943            ,
Preferred stock                                                                        50,000                           0             0 Long-term debt .                                                                    146,120                200,000                    0 Redemptions:
Debt retirements                                                                   (118,000)                (23,609)          (16,270)            i
                                      . Preference stock                                                                     (50.0001                           0              0 Net change in chort term debt                                                                      35,770               (39,310)            99,260            t Dividends paid                                                                                   (79,5451-             (76AS4)            (87,083)
                  ~ Net cash provided by fic.ancing activities                                                                 52,545                69,140               6.850 het incIcase (decrease) in cash and cash equivalents                                                          2.612                   i322)         (1,246)
Cash and cash couivalents at the beginning of the year                                                        1,607-                 1,989             3,235 .       3 Cash and cash equivalents at the end of the yent                                                      $_4MJi 1i667_                            i _ 1,939 Ca6h paid during the year for:
interest, net of amounts capitatimd                                                          3 115,488           $ 105,642             $ 100,647 income taxes ;                                                                               $     18,9'9        5 19,227              $ 42,159 The accompanying notes and schedules are an integral part of the censolidated financial statements.
M.
u
   ,.,,,,,.._._._,..,..,,_,,_,,,,....m.,.,_,._,                                 ,_ , ,.,,,., _ ..,_.,. ._        ,.,m.%.                _,.__m.,,...,__.m..,._,.,                 , . , .

   ,. . - _ .   ..._m....                   . _ . _ . . _ - _ _ . . - _ . _ _ _ . . . . _ _ . . _ _ . .         m.___.         _ _ _ _ _ .                          -_               -
t                                                                                                                                                                         -
                                                                                                                                                                                                                   \
OPCefhher .'81,          ;
,                       (in thousards, except pc sSare amounts)                                                                                                                1*91                        1990    )
Cammon stock equ!!y:                                                                                                                                                                      i Common stock .                                                                 _
i' -
Shares outsteadiag: 100,000,000 and 50,000.000 euthorized, respectively                                                                       42,047                    38.999
                         . Par value pts share                                                                                                                         $         1.00          $           5.00    i Totd N. valuo                                                                                                                       $ 42,047                $ 194,993 Premium on common stock                                                                                                                         b36,507                   314,021 Retained earnings                                                                                                                               174.477                   161,143 Surplus invested in plant                                                                                                                               40b                        405 Total                                                                                                                        $ 753A46.=:.=.m. ,6 $71.,~362              ;
                                           = _ _   . ._m =a.=.==.
                                                                         .   == xm== := u=n m =:m ---
anw==                                   =-.          ,
Cumulative preferred stock:
Par Value $100 per share,2,830,000 shares authorized; issued and ountanding:                                                                                                             .
'~
Non-mandatory redeemable series:
Series                           Shares                Redemption Prico/Shere                                                                                                !
4,25 %                       .180,000                                      $ 103.625                                            $ 18.000                $ 18,000 4.78%                         250,000                                      $      102.80                                              25.000                  25,000 8.88 %                        400,000                                      $      102.00                                               40,000                 40,000       ,
                         -a.,        . T. .o. t a--,.u
                                               .-     l   .. ~ - .                ~                           .
                                                                                                                                          ,. n -               .
                                                                                                                                                                       $ 83,000 ,:-w $ 53,000 Mondatory todeemsble series:                                                                                                                                                   '
Seriec                          Shares 7.27 %                        500,000                                                                                           $ 50,000                5 50,000 8.d0% -                       500,000                                                                                                 60,000                           0 Totat                                                  .
                                                                                                                                      -.- ....-. ..- . .. .= _$ .100. ,.0.      ,0_            $
                                                                                                                                                                                     =0, .m.n.=.50,000 w.m=                                                          .=                        x                                                       ,                              ==.:.     .
                       . Cumute.~re preteeence stock:
Par value $1 per share,8,000,000 shares authorized; issued and outt.tanding:
Non mandatory redeemable series:
: i.                                $1.46 Se'les - 2,675,000 s. hares                                                                                              $ 2,675                 $ 2,615 Piemium on $1 d6 Series                                                                                            _
35458                 . 35,659
                           .-             Total                                                                             ._.,__.-.._.,_.~..r=.====.=u
                                                                                                                                                                       $ 38.333                $ 3?,333 c.====..._.._._._,________,.
                                  - Mandatory redeemable series:
Stated ute suc'it riproference stock 0 und 500,000 shares                                                                      5            0          $-           500   '
_Pr  emium on stated_ rate auction preference stock                                                                                             0                 49,500
                                    .,_,.T.o_ta,l       -     -
5_.-.        0 _ -, .$. -. 5._0$00 n .                                             .
i The accompanying notes are an integral part of _the consolidated (mancial statements                                                                                                   ,
4 E
a
          -4~,,,_4.._              - _._ ,,.. _ _._, _ a ,-. . .,. _.,,.....                                 ,..L.     -.......a.       .-
_,._,-,;._~,.._,...,,.m,.a,..'

_.    .                    . _ , _ . . _ . _ . ~ . _ _ _ . . _ . _ . _ . . _ . . _ . _ . . . . _ . _ _ . . . . _ . _ _ _ _ _ _ _._
1 EGil GII.E 52I!f1CEAC.MEIIE Long lonn debt:
Boston Edison Unmpanyt                                                                                                                                                                      ,   j First mortgage bonds:                                                                                                                                                                           j (in thousands)
Nerest                                                                                                                               Deber 31,             .
Series                           Ratn (fQ,_,                                  . M a t u n y,_ _ __, ,,_ . _, _ ,_, _ _ _ . _, ,                     . ., .199 L _,_ ._,.J990 H                                41/4                                            June 1,1992                                                          $ 15,000             $ 15,000 l'                               43'4                                             Nov.1,1905                                                              25,000               25,000 J                                61/3                                            June 1,199/                                                              40.000               40,000 K                                67/P                                             Nov.1,1999                                                              50,000               50.000 L                                9                                                Dec.1,1999                                                              % 000                50,000 i
M-                               93/8                                            July 1,2000                                                              60.000               60,000           l N                                ?1/8                                             May 15,2001                                                             75.000               75.000           j
           $                                9 at 'able -                                    Jan.15.2002                                                              25.000               25/00 0                                S $4                                             Dec.15,2003                                                             C0.975               74.575 R                                10.95                                           Oct. 31,2004                                                             50,250               56,250           i P                                91/4                                             Apr.15,2007                                                             60.000               60,000           )
U                                in 1/4                                          Apr.1, 2014                                                              15.000               15 000           1 W                                91/2                                            July 15,2010                                                            135.000             135,000 X                                11                                               Sept.15,2017                                                            45.000             100.000 Total first mortgage bonds                                                                                                                       712,225              780.825 Lest,: due within ono year                                                                                                                         21.800                 6,800
          .,          . First moirpgo.b.o..n..d..s... net - -- - - - ..__ = = = ....=;
S 690.425  -    ==$ 77.=4,025 l
Unsecured medium.torm notes                                                                                                                          $ 100.000             $ 150.000            l less. due within one year                                                                                                                                  0            50,000 U sec
           -.- - .n.-..u,.re.      d m.  . ed.    -   i.=ur.n_ term   , = ..n.;otes= ,.=._- n.et                   .
                                                                                                                                           = ,._= = =. = = .-
                                                                                                                                                              = 5. 100.000
                                                                                                                                                                   = = ..    .
                                                                                                                                                                               = = ._    ,000
                                                                                                                                                                                      $ 100        __
H, Debentures:
9 7/S% due June 1,2020                                                                                                                        $ 100,000             $ 100.000 8 7/8% due December 15,1995                                                                                                                       100 000             100,000 9 3/8% due August 15,2021                                                                                                                        125.000                         0
~
y_ .
Totgi debentures                                                 ,                            _               ___
_,____$ 325,000__$ 200,000 Harbor Electric Energy Company:
Sewage facility revenue bonds                                                                                                                 $ 36,300             $             0 Leas: funds held by trustee                                                                                                                        15.180                        0
                                                                                                                                                                $ 21,120             $ ._ . . ... 0. -
T_ot a. l...._.      .     .-.                    _ __m      _                              .
                                                                                                                                  . _,,,__._ _ _.m       .
            $hort term debt:
Boston Edison Company:                                                                                                                                                                        ,
Notes payable:
Bank loans                                                                                                                                    $ 89.000             $ 72,500
                - Commercial paper                                                                                                                                 121.300               81,030 Total .m           notos payable,. r.:x _ ==;:.== = a. = =2,.= =======                                                                 S 210,3,00.-- ~iil53=.,530
                                                                                                                                                                =m.
                                                                                                                                                                                               =
Harbor F.lectric Energy Company:
          - Sewa
             =:.==2e  =. facility w               revenue bonds.. ._..... - _..-. .._ _ _ .
                                                                                                                                                           -m=---------p--$
                                                                                                                                                                $            0        21 00 The accompanying notes are an integral part of the consolidated financial statements.
El-
_ .. m ... m. m _ . _ . _ _ _ .                                                                                          __.._._._______.__.a

   .           -- - _. . , - - . - .~                                                            . -       =
                                                                                                               - ~- ,_. ~ ~ _                                    . - . . _ . _ - _ -                                                                          . - - - .
Moses'to C'                 pehda           4    $chtdidos of Capital Stock and                        ednest s
1, Ccmmnq Stock Since December 31,1939, we nave issued the following shares of common stocl-Number                                           Total                                 Premium on
,     ;.                                                                                                                                 of Shares                               Por Value                               Common Stock Balance December 31,1988                                                                                         37,893,791                       $189,468,955                                             $300J79.09)
Dividend reinvestment plan                                                                                      ti32,294                           3,161,470                                              7,781,960
                      ~B'       lance Decamber ii,~13iff- ~~
a                                                                                                             38.5}538f                            192,630,425                                              309.561,065 DivideM reinvestment plan                                                                                       472,446                            2.362,230                                              6,260,499 Balance December 31,1990                                                                                        38,998,531                           194,992,655                                              314,821,564 Dividend reinvestment plan '*'                                                                                  448,825                            2,181,357                                              6,844,492 Change in par value of common tt ack
* 0             $167,7?6,656)                                               157,72fi,656                          i New issuo '"                                                                                                2,600,000                              2,600,000                                             51,174,000 12.047,356                          $    4f0.4.=7,356.mm$5365.                                         KfD
_Elance Decem._be.r.3._1_/1991--                                      ,__,___.                           _,=                          m.          .=                         =                                  =        m y
                    . (al At Decembet 31,1991, tM temminm0 authorned common Shares itsefved for future irissance under the Davidend Remver.tment and Common Stock Purchow Plan are 1.597,M1 shares.
ib) ' in November 1991, we amended out P4 stated Articles of Orgamtation increasing our au*honted comrnon stock from 50,000,00% to                                                                                                                   ,
                               %t000.000 shares and rouutirsg the pm v elve from $5 to $1 per common snare.                                                                                                                                                                ,
(d We issued 2400 000 snares of common stock in Oe:vimber 199L The net proceeds were used to eere $55.0cc.000 08 senes X,11% first                                                                                                                   i morigsgo bonds, 2* Cumulative Non Manstatory Hedeemable Pieterreo and Preference Stock                                                                                                                                                                              ,
Holder; of our cumula@s non mandatory redeumabh prefened stock are entitled to $100 per share upon any
                     . liquidation of the Company, Our cumulative non mandatory redeemable preference stock may be redeemed as a                                                                                                                                           ,
                     -whole or in part upon resolution of the Board of Directors. The redemption price at December 31,1991 was $15.00                                                                                                                                      i per share. Subject to the plior preferential righte of car comeintive preferred stockholders, upon involuntary liquidtstion of the Compny, holders of out $1,46 Seriec am entitled to receivs $15 pcr share.
3, Cumulative Mandatory ftedeemable Preferred and Preference Stock The 500,000 shares of our 1.27% sinkin0 fund series $100 par value, cumulative preferred stock are redeemable at i
our option at $'07.27 prio,'to May 1,1992, providad that we ma/ not ma\e a redemption prior to M:y 1,1992 by
.                      refunding from the issuance of aebt or certain stock having an interest rate, dividend rato or cost to us of leas thrn                                                                                                                              .
7,334% per year, Commencing M y 1,1092, she redemption price dNlines from $104.85 po'sha e to par value on
                     - May 1,2002. The 7.27% pre' erred stock will be entitled to a sinking fund to mtire 20 000 shates at $100 per sham, plus accruso dividends, on May 1 nf each year, beginning in 1993. On May 1 in any year, beginnin0 in 1993, we have the non-cumulative option to redeem an t,dditional nur-ber of sharcs, not to exceed 20,000 for the sinking fund at I-                     $100 per share, plus accrued dividends. Upon any liquidation of the Company, holders are entitled to $100 per share.
l~
On Do; ember 2,1991, we sold 500,000 shares of $100 par value cumulative preferred strmk. 8% series. %e are l'                     not able to redeem this series, in whole or in part, prior to December 1,2001, The entire scrit:s of the preferred Stock                                                                                                                            ,
is subject to mandatory refemption, out of funds legaily available for this purpose, on Det. ember 1,2001, at $100 per l
share, plus accrued and unpaid dividends There is no sinking fund for this preferred stock. Holders are entitled to                                                                                                                              . ,
                       $100 per share net upon arr, linuidation of the Compaay. We used the proceeds of this issuance to redeem all our                                                                                                                                    .
                                                                                    ~
outstanding stated rate auction preference stock in Otcember 1991.
: 4. Long Term Debt                                                                                                                                                                                                                                  l Subst6atially all our property, plant and equipment and materials and supplies are subje~t to lier, undr the terms of
: our indsnture of Trust and First Mortgage dated December 1,1940, and its supplements.                                                                                                                                                            _;
The aggregate principai amounts of our first rwartga0e bonds, debettures, medium-term notes and sewage                                                                                                                                      i L                      facility revenue bonds 6ncludin0 sinking fund requirements) due in the fwe years 1992 through 1996 are $21,800,000, j                       $56,000.000, $56,800,000, $137,400,000, ant' $i1,535,000, respectively.
l                                                                                                                                                                                                                                                                          .
E                          .
au   saw.-o, .ht*          ,   9 -g   g. . 9 -c  ep 4yw---.,py.u.,.g       .--   o ..-.q,,,,y   g,--e   e ,..m.,.o.-     4 e.ge+eCh-rr---=**-ew* Ween     e -
* w -a e e - m ur * +-+,s e m w ,-P ow-w g ee t u n - W <e''ve'"'            -eWWe**-*++#'*e-        -*

__~
Our first mortgage bonds, Series S, adjustable rate duo 2002, hme interest at 10 50% per */ser for the period Je<iuary 15,1991 throu,h January 14,1992. The rate is adjus%d annually and is based upon the ten year constant maturity Treasury Rate as published by the f ederal Reserve Board. The inurev rate for the period January 15,1992 through January 14,1993 ir 160%
On September 15, 1988, we issued $150,000,090 medium term actes Series A, in three equal incternents of
        $50,000,000, bearin0i nterest at 9.35% 9.65% and 9.75% per annum and maturing on Septemou 16,1991, September 15,1993, and September 15.1994, respectively. The 9.35% medium term notes were returd m fall at their maturity               ,
in September 1991, The notes are unsucured nbligatio..s of the Cornpany, in Decemuer 1991, we deposited a $59,774,000 repurchase ayeement and rash of $1,507,N)0 m an irrevocable trur,t to pay the principal, call premium .nd iritorest payments on $55,000,000 of Series X 11% first mortgage bonds.
The repurchase agreement was recuro.l hy certair' Government National Mortgage Associatk.n (GNMA) t,ncurities and tratured on January 2*,19M The bonds were selected for a partial redemption on January 23, 992 et a call pramium of 8.10% As a result of these actions, the duot, asscciated accrued interest, repurchase apecement and cash were rer,vaved from our consolidated balance shee+ at December 31,1991.
In August 1991, we issued $125,000,000 of debentures. The debentures uear an mterest rate of 9 3/8% per annum and mature on August 15,2021. On and after August 15,2001, the dehentures we redeemable at prices declining f,om 104.612% of par beginning on August 15,2001 a 100% of par on and after August 15,2011,
: 5. Short Term Dott We nave avadable a $200,000,000 revolving credit agreement with a group of bank This agreement is intended to provida us with a standby source of short term borrowinOs, The agieement terminates on the earlier of (i) February 28,1993 or (ii) the 364th day following the first borrowiag made under the agttement if we have not .cceived approval from our state regulators to borrow under the agreement for a period of more than one year, As of December 31,1991, we have, not applien to eur state regidatore, for appro. 'l to bortaw on 3 fong term basis under tha agreernent, nor had we borrowed on a shordterm basis under the agreement. We must pay commitment fees on the unused portion of the total agreement amou-l.
Under the tarrns of this agreamant, we are required to maintain certain financial ratios related to our capitalriation and interest coverages. The most ter.trictis ) connant requires that w? not declare dividcads or rnde other distributicas on our common ster , or incc: additional debt,if certain capitahration ratios are not maintained.
      . As of Dt ember 31,1991, our capitalization ratios exceedJd the rninimum requirement, We have arrangernants with certain banks to p: ovide short term credit on a committed as well as an unconmitted and as available bas s, h currently have authority to issue up to 5350,000,000 of shor' term debt and had $210,300,000 outstanding at December 31,1991.
Information regarding our short tem berrowings, comprised of bank loans, commercial paper, and short term sewage facility revenue bonds, is as follows:
ithousands of dollars)                                                      1991                1990             1989
,,4    Maximum short ter.m borrowirigs                                         $324 400         $302,900            $233,275 Daily weighted averhge amount ou' standing                              5221,481         $221.525            $169,377 Wei0hted daily average interest rates, excluding f.ommitment fees, on balance during the year                                6E               85%               9.4%
: 6. Sewapt Facility llevenue Dondt                                                                                                -
in December 1991, Harbor Flec' ic Energy Compane (HEEC), our wholly owned subsidiary, issued $36,300,000 of L      long term sewage facility revenue bonds (the '.,onds). The bonds are tax exempt and are subject to annual
[      mandatary sinking fund redemption requiremer,:, and mature in the years 1995-2015. The bonds have a weighted I      average coupon rate of 7.35 On Decetaber 11,1991, a portion of the proceeds from the bonds was used to retire
       $21,000,000 of shot 0 term sewa00 facility revenue bonds at maturity. The remainder of the proceeds, which is on l'     deposit 'with the tr.stee, is erpuctec; to ultimata fnince the construction of HdC's perm;aent substation tu be located on Deer ist&nd (in Bostrn narbot) and to iuad an amount which mum remain in reserve with the trustee. In certain circumstancas, snould HEEC have insufficient funds en pay certain costs on a timely basis or be unable to meet certain net worth requirements, we would be *cquuod to mak9 additional capital contributions or loann to ttie
!      subCdiary up to a maximum uf $7,000,000.
N

hten to C8nsendsted F6senuel t, togspt, Noto A. Summary of $1gnificant Accounting Policies
                   ~ We are regulated by various agencies. Because rates charged to our customers are set by these agencies, thcre are
:s                 . diffeiencer in *he generally accepted accounting principles applied to our business and to nonregulated businesset.
                   . These differerr;cs are primarily due to 2he timing of bcluding vanous Hems in ca culating net income in accordance
     , _             with the objetWe of mStch;ng 09r costs ano revenues                                                                                            ,
,.                                                                                                                                                                  r t Basiti of ConsolHation                                                                                                                      t Our conschaated fmancial statenents ir.clude the ac.lvities of Hatbor f.iectric Energy Company, our whoPy owned
                   ' subsidiary. Allintercompany transactions between the subsidiary and us have been eliminated.                                                   ,
: 3. Depreciation. Amortiration and Maintenance ur physical property (excluding a factor for the cost of decommissioning nuclear units) was depreciated on an annua! Mrai0ht Une basis in 1991,1990 and 1989 at approximately 3 41% 3 41% and 3 69% per year, respectively, using the avelIge remaining hte method o' computing depreciation. When these property units are retired. the cost                             i and the nil ?f she coc! to remove them and the sah/ age value are charged to accumuhited depreciation.
l Tha cost of our nuclear fuelis amortiied (expensed) based on the amount of electricity out nuclear unit                                {
produces Our noctear fuel expense also ...cludes an amount for the entirnc',cd costs of ultimately disposing of the spent nucit ar_ ical. These costs are expensed and included in the costs we charge our customers for fuel and purchased pwer.                                                                                                                               ,
We cht                naintenance evense for the cost of current repa;rs and the replacement or addition of froner parts to            [
our Nanb ad p ropertiens we cor.otete the wotl                                                                                                i
: 3. Forecasted Fuel and Pedormr.nce Rates The rate we charge our Ms4 customers fo' fuel and purchased power allows for all fuel costs, the capacny portion of                           I some purchased power Losts some transnission costs and demanc side management costs to be billed to our                                       ,
customers monthly using a forecasted rate The difference between out actual and en:imated costs is included in                                ;
accounte f eceivable on our consolidated balance sheet until we adjust subsequent rates. The nortfuel portion of some of our pwchased power costs are collected through out base rates. Our stato regulators have the right to redne our subsequent fuel rates if they find that we have been unreasonable or imprudent in the operation of our generating units or in purchasing fuel. As part of our Retail Settlement Agreement, we began charging our retail cuc*omers a performance charge from Nover,ber 1989 through October 31,1992.                                                                   '
T
: 4. Rsve%nt pecngnition in tbs hrst quarter of 1990, we began recording sevenues for elecincsty used by our custome's but not billed, in ruder to
                    - match our revenues more closely with e penses. Before thls. we recorded to/enues only after bills had been sent to our Oustomersi                                                                                                                                    -
: 5. Amortsation of Olscoents, Premiums and Redemption Premiums on Debt                                                                         ,
We amortire discounts, prcmiums, redemption premiums and related expenses associated with issuances of debt or                                ;
refinanc;ng of existing debt in equal annualinstallments ever Ino 1.fo of the new debt.
: 6. Ahowance for Funds Used During Construction
                    - We include in the cost of our plant axpe.iditures an allowance for funds used during construc00n (AFUDC). AFUDC                               1 r' epresents our estimated financing costs and the cost of equity which we use to finance our plant expenditores. We -                        ,
receive payment for those costs from our cntomers over the service life of the plant in the form of increased revenues collected as a result of higher depreciation expense. Our AFUDC rates for the yaars 1991,1990 and 1989 were 6.85% S.00% and 10.20% respectively.
j
: 7. Cash and Cash Equivalents .                                                                                                               +
Cash and cash equivalents are generally comprised of highly liquid instruments with maturities of three months or less. We' record outstanding checks in accuunts p<able until they are presented ta us for payment.
                                                                                                                                                                 'l
   .- . ,.---_ ..--.__ ,--, _ . _ _ . _ , _ - , - _ _ _ _                                                                                    . . ~ . _ . - _ . ,

                                  -. -                . _ -                    . .               -.         - - ~             . - .              -- ..           -_
: 8. Deierrod Dobits Through December 31,1991, we deforted appioximately $40,000,000 of certam nuclear outue-related, storm, pension and demand side mancgement program ccsts, in accordance with generally accepted accounting principles applicable to our business, and ter which our state regulators have permitted cost recovery consistent with r.imilar                                                ,
retail rate orders of other Massachuset's electric utilities. We have it cludeJ these items in "Other deferred deb?.s'                                             l on cui consolidated balance sheet at December 31,1991 and will oxpense them over tne same p9tiod that we expect                                                    i to charge our customers.                                                                                                                                         ,
: 9. Reciassifications We have rm.de certain reclassifications, not affecting income, to smtunts we teported in prior years to conform to our 1991 presentation.
Note B Income Teres We incurred deferred Income tax expense when certain income and expenses were reported on the tax return in different years than reported in the financ;al statements. Investment tax credits are included in our incomo over the estimated usefullives of the related property Components of our income tax expense are os follows:                                                                 l i
I (in thovsmds)                                                                                           1901                  19%)                1989 S (8555i~ $ (8,995;
                                                               ~
Crncelled nuclear unit                                                         ~~~S                   (0.998i Ewess tax depreciation over book depreciation                                                         10,802                11,165               4,4C4             ;
Deferred fuel espense                                                                                         56            (4,141)                (879)
Debt portion of allowano) for funds usea dunng construction                                            2.856                 2.966               2.891             !
Mctsschusetts corpotate franchiso tn                                                                   7,140                 5,964                 (F46)
Defetted nuclear ot,ttpe eapense                                                                       7,014                   (477)           (6,795) i Unbilled revenues                                                                                              0               (873)           (1,938)
Cost of r:moval                                                                                        4,277                 3,063               1,359 Revenue reserve adjustment                                                                              (760)               (1,297)              4,843            l Rate and contract sett4ments                                                                          10,196              20,389                       0 Mun t cipal property taxes                                                                             3,745                 3.150                   261 Constmtion/ load management programs                                                                   2,256                    494              1.802 Settlement agreement                                                                                 (12,000f"'             (2,0000*'                  O          ,
Ot))t.r                                                                                               t? 360) _ ,_JL0731                       (6 023)#
1 Subtota! ceferredincom taxes                                                                    23.224              27,332               (9,893)
'   Current income tax expense                                                                            (1,823)                7.046             40,349 inveement tax credits                                                                                 (4,29 ))              (4 740)            (4,233)
P;ovision for income taxes                                                                17 151              29,638              26.222 Taxes on other income:
Current                                                                                             406                   516              1,065 Deferred                                                                                         1.2E2                 1,689               5,511 SubdiaI                                                                              ~Ilid                       2,207              6,5#6             i I
Change in accounting principle.
l         Current                                                                                                  0                871                    0          .
!         Def erred                                                                                                0             8,943                     0          i
  - Rate and contract dettlements:
Current -                                                                                                0                  0            (2,929)
Deferred                                                                                                 0                  0          (69.441)
Subtotal                                                                                          0                  0          (72,370s              '
l l                   Total                                                                           5 18.768             5 41,664            $ (39,572)
(as in 1991 and 1390,is we agreed to do in toe Ntail SettM rut Ag<eement, we included in net income $11000.000 ud $2,001000. respectwely of defeired taxes
    ,b)   in 1989 wu redor.ed dorerred incorne ta uper.se by $kM000 or 5015 per common share resAng from the reversal of sorne AFuDC telated deferred taxes rKr:rded during the years 19771979, wNch were calculated besed upon the method requirmi by cur federal regulators, Ekcame our st6te rege JParn have not adored our federal, eguWors' method for these yeaa the eitt.ess deterred tu amour +ts were pdded bri to iricome.
El

                                                    - .-                     .   .            - -      -- -                . -    - . .       --           ~
The owetive itcome tax raies reflected in our consohdated (mancial statements and the renons for : heir differences from the statutory federal mccme tax rate are exp!ained belovv:
1991               1990              1989
                                                         ~                ~                       '
Matutory tax rate (benefit)                                                                         34 0 %             34.0 %            (34.0)%     ;
Allowance for other funds user: during ccastruction                                                                                       toc)
Massachusetts corporate fre.nchise tan                                                                4.1                41               (4.5) frwestment tax credit                                                                                :3 m               (3 4)             (8 2)
$       Municipal proporty tax adjustment                                                                    (1.6)              (1.3>             (3.21 Reversal of outage expense deferred tous                                                                                    -
p.11 Reversalof dverred taxeMettlernent ag eemeras                                                      (11.5F               (1.b)""
Federal tax beneht of twdate.1 payments from settlement agreements                                   G31 Other                                                                                                H .41              (1.51            (13.2) "d
        == r ~
Total                                                                                     16.5 %            30.4%             01.0) %     :
                      ~.=.m= s r=:=m== u = ===wx ==                                                 :n      r~-           == u = =:= w . w (al in 1991 and 1990 as we spreed tc rio in W Metad Sewemcet Areement. wn mctude.1 m net inwmc $n000 0D0 and $7000 000. mmtnely cf deterred tues.
Ib) In 1389 wv reduced deferre income tax empente b) $5 90CJ00 or $Els per er,.ntnon shee invHing trom tbn reversal of some ArUDc related defe**ed ase*, rect 9ded Nrir9 the years 197719i9. whah wero < akolated based uron the method requked by oui federal regul#Mel Off 9ulf Der U.etR repJrdern h}/e not adopted ( Jr ft*deral regu l
ai0rs' rnethod for thete yeart, the eumt Jefe'rej fM nmouht$
Were #dd90 bd 10 MCDrhe.
Note C. Settlement of Certakt Proceedings                                                                                                            ,
On October 31,1989, the Commonweelth of Massachusetts Department of Public Utilities (our state regulators) approved a Retail Settlement Agreemer,t effective November 1,1989, refaling to certcin of our proceedings belcre them. On November 5, IMO the Federal Enurgy Regulabry Commission (our federal regulatorri approved the Wholenlo Settloment Agmoments re'ating to claims filed by certain of our wholescle ecstomers in connection with the 19861958 outage at Pilgrim Nodaar Power Station iPilgrim Station). Through December 31,1991, we made cash payments of 557,687,000 to the wholessle settling ?arties as discussed furtner below.
As a result of the hetall Scttlement Agmement and the WI,olocale Settlement Agreementt we recorded in the                                      5 fourth quaner of 1989 a before-tax crarge of $178,650,000, Mth an n'ter tax effett of $106,280,000 or $2.78 per share of commnn stock. This charge wr,incWded in our W89 yeawnd consolidated statemet of income as a component of
         *Other income (loss)" consistent with elec;ric utility practices and methods of presentation. We am not allowed to collect the costs of this 1989 one time chcrge to caraings frcm eithe' our retail or wholesale customert The t.harge to earnirgs for a?! of the settlement agreements included about $N,000,000 for retail demand side mana0cment expenses, $31,000,000 of prey!ously deierred outago related nucles expenses, 541400,000 of litigation, segulatory commission and other expenses, and $31,000,000 for costa to replace the power that would have normally bee 7 generated by this unit. Monies spent on our demand side mana0ement activities (not directly associated with the sr ttlemnnt agreements) are normaPy charged to customers through our rates in accordance with regulatory guidelines. Defer *ed Lutwe-telat d nuclear costs (not direct:y associated with the settlement agreements) are normally included as part of our operating expenses ("Amortiration of deferred nuclear outage costs')in the consolidated statement of income. Wr; axpect to charge customors foi similar costs incurred in the future, as we have been allowed to do in the past by our vtate *egulntors. We made cash paymeats for these settlement agteements of appro;rimately $68,070,000 in 1990 and 3;; proximately $45,000,000 in 1991, As of December 31,1991, we expect to make cash payments in 1992 of apprcximately $32,500,000 as part of these approved settlement agreements.
As part of '.h3 Retail Settlement Agreement, we agreed to limit increases in our retail revenues prior to November 1.1992 to approximately 2% per year, subject to adjustment based on Pilgrim Station's performance.
Theciore, our ability to mcintain or merease earnings through October 31,1992 will depend primarily on oui abihty to coatml costs and increase electric sales, as well at how efficiently we operato Pilgrim Station. During the period November 1,1950 through October 31,1991 we received approximatcly $22.500,000 from this retail revenue lacrease. Effective November 1,1991 our annual retail revenues increased an additional 525.000,000, which is subject to adjustment for Pilgrim Station's performance. In addition, if we are not able to achieve a retail rate of N

retuto of 124% in 1992. we may make certain accountm0 odjustments (but only if they do not result in a rethil rate of                      I return in excest, of 12%) by taking into mceme (4 defened income toes of $23,000.000 and hi) additional municipal property tax abaternents of appwnimstely $13 000 000. During the period November 1,1992 through October 31, 2000, we 80 reed to institute a new cost ter:overy rnetharism, whkh it, ah o tied to pdgom Station't. performance, for a po Son of our investment in pdgrim Statiun and telated operating costs We will fde for retad rate rehef in the                     ,
spring cf 1992 with a decision expected by November 1,1992.
Note D, Commitment
* an't Continencies                                                                                                     ;
1, Capital Commitments At Oscember 31,1991 we had estimated contractual obhgations for plant and equipment of approximately
? *>?,000,000.
: 2. Lease Commhmertt We hsd leasta sovering certMn facihbes and egaipment at Decc.nta r 31,1991 and 1990. Our estimated nonimum rental comrritments uruer both noncannilable leases and trant, mission agreements for the years of1er 1991 are as follows:
htJ)ousandsL _ _ _ _ _ __                               __ __ ______                  _ _ _ _ , _ ._
_ _ Totyi 199/                                                                                                               $ 33,199
 " 93                                                                                                                  31,050 1994                                                                                                                   24,139 1995                                                                                                                  20,587 1996                                                                                                                  19.541 Years therosfter                                                                                                      17tL651
= =bol:              m= r _              = - -    = -           -
Wc will cap;take a portion of toeso lease rentr.ls as part of plant expenditures in the future Que total erpense for both leaso rentats and transmission agreements for the years ended December 31,1991,1990 and 19M was 1;,33,500,000, $32,000.000 and $29,300,000, respectively, net of capitalized expenses of 54,800,000, $3,000.000 and S4.000,000, respective!y. Lease payments under cenain t<ansmission hno a0reements are expected to be offset by the savings fa,m a mlated energy contract. Recovery of ther,e lease payments (net o any savin 08) are collected 8
through our retail fuel and purchrised power rates 1
: 3. Nuclear Int,urance The federal Price Ar.derson Act currently provides $7,807,000,000 of financial protection for public habihty claims and                +
legal costs arising from a single nu: lear related accident. The first $200.000,000 of nuclear habihty is covered by the mavimum provided by commerual insurance. Additional nuclear liability insurance up to $7,245.000,000 is provided by a retrospective atsessment of up to $63,000,000 per incident icvied on each of the 115 unitt, bcensed to operate in the Unitec States, with a maximum assessment of $10,000.000 per reactor per accident in any yeur. The additional nuclear habihty insurance amount inay charsgo as new commercial nuclear units are licensed and exiang u tits give up their license. In addition to the nuclear habnity retror.pecthe assessments d$ cussed above, if the sum of eli public liabil ity cleims and legal corts arising from any nuclear accident ext.eeds the maximum amount of financial protectic.1 each !icensee can bt, assessed an add;!ional five parcent 151150.000) of the maximum retrospective auessenent.
We have purchased insurtnre from Nuclear Electric insunnce Umited (NGU to ccver some of the costs to purchase replacement power during a profonged accidental outage at Pdgrim Station and the cost of repair,
 'eplacement, decontamination or decommissioning of our utility propedy resulbng from covered mcidents at pdgrim Q

l I
Station. Our matiraum potential assessments foi fosses which occbf during cunent poiicy years i 1 approximately                    l 59,0')0,000 undet both the reptoccaient power policy and onuss property damage, decontarm iation and                               i decomm;ssioning phcies All compaaies insured with NLil are sclyect to retroattive assesrnents ;! losses are in                     j excess of the total funds availaDie to NLfL While assessments may alto be made for lossos m uitain pior pokey years, we are not awatt af any losses in those yr.ars which we believe c.e hkely 10 le$ ult in an a ;bessthent.
: 4. datardon: Waste Under tHr requiremeres of the applicable state and federal *Supmund" laws and rege'ations adopted, we and otners are caposed to potental Wnt and several habihty with respect to t% Jeanup of utes e here hwrue.is wnten may have been spilled or disposed of in the past. We have had claims assened against us related to Aanup costs at a                    ;
number of the6e sites in Massachusetts and othet states. While we atI currently unab!n to predic' the ultimsw total cleanup costn for these site; c' woat our sham of costi w;H be for exh of thuse sites based on the inforr ima,n we                 !
prcsently have availalJe, we belien it in remote that we williruuf any material habihty for thes9 sites fi.1lydro-Quebec                                                                                                                   ;
Along with other h0w Enghnd electric utikties, ce ' ave entered into an agreemen' to <xrmad ths existing 690 MW transmission hne interconnection with the Hydro Cmebec :,ystem of s tneue to 1,0u0 MW. These transra;ssion                         j f acilities were transterred to the Now England Power cxchange for com,neici i cperatiorni on Novernber 4,1990. V'e
  !1 ave approximately an 11% eouly ownership interest in two ca.npanies who own uine transmission f acihties which is included in ont consoldated financial statements. All ryuity rsart .;ips'its are required to guarantee, m addition to their own share, the total obligations of 1:.ose participants aho do not meet certain cred t criteth and are compensated accordingly At Detember $1,1961 our portion of these gur.nntees was apocoxirnate.e $25.000,000.
: 6. Yankee Atomic Electric Company - Subsequent Evem We have a $2 mdhon hvestment (9 % interest) in the Yankce Atomic Llecit : Company (Yankee A amic) which own-and operates the c!detu nuclear power plant in the country. On Octobe 1, IM,I, the 9 unit e<a;, shut dowa in response to a Nucl:ar Regcla'.ory Commission cencern over tne condo ou of the reactor vesset On February 20.1992, the Board of Directors of Yanha Atemic vared to per aanently clow '.ne unit and prepate for cany decornmissioning of the plant Yankee Atomic will be filing with ftderal re;)aletn to collect the costs associal' d with this shutdo, n ano decommissioning between now end the year 2000 frorr its contract custome,a ne nd tri rerponsible for our proportionate share. Yankee Atornic ha. a dect,*missioning estimate of appfuxitaatMy 59B(4,0,000 as of January 1, 1389, and is working on a new estimate which is expated to be sigrTcantly higher. We exped to recee ,ecovery
, from our custorners for all of these costs.
: 7. Litigation On March 8.1991, we were named in a I"vsuit brought in the Uniteci Siates District Court for the District of Massachusetts. This suit a,bges disctnninatory employment practices under *he Age Discrimination ,,i Ecr ployment Act of 1967 concerning f arty six employees afbd by out 1960 wortforce reduction. We oro currently analynng the allegations made in these setmns, ato :p with our legal counsel and miend to vigorously defend our positian Based on the information w I presently have available, we do not beheve they will hwe a material negativo impAt no our financial concitan.
r G

i N:ts f' P:nsiono cred Othet FestAtir:m:nt B:nafits We have a noncontribotnry funde J retirement plan. witn certain features that allow voluntary contributions. Benefas                                                  l
('e based upon an emp1090's /cara of service and compensation during the last years of emp!oyment. Our funding policy is to co'1 tribute ennually an cmount which at least equals the mmimum amotot required by the government's fuhJm9 atsndards, but does not exceed the rmount which we con deduct for federalincome tax purposes, Plan                                                         ,
assets are primarily int.utance contracts, equitiu and real est; te.
Our retiiement plan costs foe 1991,1990 and 1689 were $4,32.?.000, $2.580.00fi and $3.728.000, respectively, of wNch $0, $748.000 cod $t";7,000, respectively, was capitalized.
The components of our not ponsion cost for 1991,1990 and 1989 weiu as follows (in thousands)                                                                                           19's1                          1990           1989 Current service cost - benefits eamed during the ; enod                                             S   8.567             $            6.686   $     5,821 Interest cost on projected benel't obhgaticn                                                          29,817                        11,627          2't,823 Ac%al retum t.             Can asMs                                                                   W: t"3)                         .9.454)      150,261) 18,"245
                                                                                                                                                                            )
f et amortinnion and defintal                                                                         26,811                       (26.269)
Net pension cost                                                                 S   4 3a*             $            2,580   $     3 728
                                                          .= m.m =.                 =,m_       _
m      m.        _                       _
(4) I,1991. m racordante r*h gaarchy actned omDonm9 orinov% n.phab!e to 'ete reg. dated comparuen in os ste. vse defentA ost t+t ptf 5109 CDlh W@ etpM1 D# f f 9/.7.il10 YpIDv0 f Mf/v@f y lO ihrf,y (rtts t tri %.t rath it e 4 lri t$tt furgte.
l The following table sets fortn the plan's furded status at December 31,1991 ann 1990:
pn thousands)                                                                                                                            1931         1990 Actuarial present vtfue of beaefn obQutions:
Accumuuted bener it obligation, includW vi.tt: I benefits of $3145U and $270.561                                   ? 331.997            5 286.143 Plan asse's e? ' air vi.uo                                                                                                5 402 977            $ 371,400              ;
Projected obligation 41 servies anJered b date                                                                                (409.265)          (350.f>65)
Pian assets m euesU f p ciected benefit cbligations                                                                                  (6,28fn        20,535 Unreengnied pGr service cort                                                                                                           9,49'.i      10.082 Unrecognized net gain                                                                                                              (''1.899)      (45,921)
Unrecopaired t.M obligation                                                                                                         11,300          12,734 A.cqrued gnsMn eg.. - .-. ..-- .. .t    included .in accounts unpble. at liecember 31. -. _. . _.- , _. ,. - .
                                                                                                                                $ , 363. 921,- .-_ $ ._t2.570) i Pie weighted w.unqe discount ratts we utijd to .aeasure our projected benefit obligation for 1991 and 1990                                                  '
were 8.25% and 9.0% tcspectbely. Our expected weighted average long tom rate of return on plan assets for 1991 and 1990 werc 10.0% and 915% respectively Our rate of compensation incresse for bot;i 1991 and 1990 was 4.5%
in adddion to pe sion benefits, we also provide certain health care and life insurance benehts to our retired employees. ;he cost of provioing those benefits was apptoximately $8,200,000 in 1991, $6,900.000 in 1990 and
      $4,600,000 in 15o9. Vie record health care beneht:i and d.uth benef;ts as claims are paid. New accounting rules effective in 1993 uill Poquire "s to use an actuarial basis for calculating these benefits. P'eliminanc estimates ar? in the process ot 9eing ptspared by our aJwies. However, we have not yet fully deterre ned the means of recovery of such expenses through the rrtemaking process or of impfeinenting this recounting pronounceinent The adoption of this pronouncement is not e4pycted to impact our cash f%vs ,n the near futuro.
l l
l l
D

Note F. Long Terrn Pow:r Contr: cts 1.Long-Term Contracts for the Purchase of Dectricity We have certain long term :ontracts for purchasing electric power. Under these contracts, we pay our sharo of the operating costs Oncluding depreciation anci a return on capital) through the contract empirat;on date. We included the total annua' costs under these contracts with our purchajed power expense in our consolidated statements of                                                          ,
fMoner. The*se cont # acts are as foPows:
proportionate share Un thousandO                                ,
Uruts of                    1991       1991 Interest                           Debt           l Contract                        CapaGty                Mmimum                 Pertion of                  utstandhg Expiration                       Purchased
* Debt              Minimum inrough Cont.
Goyerating Unit                               Date                %             MW                 Service        Debt Service                       Exp. Date Canal '.Init # I                              2001              25.0            142              5      882                $             U3          $ 2.416 Connecticut Yankee Atomic                     2007               9.5              56                  3,196                         2,331               19,864 Yankt.e Aumic                                 2000               9.5              16                    313                              151             2350 Mass. Day 'lransportation Authority Gas TurDine                     2005            100 0               35                     (N                                %                    ru Northeast Utilities Bue Load                  1993                  -
300                 11,212                          8,661                4,501 Ocean State Power - Unit !!!                  2010              23 5              US                  5,320                         4.051               24,480 Ocean Stato Power Unit #2                     2011              23.5              65                  4,432                         3,349               19,942 Northear,t Energy Associates                         to           to            219                       to                               M                    to Down East Peat                                2008            100.0               24                     uti                               Hi                  on       '
                                                                                                            ~$ :.;
25,355
                                                                                                                    - =.: = =a,936     $ 16                      $ 73,143 n .: :::a == c= ===== = == = = === == ==:=. :                         ==r=-     2.=      .=                                                 = = . .           .
t W The Nortneast UtM+s and the Northeast Energy Anooetes contrans rrtment 8 0% and 6 e% reyawery of or emtaved net cnietety The remaini.y utts hstut above aggregate 14.3'A tb) We 6te remdri d to pay Pie greater or $22.00 rArt knews*f yriar or feQ% ro NFr'OOL CMabihty Amperwtsty Adjustnwnt chmge op to W.4 D0 per khnMt year times the quahhed capaaty (preuntiv 33 6MW) plus hciementa! operst rig mamtename and f, set me Ihn tutni ch rges                                  t for this (W.:ect in 1991 were oppionrnately $2.100.030 4,    We puttnaso appro8mateft 75.5 % of the e'se gy cutout of this uwt under rno contracts Or.e (entract rememte 13WW and el et, n the year 2015, the other cor. tract is for 64MW and empires en 2010 We ony for this energy based upon a prus per kWh rfgun.,rd in total charges for these contracts in 1'/31 were $22.675 000.
(d) We porci ase 101% of the energy output of this umt. We pay for tms energy based upon a price por kWh rece,e-1 The tval rharges i"ider                               ,
                 . thic tontract in 1991 were $12177.000.                                                                                                                           ,
Our total fixed and variable costs for these contracts in 1991,1990 ar'd 1989 were StS3.577,000, $93/107,000 and
            $62,334,000, respectively, The variablo component represents fuel costs which wo mcluded with not purchased power in our consolidated statements of income.
The aggregate principal amounts of our future unconJitional purcriase obligations due in the period 1992 through 1996 Snd 1997 & thereafter n'e $130,792.000, $123,471,000, $71.975,000. $75,528,000, $76,080.000 and
;           $844,520,000, respectively. The aggregate present value of these ob"0ations is $703,658.000.
: 2. Long. Term Power Saks
,           We sell a portion of the output from Pilgrirn Nuclear Power Station to other utilities under long term contractt for the
: l.          sale of electric power. The contraris are as follows:
Year of                                            Unitt of          .
Contract                                        Capacity Sold Contract                                                                                        Expiration                                 %              MW Commonwealth Electric Company                                                                         2012                              11.0              73.7 Montaup Electric Company                                                                              2012                             11.0               73 7 Vanous municipahties 2000 3.7              25,0           .
            ========.=.=======;=====- --===.==========:-==,.======
n W     Subre tt to ce''tain ed uttmerits i
o

         ~.        . .                      .     -   -      ..                -              .     -.          -.--              , -       _ - - - ..
U, der thesa contract $, the participating "tihtiet, beat their proportional share of the costs of operating Pilgrim Nuclear Power Station and e$sociated transmission f acilities, including operation and maintenance expenses, insurance, local taxes, deptuciation, decommissionc g and a return on the capital invested.
Note G. Estimated Future Costs of Disposing of Spent Nuctor Fust and Atiring Nuclear Generating Plants                                           .
We have expanded our spent nuclear fuel storage facility at Pilgrim Station to includo sufficient room for spent nuclear fuel through approximately the year 1995. However, under the Nuclear Waste Pohcy A=1 of 1982, the United States Department of Energy (DOE)is responsitWe for the ultimate disposal of spent nuclear furd.                                              '
We are receiving funds from cor,tomers each year to cover our cost of docu.nmotioning (i.e. retiring) Pilgrim Station at the end of its usefullife. The funds collected for deenmmissioning are restricted in their uso. Ther,e funds collected in the rates charged to our custamorp 9 e based upon a 1905 estimate of $122,000.000 to decemmission the piant (immediate dismantlemer,t method) as approved by our state regulators. Our most recent estimate (1988) was
         $218,000,000 and we will inch 4de i revised estirnate in out nest rate case, which will be filed in April 1992. Securities held in the nuclear decommissioring fund are statrd at cost, which approximates market, We also collect a provision for the cot,t of decommissioning Pagrim Station from those custorners (other utibty companies and municipahties)                                 i with contracts to purr,hase a porhon of the electricity generated by the unit over its lifetime.
We6- air.o en investor in two other domestic nuclear units. Both of these units receive through the rates chJrged to the,ir customers an rrmount to cover the estimated cost to dispose of their spent nuclear fuel and to retire the units at the end of their usefullives.
Note H. Change in Accounting Principle Ur6illed fiever:ues Effective January 1,1990, we t.6prn to record revenues for electncity used by our customers, but not yet billed, in order to n, ore closely match out revenues with our expenses The cumulative effect of this accounting change os of January 1,1990, was to increare at 1990 earnings by $0,41 per common share ($15,824,000, net of taxes of
         $9.819.000). Had we recorded there unbilled revenues in 1989, the pro forma ef'ect of this change on the year er,Jo,                            ,
December 31,1989 results wouH have baen as follows (in thousands, except loss per shareh 1989 as reported ._ pro formo Balance available for ccmmon stock                                                             $ (33,788)       $ (32,299)
Loss per common share                                                                          $    (0.88)      $            (084)
Note 1. Cancehad Nuclear Unit We began amortiziag the cost of our can elled Pilgrim 2 nuclear mit in May 1982 over approximately eleven and one half years in accordance with an order received frorr our state regulators. These mosts include certain financial carrying costs that will be reviewed and m y 50 increased or decreased from tirne to time by our state regulators.
in 1987, we adopted the Statement of Financial Accounting Standards (SFAS) No 90,
* Accounting for
!        Abandonrnents and Disallowances sf Plant Costv, which requires us to include in neiincome an amount for interest i.
effwively earned from the revenues we collect trom our custolners to recover the costs of cancelling this unit. This L        had the effect of increasing net income for 1991,1990 and 1989 by $2,017,000 ($0 05 per common s+e), $2.724,000 (50.07 per share) and $1384,000 ($0.09 por shalat, net of taxes of $1,251,000, $1,690,000 and $2.099,000, respecovely.                          -
l      ' At December 31, 1991, the unamortized discount was approximately $2,765,000, with related defei.ed taxes of
          $1,059,000.
Noto J. Eminent Domain On May 4,1989 the Commonwealth of Mass 6chusetts Metropolitan District Commission (the MDC) filed an order of land taHng ,vith respect to certain Company owned property located in Quincy, MA. The MDC paia us $9,145,000 on August 24,1989, and we recorded a gain of 50.14 per common share, which is redected in the accompanying l
financial statements. We have three years from the eminent domain takin0 to determine whether to pursue additional damages in ourt.
1 l.
I l       g                                                                                                                                                >

          . . - .          . -        - - . . . ~       .- . . -          .-.~ - - - --.- . . - . . . - - .-.---..-                                                                 -
          ,         Aeport of leyle ! . t Acceentants 4
We have audited the accompanying r,onsolidated balance sheets and schedulos of capital stock and indet/edness of Boston Edison Comr ny and subudiary (the Companyl as of December 31,1991 and 1990 and the related                                                                   l consohdated htatements of income (loss), retained earnings and enh flows for each of the three years in the petiod                                                  l ended December 31,1991. These financial statements era the rasponsibility of the Company's managernent. Our
      ,           resounsibility is to express an opinion on these financial statements based on out audits.                                                                          i We conducted out audite in accordance with generally accepted auditing standards. Those standards require                                                        ,
that we plan and 7.orform the audit to obtain reasonable awurance about whether the financial statements are free of                                                ;
material misstatement. An audit includes examining, on a test l' asis, evidence supporting the amounts and                                                           i disclosures in 1he financlol statements. An audit also includes assessing the accouriting principles used and significant estim#1s made by management, as well as vvaluaimg the overall financial statement presentation Wo believe that our audits provide a rrasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairty, in all material respects, the knancial position of the Company a of December 31,1991 and 1990, and the conso!idated results of its operarons and its cash flown for each el the three years in the period ended December 31,1991, in conformity with generally accepted acesunting principles.
As discussed in Note H of " Notes to Consolidated Financial Statements", in 1990 the Company (. hanged to the                                                   i unbilhd method of roc 00nizing toienues.                                                                                                                            :
y81L.-                         <>         tfvt%b-Boston, Massachosof ts l-               JanJary 21,1992, except as to the information presented in .
Item 6 of Note D for which the                                                                                                                                       >
date is February 26,1992 i
1 6
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   ,#e'-    .
g--g.h',.,.,,E-Ew...,,,y,.,_ ..~.m' ..u__%#,_      ,, ,. . .y., , ,~.r s,gn.g.,,,,,           y  .,r,wg,,,e.,,_,.w,,,,,._..m,,w.my.E,.-,,ww...,-,_m.._..m,,,,- e*,.,4

c                                                                                               --
Selected Ce l 4 dated FmancialStat' ticsJunauthted) :
Quarterly Financial Data tin thousand!, except earnings / doss) pw cornmon share)
Balance                   Earnings!(1.oss)
Orarating            Opeuting                                               Net                        Avacable for                              Per Share of Rovenues                  income                    incorne/(Loss)                           Cor, mon Stxk                               Common Stock'''
199 First Quarter                               $ 307,730               $ 35.214                        $              8,491                                 $       4,018                              $ 0.10 Second Quartet                                 290,018                  32,213                                     4.318                                             205                                  0.01 391303                   97,697                                 68,100                                        64,367                                       1,64 Third Ova tor      .
329,663                  40,737                                  12,781                                          8,409                                     0.21
,           l fourth Quarter 1990 First Quarter                               $ 309,664               $ 39,213                        $           30,595 #                                 $ 26,182 *                                 $ 0.68 *                   ,
269,652                  22.905                                  (2,048)                                        (6,462)                                  10,17)
Second Quarter Third Quarter                                  353,863                  81,483                                  56,914                                        S2,502                                      1.35 Fourth Quarter                                 325,367                  36,137                                     9,979                                         5,566                                    0.14 tal . Based upon the weighted everage number of common shares outstand #ng duting the quarter.
(b ' includes a gain of $15 824h00 or $141 per common share imm an accounting change.
I Our electricity sales and base revenues are seasonalin nature, with both being lower in the spring and fall                                                                                                         !
seasons. :n addition, under order of state regulators, the non fuel related rates billed to our retail customera, are, on average, forty percent higher in the billing months of July through October when demana is usually higher.
Accordingly, a significant portion of our annust camings occurs in the third quarter,
            - Quarterly Stock Data Followhg ere the reported high and low sales prices of our commco s'ock on the New York Stock Exchan3e Consoiidated               _
Taps for esca of the quarters of 1991 and 1990 and the dividends decle ed por shars durlag each of thoso quarters:
I 1991                                                                                                   1990 High                  Iow                   D vidends                                     High                                 low                Divider.ds                      ,
             . First Quarter                            $201/2                $181/4                         $0.395                                 $19 7/8                           $17 5/8                     - $0.380 Second Quarter                             20 6/8              191/D                           0.395                                 19 5/8                               17 3!4                      0.380               -
Third Quarter                              213/4               18 1/2                          0.395                                 19 3/8                              16 1/2                       0.380 Fourth Quartst                             24 7/8-             21 1/4                          0.410                                 20 1/4                              17 1/4                       0.395 l
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  , ,      . . . .            - - . .   . - . - . -         . ~ - - . .      . - . ~ . . .      ,.       .    , . -           = - . . .             . . . -
xted ConselWated a peastmg $tp;6stics 1991                1990               1989                 1988                   1987 Capacity MW:
New Boston Station                        760                   760               760                  760                   760 Pilgrim Station                           670                   670               679                  670                   670
     ..           Mystic Station                         1,015               LO14               1,018                1.027                  1.036
: 1. St.ect S*ation                          ''2                    22               22                   22                     22 W.F. Wyman Vait 4                          3'                     36               36                   30                    36 Jet .urbinev                              259                   259               2!il                 249                   256 votal                              2.757               2.761              2,757                2,764                  2,780 Contract purchases                      1,203                   924            1,102                1,301                    901 Contract salu                            (293)               (173)              1171)                 (173)                 (258)
Net capabi!t.Lat_ year and       3,7J2___ , 3,M 2__ , _ 3.688                                3f92                   3J23 Net capability at peak MW                     3.C95               3.b05              3,483                3.200                 '3,200 Capability responsibility to NEPOOL at peak MW                   3,311               3,393              3.443                3,253                  2,827 Edison territory:
Houny peak-MW                          2,652               2,548              2.626                2,626                  2,432 Load factor                              60.0 %               62.2 %             61.4 %              ti0.5 %                62.7 %
)         Cencrating station econcmp
              - (BTU / net kWh)                        10,331              10,403             10,30S             10,050                   10.151 Average cost of fuel (Cornpany)-
c per million BTU:
Fossil                                240.18              255.51             254.56             226.91                  272.24 Nuclear                                56.18               59.05              56.79                       -                     -
Composite                             180.49              191.48             223.86                       -                     -
Capability (net kW):
Fossil                                     81 %                  81 %              82 %                 83 %                  80 %
Nuclear                                    19 %                  19 %              18 %                 17 %                  10 %
Geneiation (system LWh excfrding interchange):
Fossil                                      70 %                  72 %              87 %                 90 %                  90 % -
Nuclear                                    30 %                  28 %              13 %                 10 %                  10 %
Utility plant ($):
Expenditures                          202,689             240,902            234,253         244,807                    317,797 Retirements -                          30,333              27,100             14,042            12.017                   25,070
              ' Mcumulated depreciation             1,097,991           1.015,371            950.298         862,297                    779,246 C 4preciable plant                  3,488,269           3,277,616          3,130,031       2,910,390                 2,492,547 Number of employees at year-end               4,654               4,738              4,686                4,559                  4,532 I
J7
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_                     _.          _.                 -m.             . _ _ _ -                  ._         _ _ . .                                                ~ _ . _ . _ _                                                      . .. _ .
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1991               19s0            1989                                  1988                                      1987
{
Electiic er.ergy: (.a% in thousands)
            ' Sourcos (net system outp"th                                                                                                                                                                                                             ,
10,602.110              12,744,238      11,679,060                      8.653.274                                 8,951,229                          l dentated                                                                                                                                                                                                                         '
4,651,101             3,305,491       4,177,079                      4,474,726                                 3,129,045 Purchased                                                                                                                                                                                                                   ,
interchange                                                                          21,990           (d19/34)        1919,391)                     1,116.394                                 1,501,746 fotal.                  ._ n ,m., w .r                            JM7520*t , , J5,23s '.95_,14.936 748,_. 14,244J94                                                                 1p82,0'[0 Disposition:
Retail sales:
7,132,179             7.18?.347       7,095,297                      7,004,452                                 6.750,870 Commercia!
3.382,306             3,430,720       3,413,801                      3,434 611                                 3,188.74u                         -
Residential 1,684 864             1, ISO,325      1,845,441                       1,839,363                                1,853,019 Industrial Street ligt ting                                                                 130,823             132,016        132,791                           131,549                                   132,6C6 148,717              143,197        126.971                             90,697                                             0 F ailroade                                                                                                                                                                                    ~
Total retail                                                           12,478,889             12,639,605      12,614,301                    52,496,672                               11,97U03 Sales for resale total requstements 333,025                                                            336,343         332,800                           331,913                                  315,35J Terntory total                                                         12,611,914             12,975,948      12,947,101                    1/,828,590                               12,240,657 Sales for resala partial requirements                                                                1,327,322             1,337,771         805,882                           282,929                                   219,298 Total system                                                           14,139,236             14,313,719      13,752,983                    13,111,519                               12,459,955                           ,
Miscellaneous usage                                                           1,135,365               916,576       1,183,765                       1,132,875                                1,122,065 Totg.L                                                     , _ 15.,275.20,1                   151 230J95_ _1_4 934748 _ 14,244 394 _ _ 13,58&O20
_ . _Kilowatthours annualgrowth porcent:
Retail sales:
!.                      Commercial                                                                             (0.71%              1.2 %          1.3 %                                   3.8 %                                  6.1 %
Residential -                                                                         (l.4)               0.5          (0 5)                                     7.6                                    4.0
                         'ndustrial                                                                            (3.7)              (5.2)          0.3                                     (0.7)                                   09 Street lighting                                                                       (0.9)              (0.6)          09                                      (0.8)                                  (1.1)
Railroads                                                                               3.9             12.8           40.0                                            -                                   -
Total retail                                                                       (1.3)               0.2           0.9 -                                    4.8                                    4.8 Sales for resale - total requirements                                                    (1.0)               1,1           0.3                                      5.3                                    4.3 Territory total                                                                     ('.3)              0.2           0.9                                      4.8                                    4.8 Sales for resale + partial requirementn                                                  (0 8)             66.0          184.8                                   29.0                      _
M9.3)
Jtal tystem                                                                              (1.21 %            4.1 %          4.9 %                                   5.2 %                                  05%
System tr tal eiectric revenues by class:
Commercial                                                                                  48 %              48 %           48 %                                     48 %                                  49 %               -
Residential                                                                                 27 %              28 %           27 %                                     28 %                                  28 %
Industrial                                                                                    10 %            10 %           11 %                                     11 %                                  12 %
Sales for resale                                                                             10 %              9%            10 %                                        9%                                  9%
Other                                                                                          5%              5%               4%                                       4%                                  2%
Electric sales statistics:
Residential overogos:
                       - Annual kWh use                                                                     6.053              6,150           6,160                                 6,270                                    5,903 Revenue per kWh
* 10,51 e             10.10 e        10.19 c                                 9.95 c                                 10.26 c Annual bill
* 5036.17             $621.15         562).70                           $62'i.87                                 $605.65 Customer:
                       . Average number                                                                  642,907             642,041         637,871                           029.659                                  621,083 ll
              .W       Excludes o+ferred fuel revenue.
Certain reclassifications have been made to the data reported in prior years to conform to the method of presentation used in 1991.
as .

Selveted Cemehdated NAsheial Statistics 1991                    1990                        1989                              1988                                     1987                       l 7 6 19,714                $I,25546                   5I'f653Tf'~~$1,2055T~~Til51397 Operating revenues 600}
         . Balance for common (000))                                 $77,059               $77,788                   $(33,788)                          $70,071                                    $64.255 Per commaa share:                                                                                                                                                                                                    ,
Earnings (loss)                                       $1.96                  $2.01 'd                    $(0.89) '''                       $1.86                                    $2 27
* Dividends declareu                                  $1.595                $1.535                       $1.745                              $1.82                                    $1.80 Dividends paid                                        $1.56                  $1.52                        $1.82                            $1.82                                    $1.79 Book value                                          $17.90                $17.20                       $16.71                            $ 19.36                                  $19.35 Cash flow *                                           $5 64                  $6.86                       $5.10                             $4.55                                    $5.53 Payout ratio                                                    81 %                      76 %                             -'''                        98 %                                      79 %
Return on averaga cott,.non equity                           11.3 %                   11.8 %                        (4.6) %                           96%                                    11.9 %
Year end dividend yield                                        66%                      79%                          7.6%                        11.03 %                                    9.71 %                   i Fixed charge coverage (SEC)                                   1,86 x                  2.13 x                      0.52 x                           2,08x                                    2.85 x Capitalitation:                                                                                                                                                                                                       :
Long term debt                                            54 %                      55 %                        52 %                             50 %                                      48 %
Preferrerl and preference oquity                          10 %                      11 %                         12 %                            12 %                                      10 %                 _
Common equity                                            36 %                       34 %                        36 %                            38 %                                       42 %
Long term debt (000)                                 $1,136,545           $1,074,026                   $948M39                             $960,534                                  $822.659                        !
Manuatory rodeomable preferrew                                                                                                                                                                                        ,
preferance stocks (000)                           $100.000             $100,000                  $100,000                            $100,000                                   $50,000 Total assets (000)                                   $3,113,598           $3,014,109               $2.878,271                           $2.817,050                              $2,072.960 Interna! generation after                                                                                                                                                                                             ,
dividends (000)#                                  $191.016             $187,954                  $147,449                            $104,241                                  $148,644 PNnt openditures (000)                                  $214,213             $255,784                  $235.946                            $245,103                                  $309,239 Internal genera: ion
* 89 %                      It3 %                        62 %                            43 %                                      48 %
Common stockholders at year end                           44,687                J 5,826                     49,149                            49,976                                    48,063 Common shares outstanding:
Weighted average                               39,347,824           38,778.901               38 245,648                           37,683 515                             37,168,722                             ,
Year-end                                       42,047,356           38,998,531               38,526,085                           37,833,791                             37,424,910 Stock price.                                                                                                                                                                                                          >
High                                                 24 7/8                20 1/4                       22 1/8                           18 3/4                                           28 Low                                                  1B1/4                 16 1/2                       15 3/8                           12 1/2                                   16 3/4 Year-end                -
24 3/4                         20                          20                        16 1/2                                    183/4 Year end market value (000)                           $1,040,672               $779,971                 $764.913                           $625,248                                    $701,717                        .
Trading volene                                         17,464,300           19.652,300               29,938,900                           46,517,500                             30,040,900 Market / book (year end)                                      1.38                    1.16                        1.20                                .85                                      .97 Price / earnings ratio (year end) -                            12.6                    10.0                                -
                                                                                                                                        '''                     88                                        8.3 l-la) ' .ncludes $2.78 per common share loss apphcab'e to rate and contract sett!ements.
(h) - .tncludes 50 30 per commc.n share from discontinued operations.
I         \c) Not calcutaied based upon a loss (,er comrnon share. A payout ratio of 96% and a price /earrJngs rats of 10 5 were calculated bued upon                                                                            *
                 $1.90 operating earnings per common share, ecluding the 52.70 per common share loss due to rate and cun:rs:t settlements.
(d) includvs $0 41 per common share from an accountmg change.
(e) Encludes effect or rate and erntract settlements.
        > Certain reclassifications have been made to the data reported in prior years to conform to tha method of presentation used in 1991.
i l
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t     -p w   e                   -- -,ee             ,e-  e .         ,e-,-+-   eer e- e    ,,..ww     n-v e- ,   e.- ev &e      w  w--      v , .w m e. . e v e e eir"e        .-v e -   -w.''
                                                                                                                                                                                                                            'e''

                                                                                                                                  ~
Oh                                                          EE Bernard W. Reznicek, Presider.t and Chief                     taabinH a Wdliam E. Connell, Chairman and Chief Executive Officer, Connell Limited Executive Officer Partneisnip innd ls recyr ..ip and prn:essing Thomas J. May, Executivo Wce President                                       and industrial prorbction)
George W Davis, Jr., Executive Vice President                     w te Gary L Courc.ryman, President and Chief Executive Officer, Liberty MutualInsurance      .
Any A. Anderson, Sem,or Vice Pres. i dent Nuclear Company Cameron H. Deley, Senior Vice Presidt.nt Power Sur ply                       George W. Davis, Jr., En ecutive Vice President, Bosten Edison Company L Carlisle Gustin, Serio.' Vice President - Marketing &
d'H' Ho Thomas G. Dignan, Jr., Partner, Ropes &
Customer Service Gray (law firm)
John J. Higgins, Jr., Senior Vice President - Human             > kHm Charles K. Gifford. President, Bank of Boston Renurces                                                                     Corporation { bank holding company) and The Fi'st Ns;ional Bank of Boran Ronald A. i.edgett, Senlor Vice President Power Delivery, Stores and Service                                       t**       Nelson S. Gifford, Vice Chairman, Avery Den'1ison Corporation (pressure sensitive Charles E. Peters, Jr., Senior Vice President - Finance adhesives and materials, office produc' Marc S. Alpert, Vice President and Treasurer                                 product identification and control systems and soncialty chemints) m E. Thomas Boulette, Vice President Nuclear h*!    Kenneth 1. Guscott, General Partner, Long Operations and Station Director Lay Management Cornpany (real estate C, B uce Damreit Vice Ptesident Power Delivecy                               development) ystem                                                           (bu
* Matina S, Horner, Executive Vice Premdent, John J. Desmond,llL Vice President and General                                Teachers insurance and Annuity Aesociatior, Counsat and College Retirement Equities Fund am a Manh, Mm             ecu b %
Richard S. Hahn,Vice President Marketing                                      Premdent, Cabot Corpon@ tion (energy JoelY Kamya,Vice President Production Operations                              performance chemhis) m Thomas J. May, Executive Vice President, Martin S. Nort Vice President - Corporate Planning Boston Edisnn Company Craig D. Pcffer, Vice President - Customer Service                 (bum Sherry H. Penney, ChanceUor, University of Massachusetts at Boston, MA Arthur P Phillips, Jr., Vice President - Corporate tanc) Bernard W. Reznicek, President and Chief Mformation Services Executive Officer, Boston E6 son Company         '
Eowin J. Wagner, Vice President Nuclear Engineering               laHM Herbert Roth, Jr., Former Chairman of the Robert J. Weafer, Jr., Vice President, Contiolier and                        Board and Chief Excevtive Officer, LFE Chief Accounting Officer                                                     Corporation (traf tic and industrial process control systems)
Theodora S. Convisser, Clerk of the Corporation
                                                                                '*> Stephen J. Sweeney, Chrirman and former Donald Anastasia, Assistant Treasurer                                        Chief Executive Officer, Boston Edison Company James J. Judge, Assistant Treasurer (bHd) Paul E. Tsongas, of counsel, Foley, Hoag and Jean C. Quinn, Assistant Clerk of the Corporation                            Eliot (law firm) l I                                                                          ibue Charics A. Zraket, Trustee, The MITRE Corporation (not for ptofit system research and engineering firm)
I r1) { ffective February 1,192                                          On       Member of Executwe C3mmittee tb)      Member of A# Finance podinsuwce Comrmt1ce tc)     Member of Pncing Committee kh       Me mber of Esecutwe Pemnnel Cumrmtten (e)      Member or Nuclear operrions Recew Committee At

                         .     . ..    -_ -                , - . -            - -.                    -     - -             .     -.~ .
* l NEMM                                                                                                                        l 1
Our D9idend Reinvestment and Common Stock Purchase Plan is available to our common, preferred and preterence stockholders, Under the plan, common, preferred and preference stockholders niav have their dividends reinvested in our common stock at curren! markct prices. All participants may invest optional cash contributions, up to a maximum of $5,000 per quarter, which wiil be invested at 15e current market price. Participants de not oay fees or commissions.
    ;,           All recordholders of shares of common, preferred or preference stock are eh0 ible to participate directiv in the Plan. Beneficial owners of our stock whose shgres are ret,istered in names o her than their own (e.g., a broker or bank nominee) must arrange participation with the recordholder. Il for any reason a beneficial owner is unable to arrange participation with their broder or bank nominee, they must become a recordholder by haymg the shares                ,
trar.sferred to their own name.                                                                                             4 All correspondence concerning changes in plan ownership should be directed to the Plan Agent:
The First National Bank of Boston Dividend Remvestment Unit Mall Stop: 45-01 06                                                                                      <
P.O. Box 1C81 Boston, Massachusettfr 02105 1681 Impersestt 9teckholder haformation Annual Meeting                                                 Stock Transfer Agent, Registrar of Stock and
         . Our Anrual Meeting of Stockholders will be held on            Dividend Reinvestment Plan Agent April 28,1992, at 11:00 a.m. If you wish to receive a         The First Nationcl Bank of Boston copy of Bernie Retniceki remarks, please write to our investor Relations Depsitment.                                SEC Form 104 Stockholders may obta,m a copy of our annual report Cornpany Contact                                              to the Securities and Enchange Commission, on Form Theodora S. Convisser                                           10 K, including our financial statements and related Clerk of the Corporation                                      schedules by making a written request to our investor Relations Department.
_ investor Relations Contact L
Daniel L Desjardins                                           Inquiries Concerning Stock Director,lovestor Reladons                                    .f you have questions concerning your dividend
!                                                                        payments, dividend reinvestment plan status, transfer Genera 10ffices procedures and other stock account matters p!Oase 800 Boylston Street, Boston, Massachusetts contact our Stock Transfer AD ent at the following 02199-2099
                                                                       . address:
(617)424 2000
   ^
The First National Banic of Boston Stock IJstings                                                           Shareholder Services Division l       - New York and Boston stock exchanges                                      Mail Stop: 45-02 09
,                                                                                  P. O. Box 644 Stock Symbol                                                             Boston, Massachusetts 02102-0644 I       BSE                                                                 If you ere submitting documents requesting a I
Dividend Payment Dates                                         transfer, address change or account conschda; ion, I        Common and Preferred                                           please use this same address with Mail Stop: 45 01             ,
l 1st of February, May, August, November                     05. If you would like to contact the Bank by telephone.
Preferece                                                      a toll-free number is now available to shareholders 1st of March, Jur,e, September, December                     utside of Massachusetts. Please call 1800 4424001.
        - Tax Status of 1991 Dividends l         No part of the dividends paid in 1991 on our common,
,         preferred and preference stock were considered a l         return of capital.
l E

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