ML19309F889: Difference between revisions
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Electric Operating Revenues $24,475,296 $21,157,542 Gas Operating Revenues $ 9,786,185 $ 7,919,991 Total Operating Revenues $34,261,481 $29,077,533 Kilowatt IIours of Electricity Sold 392,691,432 398,543,732 Average Annual Kilowatt Hour Sales Per Residential Customer 5.033 5,073 Number of Electric Customers 21,744 21,508 Thousands of Cubic Feet of Gas Sold 2,343,116 2,062,391 Average Annual Cubic Feet Sales Per Residential Customer 86,431 92,076 Number of Gas Customers 13,693 13,069 Net Utility Plant $37,294,322 $35,267,214 Number of Employees 161 185 Number of Shareholders 2,252 2,236 l | Electric Operating Revenues $24,475,296 $21,157,542 Gas Operating Revenues $ 9,786,185 $ 7,919,991 Total Operating Revenues $34,261,481 $29,077,533 Kilowatt IIours of Electricity Sold 392,691,432 398,543,732 Average Annual Kilowatt Hour Sales Per Residential Customer 5.033 5,073 Number of Electric Customers 21,744 21,508 Thousands of Cubic Feet of Gas Sold 2,343,116 2,062,391 Average Annual Cubic Feet Sales Per Residential Customer 86,431 92,076 Number of Gas Customers 13,693 13,069 Net Utility Plant $37,294,322 $35,267,214 Number of Employees 161 185 Number of Shareholders 2,252 2,236 l | ||
Cover FGaE's service team works with a constantly improving ringe of equipment, including this recently acquired digger dIrrick truck with the new Company logo. | Cover FGaE's service team works with a constantly improving ringe of equipment, including this recently acquired digger dIrrick truck with the new Company logo. | ||
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, heating to consist of an energy efficient heat pump explain the whys and wherefores of Company opera- | , heating to consist of an energy efficient heat pump explain the whys and wherefores of Company opera- | ||
! system supplemented by a gas-fired boiler, tions, the program has played an important role in l generating a more positive attitude towards the Company within the community. Issues addressed include the need for increased nuclear power within | ! system supplemented by a gas-fired boiler, tions, the program has played an important role in l generating a more positive attitude towards the Company within the community. Issues addressed include the need for increased nuclear power within | ||
! the Company's generation mix, the basis upon which fuel adjustments are charged, why electric rates are at their current level and the availability of gas supply. Additional exposure is gained through an | ! the Company's generation mix, the basis upon which fuel adjustments are charged, why electric rates are at their current level and the availability of gas supply. Additional exposure is gained through an i | ||
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( Fitchburg Gas and Electric Light Company Financial and StatisticalInformation AnnualReport1979 l- | ( Fitchburg Gas and Electric Light Company Financial and StatisticalInformation AnnualReport1979 l-L Common Dividends Paid Per Share 1 | ||
L Common Dividends Paid Per Share 1 | |||
I 75 76 77 l | I 75 76 77 l | ||
78 79 80 | 78 79 80 | ||
| Line 620: | Line 601: | ||
I ' | I ' | ||
Purchases of redeemable Preferred Stock during end $5,420,000 . $1,945,000 i | Purchases of redeemable Preferred Stock during end $5,420,000 . $1,945,000 i | ||
the years 1979 and 1978 consisted of the following: nth such niaxiniuni occumd Decenser Mard D d | the years 1979 and 1978 consisted of the following: nth such niaxiniuni occumd Decenser Mard D d sm. Note 7: FederalIncome Tax-Federalincome tax - | ||
sm. Note 7: FederalIncome Tax-Federalincome tax - | |||
expenseis comprised of the following components: " | expenseis comprised of the following components: " | ||
; 5%% - | ; 5%% - | ||
| Line 672: | Line 651: | ||
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result from applying the statutory Federalincome . ., | result from applying the statutory Federalincome . ., | ||
tIx rate to Net Income before income tax. The ' | tIx rate to Net Income before income tax. The ' | ||
; ', - 'The DPU,in orders dated Asgust 31 and Septem- | ; ', - 'The DPU,in orders dated Asgust 31 and Septem- | ||
| Line 716: | Line 693: | ||
designed to produce an additional $1,615,843 in - | designed to produce an additional $1,615,843 in - | ||
Year Ended electric and gas revenues. | Year Ended electric and gas revenues. | ||
. December s1, . - | . December s1, . - | ||
" '" '" ;The Company appealed'the decision to the Su ' | " '" '" ;The Company appealed'the decision to the Su ' | ||
| Line 751: | Line 727: | ||
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- Statement's applicability'to rate-regulaWl enter- . | - Statement's applicability'to rate-regulaWl enter- . | ||
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1977 $ 19,061,3 99 $6,860,860 $2,691,154 $916,881 1978) 1979) See Note 9 to the accompanyang Consolidated Financial Statements. | 1977 $ 19,061,3 99 $6,860,860 $2,691,154 $916,881 1978) 1979) See Note 9 to the accompanyang Consolidated Financial Statements. | ||
Providing the Company's service area with a broad economic base are firms which manufacture paper, saws, industrial knives, builders ' hardware, turbines, textile and yarns, furnsture, iron castings, special machinery, machine tools and parts, time recorders, electronic components, indus trial i as r conda tioners, fi rea rms , toys, molded plastics, chemicals, screen plates, wood turnings, shoes and other diversified products. | Providing the Company's service area with a broad economic base are firms which manufacture paper, saws, industrial knives, builders ' hardware, turbines, textile and yarns, furnsture, iron castings, special machinery, machine tools and parts, time recorders, electronic components, indus trial i as r conda tioners, fi rea rms , toys, molded plastics, chemicals, screen plates, wood turnings, shoes and other diversified products. | ||
Electric Operations and Energy Supply The Company has a 4. 5% interest (20,115 kw) in an 021-f2 red generating plant in New Haven, Connecticut, which is operated by The United Illuminating as the majority owner. The Canaany also has a .1822% 2nterest (1,120 kw) in an oil-fired generating plant in Ya rmouth, Maine, which is operated by Central Maine Power Company as the | Electric Operations and Energy Supply The Company has a 4. 5% interest (20,115 kw) in an 021-f2 red generating plant in New Haven, Connecticut, which is operated by The United Illuminating as the majority owner. The Canaany also has a .1822% 2nterest (1,120 kw) in an oil-fired generating plant in Ya rmouth, Maine, which is operated by Central Maine Power Company as the l | ||
E majorsly owner. In addi tion, the Company operates under lease a combustion turbane electric peaking generator with a current capability of 27,910 kw. | |||
majorsly owner. In addi tion, the Company operates under lease a combustion turbane electric peaking generator with a current capability of 27,910 kw. | |||
l A total of 35.11% | l A total of 35.11% | ||
of the capab21ity of this turbine is sold to Reading Municipal Light Department under a contract expiring October 31, 1980. This contract requires the purchaser to pay | of the capab21ity of this turbine is sold to Reading Municipal Light Department under a contract expiring October 31, 1980. This contract requires the purchaser to pay | ||
| Line 1,879: | Line 1,847: | ||
(D) Additional costs 2ncurred an connection with NLPCO facilitses purchase. | (D) Additional costs 2ncurred an connection with NLPCO facilitses purchase. | ||
R 8 | R 8 | ||
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$220,480 $597,025 $ 54,0 50 $M 5n 955 $177 J80- . | $220,480 $597,025 $ 54,0 50 $M 5n 955 $177 J80- . | ||
(A) Collections on Account (B) Bad Debts charged off. | (A) Collections on Account (B) Bad Debts charged off. | ||
EE | EE 4 | ||
4 | |||
l ' l l | l ' l l | ||
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; Net income $ 1,976,520 $ 2,344,438 Earnings per share $3.71 - | ; Net income $ 1,976,520 $ 2,344,438 Earnings per share $3.71 - | ||
$4.52 Number of shares used to compute carnings per share 455,475 455,475 Cash dividends per share . $1.59 $2.10 ' | $4.52 Number of shares used to compute carnings per share 455,475 455,475 Cash dividends per share . $1.59 $2.10 ' | ||
, Changes for the twelve month period ended February 29,19S0, compared to the period ended February 28,1979, primarily reflect the factors discussed in " Management's Discussion and Analysis of the Consolidated Statement of Income" as relating to changes for the twelve-month period ending | , Changes for the twelve month period ended February 29,19S0, compared to the period ended February 28,1979, primarily reflect the factors discussed in " Management's Discussion and Analysis of the Consolidated Statement of Income" as relating to changes for the twelve-month period ending December 31, 1979 over the twelve-month period ended December 31, 1978; recognizing that the | ||
December 31, 1979 over the twelve-month period ended December 31, 1978; recognizing that the | |||
; specific factors discussed in " Management's Discussion of the Consolidated Statement of Income - | ; specific factors discussed in " Management's Discussion of the Consolidated Statement of Income - | ||
l Local Property Tarcs" relating to the October,1979 tax settlement had no impact on the twelve-month- | l Local Property Tarcs" relating to the October,1979 tax settlement had no impact on the twelve-month- | ||
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I | I | ||
l 1 | l 1 | ||
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: Total Hevenue from Energy Sales . 21,437,627 21,126,480 19,026,688 16,558,878 16,068,842 - | : Total Hevenue from Energy Sales . 21,437,627 21,126,480 19,026,688 16,558,878 16,068,842 - | ||
. Aliscellaneous Revenue 37,609 31,062 34,751 ~ 42,399 38,225 Total Electric Operating Herenue ,$241,475,296 $21,157,542 $10,061_,399 $16,601,277 _416,107,067 AVEnACE AxxvAt KWil SAlis ' | . Aliscellaneous Revenue 37,609 31,062 34,751 ~ 42,399 38,225 Total Electric Operating Herenue ,$241,475,296 $21,157,542 $10,061_,399 $16,601,277 _416,107,067 AVEnACE AxxvAt KWil SAlis ' | ||
pen HEsmENTIAt/ CUsTMIEn - _ 5,074- 5,116 5,097 5,150 5,004 AvEnACE ANNUA 1' tht.L Ptn REsioENT AL CusToxiEn $391.47 $352.26 $335.73 $338.54 $276.64 l | pen HEsmENTIAt/ CUsTMIEn - _ 5,074- 5,116 5,097 5,150 5,004 AvEnACE ANNUA 1' tht.L Ptn REsioENT AL CusToxiEn $391.47 $352.26 $335.73 $338.54 $276.64 l | ||
i- AvEnAct HEVENUE pen EWII I Bit. tap: | i- AvEnAct HEVENUE pen EWII I Bit. tap: | ||
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l l 25 l | l l 25 l | ||
l 1 | l 1 | ||
I DESCHIPTION OF CONIAION STOCK Dividend Hights and Hestrictions Subject to the restrictions set forth below and to the preferential rights of the holders of Cumula-tive Preferred Stock to receive full cumulative dividends, holders of Common Stock are entitled to receive such dividends as may be declared by the Board of Directors from funds legally available. | I DESCHIPTION OF CONIAION STOCK Dividend Hights and Hestrictions Subject to the restrictions set forth below and to the preferential rights of the holders of Cumula-tive Preferred Stock to receive full cumulative dividends, holders of Common Stock are entitled to receive such dividends as may be declared by the Board of Directors from funds legally available. | ||
| Line 2,715: | Line 2,675: | ||
of the the cost of the pig! after the payment ' | of the the cost of the pig! after the payment ' | ||
of all operating expenses, interest on the outstanding debt, the requirements l of the serial debt or sinking fund established to meet said debt, and also I | of all operating expenses, interest on the outstanding debt, the requirements l of the serial debt or sinking fund established to meet said debt, and also I | ||
depreciation of.the plant reckoned as provided in section fifty-seven and losses; but any losses exceeding three per cent of the investment in the plant may be charged in succeeding years at not more than three per cent per annum. The gas and electricity used by the municipality for any purpose l except street lighting shall be charged for in accordance with the prices in the fixed schedules. The gas and electricity used by the municipality for street lighting shall be charged for at a cost to be determined as | depreciation of.the plant reckoned as provided in section fifty-seven and losses; but any losses exceeding three per cent of the investment in the plant may be charged in succeeding years at not more than three per cent per annum. The gas and electricity used by the municipality for any purpose l except street lighting shall be charged for in accordance with the prices in the fixed schedules. The gas and electricity used by the municipality for street lighting shall be charged for at a cost to be determined as follows: the sum of all operating expenses, interest on the outstanding .. , | ||
follows: the sum of all operating expenses, interest on the outstanding .. , | |||
debt, the requirements of the serial debt or sinking fund established to t i meet said debt, and also depreciation of the plant reckoned as provided in section fifty-seven, and losses, shall be the dividend; the kilowatt hours i sold including those supplied for street lighting shall be the divisor, and | debt, the requirements of the serial debt or sinking fund established to t i meet said debt, and also depreciation of the plant reckoned as provided in section fifty-seven, and losses, shall be the dividend; the kilowatt hours i sold including those supplied for street lighting shall be the divisor, and | ||
, the resulting quotient multiplied by the kilowatt hours supplied for street 1/ Chapter 164, Section 56, Massachusetts General Laws 2/ Department - Massachusetts Department of Public Utilities l | , the resulting quotient multiplied by the kilowatt hours supplied for street 1/ Chapter 164, Section 56, Massachusetts General Laws 2/ Department - Massachusetts Department of Public Utilities l | ||
| Line 2,728: | Line 2,686: | ||
e | e | ||
TABLE I HUDSON LIGHT AND POWER DEPARTMENT ESTIMATED TOTAL CASH FLOW REQUIREMENTS SEABROOK UNITS 1 & 2 | TABLE I HUDSON LIGHT AND POWER DEPARTMENT ESTIMATED TOTAL CASH FLOW REQUIREMENTS SEABROOK UNITS 1 & 2 | ||
~ | ~ | ||
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TABLE II HUDSON LIGHT AND POWER DEPARTMENT ESTIMATED TOTAL CAPITAL REQUIREMENTS SEABROOK AND OTHER PROJECTS TOTAL PERIOD CAPITAL EXPENDITURES 4/1-12/31/80 $712,193 1981 728,460 1982 823,713 1983 802,115 1984 748,658 1985 779,802 | TABLE II HUDSON LIGHT AND POWER DEPARTMENT ESTIMATED TOTAL CAPITAL REQUIREMENTS SEABROOK AND OTHER PROJECTS TOTAL PERIOD CAPITAL EXPENDITURES 4/1-12/31/80 $712,193 1981 728,460 1982 823,713 1983 802,115 1984 748,658 1985 779,802 | ||
~ | ~ | ||
TABLE III ESTIMATED INTERNAL FUNDS-AVAILABLE TO MEET CAPITAL EXPENDITURES TOTAL FUNDS PERIOD AVAILABLE DURING PERIOD 4/1 - 12/31/80 $1,941,000 1981 , | TABLE III ESTIMATED INTERNAL FUNDS-AVAILABLE TO MEET CAPITAL EXPENDITURES TOTAL FUNDS PERIOD AVAILABLE DURING PERIOD 4/1 - 12/31/80 $1,941,000 1981 , | ||
| Line 2,799: | Line 2,755: | ||
27 174 Miscellaneous Current Assets. .. . . _ | 27 174 Miscellaneous Current Assets. .. . . _ | ||
is,4ye.oi 5 .i 28 Total Current and Accrued Assets.. . li445,093.16 1,458,491.// | is,4ye.oi 5 .i 28 Total Current and Accrued Assets.. . li445,093.16 1,458,491.// | ||
29 DEFERRED DEBITS ' | 29 DEFERRED DEBITS ' | ||
None None None ' | None None None ' | ||
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* STATEMENT W BNOOME FOR TffE YEAR T | * STATEMENT W BNOOME FOR TffE YEAR T | ||
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.t D s | .t D s | ||
., it 41s:InteresUncesie. .h.. . . . . . . . . . d' c; '. . . . . . . . . MfC 7 "[ 'is 4:1 Miscallareon's Nonoperating Income. , | ., it 41s:InteresUncesie. .h.. . . . . . . . . . d' c; '. . . . . . . . . MfC 7 "[ 'is 4:1 Miscallareon's Nonoperating Income. , | ||
.......;t.......... 63.77 i(g63.77..j- :M | .......;t.......... 63.77 i(g63.77..j- :M 19 | ||
19 | |||
.20 Total otp In come . . . . . . . . . . . . . . . . . , . . .,. . . . . . . . . | .20 Total otp In come . . . . . . . . . . . . . . . . . , . . .,. . . . . . . . . | ||
'roest Ineem. . . ... .... .... ..... | 'roest Ineem. . . ... .... .... ..... | ||
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21 [ MISCELLANCOUR INCOME DEDUCK8a | 21 [ MISCELLANCOUR INCOME DEDUCK8a | ||
+ | + | ||
I g | I g | ||
22 425 Miscellaneous Amortization. . .... .. ...... . 'Y 23 420 Other Income Deductions. . '. .. .... . . , . - | 22 425 Miscellaneous Amortization. . .... .. ...... . 'Y 23 420 Other Income Deductions. . '. .. .... . . , . - | ||
Revision as of 21:13, 21 February 2020
| ML19309F889 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 04/30/1980 |
| From: | FITCHBURG GAS & ELECTRIC LIGHT CO. |
| To: | |
| Shared Package | |
| ML19309F878 | List: |
| References | |
| NUDOCS 8005010556 | |
| Download: ML19309F889 (39) | |
Text
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Fitchburg Gas and Electric Light Company FinancialHighlights ofl979 1979 1978 Net Income $ 2,260,706 $ 1,959,850 Earnings Per Common Share $4.34 $3.67 Dividends Paid Per Common Share $1.90 $1.50 Present Quarterly Dividend is Equivalent to an Annual Rate of $2.t . Electric Operating Revenues $24,475,296 $21,157,542 Gas Operating Revenues $ 9,786,185 $ 7,919,991 Total Operating Revenues $34,261,481 $29,077,533 Kilowatt IIours of Electricity Sold 392,691,432 398,543,732 Average Annual Kilowatt Hour Sales Per Residential Customer 5.033 5,073 Number of Electric Customers 21,744 21,508 Thousands of Cubic Feet of Gas Sold 2,343,116 2,062,391 Average Annual Cubic Feet Sales Per Residential Customer 86,431 92,076 Number of Gas Customers 13,693 13,069 Net Utility Plant $37,294,322 $35,267,214 Number of Employees 161 185 Number of Shareholders 2,252 2,236 l Cover FGaE's service team works with a constantly improving ringe of equipment, including this recently acquired digger dIrrick truck with the new Company logo. l
Capital expenditures for 1979 amounted to ( 3? % $3,504,444, including costs associated with the continued investment in jointly owned generating facilities, the relocation of three miles of overhead distribution system in Ashby in connection with j V' highway reconstruction and the completion of the Ashby-Townsend loop tie and a high pressure gas y . - '. - main which ties the distribution systems of each town g' together to provide more reliable service. An f additional expenditure was made for conversion l
! chars n.' rennes n chairman af the soara nowara w. Evirs. ir.. $esiae : E"" d P""h*NO#h#d to customers on a monthly basis.
l Looking to the year 1980, major capital To OurShareholders: expenditures, estimated at $14,348,500, are expected 1
. to include increased investment in jointly owned i For Fitchburg Gas and Electric, the year 1979 was an nuclear plants, a continuation of the gas conversion excellent one, a period of contmued growth and program, and further investment in our exploration progress. While consistently pursuing the corporat and development subsidiary, Fitchburg Energy goals of controllmg costs and increasing operatmg Development Company.
efficiencies, the Company achieved record earnmgs. There was no long term financing in 1973. The Net income for the year was $2.200,700, up 15% year 1980 will require that both debt and equity from the 1978 level of $1,959,850.1979 earnings per financing be undertaken. The size and timing of both common share were $4.34 compai%d to $3.07 in 1978. , , , will depend on developments in the security market , A number of factors played a sigmficant role in
, and the Company's attempt to acquire additional I enabling the Company to maintain the forward capacity in the Seabrook nuclear units.
I As highlighted in the following pages of this i a n c s le ro e by 13.0% as a result of improved availability of gas supplies. Due to spiraling report, the Company continues to seek new and fuel oil costs, and the resulting increased demand unproved ways to fulfillits responsibilities to its customers and its investors. Over the next ten years, i for gas as an alternative fuel, the Company has embarked on an extensive marketing campaign, and Fitchburg Gas and Electric will work to shift the anticipates continued growth in this area throughout ratio of power generation sources from high-cost the coming year. imp rted oil to more efficient and economical energy.
- The Company obtained a favorable property A new FG&E Customer Service Center is being tax settlement on all its properties in the City of planned to increase operating and distribution Fitchburg. Though no longer in use, the retired efficiencies. A series of internal and external com-Sawyer Passw iy steam generating facility had been munications programs are being implemented.
appraised as ar operating plant.This settlement The year 1979 marked the 100th anniversary of reduces the level of these property taxes by approx _ Thomas Alva Edison's invention of the electric mately 34%. Afanagement's Discussion and Analysis lightbulb and with it the birth of the electric utility
- of the Summary of Operations contains details of industry. For Fitchburg Gas and Electric, the occasion these abatements. serves as a time of rededication, a time to move
- Continuing management commitment to forward with renewed vigor in our ongoing quest to strengthening the Company both internally and provide our region with a reliable and affordable externally has led to improved efficiencies at all energy supply.
levels of operation.Though firm kilowatt sales show We look forward to 1980 as a year of continued a decline of 1.5%, this may be attributed to a lengthy growth and progress in the fulfillment of our strike at one of our major industrial customers, responsibilities to our customers, our shareholders plus the energy conservation efforts of our and our employees. customers. Company employment as well as the area's economy, has remained stable. With the August 15 payment, the quarterly common dividend was increased from S.45 per share T g ,f3/ h , to S.50 per share, an effective annual rate of $2.00 per ggt . share compared to the amount of $1.50 paid last year. Charles H. Tenney II Howard W. Evirs, Jr. No part of the dividends paid during 1970 constitutes Choirman of the President a tax-free return of capital. Doord of Directors Reflecting the Company's continued improved performance, the dividend was again increased with the February 15,1980 payment to S.05 per common share, an effective annual rate of $2.00. Such continued support of the shareholders' need for a higher return is an essential step in the ongoing process of attracting new shareholderinvestment. 1
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Prontpf, drCt]TGle inofer iD5fGIlatj0n Gnd SPfling Ort' ret 11ral to FGGE service l PrOVilling A Reliable Energy Supply Today the Conipany continues to be accountable for the energy requirements of its customers and to assess electrical generation options in terms of Fitchburg Gas and Electric Light Company is totally economical alternatives and acceptable risks. Within interdependent with the are it serves. As the that context Fitchburg Gas and Electric remains provider of energy to an area encompassing approxi- committed to nuclear technology and to public safety. mately 170 square miles in North Central Massachu- The impact of the increasingly high cost of setts, we have the ability to make significant foreign oil and the government mandate to reduce contributions to the quality of life in our region. Our our dependence on this politically volatile resource own financial performance in turn reflects the by 50% by 1990 underscores the urgency of replacing economic health and vitality of our customers and oil-fired generation with an increasingly greater share their communities. of nuclear power. Even with its heavier capital Fitchburg Gas and Electric remains committed requirements, nuclear energy has a 20 percent cost to its goal of providing its customers with an advantage over coal and an unquestionable advantage adequate and reliable energy supply at an affordable over the ever-inc- asing and uncontrollable costs price. During the past months many steps have been of oil. taken to improve our operations and facilities in a On August 2,1979, the Massachusetts Depart-variety of constructive ways, thereby providing ment of Public Utilities reconvened hearings on the better services to the more than 23,000 commercial, Company's proposed purchase of an additional 10 industrial and residential customers who rely on us megawatts of New llampshire's Seabrook nuclear for their energy needs, units from The Connecticut I.ight and Power Com-pany. Final decision on this acquisition was still pending at this printing. D ]D "]D'T j 2 wM .M.1 A{IA}
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n f ens,ve n orr ;ro urng i npalniztms streamlane company performance eresident floward W. Evars. fr , addresses rivic groups throughout the i ommumty On f ktober 25th, the Company's lloard of requested and received DPU approval to amortize ! Directors authorized the purch ise from Public over a three year period its investment to date in the ' Service Company of New Hampshire of an NEP units. The amount proposed to be amortized, net additional three megawatts in each of the two of taxes, is approximately $391,000. FG&E had a i Seabrook nuclear units, increasing the Company's 26-megawatt interest in the units which, along with proposed total ownership to approximately 20 mega- other joint interests, had been counted on to establish l watts. The purchase is subject to approval by the a nuclear base capacity of 50% for the Company. l l :ommon sharehohhzs and receipt of approval This capacity was also required to help the Company l l acceptable to the Company from the Massachusetts obtain a 50"o reduction in the use of oil by 1990. l Department of Public Utilities (DPUJ. Operational and financial testimony continues T' is proposed purchase was precipitated by the to be supplied to the DPU in support of the proposed October 9 announcement by New England Electric Seabrook purchases and we are hopeful that satis-System to defer indelimtely the in-service dates of factory approval will be received by mid-1980. the New England Power (NEP) Charlestown nuclear j units t and 22. Previously, in-service dates had been set at 1987 and 1989. NEP has since announced term-ination of this project. Fitchburg Gas and Electric has C 1 gd,i>3 gy[m =.ms .2 :pT a A e .m Q:$mi( 1 1 1 3
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Heliable supplies of liquified natural gas enhance gas rnarketing program Energy usage and sources are carefully monitored to ensure continuous service 1 Utilizing AllPossible Resources At year end, the Company had achieved its 1979 corporate goal of 2,000 residentialinstallations, primarily with existing customers. With the demand In 1979 we began to see the first fruits of deregulation for residential conversions from oil to gas heat of gas. For the first time in many years, delivery of continuing at a record pace through the year, the pipeline natural;;as significantly increased as Company augmented existing gas marketing and compared to prior years. In addition, supplies of service staffs with reassigned personnel to help liquid propane (LP) and liquefied natural gas (LNG) respond to inquiries and to follow up on sales and from our suppliers continued on an uninterrupted installations. basis. Initially some delays in installation were i To insure that the Company will be able to fully experienced due to tight supply of conversion utilize these gas supplies, Fitchburg Gas and burners from manufacturers and the limited number Electric entered into two long-term underground of installers available. By year end the situation had storage arrangements with Consolidated Gas Supply cased and installations of gas heat within the i Corporation and National Fuel Gas Corporation. Company's marketing area were proceeding at an l As gas supplies have increased and home unprecedented pace. heating oil prices have risen, Fitchburg Gas and l As long as gas supplies remain plentiful, at a ' Electric has conducted an aggressive marketing and price consistently less expensive than oil, the demand advertising campaign to promote gas for both home for gas heating conversions is expected to continue. heating and water heating. Gas prices are expected to rise about 15% during i' 1980 over 1979 levels due to phased deregulation of natural gas. At the same time, however, oil prices
, continue to increase at a more rapid rate, making j the market potential for conversions even greater.
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MMD?%_- .m~s: l 1 Ilowever, the customer using gas during the has committed in principle to drill an additional six 1979-80 winter will still achieve savings of 30% wells in hforgan County by June of 1980 and is or more as compared to the oil customer who will be evaluating opportunities in such areas as Louisiana, paying as much as St.00 a gallon to heat a home Texas and Oklahoma. during this period. Gas customers will be paying Fitchburg Gas and Electric anticipates petitioning prices similar to 1978 oil costs of 57c per gallon, a the hfassachusetts Department of public Utilities for significant point considering the rise in the price the right to invest further funds in FEDCO. A DpU of oil, order currently limits the Company's investment to Fitchburg Gas and Electric coni.nues to pursue $1 million. Hearings,if required, should be held by the development of domestic oil and gas supplies the middle part of 1980, through its exploration and development subsidiary, Fitchhurg Energy Development Company (FEDCO), Using Our Energies which is a partryer in the hiinuteman Exploration To Serve Our Customers Best Company. A lomt venture program through Ahnute-man has involved the drilling of 17 wells in Aforgan County, Ohio, since exploration was started in One of the Company's major responsibilities to its July 1978. customers is to assure an adequate and reliable The Company looks forward to continuing its source of energy around-the-clock;in short, to expansion in the oil and gas field during 1980. Sixteen provide excellence of service. As a demonstration of of these wells are currently producing oil and gas. its commitment to Fitchburg and the communities we Negotiations are underway to transport some of serve, Fitchburg Gas and Electric has announced l this gas back to Fitchburg customers. Afinuteman plans for construction of a new building in Fitchburg. l O 90 D h a }b . A u, 5
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[ Gas heating conversions reach new homes along gas mafns FGfvE Consumer Aldes effectively answer questions j and solve customer problems i l In line with the Company's obligation t COnSumerCommuniCationS 1 control expenses, the new building is being planned l so as not to add to the present cost of service. ! Construction expenditures are expected to amount to In today's inflationary climate, compounded by rising l $2 million, to be offset in part by the sale of the energy needs, nuclear licensing delays and complexi-j buildings being vacated as well as by energy cost ties of the regulatory process,it is essential that we
! reductions and other operating efficiencies. maintain open lines of communication with our l The new facility, a one-story functional structure customers. Only through understanding can we i geared to improving customer service without expect the utility industry to receive the support ! investing in elaborate surroundings,is expected to be required to provide an affordable and adequate j leased. It will consolidate all Company departments, supply of energy to this area and this region.
i except energy production facilities, under one roof. As a means of accomplishing this goal, the Presently the Company operates from seven Company reinstituted its Operation outreach pro-separate buildings. gram in early spring. Presented as a series of Design plans call for a 55,000 sq. ft facility with neighborhood meetings at which Company officials
, heating to consist of an energy efficient heat pump explain the whys and wherefores of Company opera- ! system supplemented by a gas-fired boiler, tions, the program has played an important role in l generating a more positive attitude towards the Company within the community. Issues addressed include the need for increased nuclear power within ! the Company's generation mix, the basis upon which fuel adjustments are charged, why electric rates are at their current level and the availability of gas supply. Additional exposure is gained through an i
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'. * -. N bb Com; any v hv.3' t rocrum, stu lude edutational tru;.s to svuhrook, N H . nuclear facihty active film and speaking program before community service. Customers are individually assigned so that clubs and organizations, as well as through the they will be handled by the same Aide for all prob-sponsorship of various school activities, including ' ems, thereby enabling the establishment of better bus trips to the Seabrook nuclear plant site. communications between the Company and its Key to the increased focus on the Company's customers.
image within the community which it serves is the creation and implementatioii of a new contemporary COnSerValiOn and logotype. lIsing strong cohesive Company graphics and the theme "Itsing our energies to serve you Energy Management hest." the program stresses the importance of fast, efficient, quality customer service, and extends into in response to the National Energy Conservation all areas of Company operatmns. Policy Act, the Company places special emphasis on As a means of providmg person-to-person com- the encouragement of energy conservation and energy munications between the Company and its customers, management. In addition to implementing optional ~ a new Consumer Aides program has been developed. residential Time-of-Day rates, which recognize the Four specially trained Consumer Aides handle all lower cost of producin'g electricity during off-peak calls having to do with any aspect of customer hours, the Company maintains an ongoing conserva-tion education program through its bill enclosures and other forms of customer communications. D J D 70 ma%uh ff O' 7
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FG&E engineering team reviews plans for new service facility Edward D.hicKenzie was elected Assistant Miliitigement Changes Treasurer of the Company, effective October 1. Thomas W. Sherman has announced his intention Due to the increasing responsibilities as officers of not to stand for re-election as an officer when his another utility, Joseph A. Raffaele and George A. term expires as Treasurer at the 1980 annual meeting Carlson resigned as Assistant Treasurers of the and as Vice President at the first Directors' meeting Company and its subsidiary, effective July 1 and thereafter. hir. Childs is being nominated for October 1, respectively, and Roger A. Young resigned election as Treasurer at the annual meeting, hir. as Assistant Clerk of the Company and as Assistant Sherman will remain as a Director of the Company Secretary of the Company's subsidiary, both effective and its subsidiary. July 1. hianagement wishes to thank the former officers for their years of devoted service to the Company. At the July 12th meeting of the Board of Directors, Frank L. Childs was elected Vice President and Assistant Treasurer, and William D. AfacGillivray was appointed Assistant Clerk, all effective July 1. hir. Childs and hir. AfacGillivray were also elected Assistant Treasurer and Assistant Secretary, i respectively, of the Company's subsidiary. i D""D "DT{Q~ oi d . AA !r h , 8
l ( Fitchburg Gas and Electric Light Company Financial and StatisticalInformation AnnualReport1979 l-L Common Dividends Paid Per Share 1 I 75 76 77 l 78 79 80
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- 20 40- 60 80 100 120 140' 160 180 200 ~ 220 240 260 3
- Assumes latest quarterly dividend annualized.
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- Dividends Paid Per Share on the Common Stock of the Company i i
1st Quarter ' 2nd Quarter 3rd Quarter 4th Quarter The Year 1
$.50 $;50 $1.50
$.45 S.45
$.36 $.36 1978. 1979 1978 1979 1978. 1979 1978 1979 1978 1979 i Price Range ofCommon Stock 1st Quarter 2nd Quarter ' 3rd Quarter 4th Quarter I -
High 21% High' 19% High 18% High 18% l High 16% Low 17% - Low ' 17% Hi8h 10% Low 16Ya Low 16 Low 15% w 15Y Low - 15% 1978 1979 1978 1979 1978- 1979 1978 1979 The Common Stock of the Company is listed on the American Stock Exchange . - . mW (Symbol: FGE) and the Boston Stock Exchange.
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' ASSETS' December 31, 1979 1978 Utility Plant (at cost)':
Electric ^
$29,788,954 $29,150,076 Gas 10,763,237 9,701,448.
Commun 1,395,550 1,430,568 Construction work in progress (Note 9) 5,196,391 4,179,203 . Gross Utility Plant - 47,144,132 44,401,295 Less: Accumulated depreciation (Note 1) 9,849,810 9,194,081 Net Utility Plant 37,294,322 35,267,214 Miscellaneous Physical Property (at cost) 26,005 20,005 Investments (Note 1) 348,006 270,748 Current Asset 9 Cash 1,727,899 459,751 Accr' ants receivable (including installment sales)-less allowance for doubtful accounts of $177,580 and $220,480 5,082,572 3,885,345 Refundable income taxes 264,990 - Materials and supplies (at average cost) 877,721 6"6,030 Prepaymenis 829,875 201,322 Property tax abatements 462,821 - l Total Current Assets 9,245,878 5,222,448 ' 1 Deferred Debits Unamortized debt expense (amortized over term of secu ities) 275,932 296,402 Unamortized cost of abandoned properties (Note 2) 2,976,821 2,981,332-Other (Note 2) 646,331 160,878 Total Deferred Debits ~ 3,899,084 - 3,438,612-TOTAL ~ $50,813,295 $44,225.027 D**D *]D NY@ -l oo o JuJ 1 1 tAlo l S ,
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LIABILITIES December 31, 1979 1978 Capitalization Qm mon Stock Equity Cor. non Stock, $10 par value Authorized - 1,000,000 shares Outstanding - 455,475 shares $ 4,554,750 $ 4,554,750 Premium on common stock 1,754,358 1,754,358 Capital stock expense (181,737) (183,744) Retained earnings (Note 3) 6,417,530 5,304,422 Total Common Stock Equity 12.544,901 11,429.780 Redeemable preferred stock (Note 4) Cumulative preferred stock, $100 par value 5%% Series Authorized -16,880 and 17,300 shares Outstanding - 10,400 and 10,880 shares 1,646,000 1,688,000 8% Series Authorized - 25,000 shares Outstanding- 24,250 and 25,000 shares 2,425,000 2,500,000 Total Redeemable preferred Stock 4,071,000 4,188.000 Long-term Debt (Note 5) 16,780,000 16,978,000 Total Capitalization 33,395,901 32,595,786 Current Liabilities Long term debt due within one year 123,000 '123,000 Notes payable (Note 6) 5,420,000 970,000 Accounts payable 4,995,568 3,835,149 Customer deposits and refunds 258,675 623,558 Taxes accrued 167,860 571,105 Deferred income taxes (Notes 1 and 7) 131,266 196,956 Interest accrued 495,950 452,997 Total Current Liabilities 11,592,319 6,772,765 Deferred Credits Unamortized investment tax credit (Note 1) 1,583,601 L361,332 - Other 70,219 .73,746 Total Deferred Credits 1,653,820 1,435,078 Deferred income Taxes (Notes 1 and 7) 4,122,357 3,302.276 Reserves - Other 48,898 59,122 TOTAL $50,813,295 $44,225.027 D""D *D TY oo o 2.d m$ (The accompanying notes are an integral part of this statement]
' 11 ~
9
Consolid;ted Statement cfIIncom] For Years Ended December 31, 1979 1978' Operating Revenues - Electric $24,475,296 $21.157,542 Gas - 9,786.185 7,919,991 Total Operating Revenues 34,261.481 29,077,533 Operating Expenses Operating expenses, other - 5,132,726 4,833,281 Electricity purchased for resale 10,470,503 8,538,045 Fuel used in electric generation 3,401,852 '2,158,983 Gas purchased for resale - 5,850,610. 4,334,096 hiaintenance - 933,360 734,113. Depreciation (Note 1) 1,236,692 1,181,787 Amortization of cost of abandoned properties (Note 2) 657,048 595,937 Provisions for taxes (Notes 1 and 7) Federal income tax on net ojwrating income 957,846 1,210,342 Deferred Federalincome 715,030 339,151 Amortization of investment tax credit (89,049) (61,706) State franchise 112,348 81,403 Deferred state franchise 66,293 32,587 Local property - current 1,362,511 1,093,004-
-abatement of prar year (244,076) -
Other 193,669 100,859 Total Operating Expenses 30,757,363 25,845,322 Operating Income 3,504.118 3,232,211 Non-operating Income Allowance for other funds used during construction 116,319 118,573 Other (net ofincome taxes) (Note 7) (27,605) 63,418
-Total Non-operating Income '
88,714 201,991 Gross Income 3,592,832 3,434,202~ Income Deductions Interest on long-term debt 1,498,655 1,513,476 Other interest charges 325,596 233,859 Amortization of debt' expense 20,470 10.324 Discount on long-term debt purchased for sinking fund (credit) (3,030) (2,107) Other 2,816 8,992 Gross Income Deductions 1,844,507 1,772,484
. Allowance for borrowed funds used during construction '(512,381) (298,132)-
Net Income Deductions 1,332,126 1,474,352 Net Income - '2,260,'706 ' 1,950,850 Dividend Requirements on Preferred Stock 281,754 287,407 Net Income Applicable to Common Stock $ 1.978,952. $ 1,072,443
~
Number of Common Shares Outstanding 455,475 455,475 , Eirnings per Common Share Outstanding $4.34 $3.07 - t
. (The accomp'anying notes are an integral part of this statement) -
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Cons: lid:t d St:t:m:nt cf Ch:nges in Fin:nci:1 Positi:n Year Ended December 31, 1979 1978 Frnds Provided By: Funds from Operations Net Income $2,260,706 $ 1,959,850 Principal Non Cash Charges (Credits) to Income (Notes 1 and 7) , Depreciation 1,236,692' 1,181,787 Deferred Federalincome tax 687,646 344,666 Deferred state franchise tax 72,435 30,504 s Amortization of investment tax credit (89,049) (61,766) Allowance for other and borrowed funds used during construction (628,700) (416,705)_ Property tax abatements (270,813) - Amortization of deferred debits 722,385 048,490 Funds Provided by Operations _ 3,991,302 '3,680,826 Other Sources - Nel 179,616 ~224,299 - ' increase (Decrease) in Short-term Debt 4,450,000 (1,530,000) Total Funds Provided $8,620,918 $ 2,381,125 Funds Applied To: Additions to Plant $3,270,600 . $ 3,098,508 Investments in Non-utility Operations (Note 1) 233,844 271,222 Common Stock Dividends 865,164 683,017 Preferred Stock Dividends 282,434 287,586 Funds Used for Retirenient of Securities: Long-term debt 198,000 191,000 Preferred stock 117,000 42,000 Increase (Decrease) in Working Capital, Excluding Short-term Debt 3,653,876 (2,192,208) Total Funds Applied , $8,620,918 $ 2,381,125 Increase (Decrease) in Components of Working Capital, Excluding Short-term Debt: Cash $1,268,148 $ (312,002) Accounts receivable 1,197,227 71,440 ~ Refundable income taxes ' 264,990 -
- Materials and supplies 201,691 (20,487)
~
Prepayments _ 628,553 ~ (20,591) Property tax abatement 462,821' n-
~
Accounts payable (1,160,419) (1,090,918) Customers' $l eposits and refunds - 364,883 (256,117) Taxes accrued 1 403,245 (508,104). Dcierred income taxes 65,690, (63,885) ' In ' crest accrued ' (42,953) '17,456 Increase (Decrease) in Working Capital $3,653,876 $(2,192,208) (The accompanying notes are an integral part of this statement)
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Consolidated Statement of Retained Earnings , Year Ended December 31.
-1979 -1978 Retained Earnings, Beginning of Year . $5,304,422 $4,315,175 Net income 2,260,706 1.959.850 Total 7,565,128- 6.275.03 Deduct:
Caslidividends declared: Cumulative preferred. stock: 5% % Series at ari annual rate of $5.125 per sharc - 85,434 87,580 8% Series at an annual rate of $8.00 per share 197,000 200,000 Common stock at an annual rate of $1.90 and $1.50 per share 865,164 683.017 Total Deductions 1,147.598 970.603 Retained Earnings. End of Year (Note 3) $6,417.530 $5.304.422 }l
+
-(The accompanying notes are an integral part of this statement)
Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Revenu'e Recognition -The Company records
-The Company is subject to regulation by the ' unbilled fuel adjustment revenue currently to hfassachusetts Department of Public Utilities (DPU) properly match revenues with related costs. Such with respect to'its rates and accounting.'The Com- unbilled revenue aggregated $756,082 and $389,156 pany's accounting policies conform with generally at December 31,1979 and 1978 respectively.-
accepted accounting principles, as applied in the ._ . case of regulated public utilities, and are in accor- Depreciation - Annual provisions are determined . - dance with the accounting requirements of the on a group straight line basis. Provisions for deprecia-DPU. A description of the Company's significant - tion were equivalent to the following composite accounting policies follows. rates based on' the average depreciable property balances at the beginning and end of each year: Principles of Consolidation- On February 24,1978,- 1979 -- 3.11% and 1978 - 3.01%. ' Fitchburg in' vested $20,000 in the Common Stock of a new wholly-owned subsidiary, Fitchburg Energy Accounting for Income Taxes - For income tax
- Development Company (FEDCO). FEDCO has in- purposes the Company excludes a portion of unbilled l vested in oil and gas drilling facilities, which .
fuel adjustment revenue and accordingly provides investment has been recorded on the equity method. deferred income taxes payab!c in the succeed 5g
. All inter-company items have been eliminated in - , year on such revenue which is carried as a current
' consolidation. asset.
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The Company has used an accelerated method Note 2: Deferred Debits-Unan ortized Cost of of depreciation which presently results in the annual Abandoned Properties -The unamortized cost of tax depreciation being in excess of book depreciation, abandoned properties is being amortized at various and has deducted currently certain elements of con- rates as ordered by the Massachusetts Department of struction overheads that are capitalized for book Public Utilities (DPU). During 1978 and 1979 the purposes. For each of these differences the Com- following events occurred: pany provides for deferred income tax as approved On October 18,1978, the Company filed with the for rate making purposes In addition, the Company DPU its proposed accounting treatment relative has recorded deferred income taxes related t
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to the book abandonment of a generating unit ordered certam abandoned properties which are recognized by the DPU, which treatment was approved by the as tax losses at differ!'g times. DPU on November 7,1978. As a result, the Company commenced amortization of this property in In addition to the above, the Company,in 1979, capitalized certain maintenance costs for a generat- S ptember,1978, retroactive to January 21,1978. Ing unit, yet continued to deduct these costs currently On November 1,1979, the Company began for tax purposes. Deferred income taxes have been amortizing the costs of its investment in the Charles ' provided for this timing difference. town Units 1 and 2 proposed nuclear generating plants. This abandonment was precipitated by the The annual imestment tax credits permitted by announcement on October 9,1979 by the lead additions to the Company's utility property are participant, New England Electric System, to defer being amortized into income rateably over the esti- indefinitely the in-service date and the subsequent mated productive lives of the related assets as announccd termination of this project. On Novem-allowed by the DPU. Such deferrals for the year ber 27,1979 the DPU approved the Company's - 1979 and 1978 amount to $308,687 and $292,457, request to amortize approximately $653,000 over a respectively. 30 month period. The Company will request from the DPU permission to apply similar treatment to any The Company has elected to account for invest- additional costs associated with these units. ment tax credits on non-utility property additions, primarily related to FEDCO, by the " flow-through" The amounts to be amortized for all properties method. Under this method credits are recognized as over the next five years are as follows: 1980, a reduction of Federalincome tax expense in the $838,309: 1981, $723,407; 1982, $629,807; 1983, year utilized. In 1979 at i 197c these credits amount $58,523: 1984, $58,523. to $7,607 and $10,380, respectively. Other Deferred Debits --- Other deferred debits are composed of the following: The additional investment tax credit permitted - under the Company's Tax Reduction Act Employee me-tm 31 Stock Ownership Plan. (TRAESOP) reduced Federal two togs Income Taxes payable by 1%% of the Company's : Property tax abatements' (Due qualified property additions. The resulting amounts 1981) $270,813 f, - are payable to the TRAESOP.. ~ Preliminary survey and engineering costs 101,688 52,189 Allowance for Funds Used During Construction-Deferred maintenance costs (amor - An allowance for funds used during construction tized based upon generation) 195,192 - (AFUDC), a non-cash item, is it.cluded in construction , work in progress and based upon a composite rate- htiscellaneous 78,638 108,689 applied to construction work in progress, which Total other deferred debits
$646,331 $160,878 assumes that funds used for construction were provided by borrowings, preferred stock and common ..
equity. The allowance for funds used during con . Note 3: Restrictions on Retained Earnings-Under struction amounted to 31.80/o and 24.90/o of the net the most restrictive provisions of the Indentures income applicable to common stock for the years relating to the Company's long-term debt, $4,324,100 - 1979 and 1978, respectively. The annual rates of and $3,120,077 of retained earnings were ~a vailable approximately 14% and 11% were used for the for the payment of cash dividends on Common years 1979 and 1978, respectively, - Stock at December 31,1979 and 1978,' respectively. g Og 15.
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' The Cumulative Preferred Stock,5% % Series,ls 2 for each of the five ye' ars following 1979 are: 1980, . ..
- preferred over Common' Stock in voluntary liquida 1 ;$123,000: 1981, $198,000; 1982 and 1983, $398,000 and I
tion'at the redemption price in'effect at the time : 1984, $3,366,000. The C6mpany has satisfied the - of such voluntary liquidation, and in involuntary - .1980 sinking fund requirement for the 9%% Notes , liquidation at $100 per share,'both plus accrued , in the amount of $75,000. dividends. Shares of the 5%% Series'are redeemable - . at the Company's option at $102.56 per share on or, Note 6:-Notes Payable -The Company has agreed before May 31,1981 and at.$101.28 thereafter. Lt o maintain certain' average amounts on deposit The Company is required to purchase on June 1 of . or pay certain fees in lieu of compensating balances. each year not less than 420 shares, unless a _ , Certain of the lines require that compensating -
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' lesser amount of shares are tendered, at $100 per. - balances be increased in relation to usage. Compen '
2 ~ share plus accrued' dividends. _ sating balances ~ at December 31,1979, were
~
The Cumulative Preferred StoEk' 8% Series,is , approximately $985,000. . t
,~ preferred over Common Stock in voluntary liquida- short I me.
tion at the redemption price in effect at the time December si.. l- of such voluntary liquidation and in involuntary . se7. sers
' liquidation.at $100 per share, both plus accrued divi- -
dends. Shares of the 8% Series are redeemable at '
,gh ed average interest rate ' -15.33 % 11.52 % .
the Company a option at $108.00 per share on or before August 31,1983 and at diminishing premium unused line of credit - $4,230,0001 $5,030,000
- rates thereafter, The Company is required to purchas c{g ted daily average inter -
on June 1, of each year, not less than 750 shares-est rate 13.01 % 8.61 % - l unless a lesser amount of shares are tendered, at Average borrowings $2,441,400 - $1.491,700' > l $100 per share plus accrued dividends. Maximum borrowings at month - I ' Purchases of redeemable Preferred Stock during end $5,420,000 . $1,945,000 i the years 1979 and 1978 consisted of the following: nth such niaxiniuni occumd Decenser Mard D d sm. Note 7: FederalIncome Tax-Federalincome tax - expenseis comprised of the following components: "
- 5%% -
$42,000 $42,000 8% $75,000 -
December 31,
. - 1979- 1978 The aggregate amount of sinking fund requirements ! in each of the five years following 1979 is $117,000. Current expense charged ,a 4 _
(cre_dited): 1 Nute' 5: Long term Debt-Details of Long-term Debt , Operating expenses $ 9' 57,846$ $1310.342 '
- l. at December 31,1979 and 1978 are sh'own below: -
. Non-operating income :(123,736)- . (78,949) 4 Amortization of investment .
. Deceseber 31, tax credit ' , '(89,049) <
' (61',766]; <
- . , 1m 1978 _ 745.061 ' 1,075,6271 '
. - Twenty-five year notes,4%%, . . . .
. Deferred tax expense charged
- due February 1,1984, ($ 3,183,000 $ 3,226,000 ~ (credited)
- -
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' 61,180' '
-Twenty-five year notes,9%%,- ,
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- Deferred unbilled revenue - 4,905 -
. due March 1,1995- 6,900,000 6,975,000 ' " Accelerated ta'x.depreciationj c 2PI,315 ~ 284,733
! ' -Twenty year notes,10%, due
' Aban.doned properties ,31,085 - (150,853). '
b September 1,1996 ; , J 3,000,000 3,000,000- ,. Overh'eads and other . , 217,473 ~ 192,910 Twenty-five ye'ar notes,- ; Deferred maintenance costs 5' l 85,303." 10%%, due May 1,1999f c
~ 3,820,000 3,900,000 /
Percentage repair allowance 19,949
...om-57,181 '
- Tctal 'f 16,903,000 c 17,101,000 s .1 ~ 4 ., 7715,030 339,151 .
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'Non-operating expense 4 LLessiInstallments due wittiin . .
- 44,692.- 67,3174
. c. One' year' ' '
'123,000' 123,000 - '* -
-" t G 759,722 " 406,468 ? ,'
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- Tctal Long-term Debt ' . $16,780,000 L $16,978,000 Total expense ' ! $1,504,783 $1,482,095 - -
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l .. , i' . The Federal inc'ome tax amounts includsd in the : , for rates designed to increase' electric and gas rev ' , i . ' Statement 'of Income differ froni the amounts which enues by $3,633,000.
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result from applying the statutory Federalincome . ., tIx rate to Net Income before income tax. The '
- ', - 'The DPU,in orders dated Asgust 31 and Septem-
' . reasons, with related percentage effects, are as -
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ber 15,1977,' allowed ths Company to file rates '
- shown below
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designed to produce an additional $1,615,843 in - Year Ended electric and gas revenues.
. December s1, . -
" '" '" ;The Company appealed'the decision to the Su '
Statutory Federal income tax rate .46% 48 % preme Judicial Court (SJC) of Massachusetts, and on
, Income tax effects of timing - October 21,1977,' the Court granted a stay allowing differences: the Company to, collect annually an additional 4
, . - . , $472,831 in electric revenues, subject to refund.-
l liowance for funds'used during -
. construction (see Note 1) (5) (4)
- On June 30,1978, the Court issued its orde'r up-;
Miscellaneous - - [11 - - (1) holding Pte DPU's decision to remove la generating'. Effective Federal income ta'x rate 40% - - 43% unit from the Company's rate base, but instructed. , the DPU to reco'nsider how much in revenues the . Company would still be allowed. - Note 8: Regulatory Matters: The DPU's October,1978 klecision' reflected its final ruling allowing the' Company to retain the . > ' j: Revenue Adjustments-The Conipany's method of : $472,831 annual amount' collected under the Court - billing and accounting for revenue underits fuel ' ' stay, as well as granting the additional $269,240. adjustment clause in effect through September 26, 1974 has been challenged before the Massachusetts
- Department of Public Utilities (DPU) by the Attorney ,_ . .
General of the Commonwealth of Massachusetts. Note 9: Commitments: , , The required monthly fuel adjustment schedule . heretofore filed with the DPU had not been disputed . - Lease Obligations -In accordance with the guide , b the regulatory authority. The ~ portion of such fuel lines of Stat.ement of Financial Accounting Standards adjustment clause revenues recorded by the Com , No.13 issued, by,the Financial Accounting Standards pany and noiv challenged by the Attorney Ceneral Board, the Company I's disclosing pertinent informa-~ t - aggregate approximately $724,000 and is equivalent ~ ' tion regarding its capitalleasesiThe Securities and ^ ~ ' g to $.83 per average Common Share ~ outstanding on - Exchange Commission requires, for rate-regulated ' , 1974 earnings, after giving tax effect thereto. The. enterprises; disclosure of the effect on the balance 1 Company has vigorously defended its procedures in-
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. sheet and on expenses if-such leases had been .
proceedin8s before the DPU, the outcome of which'
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capitalized, pending the res'ults' of its review of the?
' is uncertain.
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- Statement's applicability'to rate-regulaWl enter- .
" prises.-
i - The Company's billing and accounting for revenues. '
'A under fuel adjustments based on costs incurred after" The dompany has'a sigdificant twenty-fihe yem '
September 26,1974 are being made under a new - . lease'wt/ch began April 1,1973 for a combustion *
, fuel adjustment clause which took effect on Sep- -
turbine and a' liquefied natural gas storage facility.-
;tember 27,1974 and are not being challenged. . > The lease is cubject to a ten ye'ar renewal period at ,
f. _:- ., x the option of the Company at an annual rental of: Ccnclusion of Rate Appeal-The Company onj ' 14 % */o of the aggregate fair mark.et value as 'at the; ' October 5,1978 was authorized by the Massachui end'of the initiallease term.;Under certain conditions : ' M i fsetts DipNtment of Public Utilities (DPU) to' increase; . the Company has the right 16 purchase the units at . g[. J ".ita electric rates' by $269,240. With this action by the y, .an independently appraised market value. Under the) y DPU, the Company was grant'dd a total of $2,357,914 -lease. the Company has the obligation to maintain : E of the amount it originally reque'stdd when it filed ~ the equipment in' good operating condition and pay; .
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t' sll taxes and insurance on said equipment. Had the The Company has executed a commitment letter ~ ' Company capitalized its capital leases, Depreciation' to purchase computer system hardware and periph- - L cnd Other Interest Charges would have increased cral equipment, with an acquisition cost of approx-
$171,721 and $181,920 respectively, and Operating imately $211,000 to be in o'peration by the end of Expenses, Other would have decreased $307,493 1980. The Company intends to finance this acquisition for the year ended December 31.-1979. At December by means of a third-party sale and leaseback 31,1979 the asset and related liability which would arrangement.
have been recorded on the balance sheet for the Company's capitalleases were $2,202,922 and
$2,538,358, respectively. For the year ended Decem- Pension Plans -The Company has in effect two ber 31,1978, Depreciation and Other Interest Charges funded Pension Plans and related Trust Agreements would have increased $102.733, and $179,180, re- to provide retirement annuities for participating spectively, and Operating Expenses, Other would employees at age 65. The entire amount of the annual have decreased $287,507. At December 31,1978, contribution under the actuarial requirements of the the asset and related liability which would have Plans is borne by the Company.
l.cen recorded on the balance sheet were $2,374,043 and $2,665,328, respectively. The Company's contribution to the Plans during the years ended December 31,1979 and 1978 The minimum commitments under all non-can- amounted to $519,323 and $497,077, respectively, cellable long-term leases m effect at December 31, which includes amortization of prior service costs 1979 are as follows:1980-$309,884;1981 - over a period of thirty years.
$200,325; 1982 -' $202,930; 1983 - $255,073 ; 1984
- $249,495; 1985-1989 - $1,141,148; aggregate for The Company's policy is to fund the pension cost the period; 1990-1994 - $1,120,043 aggregate for accrued. The actuarially computed value of vested the period; and 1995 and thereafter - $788,230 benefits as of January 1,1979, the date of the latest
, aggregate for the period. actuarial valuation, exceeded the total of the Total rental expenses for the years ended Decem- pension fund by $3,969,379. The ag8te8 ate amount of ber 31,1979 and 1978 amounted to $430,309 and unfunded prior service costs as of the same date
$428,289, respectively. wa ; $5,105,390.
l l Joint Ownership Units and Construction-The Company is participating on a tenancy-in-common basis with other New England utilities in the construction and' ownership of eight generating units. New Haven Harbor -l and Wyman Unit #4, both oil-fired stations, have been in commercial operation since August 1975 and Decem-ber 1978, respectively. The remaining six nuclear units are planned or under construction. Details relating to the various units are as follows: Company's Share in Thou' sands of Dollars Proportionate Total
' Share of Amount of Accumu- Amount Estimated Total Utility lated Expended Cost of Ownership _ Plant in Depreci- through . Construc .
Joint Ownership Units State % mw Service ation 12/31/79 ~t ie n ~ Seabrook Units #1 & ? New Hampshire .1710 3.9 .
- 1,902 '5,851 .
Millstone Unit #3 - Connecticut .217 2.5 - - ~ 1,762 - 7,037 Pilgrim Unit #2 Massachusetts . .19 , 2.2 ' - -- 007 - 5,565 Montague Units #1 & 2 Massachusetts .35 8.1 -- -
'250 12,293 Wyman Unit #4 ' Maine .1822 1.1 396 '19 New Haven Harbor Connecticut ~ 4.5 ' _20.1 0,930 828 '
mo o g-28 w Mw Jt 1 Aln b - t
Operating expenses included in the Consolidated On January 25,1979, the common shareholders Statement of Income and proportionate amounts approved the acquisition of an additional ~.43333% charged to specific operating expenses are as follows: ownership interest in each of the Seabrook units from the Connecticut Light & Power Company. The Thousands of Dollars Company has made an agreement to purchase up to
% to
- Wyman New Haven Total
- an additional .26087% ownership in each of the Unit 4 Harbor Electric Seabrook units from public Service Company of Operating expense, other 32 250 8 New Hampshire, subject to the approval of the Fuel used in electric genera- common shareholders. The purchase of both 11 n 19 3,228 95 additional interests, representing approximately an Maintenance 2 90- 14 additional 16 mw, has been excluded from the in-Local property tax 4 187 18 formation presented herein, pending final approval Other taxes -
6 5 of the purchases by'the Massachusetts Department s.
-Total operating expenses 57 3,767
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The Company expects to finance the cost of its ' The Company estimates construction requirements pa'rticipation in the units initially through the use of relative to these units of approximately $10,160,000 short-term borrowings, At the appropriate times, . during the next five year period ending December short-term borrowings will be converted into 31,1984. permanent financing. Note 10: Segment Information-In accordance with Financial Accounting Standard No.14, the following in-
' formation is presented relative to the gas and electric operations of the Company:
Electric Gas Total Operations Operations Company 1979 1978 1979 1978 1979 1978-
, Operating revenues . $24,475,296 $21,157,542 $ 9,786,185 $ 7,919,991 $34,261,481 $29,077,533 Operating income before in-come taxes $ 3,910,716 $ 3,654,896 $ 1,355,870 'S 1,185,032 $ 5,266,586 $ 4,839,928 Income taxes (1,762,468) (1,607,717)
Non-operating income 88,714 201,991 Not income deductions (1,332,126) (1,474,352) Net income $ 2,260,706 $ 1.959.850 Identifiable assets as of December 31 $32,460 207 $30,724,323 $11,097,002 $ 8,987,224 $43,557,209 $39,711,547 Unallocated assets, primar- _ily, working capital $ 7,256,086 $ 4,513,480 Total assets as of -
-Dec_ ember 31 '
' $50,813,295 ' $44,225,02_7
$ 955,004 _$_ 932,260 $ ' 281,688 $ 249,527 $ 1,236,692 '$ 1,181,787 Mmciation _
Construction expenditures $ 1,841,551 >$ 2,339,849 $ 1,429,049 S 758,659 $ 3,270,000 $ 3,098,508 Expenses used to determine operating income - Department of Public Utilities. Assets allocated to before taxes ar'e charged directly to either segment each segment are based upon specific identification . or are allocated in accordance with factors contained . of such assets provided by Comp ~any records. Assets in cost of service studies which were included in' not so identified represent primarily working capital . rate applications approved by the Massachusetts items. V' _.m
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-Note 11:' Quarterly Financial Data (Unaudited) -
- Summarized quarte'rly financial data'for 979 'and 19'/8 is as follows:
r Three Months Ended March s1 ' June so Sept. so Dec. s1 1979 1978 1979 1978 1979 1978. 1979 1978 Total x operating ' - I revenues ' $9,202,880 $8,913 *40- $7,903,958 $6,585,503. $7,790,297. $5,988,814 $9,304,340 $7,589,770 Operating _- 1 income $ 942,964 - $1,032,845 $ 089,517 $ 092,098 $ 007,480 $ . 67,7,117 $1,204,131, . $ 830,151 Net income . $ 054,713 ' $ 1089,408 $ 424,545 $ 391,099 f $ 319,478 $ 305,942 . $ 801,970 $ 513,34
~
Earnings . per share $1.28 ' $1.301 $.78 $.70 $.55 $.05 $1.73 $.90 l l Net income for the quarter ended December 31,1979. has been increased by $370,478 or $.83 of earnings per ' common share, resulting from abatements of real estata taxes. Auditors' Report
~
To the Shareholders of FITCHBURG GAS AND ELECTRIC , I LIGHT COMPANY: We have examined the consolidated balance defended its procedures,- but the ultimate outcome sheets of Fitchburg Gas and Electric Light Company is uncertain and no provision for any liability that . may result has been made in the financial statements. and Subsidiaries as of December 31,1979 and 1978 and the related consolidated statements ofincome, . In our opinion, sub.iect to the effect of such _ l retained earnings and changes in financial position adjustments, if any, as might have been required j
. for the years then ended. Our examinations were had the outcome of the matter discussed above been ? - 9 made in accordance with generally accepted auditing kno~wn, the financial statements referred to above ,
standards, and accordingly included such tests of present fairly the financial position of Fitchburg Gas' the accounting records and such other auditing - and Electric Light Company and Subsidiaries at - , procedures as we considered necessary in thel December 31,1979 and 1978 and the results of its '
' circumstances. operations and changes in'ils financial position -
.. for the years then ended, in conformity with .
As discussed in Note 8 to the financial statements, generally accepted accounting principles appliedc the Company's method of billing and accounting on a consistent basis. for revenues under its fuel adjustment clause in > effect from January 1 through _ September 20,1974 Alexander Grant & Company has been challenged by the Att'orney General of - . _. the Commonwealth of Massachusetts. The Company' Bosto'n, Massachusetts ' ' '
. believes its methods are correct and has vigorously. February 7,1980
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- 1 Management's Discussion and Analysis ~ of the Sumrnary of O'perations .
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. THE ELECTRIC OPERATING REVENUES increasef OPERATION, OTHER AND MAINTENANCE in-
- of 16% in 1979 was attributable to'the net effect of creases'are associated with lease obligations, higher three major factors: the increase in fuel costs for. . wage rates, increased pension and insurance costs ,
generation and energy costs of purchased power; the and other cost increases that reflect the continuing full year effect of the rate increase approved October' effect of inflation.
~
5,1978; and a strike that halted production by one -
- of our major industrial customers. The 11% DEPRECIATION expense has risen due to th.e increase in 1978 is due primarily to four factors: additional plant put in service and due to the in- -
the full year's effect of additional rate relief granted- creased rates that became effective September effective September 1977; the additional rate relief
~
I' 1877", permitted in October 1977 and subsequently granted AMORTIZATION OF COST OF ABANDONED , as a result of the Cor6p PROPERTIES increased in 1979 due to the first full-
~ mentioned rate decision,any's , the sale ofappeal of the above 76,747,276 - year's effect of the amortization of unit No. 6 and kilowatt hours to the six new industrial customers two months amortizati6n of Charlestown No.1 an'd.
acquired 's of June 1,1977 in connection with the No. 2. The increase in 1978 is due to the amortization purchase af electric facilities from New England of unit No. 6. , Power Company, and the lower per unit energy cost components of power generated and purchased LOCAL PROPERTY TAXES in 1979 decreased with a resulting decrease in total cost recoverable from 1978, principally due to a praperty tax settle- ' through the Company's fuel expense adjustment ~ ment agreed to by the City of Fitchburg in. October, clause. 1979. The Company in 1979 received abatements with a value of $733,634, of which $244,076 pertains' GAS OPERATING REVENUES increased 24% in to the 1978 period. In 1979, these abatements have . 1979 primarily due to three factors: increase of increa' sed net income by $376,478 or $.83 of e'a rnings 391,300 MCF's in interruptible sales ($1,279,400 in- per common share. The Company anticipates that the
- crease); the increased cost of purchased gas which future levels of property tax expense will continue to is passed on to customers through the operation of reflect the lower assessed valuation resulting from '
a cost of gas adjustment claus ~e; and a decrease in this settlement. The 1978 increase over 1977 is off-system sales of $410,431. The 15% increase in ' due to the acquisition of the new electric facilities-1978 gas operating revenues is primarily related t purchased on June 1,1977 > three factors: the increased cost of purchased gas - . .. . which is passed on to customers through the cost of THE ALLOWANCE FOR OTHER~AND - . gas adjustment clause; the first full year impact of the BORROWED FUNDS USED DURING CONSTRUC . _ permanent rate relief of $553,734 granted effective TION has generally increased since 1976 due to the- , in September 1977; and an increase in off-system . CompanyVcontinued investment in electric sales of 36,892 MCF. generating facilities under construction. In addition. .
- the~ increase in interest' rates has had a significant ~
ELECTRICITY PURCHASED FOR RESALE in- impact on these aniounts.
' creased $1,932,458 in 1979 over 1978 an'd $297,758 in 1978 over 1977. The 1979 increase r.eflects the higher . OTHER NON-OPERATING INCONfE hIs .
,- per unit energy cost. The 1978 expenses increased decreased by' $109,015 due to the loss sustained by. -
.t he Company's subsidiary (Fitchburg Energy Devel-
~
primarily due to a greater reliance on electricity frota other utilities. ' - Spment Company)'and to the reduced interest - income on commercial and industrial accounts . w FUEL USED IN ELECTRIC GENERATION in? .
' receivable outstanding. '
creased in.1979 due to' the escalation in the costs of. fuel used to generate a level of kilowatt hours . ~ GROSS INCOME DEDUCTIONS increa' sed due to ~
'slightly higher than that of 1978. The 1978 costs the Company's issuing $3,000,000 of 10% Note's in
. -. increased over 1977 due to a higher level of' kilowatt Septeml{er,1976. The increase also reflects the'
^
. hours generated. g '
interest expenses related to'short-term borrowings ; ,
. required to finance the Company's construction '
,. J GAS PURCHASED FOR RESALE increased due to?
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program and in 1979 and 1978,' the e@ense in- ' lthe large increase by 'our pit ieline supplier the in-~' ' cludes interest related to' pipeline refunds due
, . cre: sing unit cost of our supplemental gas'es and a'. '
customers which the Company used in lieu"of short- %
- higher level of total MCF sales.
. term borrowings; -
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o. Summary of Consolidated Operations , Statement of Income (000's) '1979 1978 1977 1976 1975-Operating Revenues: Electric $24,475 $21,158 $19,001 $10,601. $16,107 Gas 9,786 7,920 6,861 = 5,698 4,408 Total Operating Revenues 34,261 29,078 25,922 22,299 20,515 Operating Expenses: Operation, other and maintenance 6,066 5,508 5,320 4,801 4,516 Electricity purchased for resale 10,470 8,538 8,240 0,300 7,163 Fuel used in electric generation 3,402 2,159 2,083 E869 1,536 Gas purchased for resale 5,851 4,335 3,709 2,380 2,173 Depreciation 1,237 1,182 1,094 953 873 Amortization of cost of abandoned properties 657 590 173 170 71 Federalincome tax 958 1,210 502 702 '311 Deferred income taxes 781 371 470 258 230 Amortization of investment tax credit (89) (02) (52) (49) (34) State franchise tax 112 81 84 100' 54 Local property tax -current 1,362 1,094 1,529 1,384 1,254
-abatement of prior year (244) - - - -
Other taxes 194 107 100 145' 135 Total Operating Expenses 30,757 25,845 23,378 19,841 18.282 , Operating Income 3,504 3,233 2,544 . 2,458 2.233 Non-operating Income: Allowance for funds used during (.onstruction - - - 135 452 Allowance for other funds used during construction
~
116 118 30 - - Other (net of income taxes) (27) 83 76 63' 93 Total Non-operating Income 89 201 112 198 545-Gross Income 3,593 3,434 ~ 2,650 2,056 2,778 ' Income Deductions (Net) 1,332 1,474 1,456 1,573 1,600 Net Income - 2,261 1,960 1,200 1,08'l . 1,178 Preferred Stock Dividend Requirements 282 288 290 291~ 294 Net income Available for Common Stock '$ 1,979 $ 1,672 $ 910 $ 792' $ 884 Common Stock Data - Shares of Common Stock: Year end (000's) - -455 455 455 ~455 455
' Eirnings per Common Sharc Outstanding $ 4.3'4 $ 3.67; $' 2.00 - $ t 1.74 $ 1.94
$ 1.90 $ - 1.50 $ 1,44 $ .1.41 - $ 1.38
~
Dividends paid per Common Share .
. 22
~
D""D ws Q YQ on.1$$t\,: ~ 1 m
A 1979 1978 1977- 1976 1975 Balance Sheet Data (000's)
' 2 Utility Plant (at cost) . $47,144 $44,461 $44,100 ' $39,8'29 , $37,957-Accumulated Depreciation ~ $ 9,850 ' $ 9,194 $ 9,020 $ 7,125 $ 6,365 Total Assets ' 550,813 $44,225 $42,435 $39,271 .$38,777' , ' Cspitalization and Short term Notes:
Common stock equity ~ $12,545 $11,430 $10,440 $10,185 $ 9,805 Redeemable preferred sto'ck equity $ 4,071 $ 4,188 $ 4,230 $ 4,272 _ $ 4,314 Long-term debt $16,780 ' $16,978 $17,176 $17,294 $14,414 Short-term notes payable -
' $ 5,420 $ 970 ($ 2,500' $ ~ 300 $ 4,400
~
Electric Statistics Sales-Thousands of KWH 392,691 398,544 349,549 .309,257 289,320 Electric Customers - Year End 21,744 21,508 21,272 21,023 20,957 Avg. Annual KWH Sales per Residential Customer 5,033 - 5,073 5,049 5,140 :4,992
~
Avg. Revenuc per Hundred KWH- Residential -
$ 7.78 $ 6.91 $ 6.60 $ . 6.45 $ . ' 6.65 '
Grs Statistics - Sales -Thousands of MCF 2,343 2,062 2,044 1,970 1,805-Gas Customers - Year End 13,693 13,069- 12,927 12,832 12,937 Average Annual Cubic Feet Sabs per Residential Customer 86,431 92,076. '87,253 91,253 84,139 . Average Revenue per MCF - Residential $ 4.62 $ 4.03 $ 3.56 $ ' - 3.08 $ 2.60 m W 4 [ l . F
,e .
L g
.- 23 r ,
3 #
o . e-Board of Directors Officers i* Philip H. Bradley, Resident Manager, Northeast, ; Charles H.TEmney H, Chairman'of the Board of of IBM Corporation, Waltham, Mass. Dhectors and Chief Executive Officer of the Company." Richard L. Brickley, Lawyer; partner in the law firm . of Brickley, Sears & Cole, Boston, Mass.; Director - Howard W. Evirs, Jr., President of the Company.** of subsidiary. Thomas 'W. Sherman, Vice President and Treasurer Howard W. Evirs, Jr., President of the Company; of the Company." Director and President of subsidiary. Frank L. Childs,'Vice' President and' Assistant .
- John Grado, Jr., Vice President of Litton Industries, . Treasurer of the Company: Assistant Treasurer of Inc., Fitchburg, Mass. (a diversified industry), and . '
subsidiary; Assistant Treasurer of Concord Electric' Chief Executive of its Paper, Printing and Forms ~ Company, Concord, N.H., and Exeter & Hampton Group. Electric Company, Exeter, N.H.- Thomas W. Sherman, Vice President and Treasurer ~ Charles T. Ellis, Vice President of the Company; of the Company; Director, Vice President and Trea- ' Director and Vice President of subsidiary; Vice surer of subsidiary; Director, Executive Vice President of Bay State Gas Company, Canton, Mass. President and Treasurer of Bay State Gas Company, Edward D. McKenzie, Assistant Treasurer of the Canton, Mass.: Director, Vice President and Company; Assistant Treasurer of subsidiary: Assist . Treasurer of Concord Electric Company, Concord, ant Treasurer of Concord Electric Company, Concord, N.H., and Exeter & Hampton Electric Company, N.H., and Exeter & Hampton Electric Company. Exeter, N.H. Exeter, N.H. IRobert V. Shupe, President of R. L. Gourley Co.' Angela P. Carlson, Clerk of the Company: Secretary Inc., Wellesley, Mass. (distributors of heating, air of subsidiary; Clerk of Bay State Gas Company, ' conditioning and water heating equipment]. Canton, Mass.; Secretary of the Board of Directors ,
' Charles H.Tenney H, Chairman of the Board of of Concord Electric Company, Concord, N.H., and Directors and Chief Executive Officer of the Exeter & Hampton Electric Company, Exeter, N.H. .
Company; Director, Chairman of the Board of ~ -
. William D.MacGillivray, Assistant Clerk of the Directors and Chief Executive Officer of subsidiary:
Company: Assistant Secretary of subsidiary; Assist-Director, Chairman of the Board of Directors, ant Clerk of Bay State Gas Company, Canton, Mass. President and Chief Executive Officer of Bay State Gas Company, Canton, Mass.: Director, Chairman of ** See Director listing for other principal occupations. the Board of Directors and Chief Executive Officer of . Subsidiary: Fitchburg Energy Development Company. Concord Electric Company, Concord, N.H., and ' Exeter & Hampton Electric Company Exeter, N.H. f Robert L. Ware, Lawyer; partner in the law firm- ' of Ware & Ware, Fitchburg, Mass. r i Member of Audit Committee. '
- Member of Compensation Committee. ,
- MmM lllh S
b y J . k s F _
' ~ ;24; - , ,
) % % / t s , f
We ANNUAL MEETING: The annual meeting of common TRUSTEE: The First National Bank of Boston, P.O. Box shareholders is scheduled to be held at The First National 1897, Boston, hfassachusetts 02105, is Trustee under indentures B;nk of Boston,100 Federal Street, Boston, Afassachusetts,in covering the Company's Notes due Afarch 1,1995 and hfay 1, ths Directors Room on the Second Floor, on Tueschy, hfarch 1999, respectively. 23,1980, at 10:30 A.ht. This report, including the flaancial statements contained herein,is submitted for the generalinformation of the TRANSFER OF STOCK: The Company's Transfer Agent shareholders of the Company as such, and is not intended to is The First National Bank of Boston.100 Federal Street, induce, or for use in connection with, any sale or purchase Boston, hiassachusetts 02110. of any securities. FG&E Service Area Fitchburg Gas and Electric Light Company serves a population of approximately 80,000 people in an area of approximately 170 square miles in North Central Massachusetts, The Company provides both gas and electric services to the area communities of Fitchburg, Ashby, Lunenburg, and Townsend. In addition, we provide gas service in the neighboring areas of Gardner and Westminster, The City of Fitchburg is the primary business and commercial center for surrounding communities, drawing on an estimated 225,000 people, both within and outside our service area. The entire area benefits from a skilled labor force, diverse transportation facil-ities, and proximity to important commercial markets. The continued vitality and stability of the Fitchburg business community is a key factorin the stable employment and healthy economy which characterize thearea. l i o e I
a l l l 1 l
=
'N FFICHBUItG GAS AND
- e ELECTItIC IJGHT CO.
m Using our energies to serve you best General Office: 655 Main Street
- Fitchburg
- Massachusetts 01420
- Telephone (617) 343 6931
I L E i SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 I L FORM 10-K r ~ ANNUAL REPORT PURSUANT TO SECTION 13 OR IS(d) OF THE SECURITIES EXCHANGE ACT OF 1934 r-- - L for Fiscal Year Ended December 31, 1979 Commission file Number 1-7536 FITCNBURG GAS AND ELECTRIC LIGHT COMPANY (Lxact name of registrant as specified in its charter) Massachusetts 04-1328660 (State or other jurisdiction of (f.R.S. Employer incorporation or organization) Identi fication No. ) 120 Rugall St.reet, Canton, Massachuset.ts 02021 (Address of principal executive offices) (Zip Code) Registrant 's telephone number, including area code 617-828-8660 _ Securn tnes registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered [~
- Common Stock, $10 Par Value Ameracan Stock Exchange Boston Stock Exchange Securn ties registered pursuant to Secton 12(g) of the Act:
Not Applicable (Title of Class) E Indscale by check mark whether the registtant (1) has filed al1 reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during f the preceding 12 months (or for such shorter period that the registrant was L required to file such reports), and (2) has been subject to such filing require-ments for the past 90 days. Yes X Ho Indicate the number of shares outstanding of each of the issuer 's classes of common stock, as of the close of the period covered by this report. Class Outs tanding at December 31, 1979 Common Stock, $ 10 Par Value 455,475 Shares
l Item 1. Business History and Business Fitchburg Gas and Electric L2ght Company (the " Company"), a Massachusetts corporation organized in 1852, is an operating public utility providing electric and natural gas service to the communs tses of Fitchburg, Ashby, Lunenburg and Tunasend and natural gas service only to the communities The service area encompasses approximately i of Gardner ana Westminster. 170 square miles in northcentral Massachusetts. The Company's main office is located at 655 Hann Street, Fitchburg, Massachusetts 01420 and its principal executive office is at 120 Royall Street, Canton, Massachusetts 02021 (fele, phone Number (617) 828-8660). l As of December 31, 1979, the Company furnished electric service to 21,744 customers and gas service to 13,693 customers of which approximately 12,300 customers used both electrici ty and gas. Electric sales in 1979 l totaled 392,691,432 kilowatt hours, a decrease of approximately 1% from 1978. The decrease was primarily due to a strike that halted production by one of our major 2ndus trial customers. In 1979, gas sales totaled 2,343,116 NCF, an increase of approximately 14% over 1978. The increase was primarily due to the additional interruptible sales. During the years 1975 and 1976, the approximate percentages of l 0perating revenues and operating income, before income taxes, attributable to the sale of electrsc2 ty and gas and for the years 1977 through 1979 the operating revenues and operating income, before income taxes, attributable to the sale of elects scity and gas were as follows: Opera ting Operating Income (be fore Revenues Income Taxes ) Liectric Gas Liectric Gas i 1975 79% 21% 85% 15% 1976 74% 26% 8 13 19% 1977 $ 19,061,3 99 $6,860,860 $2,691,154 $916,881 1978) 1979) See Note 9 to the accompanyang Consolidated Financial Statements. Providing the Company's service area with a broad economic base are firms which manufacture paper, saws, industrial knives, builders ' hardware, turbines, textile and yarns, furnsture, iron castings, special machinery, machine tools and parts, time recorders, electronic components, indus trial i as r conda tioners, fi rea rms , toys, molded plastics, chemicals, screen plates, wood turnings, shoes and other diversified products. Electric Operations and Energy Supply The Company has a 4. 5% interest (20,115 kw) in an 021-f2 red generating plant in New Haven, Connecticut, which is operated by The United Illuminating as the majority owner. The Canaany also has a .1822% 2nterest (1,120 kw) in an oil-fired generating plant in Ya rmouth, Maine, which is operated by Central Maine Power Company as the l E majorsly owner. In addi tion, the Company operates under lease a combustion turbane electric peaking generator with a current capability of 27,910 kw. l A total of 35.11% of the capab21ity of this turbine is sold to Reading Municipal Light Department under a contract expiring October 31, 1980. This contract requires the purchaser to pay
2. monthly demand and transms ss son charges regardless of whether or not at I purchases ants energy, and energy charges are based on the actual cost. of fuel used for the combustion turbine. in addi t s on, the Company has three cont.racts to purchase power from nearby E ut s i s t.n cs. The first cont ract is wi th Boston idison Company (" Boston idsson"), expsrsnq 2n 1981, for the purchase of 40,000 kn. The supply of power under thss contract. ss based on the avanlabs tilt; of the follonsng four Boston idison Unst.s at 10,000 kw each: Ps igtsm Uns t No. 1, New-Bos t on Un s t No. 1, New-Boston Un s t. No . 2, an d Mys t i c Un s t. No. 7; the (2rst besng a nuclear unit, the latter tbree beo ny as !-fired uni t.s. The second cont.ract. ss nath the Haane Elect. tac Power Conpany, Inc. , and provides for the purchase of 3,080 kw through October, 1985 and then for t.he purchase of onist 1,540 kn through October, 1986. The t.h t td cont ract, whsch terminates on October 31, 1980, provi des for 17,500 kw l (expandable to 21,000 kn and contractable to 15,000 kn under certain condstions) to be supplied by New England Poner Companut, 50% of whsch is provs ded from Brayton Point Unnt No. 3, and 25% from both Brayton Point. Unst No. 4 and Salem Harbor Uns t. No. 4 Ali three purchase poner cont.racts require i the Compant; t.o pay monthly demand and t ransmiss son charges regardless of nhether or not al purchases any energy and t.o pay an energy charge for each knh of electis es tri at does purchase. The tbree os 1-f a red plants, together nath t.he three purchase power contracts (manus the Reading sale contract) currently provide the Company n2 th a ne t. capabs in ty of 99,925 kn. The maximum one-hour demand for the Compantj, i exc:uss te of sales t.o other ut s la tzes occurred on August 16, 1978 and was 75,3 30 kn. New I ngl..nd Power Pool A New England Poner Pool ("NIPOOL ") agreement to which the major snvestor-onned utilstnes in New ingland, sncluding the Compants, and certain i munscapa: and cooperat n e ut s is t tes are parties, has been an effect since 1971. This Agreement provs des for joint planning and operation of generating and transmiss son fact is t ses and also ancorporales generat.ing capacity reserve obingations and previssons regarding the use of majLt transmsssion lines and payment for such use. Substantially all planning, operat son and dispat. chang of electric generating capac1ly for New Ingiand is done on a regianal bas 1s under HEP 00L. At the tsme of the 1979-1980 NEP00L wa nter peak, the New ingland utslaties had 1 l about 21,976 HW of inslalled capacit ti to meet the New England peak load of about 15,311 MW. l The Company's capabaiity respons2bi12Ltj under HiPOOL involves carrynng an allocated share of a New England capacitt; requirement. which is determined for each persod based on certann regsonal reliabslaty crsteria.
- Joint Project s and Other Plans The Compant; has entered int.o agreements for the part.ial ownership of six i nuclear fact is t.ies whsch are expected to commence commercial operation at varsous tsmes from 1983 through 1992 (see " Construction Program"). The Company 's combined share of the output of the six nuclear uns ts is expected to i
be approntmately 16. 7 HW. This excludes the output related to the acquasition of an adds tsonal ownership snterest 2n each of the Seabrook uni ts described below.
/
11 3. The Company had entered into two adds tional cont racts wn th respect to l the partial ownership of the Charlestown U itsn I and 2 proposed nuclear generating plants. On October 9, 1979 the lead part scapant, New England f.lectisc System, announced the andef2ns te deferral of the in-service date of i these two units and subsequently announced termination of the project. November 27, 1979 the UPU approved the Company 's reque*t to amortsze approxsmately $653,000 over a 36 month persod. On While the Company is unable to estimate with certasnty the amount of additional charges which may result from the cancellation of these two uni ts, it will request from the DPU permission to i apply samslar treatment to any add 2 Lianal costs assocsated with these uns ts. The Company is in the process of acqustang additional ownership interest an Seabrook from two sources (Connecticut Light & Power and from Pubic Service Company of New Hampshs te). On January 25, 1979, the common shareholders approsed the acquisitson of an additional .43332% ownership interest in each of i the Seabrook units from the Connecticut Light & Power Company. The Company has made an agreement to purchase up to an additional .260P7% ownership in each of the Seabrook uns ts from Public Servnce Company of New Hampshire, the Common Shareholders gave their approval to this purchase on Marcir 25, 1980. Both agreements are subject to the approval of the DPU. Gas Operations and Supply Gas is distributed to the area served by the Company through approximately 274 mains of steel and cast acon mains. The maximum sendout occurred on i february 2, 1979, when a new record of 15,678 MrF was achieved. The Company purchases natural gas from the Tennessee Gas Pipeline Company l (" Tennessee") under a fa rm contract which pmva des that the Company may take up to 7, 506 MCf o f gas da n ly. This cont ract expa res on November 1, 1988, but will continue beyond this exp2 ration date until terminated by either party on twelve months
- written notice.
Beginnsng an January, 1974, Tennessee began to curtail deliveries of gas due to increased overall demand in excess of pipeline capacity. All of i Tennessee 's curta21ments are currently being made pursuant to a curtailment plan filed with the Federal Energy Regulatory Commission ( "FE RC ") , formerly the federal Power Comms ssion ("FPC") on September 28, 1973, and approved by the FlRC on March 14 , 1977, subject to possible modi fications wi th respect to the i filing of an Invironmental Impact Statement by the FERC's s taff. Curtasiment of gas delsverses for the period November, 1979 through March, 1980, are expected to be o. 5% below this volumettsc purchase limitation and 0% below this volumettsc purchase limstation during the summer season, Apr21, 1980 through October, 1980. The Company has limited the impact of this i curtasiment by maintaining a low level of 2nterruptible sales. The Company intends to inmit the smpact of future curtailments on firm customers by i reducnng or eliminating remaining interruptible sales and by obtaining addn tional supplemental gas supplies. The Company has an underground storage contract with Tennessee which provides for storage of approtsmately 50,000 MCF of gas, whnch is injected into i storage during the summer months and withdrawn during the winter season. The storage contract expires on July 31, 1980. l l ll l
4. The Company has enecuted a Precedent. Agreement ws th Consola dated Gas Supply Corporatton ("Consolsdated") by which Consolsdated will provide approrsmately 50,000 HCF of underground storage to the Company for a twenty-year period starting April 1, 1980. The necessary applications to provide this service have been f21ed with the FERC, and a t is anticipated that approval of this servsce will be forthcoming w2 thin the next few months. The Company has also executed a Precedent Agreement with National Gas Storage Corporation ("Natsonal") I j which National ws il provide approximately 50,000 HCF of underground storage to the Company. This contract is to expire on March 31, 1995. The necessary appl 2 cations to provide this service have i been filed with the FLRC, and it is ant.icipated that approval of this service will be forthcoming within the next. few months. l The Company has a propane air gas plant with a daily capacity of 7,200 MCF and a storage capacit.y of 31,000 HCF. The Company also has a leased liquefted natural gas (" LNG") plant with a datly capacs ty of 7,200 MCF and a storage capaci ty of 4,167 HCF. These plants are used principally during peakload pers ods to augment. the supply of natural gas. The Campany has a contract to purchase 12 quid propane from C.H. Dining, Incorporated, which expi res on March 31, 1980, but ws ll continue beyond this exps tation date until terminated by es ther party on twelve months written notsce. This contract ws il provs de 133,028 MCF during the 1979-1980 wnter i season. in adds tson to thss quantity of liqusd propane, the Company is entitled, E under current Federal Fnergy Admsnistration Handatory Allocation Regulations, to use an adds tional volume of liqus d propane, i f available, equivalent to 50,459 HCF each winter season so long as such Regulations, as presently in i e f fec t , remair applicable to the Company. The Company also has a contract. to purchase LNG from Bay State Gas Company whsch expires on March 31, 1980, but will continue beyond this expiration date until terminated by either party on twelve months ' written not.sce. Thi s contract provsdes for an annual quantity of up to 165,000 HCF. If Tennessee does not curtasi p2peline deliverses of natural gas ssgas ficant.1y below present1y indscated levels, and LNG and iiquid propane cont.snue to be avaslable, the capacitses of the Company's LNG and propane facs i s t ies , together with the natural gas avanlable under the contract with i Tennes s ee, are expected t.o provs de adequate gas supplies to fulft il the requirements of all existing firm customers served by the Company. There can be no assurance, however, that lims tatic.ss on interruptible service will not i cont.snue to increase or that. future restrictions will not be imposed on firm customers. l ll 1 'i
5. Regulations and Rates lhe Company as subject to regulation by the Massachusells Department of Public Ut 1ILies (DPU) wsth respect to retasi rates, adequacy of service, assuance of securstses, accounting and other matters. The l'ampany as also subject to regulation by the FERC with respect to certann matters, includsnq NE POOL Interchanges, account s ,_ records and reports. The Compantj's electric and gas sales are made pursuant to rate schedules and contracts on file with the DPU at rat.es which call for iower unsL prices as month!y usage ancreases. i Un t t i 1972 there had been no general rate Increases in 52 years and dursng that period seseral voluntary rate reductions were made. During recent years the Company has sought rate ref ref dessgned to coser the smpact of sncreased costs. The amount.s of rate relief requested and the amounts granted by the DPU are set forth below: fejpe of Amount Amount Effectsve Date Department. Increase Requested G_ran t ed July 20, 1972 Gas Permanent $ 270,000 $ 228,500 Augusc 15, 1972 Liectric Permanent 480,000 357,000 March 28, 1973 Gas Permanent ( 1) 27,400 27,400 Apts! 21, 1974 Electric Interim 1,000,000 767,500 October 15, 1974 Electrac Pe rmanen t. (2) 2,300,000 2,096,000 l Appi ed for December 16, 1974 Janua ry 12, 1976 Gas Gas Intersm Permanent 536,000 663,000 349,451 Electrse Permanent 193,000 793,000 l January 12, 1976 September 15, 1977 Gas Permanent 838,000 553,734(3) September 19, 1977 ilectric Permanent 2,795,000 1,804, 180(3) l ( 1) Granted to Gardner Gas, fuel and I nght Company, a former subsidiary of the Company whsch served the communities of Gardner and Westmsnister and whsch was merged snlo the Company on May, 1973. (2) locludes the $1,000,000 requested and the $767,500 Intersm elect.rsc rate rolsef granted effcctive Aprsi 21, 1974. (3) $ 1, 062,109 was granted effect s ve September 19, 1977; see Note 7 to F:nanc2ai Statements, The viectric rates schedules of the Company for all retasi sales are subject to a cost of fuel adjustment by which rates are mods fsed to reflect changes an the cost. of fuel used for generatson and the cost of purchased energy. With the approval of the DPU, the current cost of E fuel adjustment schedule has been an effcct since September 27, 1974. The Company 's tot al fuel costs are determined on an est.imated quart.erly l l
6. I basss, subject to revsen and approval by the DPU. Toward the end of each the Comany comares actual fuel expenses incurred with the actual fuel quarter adjustment revenues collected and adds or subtracts that amount from the est.2 mated fuel costs for the next quarter. The gas rate schedules of the Company for all retasi sales are I s ubjec t. La a cost of gas adjustment by which the rates are mods fled t.o reflect. changes in the cost of purchased papeline nctural gas and supplemental gas. The current. cost of gas adjustment schedule, which I was approved by the DPU, has been in effect since January 1, 1974. Changes an the cost of papeline natural gas are reflected immediately an customer billings; however, there ss a two-month delay before customer billings reflect changes in the cost of supplemental gas. fame-of-day rates, a pricing syst.em that. re flec t.s the varying costs of providing electric energy at. diflerent. times of the day and/or during different seasons of the year, were ftled ws th the DPU 2n early 1979. The antent. of time-of-day rates is to shs ft. demand and energy use from on-peak to off-peak periods thereby reducing the amount of new generating I capacit y required t.o serve peak loads. The rates recent1y filed by the Company are applicable to ressdent.ial and commercial customers on an optional basis. I I l I ' I - I I I I I I I
7. Compet a t on While franchise rights of the Company are non-exclus s ve, statutes restrict competition from other compar,ies without approval of t.he DPU. Under the laws of Massachusetts, a municipality by appropriate vote may enter the gas or electric business and purchase the facilities of the I utslity servsng such munscapality. If the utility is not willing t.o sell, the municspality may construct a plant or acquire one from another source. The Company knows of no such movement in any menscipality served by the Company. Invstonment.al Matters fhe Company ss subject to regulations with regard t.o as e and water qualiLy and other envs tonmental conss derations by governmental authorities, fede ra l . stat.c and local. The Company cannot, however, forecast the effect of t.he I entsling or future environmental requirements upon its generating and t ransms ssson faciiit es, or upon those facii: Lies in which L has an ownership share. The Company beiseves that. It ss in compi sance wi th envs ronmental regulatsons appiscable to its combusion turbine and that no signs ficant expends tures wi11 be requsted to masntasn such compliance. The Company may, honeser, sncur increased constructson or operatsng exp*rnditures as a result of i the envstonmental requirements for those units an which st has an ownership share. Employee Relatsons As of December 31, 1979 the Company has 161 employees of which 85 are I represented by the Brotherhood of Ut.iliity Workers of New England, Incorporated. The current two-year contract terminates on Apri! 30, 1981. I I I I I ! I
l Item 2. Summary of Operattons 8. FITCNBURG GAS AND f LLCTRIC LIGHT CONPANY AND SUBSIDIARY i CONSullDAllD
SUMMARY
OF UPLRAllUNS (Note 1) Year Ended December 31, 1979 1978 1977 1976 1975 (000's Omr tled) Operatsng Revenues
$24,475 $21,158 $19,061 $16,601 $ 16,107 Electisc Gas 9,786 7,920 6,861 5,698 4,408 i Total Operating Revenues 34,261 29,078 25,922 22,299 20,515 Operatang Expenses s other a ! maintenance 6,066 5,568 5,326 4,861 4, 5 16 E Operation, Electricity purchased for resale 10,470 8,538 8,240 6,390 7, 16 3 Fuel used an electric generation 3,402 2, 159 2,083 1,869 1,536 Gas purchased for resale 5,851 4,335 3,709 2,986 2,173 1,237 1,182 1,094 953 873 Depreciation i Amortization of cost of abandoned 657 596 173 176 71 proper t ies Provisions for taxess 646 868 365 i Income taxes 1,070 1,298 470 2 58 230 Deferred income taxes 781 371 Amortizatson of Investment (89) (62) (52) (49) (34)
E tax creds t Other 1, 3 12 1,860 1,689 1,529 1,389 Total 0,perating Expenses 30,757 25,845 23,378 19,841 18,282 3,504 3,233 2,544 2,458 2,233 Operating income i Non-operatsag income: Allow. for funds used during
-- -- -- 13 5 452 constructson i Allow. for other funds used 36 --
dursng constructson 116 118 -- Other (net of income taxes of 63 93 ($78); ($10);($1); $23; and $38) (27) 83 76 E Total Non-operating Income 89 201 1 12 198 545 3,593 3,434 2,656 2,656 2,778 Gross Income Income Deductions: Interest on long-term debt 1,499 1, 515 1,527 1, 3 16 1,250 Amortizatton of debt expense 20 16 17 16 20 343 l Other snterest charges Discount on long-term debt pur-chased for s snking fund 325 (3) 234 (2) -- 123 226 (3) ( 14) 3 9 !, 18 1 Other Gross income Deductions 1,844 1,772 1,668 1,573 1,600 i Allow, for borrowed funds used dursng construction ( 5 12) (298) (2 12) -- Het Income Deductions 1,332 1,4 74 1,4 56 1, 5 73 1,600 Net Income 2,261 1,960 1,200 1,083 1,178 Davsdend Requirement on 282 288 290 291 2 94 Preferred Stock i Net income Appiscable to Common
$1,979 $ 1,672 $ 9 10 $ 792 $ 884 Stock Average Number of Common Shares Outs tandi ng 455,475 455,475 455,475 455,475 455,475 Larnsngs per Average Comon Share Outstanding (Exhsbit 1) $4.34 $3.67 $2.00 $ 1. 74 $ 1. 94 E Dividends Declared $1.90 $ 1. 50 $ 1. 44 $1.065 $ 1.38 Ratio of Earnings to Fixed Charges (Exhsbit 2) 2.93 2.82 2.22 2.25 1.98
9. FITCNBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANAL YSIS OF THE
SUMMARY
OF OPERATIDMS tnt ELLCTRIC OPERAllHG RE VLHUES 2ncrease of 16% in 1979 was attributable to the not offect of three major factors: the increase in fuel costs for generalion and energy costs of purchased power; the ful1 year effect af the rate increased approved October 5, 1978; and a strike that halted production by i one of our major indus t.rn al cus tomers. The 11% increase in 19781s due primarily to four factors: the full year 's effect of additional rate relief granted effective September 1977; the adds tional rate relief perms tted in i October 1977 and subsequently granted as a result of the Company's appeal of the above mentioned rate decssion, the sale of 76, 74 7, 276 kilowatt hours to the s2x new industrial customers acquired as of June 1, 1977 in connection with the purchase of electrsc facilities from New England Power Company, and the lower i per uns t energy cost components of power generated and purchased with a resulting decrease in total cost recoverable through the Company's fuel expense adjustment clause. GAS OPERATING REVENUES increased 24% in ?79 primarily due to three factors: ancrease of 391,300 MCF's in interruptsble sales ($ 1,279,400 increase); the E increased cost of purchased gas which is passr.d on to customers through the operation of a cost of gas adjustment clause; and a decrease in off-system sales of $410,431. The 15% increase nn 1978 gas operating revenues as primarily related to three factors: the increased cost of purchased gas which a s passed on to customers through the cost of gas adjustment clause; the first full year impact of the permanent rate relief of $S53,734 granted effetive in September 1977; and an increase nn off-systems sales of 36,892 NCF. ELECTRICITY PURCHASED FOR RESALE 2ncreased $ 1,932,4 58 in 1979 over 1978 and
$297,758 in 1978 over 1977. The 1979 increase reflects the higher per unit i energy cost. The 1978 expenses increased primarily due to a greater reliance on electricity from other utilsties.
FUEL USED IN ELECTRIC GENERATI0H increased in 1979 due to the escalation in the costs of fuel used to generate a level of kilowatt hours slightly higher than that of 1978. The 1978 costs increased over 1977 due to a higher level of k210 watt hours generated. CAS PURCHASED FOR RESALE increased due to the large increase by our pipeline supplier, the 2ncreasing unit cost of our supplemental gases and a higher level of total MCF sales. i OPERA TION, OTHER AND MAINTENANCE nncreases are associated w2 t.h lease , obligations, h2gher wage rates, increased pension and insurance costs and other cost increases that reflect the continuing effect of inflation. DEPRECIATION expense has risen due to the additional plant put in service and E due to the increased rates that became effective September 1, 1977. AMORTIZATION OF COST OF ABANDONED PROPERTIES increased in 1979 due to the first full year's effect of the amortization of unit No. 6 and two months l E amortizatnan of Charlestown No. I and No. 2. The increase in 19781s due to the amortization of unit No. 6.
10. I LOCAL PROPERTY TAXES 2n 1979 decreased from 1978, principally due to a property tax settlewnt agreed to by the City of Fitchburg in October, 1979 i The Compant) nn 1979 received abatements with a value of $733,634, of which
$244,076 pertains to the 1978 period in 1979, these abatements have increased net income by $376,478 or $.83 of earnings per common share. The Compar,y I anticipates that the future levels of property tax expense will continue to reflect the lower assessed valuation resulting from this settlement. The 1978 sncrease over 1977 is due to the acquisition of the new electric facil2 Lies purchased on June 1, 1977.
THE ALLOWANCE FOR OTHLR AND BORROWED FUNDS USED DURING CONSTRUCfl0N has generally increased since 1976 due to the Company's continued investment in I eiectrac generiting faciiities under construct 2on. In addstion, the increase in Interest rates has had a signi ficant impact on these amounts. OTHE R NON-OPERA flHG INCOME has decreased by $ 109,015 due to the loss sustained by the Company's subsidiary (Fitchburg Energy Development Company) and to the reduced interest income on commercial and industrial accounts receivable outstanding. GROSS INCOME DEDUCTIONS increased due to the Compantj's assuhang $3,000,000 of 10% Notes a n September, 1976. The increase also reflects the interest expenses I related to short-term borrowings requited to finance the Company's construction program and an 1979 and 1978, the expense includes interest related to pipeline refunds due customers which the Company used in lieu of short-term borrowings. I I I I I I I I I
! W W W W W m M M M M M M M M M M M M M FITCNBURG GAS AND ELECTRIC l.lGHT COMPANY AND SUBSIDIARY l l COMPUTATION IN SUPPORT OF EARNINGS PLR SHARE ? Year inded December 31, l 1979 1978 1977 1976 1975 (000's 0ma tted) Net Income $2,261 $1,960 $ 1,200 $1,083 $ 1,178 I Less: Dividend Requirement on Preferred Stock 282 288 290 291 2 94 Income Applicable to Common Stock $1,979 $1,672 $ 9 10 $ 792 $ 884 , l Average Number of Common Shares Outstanding 455,475 455,475 455,475 455,475 45 5,4 h Earnings per Average Common Share Outstanding $ 4.34 $3.67 $2.00 $1.74 $1.94 N 3 B m 4 4 a; 2, 0 e~ 2 h E R 8 E E~ ~
M : $%,N gf mcR% *
- b* h ER Rg t Eab M
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)
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, 2 N G A N P I M N M O C
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. om h
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exIi oine eoine ma t t nt g t nt a e oTdat aanl rt aanl M : c s neriei ezs z(I a t asz( I a h ei t f gI mrt rt sro C rt sro o n oerert eT ert eT it cf ot onh dt onh o nenemnmet enmet i W rHIDAIARO a E i F xIARO t R a W
13. Item 3. Property The Company owns a propane gas plant and leases an LNG plant, all of which are located on land owned by it in fee. The Company has entered
- i. snto agreements for josnt ownershsp sn six nuclear and two fossil fuel fac21 i t ies . At December 31, 1979 the esectric properties of the Company I cons a sted principally of 67 mz les of transmission isnes, 2I transmission and distribution substations with a capacity of 293,300 KVA and 393 miles of distribution lines. Electric transmission facilities (including substations) and steel and cast iron gas mains owned by the Company are, with minor exceptions, located on land owned by the Company in fee or occupied pursuant to perpetual casements. The Company also owns its office building and various other property and leases a combustion turbine electrsc peaking generator. See
" Electric Operations and Energy Supply; and Gas Operations and Supply" above i for adds tional nnformation regarding the Company 's plants, facilitses and gas mains.
Item 4 Parents and Subsidiaries. Parents of Fi tchburg Gas and Electric Light Company - None. E Subsidiary of Regis trant - Fitchburg Energy Development Company. Fitchburg Energy Development Company, a wholly-owned subsidiary of E the Registrant is incorporated in the State of Delaware. Item S. Legal Proceeding. (a) There are no matersal pending legal proceedings, other than ordinary routine litigation incidental to '- business, to which the Company or nLs subsadiat es 2s the subject, except as noted 2n Hole 7 to the accompanying Consolidated Financial Statements. There are no material legal proceedsngs to which any director, officer or affiliate of the Company or any associate of any such person, is a party, or has a E material interest, adverse to the Company. There are no material proceedings at2snng under environmental quality and civii tights statutes pending or known to be contemplated by government agencies to which the Company or i ts subsidiary are a party. i (b) Not Appiicable. Item 6. Increases and Decreases nn Outstanding Securs tics and Indebtedness. (a) Changes in outstanding equity securn ties in 1979 were as E follows: E Redeemable Cumulative Preferred Stock, $100 Par Value 5-1/8% 8% Series (A) Series (B) i Shares outs tanding -- December 31, 1978 16,880 25,000 Purchase of Preferred Stock (420) (750) E Shares outstanding -- December 31, 1979 16,460 24,250 I
14. l A. 5-1/8% Ser nes The Company has agreed to purchase on June i of each year not less than 420 shares as shall have been tendered to the Compant). B. 8% Series The Company has agreed to purchase on June i, i979 and on each June 1 thereafter, not less than 750 shares as shall i have been tendered to the Company. (b) Not appiscabic. (c) Not appi2 cable. ILem 7. Changes in Secursties and Changes sn Secursttj for Registered Securstnes No t. appiscable. Item 8. Defaults upon Sensor Securs tnes. Not appincabic. Item 9. Appror smate Number of Equa tti Secursttj Holders. The approxsmate number of holders of record of each class of the Company's equittj securaLies at December 31, 1979 were as foi)ows : l fille of Class Humber of Record Holders Cumulative Preferred Stock, $ 100 l l Par Value: 1 5-1/8% Series 5 8% Series 3 E Common Stock, $10 Par Value 2,244 Item 10. Submsssoon of Hatters to a Vote of Secura tt) Holders. 1
= Not applicabic.
Execut.s ve Off2cers of the Regis trant. The names, ages and poss tsons of all of the executive officers of the Conpany as of March 27, 1980 are listed below along with their business E experience during the past five years. All officers are elected or appointed annually by the Board of Directors at the first D2 rectors
- meeting following the annual meeting. There are no family relationships among these officers, not is there any arrangement or understanding between any officers and any E other persan pursuant to whsch the offscer was selected.
I I I
15. Name, Age Business Expertence and Pos a t s on Durnnq Past 5 Years Charles H. Tenney II, 61 Dn rector and Chairman of the Board Chan tman of the Board of Directors of the Company; Director of Os tectors and Chief and Chairman of the Board of Da rectors E xecutive Officer of the Company's subsidiary; On rector, E Chairman of the Board of Directors and since 1976 Pres sdent of Bay State Gas Company; and Director and Chairman af the Board E of Directors of Concord Electric Company and Exeter L Hampton Electric Company. Mr. Tenney was also D2 rector and Chairman of the ' Board I of D2 rectors of Orange and Rockland UL21ities, Inc. unt21 1976. Howard W. Evars, Jr., 54 Dn rector and Pres s dent of the Company; E Pressdent un rector and President of the Company 's s ubs 2 da ry. Irank I.. Ch21ds, 35 Vice Pres 2 dent s2nce 7/1/79 and Treasurer sance Vsce Pre 3 sdent and 3/25/80 of the Company (Ass nstant Treasurer \ Treasurer 7/1/79 - 3/25/80; 2n Financial Department peror l 1 thereto); Vice President and Treasurer of the Company 's s ubs s d2 a ty ; and Vi ce Pres 2 dent and Treasurer of Concord Electric Company since 3/12/80 and Exeter & Hamplea Electric Company , i since 3/14/80 (formerly ',ssnstant Treasurer of each 7/1/79 unt21 3I:a; in F2nancaal Department l l of each and of Say State Ga:, Company prior ' thereto). Charles T. EIIis, 43 V2ce President of the Company s2nce 1975; Vice President Di rector and V2 ce Pres 2 dent af the Company 's E subs sdtary; and Vsco President of Bay State Gas Company (formerly Assistant Vice President 3/25/75-12/18/75; in Enotgy Supply Department i prior thereto). David K. Foote, 32 l Vice President Vice Press dent since 3/25/B0 of the Company (Assistant Vice President S/1/78-3/25/80; manager Energy Productson pr2ar thereto). I Edward D. McKenine, 55 Ass 2stant Treasurer Assistant Treasurer since 10/1/79 of the Company; Assistant Treasurer of the Company's subst diary; Assistant Treasurer since 10/1/79 of I Concord Electric Company and Exeter L Hampton Electric Company (Assistant Treasurer 1978-1979 of Bay State Gas Company; Controller thereof prior thereto). l l l !I .
16. Angela P. Ca rls on , 42 Clerk since 1975 (Ass 2stant Clerk prnor Clerk thereto) of the Company; Secretary of the i Company's subsidiary; Clerk (Assistant Clerk prior thereto) of Bay State Gas Company; and Secrete.y of the Board of Dn rectors since i 1975 g Executisc Assistant pr2ar thereto) of ibocord Electric and Exeter & Hampton Liectric Company. l Ws il sam D. MacGs ili vray, 36 Assistant Clerk Ass nstant Clerk since 7/ I/79 of the Company; Assistant Secretary of the Company 's subsn diary; Assistant Clerk since 7/ I/79 of i Bay State Gas Company (Also Manager, Tax Servsces since 1977; with Alexander Grant & Company prior thereto). Elem 11. Idemni fication of Directors and Offscers. At the Annual Meeting of Common Shareholders held March 25, 1980, the Company 's By-Laws nere amended, pursuant to the provision of Massachusetts law, by, inter alsa, the addilson of the following 2ndemni ficat. ion provision. The Corporatson shall indemns fy and hold harmless each person who is or shall have been an off2cer or Dstector of the Corporation from and against any and all clasms, inab21stics and expenses to which he may be or become subject by reason of i his being or having been an officer or a Director of the Corporation or by reason of h:s alieged acts or omssssons as an offacor or D2 rector of the Corporatson, and shall indemnify and resmburse each such officer and Director against and for any and all legal and other expenses reasonably nncurred by him in connection with any such claims and 1 abz is tses, actual or threatened, whether or not at or prior to the time when so 2ndemns fied, held harmless and reimbursed he has ceased to be an officer or a Ds rector of the Corporation. The Corporatson shall sims larly 2ndemni fy and hold harmless persons who serve and shall have served at its request as directors or officers of another i organszatson in which the Corporation directly or indsrectly owns shares or of whsch at is a creditor. Such 2ndemns ficat.non may 2nclude payment. by the Corporation of expenses E sncurred in defending a civsl or criminal action or proceeding in advance of the final disposilson of such action or proceedsng, upon receipt of an undertaking by i the person andemns fied to repay such payment i f he shall be adjudicated to be most entit led to indemni ftcat son under this Art cle. No 2ndemns fscat son shall be provided for any person with respect to any matter as I to which such person shall have been finally adjudicated in any proceeding not to have acted in good fas th to the reasonable belsef that has action was in the best interest of the Corporation; not shall indemnt fscation be provided where the Corporation as required or has undertaken to submn t to a court of appropraale jurssdiction the i questaan of whether or not 2ndemnification by it is against public policy and at has been fsnally adjudscaled that such sademns facation is agasnst public policy; provided, however, that prior to such final adjudication, the Corporatin may comptoise and i settle any such claims and inab21s tics and pay such expenses, if such settlement or payment, or both, appears, in the judgment of a majority of those members of the Board of Du rectors who are not directig 2nalved in such matters, to be for the best interest i of the Corporation as evidenced by a vote to that effect adopted after receipt by the Corporation of a written op2nson of counsel for the Corporation that, based on the facts available to such counsel, such person has not acted in a manner that would prohibst sndemns fication.
I 17. The foregoing right of 2ndemnification shall not be exclusive of any other rights to which any such person 25 entitled under any agreement, vote of stockholders, statue, or as a matter of law or otherwsse. The provisions of this Article are separable, and, 2 f any provision or portion hereof shall for any reason be held snapplicable, illegal or sneffective, this shall not affect any other right of indemni fication existing under this Article. As used herein, the terms "Di rector" and "off acer" include persons elected or appointed as officers by the Board of Directors, persons elected as Directors by the stockholders or by the Board of Directors, and E persons who serve by vote or at the request of the Corporation as Directors, officers or Lrustees uf another organization in which the Corporation has any direct or I a nds rect interest as a shareholder, creditor or otherwsse. All Directors and officers are insured under a Directors ' and Officers ' Liability and Corporation Reimbursement Policy. Insofar as 2ndennification for 11 abilities arising under the Securities Act of 1933 may be permitted to Directors, officers and controlling persons of the Registrant pursuant to the provisions referred to above or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemns ficat son may contravene public policy as expressed in the Act and may therefore be unenforceable. In the event that a claim for such indemnification (except insofar as such claim seeks reimbursement from the Registrant of expenses incurred or paid by a Director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by a Director, officer, or controlling person for liabilties arising under the Act with respect to securities offered, the l Registrant n211, unless in the opinion of its counsel the matter has been settled by l controlling precedent, submit to a court of appropriate jurisdiction the question whether such 2ndemni fication by i t, or reimbursement for such claim, is against public policy as expressed in the Act and will be governed by the final adjudication of such 2ssue. I ' I I I
18. Item 12. Financial Statements and Exhibi ts Fa led and Peports on form 8-K Page No. (a ) 1. Auditors
- Report ,
E Financial Statements: Consolidated Statement of Income -- Years Ended December 31, 25. l 1979 and 1978 Consolidated Balance Sheet -- December 31, 1979 and 1978 Assets 26. Liabilities 27. Consol2 dated Statement of Retained Earnings -- Years Ended December 31, 1979 and 1978 gg, Consolidated Statement of Changes in Financial Position -- Years Ended December 31, 1979 and 1978 29, Notes to Consolidated Fianancial Statments 39 - 47 Schedules: V - Property, Plant and Equipment -- Years Ended 42 - 43 December 31, 1979 and 1978 VI - Accumulated Depreciation, Depletaan and 44 _ 45 Amortization of Property, Plant and Equipment -- Years inded December 31, 1979 and 1978 IX - Bonds, Mortgages and s2ma lar Debt -- Year Ended 46 December 31, 1979 XII - Valuation and Dualifying Accounts and Reserves -- 47 - gg Years Ended December 31, 1979 and 1978 XIII - Capital Shares -- Year Ended December 31, 1979 49 XVI - Supplementary Income Statement In forma tion: See Note 10 of Consolidated Notes to F2nancial Statements Schedules I, II, III, I V, VII, VIII, X, XI, XI V, XV, XVII, XVIII, and XIX have been omitted as the informa-tion is either not applicable or not required.
- 2. Exhibits:
- 1. Computation 2n Support of Earnings per Share
- 2. Computation in Support of Ratio of Earnings to fixed Charges
]9.
l Item 12. Financial Statements and Exhibs ts filed and Reports on Form B-K (Continued)
- 2. Enhabits: (Cont inued)
- 3. By-Laws of the Company 4 Certs ficate of Reduction of Capital pursuant to Chapter 164, Section BB of the Massachusetts General Law.
- 5. Amendment No. 2 to Pension Plan dated January 16, 1979 (pertaining to union employees).
- 6. Amendment No. 2 to Pensson Plan dated January 16, 1979 (pertaining to non-union employees).
- 7. Amendment No. I to Employee Stock Ownership Plan and related amendment to the Employee Stock Ownership Trust Agreement, dated l December 19, 1979.
- 8. Labor Agreement, effective May 1, 1979 between the Company and l the Brotherhood of Utility Workers of New England, Inc., Local No. 340.
- 9. Release from the lease of certain jointly occupned office space located in Canton, Massachusetts betncen the Company and others and Bay State Gas Company.
i
- 10. Lease of certain josntly occupied office space in Bedford, New Hampshire between the Company and others and Berkshire Builders.
II. Agreement dated December 11, 1979, relating to the purchase of B 1855 Data Processing System between the Company and Burroughs , l Corporation.
- 12. Letter agreement dated May 30, 1979, amending the Boston Ldison Company Contact.
- 13. Amendments No. 6 through 11 of Agreement for Joint Ownership, i Construction and Operations between the Company and Public Service Company of New Hampshste and other participants.
Amendments to Escrow Agreement dated Apri! 30, 1979, relating to l 14 . the New Hampshire Nuclear Units between the Company and Central Hasne Power Company and other participants. s
- 15. Extensson Agreements between the Company and The Connecticut Light and Power Company to transfer ownership share in each of the Seabrook nuclear Unit Hos. I and 2.
I
20. Ile n 12. Financsal Statements and Exhsbs ts f t led and Reports on form 8-K (Cont nued)
- 16. Amendment. No. 3, dated December 31, 1979 of Joint. Ownershsp Construction and Operatton of Wyman Unit No. 4 belneen the i
- Compant; and Cent.ral Hasne Power Compant).
- 17. Precedent. Agreement, dated August 31, 1979, botneen t.he Comparaj and National Gas Storage Corporation.
18 Precedent Agreement.s, dated November 5, 1979, between the Company and fennessee Gas Pipelsne Company. i i 19 I:xchange and Storatje Servsces Contract. da t ed June 28, 1979, l belneen the Company and the Brookiyn Unnon Gas Companej. l l
- 20. Sales contract. dated November 15, 1979 between the Company and Cape Cod Gas Company and I.onell Gas Company.
l
- 21. Contract dated Februarsj 18, 1980, botneen the Company and Consolidated Gas Supplet Corporation.
- 22. Precedent Agreement, date february 25, 1980, bet.neen the Company and National fuel Gas Supply Corporation.
Inds ys dual financs al s tat.ements of the Compant) are oms tled because s t.s total asset.s, exclust se of insestments in and advances to s t.s consolsdated subss dsary, at the date of s t.s latest balance sheet, constitute 75% or more of l the Lolal assets as shown btj the consolidated balance sheet. at that date and sts total sales and revenues, exclus2ve of 1nterest and divs dends reces ved from or ats equittj sn the sneome of the consul dated subsidiart), as shown btj 2ts l 1 latest sncome statement, cons t. s t.ute 75% or more of the total sales and resenues shown by most. recent annual consol s dated income s tat ement. l Notes: A copy of t.he annual report to stockholders is submrtled herensth. Also subms tled ss proxtj material sent to a!! stockholders. (b) No reports on form 8-K nere fs led for the three months ended December 31, 1979. PART 11 Regsstrant. has, s snce the close of the year, fsled with the Commissson defins ts ve proxy statemeln pursuant to Regulation 14A which snvolved the election of directors. I I
2] . I I SIGNA TURE Pursuant to the requirements of Sectsori 13 or 15(d) of the Securs tnes Exchange Act of 1934, the registrant has duly caused this annual report to ! be signed on :Ls behalf by the undersigned thereunto duly authorized. ! FITCHBURG GAS AND ELECTRIC LIGHT COMPANY (Registrant) i DA llD: March 27, 1980 I Frank L. Childs FRANK L. CHILDS, Vice President and Treasurer I I I i I l I I
22. I 4 I I I FITCHBURG GAS AND LLECTRIC LIGHT COMPANY AND SUBSIDIARY FINANCIAL S TATEMENTS AND SUPPLEMENTAL SCHEDULES YEAR ENDED DECEMBER 31, 1979 WITH AUDITORS
- REPORT I
I . I I Prepared for filing as part of Annual Report (Form 10-K) To the Securities and Exchange Commission I I I I I I
I 23. l !TCHBURG GAS AND ELE TRIC LIGHT COMPANY AND SUBSIDIARY INDEX TO FINANCIAL STATEHENTS AND SCHEDULES Page No. Audi tors ' Report financtal Statements: Consolidated Statement of Income -- Years inded December 31, 25 1979 and 1978 Consolidated Balance Sheet -- December 31, 1979 and 1978 26 l Assets Liabilities 27 Consolidated Statement of Retained Earnings -- Years Ended 28 December 31, 1979 and 1978
^
Consolidated Statement of Changes in Financial Position -- 29 Years Ended December 31, 1979 and 1978 Notes to Consolidated Financial State.nents 39 43 I Schedulas: l V - Property, Plant and Equipment -- Years Ended December 31, 1979 and 1978 42 - 43 VI - Accumulated Depreciation, Depletion and Amortization of 44 - 45 i Property, Plant and Equipment -- Years Ended isecember 31, 1979 and 1978 IX - Bonds , Nortgages and Samtfar Debt -- Year Ended 46 December 31, 1979 Xil - Valuation and Qualifying Accounts and Reserves -- Years 47 - 48 i Ended December 31, 1979 and 1978 XIII - Capital Shares -- Year Ended December 31, 1979 49 I j I All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto. I t
24 I AUDITORS ' REPORT TO THE SHARLHDI.DLRS OF FITCHBURG GAS AND ELECTRIC LIGHT COMPANY We base examined the consolsdated balance sheets of Fitchburg Gas l and Electric Light Company and Subsidiary as of December 31, 1979 and 1978 and the related consolidated statements of 2ncome, retained earnings and changes in financial pasition for the years then ended. Our examinatians were made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. As discussed in Note 7 to the financial statements, the Corrpany's method of billing and accounting for revenues under its fuel adjustment clause in effect from January I through September 26, 1974, has been challenget* by the Attorney General of the Commonwealth of Massachusetts. i The Company believes it.s methods are correct and has vigorously defended its procedures, but the uit.2 mate outcome is uncertain and no provision for any liabn is t.y that may result has been made an the financial st.atements. In our opinion, subject to the effect. of such adjustments, if any, as might have been required had the outcome of the matter discussed above been i known, t.he financial s tatement.s teferred to above, p resent faiily the consolndated financial position of Fitchburg Gas and Electric Light Company and Subs a daaty at December 31, 1979 and 1978 and the consolidated results af their operat.nons and changes in their financial position for the years then ended, i in conform 2 t.y ws th generally accepted accounting principles applied on a consastent basis. In connection ws th our examnnatians af the consol2 dated f2nanc2al statements as - f December 31, 1979 and 1978 and for the years then ended, we have also examined t.he schedules listed in the attached index. E In our opinion, such schedules present fairly the information required to be set forth therein. I Boston, Massachusetts Alexander Grant & Company l February 7, 1980 j I ~ I I I .
25. FITCH8URG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY CONSOLIDA TED STATEMENT OF INCOME For Years Ended December 31, 1979 1978 i Operatanq Revenues Electric $24,475,296 $21,157, 542 Cas 9,786, 185 7,919,991 i Total Operating Revenues 34,261,481 29,077,533 Operatsng Lxpenses Operating expenses, other 5, 132,726 4,833,281 Electracity purchased for resale 10,470,503 8,538,045 l Fuel used in electric generation 3,401,852 2, 158, 983 Gas purchased for resale 5,850,610 4,334,696 Maintenance 933,360 734, 113 i Depreciation (Note 1) 1,236,692 1, 18 1, 78? Amortszation of cost of abandoned properties (Note 2) 657,048 595,937 Provssions for taxes (Note 1) i Federal income tax on net operating income 957,846 1,216,342 Deferred Federal ancome 715,030 339, 151 Amortn zation of investment tax credi t (89,049) (61,766) State franchise 112,348 81,403 E Deferred state franchise 66,293 32,587 Local property - current 1,362,511 1,693, 904
- abatement of prior year (244,076) -
i Other 193,669 166,859 Total Operating Expenses 30,757,363 25,845,322 Uperatang Income 3,504, 118 3,232,211 l Non-operating Income Allowance for other funds used during construction 116,3 19 118,573 Other (net of nncome taxes) (Note 1) (27,605) 83,4 18 Total Non-operating Income 88,714 201,991 i Gross Income 3,592,832 3,434,202 Income Deduct 2ons l Interest on long-term debt Other interest charges Amortizatson of debt expense 1,498,655 325,596 20,470 1,515,476 233,859 16, 324 Discount on long-term debt purchased for sinking fund (credit) (3, 030) (2, 167) 2, 8 16 8,992 i Other Gross income Deductions 1,844,507 1,772,484 Allonance for borrowed funds used dursng construction (512,381) (298, 132) Net Income Deductions 1,332, 126 1,474,352 Net income 2,260,706 1,959,850 Divsdend Requirements on Preferred Stock 281,754 287,407 Net Income Applicable to Common Stock $ 1,973,952 $ 1,672,443 i Humber of Common Shares Outstanding 455,475 455,475 Earnings per Common Share Outstanding $4.34 $3.67 i (The accompanying notes are an integral part of this statement) i i
26. FITCNBURG CAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY CONSOLIDAllD BALANCE SNLET ASSL TS l l For Years inded December 31, 1979 1978 Utilnty Plant (at cost): Electric $29,788,954 $29,150,076 Gas 10,763,237 9,701,448 Common 1,395,550 1,430,568 Construction work in progress (Note 8) 5,196,391 4,179,203 Gross UL21ity Plant 47, 144, 132 44,461,295 Less: Accumulated depreciation (Note 1) 9,849,810 9, 194,08 1 Net Utility Plant 37,?94 322 35,267,214 Hiscellaneous Physical Property (at cost) 26,005 26,005 Investments (Note 1) 348,006 270,748 l l Current Assels Cash 1,727,899 459,751 i Accounts reces vable (including installment sales)-less allowance for doubtful accounts of $177,580 and $220,480 5,082,572 3,885,345 Refundable nncome taxes 264,990 --- Haterials and supplies (at average cost) 877,721 676,030 Prepayments 829,875 201,322 i Property tax abatements 462,821 --- Total Current Assets 9,245,878 5,222,448 Deferred Debi ts Unamortszed debt expense (amortized over term of securities) 275,932 296,402 l Unamortized cost of abandoned properties (Note 2) 2,976,82 1 2,981,332 l Other (Note 2) 646,331 160,878 Total Deferred Debs ts 3,899,084 3,438,612 i TO TAL $ 50,813,295 $44,225,027 l I (The accompanying notes are an integral part of this statement) l I
27. FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY li CONSOLIDA TLD BALANCE SHEET l LIABILITILS For Years Ended December 31, I Capstalization Common SLock Lquity 1979 1978 Common Stock, $10 par value Authorized - 1,000,000 shares E Outs tanding - 455,475 shares $ 4,554,750 $ 4,554,750 Premium on common stock 1, 754,358 1,754,358 Capital stock expense (181,737) (183,744) i Retained earnings (Note 3) 6,417,530 5,304,422 Total Common Stock Lquity 12,544,901 11,429,786 g Redeemable preferred stock (Note 4) g Cumulat 2 ve preferred stock, $100 par value 5 1/8% Series Authorized - 16,880 and 17,300 shares Outstanding -16,460 and 16,880 shares 1,646,000 1,688,000 8% Series Authorized - 25,000 shares ilm Outstanding- 24,250 and 25,000 shares Total Redeemable Preferred Stock 2,425,000 4,071,000 2,500,000 4,188,000 Long-term Debt (Note 5) 16, 780,000 16,978,000 Total Caps t slization 33,395,901 32,595,786 .i Current Laab11 sties Long-term debt due within one year 123,000 123,000 Notes payable (Note 6) 5,420,000 970,000 Accounts payable 4,995,568 3,835,149 Customer deposi ts and refunds 258,675 623,558 Taxes accrued 167,860 571, 105 Deferred income taxes (Note 1) 131,266 196,956 E Interest accrued 495,950 452,997 Total Current Lsabil2 Lies 11,592,3 19 6,772,765 Deferred Credits E Unamortszed Investment tax credit (Note 1) Other 1,583,601 1,361,332 70,219 73,746 , Total Deferred Credits 1,653,820 1,435,078 Deferred Income Taxes (Note 1) 4, 122,357 3,362,276 Reserves - Other 48,898 59, 122 TO TAL $50,813,295 $44,225,027 I j l 1 I I 1 I i (The accompanying notes are an integral part of this statement)
28. I FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY CONSOLIDATED STA TEMENT OF RETAINED _ EARNINGS for Years Ended December 31, 1979 1978 Re* 2sned Earnings, Beginning of Year $5,304,422 $4,315,175 Net income 2,260,706 1,959.850 Total 7,565,128 6,275,025 Deduc t: Cash da vs dends declared: I Cumulative preferred stock: 5 1/8% Series at an annual rate of $5.125 per share 85,434 87,586 8% Series at an annual rate of $8.00 per share 197,000 I 200,000 Common st.ock at an annual rate of $1.90 and $1. 50 per sharn 865, 164 683,017 Total Deductions 1, 147,598 970,603 Retasned Laronngs, End of Year (Note 3) $6,417, 530 $5,304,422 k I I I g <,,. acc.m. n,,n,n.L.s .re an int.,r , ..rt .,t,,s st.tement, I I I I I I
29. FITCN8URG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY CONSOLIDA TED STATEMENT 3F CHANGES IN FINANCIAL POSTION for Years Ended December 31, E 1979 1978 Funds Provided By: Funds from Operations E Net Income $2,260,706 $1,959,850 l Principal Non-Cash Charges (Credits)to Income (Note 1) 1 Depreciation 1,236,692 1, 181,787 i Deferred Federal income tax 687,646 344,666 Deferred state franchise tax 72,435 30,504 Amortization of investment tax credit (89,049) (6 1,766) l Allowance for other and borrowed funds used during cons tructi on Property tax abatements (628,700) (270,813) (416,705) l Amortization of deferred debits Funds Provided by Operations Other Sources - Nel 722,385 3.991,302 179,616 648,490
$3,686,826 224,299 Increase (Decrease) in Short-term Debt 4,450,000 (1,530,000)
E Total Funds Provided $8,620, 918 $2,381,125 Funds Applied To: Additions to Plant $3,270,600 $3,098,508 E Inves tments in Non-utility Operations (Note 1) 233,844 271,222 Common Stock Dividends 865, 164 683,017 Preferred Stock Dividends 282,434 287,586 i Funds Used for Retirement of Securities: Long-term debt 198,000 191,000 Preferred stock 117,000 42,000 i Increase (Decrease) in Working Capital, Excluding Short-term debt 3,653,876 (2, 192,208) Total Funds Applied $8,620, 918 $2,381,125 i Increase (Decrease) in Components of Work 2ng Capital, Excluding Short-term Debt: Cash $ 1, 268,148 $ (312,002) E Accounts receivable 1,197,227 71,440 Refundable income taxes 264,990 ---- Matersals and supplies 201,691 (20,487) Prepayments 628,553 l Property tax abatement 462,821 (29,591) Accounts payable (1, 160,419) (1,090,918) l Customers ' deposits and refunds Taxes accrued Deferred nncome taxes 364,883 403,245 65,690 (256, 117) (508, 104) (63,885) Interest accrued (42,953) 17,4 56 Increase (Decrease) in Working Capital $3,653,876 ( $2,192,208) (The accompanying notes are an integral part of this statement) l l Il l
I 30. I FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY NOTLS TO CONSOLIDATLD FINANCIAL STATEMENTS Note 1. Summary of Ssgni ficant Accountsng Policies: The Company is subject to regulation by the Massachusetts Department. of Public Ultistics (DPU) with respect to its rates and accounting. The Company 's accounting policies conform with generally accepted accounting princ2ples, as E applied sn the case of regulated public ut21ities, and are in accordance with the accounting requirements of the Massachusett.s Department of Pubinc l Utilstses. follows: A description of the Company's significant. accounting policies Principles of Consolidation -- On February 24, 1978, Fi t.chburg inves t.ed $20,000 1n Lhe Common Stock af a new whol1y-owned subsidiaty, Fitchbutg Energy Deselopment Company (FEDCO). FEDC0 has invested in oil and gas drilling fac 211 Li es , which investment has been recorded on the equity method. Al1 snter-company items have been eliminated in consolidation. Revenue Recogns tion -- The Company records unbilled fuel adjustment revenue currently to properly match revenues with related costs. Such unbilled revenue E aggregated $756,082 and $389,156 at 3ecember 31, 1979 and 1978, respectively. Deprecsation -- Annual provssions are determined on a group straigt t line E basis. Provisions for depreciataan were equivalent to the followinst composite rates based on the average depreciable property balances at the be] inning and end of each year: 1979-3.11% and 1978-3.01%. It ss the accounting policy of the Company, an genera', to treat maintenance, repairs and renewals as expenses in cases involving so-called items of non-uns ts of property; s f so-called uns ts of property E are involved (such as poles, gas mains, etc.), the costs ancidental to replacements are capitalized and the units replaced are retired by creds ting the original cos t. (estimated if not known) to the respective E property accounts and concurrently chargsng depreciation reserves. All expenses covering the cost of removal are charged and any salvage realized as credited to the retirement reserves. Accounting for Income Taxes -- For income tax purposes the Company excludes a portion of unb211ed fuel adjustment revenue and accordingly provides deferred income taxes payable in the succeeding year on such revenue which is carried as i a current asset. I I I
i 31. FITCNBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY NOTLS TO CONSLLIDATLD FINANCIAL STATEMENTS (Continued) Note 1. Summary of Signi ficant Accountsng Policies: (con tinued) The Company has used an accelerated method of depreciation ubich presently results in the annual tax depreciation being in excess of book depreciation, and has deducted currently certain elements of construction overheads that are i capi talized for book purposes.. For each of these di fferences the Company p rovi des for deferred income tax as approved for rate making purposes. In a ddi ti on, the Company has recorded deferred income taxes related to certain E abandoned properties which are recognized as tax losses at differing times. in addition to the abuse, the Company, in 1979, capi talized certain E maintenance costs for a generating unit, yet continued to deduct these costs currently for tax purposes. Deferred income taxes have been provided for this Liming difference. l The annual investment tax credits permitted by additions to the Company's utility property are being amortized into income rateably over the estimated productive lives of the related assets as allowed by the DPU. Such defert Is i for the year 1979 and 1978 amount to $308,687 and $292,457, respectively. The Company has elected to account for investment tax credits on E non-utt lity property additions, primarily related to FEDCO, by the
" flow-through " method. U' n der this method credits are recognized as a reduction of Federal sncome tax expense in the year uts lized. In 1979 and 1978 these crednts amount to $7,607 and $ 10,380, respectively.
The adds t sonal snvestment tax credi t permi tted under the Company 's Tax Reductson Act imployee Stock Canership Plan (TRAESOP) reduced Federal Income i Taxes payable by 1 1/2% of the Company 's quali fied property addi tions. The resulting amounts are payable to the TRAESOP. Federal income tax expense is comprised of the following components: Year Ended December 31, i 1979 1978 Current expense charged (credited): i Operat ing expenses $ 957,846 $ 1,216,342 Non-opcea:*ng income ( 123, 736) (78, 949) l Amortization of investment tax credit (89,049) (61,766) 745,061 1,075,627 Deferred tax expense charged (credi ted): Deferred unbilled revenue 74, 905 61, 180 l Accelerated tax depreciation Abandoned properties Or crheads and other 278,315 39,085 217,473 284, 733 (156,853) 92, 9 10 Deferred maintenance costs 85,303 -- i Percentage repasr allowance 19, 94 9 57, 181 715,030 339, 151 Non-operating expense 44,692 67,317 759,722 406,468 i Total expense $ 1, 504, 783 $1,482,095 i
I 32. E FITCNBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDAllD FINANCIAL S TATEMENTS (Continued) Note 1. Summary of Signi ficant Account 2ng Policies: (cont 2 nued) The Federal 2ncome tax amounts included an the Statement of Income difler from the amounts which result from applying the statutory Federal income tax rate to Het Income before income tax. The reasons, with related percentage e f fec ts , are as shown below: Year Ended I December 31, 1979 1978 Statutory Fedeal sncome tax rate 46% 48% Income tax effects of timing differences: Allowance for funds used during cons t ruc t.i on (see Hate 1) ( 5) (4) Mascellaneou_s ( 1) ( 1) i ffects ve Federal income tax rate 40% 43% Allowance for funds Used During Construct.2an -- An allowance for funds used during const.ruction (AFUDC), a non-cash i tem, is included in construction work 2n progress and based upon a composite rate applied to construction work in i p rogres s , which assumes that funds used for construction were provided by borrowsngs, preferred stock and common equn ty. The allowance for funds used during construction amounted to 31.8% and 24.9% of the net income applicable to i common stock for the years 1979 and 1978, respectively. The annual rates of approx 1mateiy 14% and 11% were used for the years 1979 and 1978, respecti vely. Note 2. Deferred Debits Unamortszed Cost of Abandoned Properties-- The unamortszed cost of abandoned properties is being amortized at various rates as ordered by the i Massachusetts Department of Public Utilities (DPU). During 1978 and 1979 the following events occured: Dn October 18, 1978, the Company fn led wi th the DPU i ts proposed accounting Lteatnet telative to the book abandonment af a generating unit ordered by t.he DPU, which treatment was approved by the DPd on November 7, 1978. As a result, the Company commenced amortization of this property in i September 1978, retroacts ve to January 21, 1978. I I I
I 33. FITCH8URG GAS AND EllCTRIC LIGHT COMPANY AND SUBSIDIARY E NOTES TO CONSOLIDA TLD FINANCIAL STATLMENTS (Continued) No t e 2. Deferred Debs *L(continued) On Nosember 1, 1919, the Company began amortazing the costs of its investment an the Charlestown Uns ts I and 2 proposed nuclear generating plants. E This abandonment was prec'pa tated by the announcement on October 9, 1979 by the lead partscapant, New Engi md Electric System, to defer 2ndefinintely the in-service date and the subsequent announced termination of this project. On November 27, 1979 the DPU approved the Company's request to amort 2ze E approx 2mately $653,000 oser a 3b month period. The Company will request from the DPU permission t.o apply similar treatment to any additional cost associated with these units. The amounts to be amortized fon ali properties over the next. five years are as follows: 1980, $838,309; 1981, $723,467; 1982, $629,867; 1983, $58,523; 1984, $58,523 E Other Deferred Debits - other deferred debits are composed of the foilowing: Decemb Q }I, I Propert.tl tax abatements (Due 198I) Preliminary sursey and engineering costs 1979
$270,813 101,688 1978 1 --
52, 189 Deierred ma1nlenance casts (amort 2 zed based upon generat2on) 195, 192 -- Miscel1ancous 78,638 108,689 lotal other deferred debits $646,331 $160,878 Note 3. Restrictions on Retained f arnante s Under the most rest rictive provisions of the Indentures relating to the Company 's inng-term debt , $4,324,106 and $3,120,077 of retained earn 2ngs were avan labic for the payment of cash dividends on Common Stock at December 31, 1979 and 1978, respectively. Note 4. Redeemable Cumulati ve Preferred Stock The %ssat.s ve Proferred Stock, 5-1/8% Series, is preferred over Common Stock in voluntary liquidation at the redemption price in effect at the time of such soluntary laquadation, and in involuntary 12quidation at $ 100 per share, E b o t *1 plus acr~ rued di v2 dends. Shares of the 5-1/8% Series are redeemable at the , Cump cry 's .ption at $102. 56 per share on or before May 31, 1981 and at $ 101. 28 \ there fle :. The Company is required to purchase on June 1 of each year not j less t i e 420 shares, unless a lesser amount of shares are tendered, at $ 100 i per sh. ' plus accrued di vidends. l Th. ?umulative Preferred Stock, 8% Series, is preferred over Common E Stock 2n aluntary liquidation at the redemption price in effect at the L1me of such soluntary Iiquidatson and 2n 2nvoluntary 1iquidat2on at. l
$100 per share, both plus accrued dividends.
l Shares of the 8% Series are redeemable at the Company 's opt. ion at $108.00 per share on or before August 31, 1983 and at diminishing premium rates thereafter. The Company l l is required to purchase on June 1 of each year not less tnan 750 shares, 1 unless a lesser amount of shares are tendered, at $100 per share plus accrued E di vi den ds .
34. TITCNBURG GAS AND LLECTRIC LIGHT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDA TED FINANCIAL STATEMENTS (Continued) Note 4. Redeemable Cumulative Preferred Stock (continued) Purchases of redeemable Preferred Stock during the year 1979 and 1978 consisted of the following Dsv1dend Series 1979 1978 5 1/8% $42,000 $42,000 8% $75,000 I The aggregate amount. of sinking fund requirements in each of the five years following 1979 is $ 117,000. Note 5 Long-Term Debt Detas is of Long-Term Debt at December 31, 1979 and 1978 are shown below: December 31, I Twenty-fa se year notes, 4-7/8%, due february 1, 1 984 1979 1978
$ 3,183,000 $ 3,226,000 Twenty-fi ve year notes, 9-3/8%, due Hatch 1, 1995 6,900,000 6,975,000 I Twenty year notes, 10 %, due September 1, 1996 3,000,000 3,000,000 I Twenty-fi ve year notes, 10-1/4%, due May 1, Total 1999 3,820,000 16, 903,000 3,900,000 17, 101, 000
)
Less: Installments due within one year 123,000 123,000 j Iotal Long-Term Debt $ 16, 780,000 $ 16, 978,000 l The aggregate amount of sinking fund requirements for each of the five years foi!owing 1979 are: 1980, $ 123,000; 1981, $198,000; 1982 and 1983, E $398,000 and 1984, $3,366,000. The Company has satisfned the 1980 sinking fund requi remen t. for the 9 3/8% Notes in the amount of $75,000. The Company as required to redeem at par plus accrued interest to the redemption date $43,000 principal amount of the 4-7/8% Twenty-five Year Notes on February 1 in each of the years 1980 to 1983, inclusive, and the balance on I february 1, 1984; $75,000 principal amount of the 9-3/8% Twenty-five Year Notes on March I sn each of the years 1980 to 1994, inclusive, and the balance on March 1, 1995; $200,000 principal amount of the 10% Twenty Year Notes on I September I in each of the years 1982 to 1995, inclusive, and the balance on September 1, 1996; and $80,000 principal amount of the 10-1/4% Twenty-five Yea r Not.es on May I in each of the years 1980 to 1998, inclusive, and the balance on I Ma y 1, 1999. I I
35. FITCHBURG GAS AND fl.tCTRIC LIGHT COMPANY AND SUBSIDIARY E NOTES TO CONSOLIDATED FINANCIAL STATEME THS (Continued) Note 6. Notes Payable lhe Company has agreed to maintasn certain aserage amounts on deposit or pay certain fees in Iseu of compensating balances. Certain of the lines E requs te that compensating balances be increased in relatson to usage. Compensating balances at December 31, 1979, were approximately $985,000 Short-term Bank Loans Year inded December 31, 1979 1976 I As of end of year: Weighted average interest rate 15.33% 1 l. 52% Unused line of credit $4,230,000 $5,630 000 for year ended: E Weighted dan ly aserage interest rate 13 . 0 1% 8.61% Average borrowsngs $2,441,4 00 $ 1,4 91, 700 Maximum borrowsngs at month end $5,420,000 $ 1, 94 5,000 E Month such maximum occurred December March Note 7. Regulatory Matters: Res enue Adjustments-The Company 's method of billing and accounting for revenue under its fuel adjustment clause in effect. through September 26, 1974 has been challenged before the Massachusetts Department of Public Utilitses E (DPU) by the Attorney General of the Commonwealth of Massachusetts. The required monthly fuel adjustment schedule heretofore filed with the DPU had not been disputed by the regulatory authority. The pc-tion of such fuel adjustment i clause revenues recorded by the Company and now cha. 'enged by the Attorney General aggregate approximately $724,000 and is equs valent t.o $.83 per average Common Share outs tanding on 1974 earnings, after gavsng tax effect thereto. The j E Company has vagarously defended its procedures in proceedings before the DPU, the outcome of whsch ss uncertain. The Company 's bs Iling and accountsng for revenues under fuel adjustments j E based on costs incurred after September 26, 1974 are being made under a nen ' fuel adjus tment clause which took effect. on September 27, 1974 and are not being challenged. Conclusion of Hate Appeal-The Company on October 5, 1978 was authorized by the Massachusetts Department of Pubisc Utils tles (DPU) t.o increase its electric rates by $269,240. W2 t.h t.hs s act ion by the DPU, the Company was granted a total of $2,3 57,914 of the amount it origina11rj requested when i t filed for rates designed to increase electric and gas re. enues by $3,633,000. The DPU, an orders dated August 31 and September 15, 1977, allowed the Company to fsle rates designed to produce an additional $1,615,843 2n electric and gas revenues. The Company appealed the decision to the Supreme Judicial Court (SJC) of Massachusetts, and on October 21, 1977, the Court granted a stay allowing the Company t.o coliect annual!y an additianal $472,831 in electr2c revenues, subject t o re fun d. E
l l E 36. l l FITCHBURG GAS AND EllCTRIC LIGHT COMPANY AND SUBSIDIARY ' NOTES 10 CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 7. Regulatory Matters: (con t a nued) On June 30, 1978, the Court tssued it.s order upholding the DPU's decision to remove a gererating unit from the Company's rate base, but instructed the DPU to reconsider how much in revenues the Compantj would still be allowed. The DPU's October 1978 decision reflected its final ruling allowing the Cortpany to retain the $472,831 annual amount collected under the Court stay, as E well as granting the additional $269,240. Note 8: Commatments: Lease Obligations--In accordance wi th the guidelines of Statement of Financial Account snq Standards No. 13 issued by the Financial Accounting Standards Board, the Company as disclosing portsnent information regarding i ts capi tal leases. The Securi ties and Exchange Commission requires, for rate-regulated enterpaises, disclosure of the effect on the balance sheet and on expenses af such leases had been capitalized, pending the result.s of its review of the E Statement s 's applicability to rate-regulated enterprises. The Compant) has a signs ficant twenty-five year lease which began April 1, E 1973 for a combustion turbane and a l2quefied natural gas storage facility. The lease as subject to a ten year renewal period at the option of the Company at. an annual rental of 14-1/2% of the aggregate fair market value as at the esd of the sna tial lease term. Under certain conditions the Compant) has the right E to purchase the units at an independently appraised market value. Under the lease, the Company has the obligation to maintain the equipment in good operating condition and pay all taxes and insurance on said equipment. Had the E Compant) capi talized i t.s caps tal leases, Depreciation and Other Interest Charges would have increased $171,721 and $181,920 respecti vely, and Operating Expenses , Other would have decreased $307,493 for the year ended December 31, 1979. At. December 31, 1979 the asset and related liability which would have i been recorded on the balance sheet. for the Company 's capi tal leases were
$2,202,922 and $2 538,3 58, respectively. For the year ended December 31, 1978, Depreciation and Other Jnt.erest Charges would have increased $162,733 and E $ 179,180, respecti vely, and Operating Expenses, Other would have decreased $287,507. At December 31, 1978, the asset and related liability which would have been recorded on the balance sheet werne $2,374,643 and $2,665,328, E respec t i vel t).
The minimum comruitment.s under all non-canceliable long-term leases an E e f fec t a t. December 31, 1979 are as follows: 1980-$309,884 ; 1981-$288,32 5; 1982-$262,930; 1983-$255,073; 1984-$249,495; 1985- 1989-$ 1,141,148; aggregate for the period; 1990- 1994-$ 1,126,043 aggregate for the period; and 1995 and there a f ter-$788,230 aggregate for the period. Total rental expenses for the years ended December 31, 1979 and 1978 amounted to $430,309 and $428,289, respectively. The Compant) has executed a commitment letter to purchase computer system hardware and peripheral equipment, with an acquisition cost of approximately
$211,000 to be in operat.1on by the end of 1980. The Company will finance this E acquisition by means of u third-part sale and leaseback arrangement.
E
r FITCHBURG CAS ANU ELECTRIC LIGHT COMPANY AND SUBSIDIARY 37. NOTLS TO CONSOLIDAllD FINANCIAL STATENINTS (Continued) Note 8. Commitments: (continued) Pens s on Plans---The Company has an effect two funded Pension Plans and related E Trust Agreements to provsde retirement annJilles for pdrLicipating emplotjees CL a ge. 65. The ent s te amount of the annual contributnan under the actuarial requirements of the Plans is borne by the Company. The Company 's cont e n but s on to the Plans during the years ended December 31, 1979 and 1978 amounted to $519,323 and $497,077, respectively, which sncludes amortszation of prsor service costs over a period of E~ thsity years. The Company 's policy a s to fund the pension cost accrued. The E act uartally computed value of vested benefits as of January 1, 1979, the date of the latest actuarsal valuation, exceeded the total of the pension fund by $3,969,379. The aggregate amount of unfunded prior service E costs as of the same date was $ 5,105,3 90. Joint Onnershsp Uns ts and Construction--The Company is participating on a tenancy-in-common basis wi th other New ingland utili t. ins in the construction E and annersh p at eIght generatang un2ts. New Has en Harbor and Wyman Uns t. M4, both on l-fired statsons, base been in commercial operation unce August 1975 and December 1978, respectively. The remaining six nuclear units are planned E or under construciton. I Det.e s t s relat snq t o t he war sous uns ts .ere .ns folloos t Cony.sny
- n $h.o re on ihnas. mets of Doll.or s Proport s un.ete lot.el Share of Amount of Accumu- Amount istseated E Jrs a n t Genershsp fatal Donershsp Ut s i s t y Plant an lated l ape nded Orp rec s - through Construc-Cost of Unnts 1 sate % me 5ersste atuun 12/51/19 t a rus Sr.nbr.urk Unsts E e l L. 2 Neo N.wy sh a re .1710 S. 9 ---- ---- 1, %2 1,519 Mstistone Unst si Curmer t s rut .2 17 2.1 ---- ---- 1,162 1,011 Ps t gt s a Uns t 92 N.e s e xhu set t. s . 19 2. 2 ---- ~~ ~ 621 1, 161 Nantague Uns t s ell 2 Mas s.ethuset t s .51 8. 9 ---- ---- 210 92,299 tym.no Unst 84 W e s ne .1822 l.1 196 19 E nee Maven Harbor Connectscut 4.1 20. 1 6,990 828 I
3 l ?00RORQgq s I
L 38. FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY ( NOTES TO CONSOLIDA TED FINANCIAL STATEMENTS (Continued) L f Note 8. Commitments: (continued) L Uperating expenses included in the Consolidated Statement of Income and proportionate amounts charged to speci fic operating expenses are as follows: Thou:. ands of Dollars
% to Wyman New Haven Tntai Unit #4 Harbor Electric Operating expenses, other 32 250 8 fuel used in electric generatiun 19 3,228 95 7 Ha2ntenance 2 96 L 14 Local property tax 4 187 18 Other taxes -- 6 5 Total operating expenses 57 3,767 The Company estimates construction requirements relative to these uni ts of approximately $ 10,160,000 during the next five year period ends ng December 31, 1984.
On January 25, 1979, the common shareholders approved the acquisition of an additsonal .43332% ownership interest in each of the Scabrook units from Cor.necticut Light & Power Company. The Company has made an agreement to purchase up to an additional .26087% ownership sn each of the Seabrook units from Public Serv 2ce Company of New Hampshire, subject to the approval of the common shareholders. The purchase of both additional interests, representing approximately an addit.nonal 16 mw, has been excluded from the information presented herein, pending final approval of the purchases by the Massachusetts Department of Public Uts is tics. The Company expects to finance the cost of its partscapation in the units initsally through the use of short-term borrowings. At the appropriate times, short-term borrowings will be converted 2nto permanent financ2ng. [ [ 1
\
[ a .
I 39. FITCHBURG GAS AND f.LiCTRIC LIGHT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDA TLD FINANCIAL STATEMENTS (Continued) Note 9. Segment In forma t ion In accordance wi .h financial Account ang Standard No. 14 t t.he follwanng snformation as presented relative to the gas and electric operation of the i Company.
!al.e l E IIccesse tipe ra t n on s C.e s Ope ra t s on s _
1978 Co*\pany 19/9 #978 7979 1978 7979 Opt tat snq Revenues $24,4 7 5, 2 96 8 2 7, f 5 7, 54 2 3 9,186, las $ 7,9f9,997 154,26 7,48 f $29,077, $13 E ikseratsnq ancome before entome t .e a e s 1,970,776 5,654,896 f,359,870 f,781,052 5,266,586 4,819,928 income taaes (1,762,468)(I,607,717) Non-operat snq sncome 88,114 20W,991 Net encome deduc t n on s f 1,112,126)( I,4 74, 5 521 i Net encome 1 2,260,706 $ 1,919,RSO Idant a fsable asset s as of Decreber 11 152,460,207 550,724,125 $11,097,002 3 0,987,224 149,117,209 139,711,547 E &ndflocated asset s, ptsaataly nothsng capstal 1 1,256,086 $ e,113,480 I fotal Assets as of December _31 Ocp r ec s .e t s un
$ 915,004 $ 912,26o $ 269,688 $
$ 50,813,291 $44,221,027 249,127 8 9,216,692 $ t,189,787 1 Cons t ruc t s on s r,uar,sss E t apen,t, t .,, e s s 2,si9.s49 s s,429, o49 s 7ss,6$9 s s,270,600 s i,09n,soa l E
l Expenses used ta delermine opetalang income before taxes are charged E daiectiy to et ther segment or are al1ocated in accordance with factors 1 contained un cost of service studies which were sncluded in rate applicatnans approved by the Massachusetts Department of Public Ut.ilitses. Assets allocated E to each segment are based upon specs fac identi ficat ton of such assets provided by Company records. As iets not so identified represent primarily working capital items. I cry 1& I I E
E 40. FITCNBURG GAS AND ELECTRIC LIGNT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDA TED TINANCIAL STA TLHINTS (Contsnued) Note 10. Supplementary Income Statement Income: Amounts recorded for maintenance and repairs and depreciation are E set forth separately nn the Statement of Income. There were no fees or royalties. Information as to taxes other than federal taxes on income is as fo ilans : Year Ended December 31, 1979 1978 Taxes Other Than Federal Income Taxes : Charged ds rect 1y to opetal2ng expenses: Other Taxes Ma scellaneous federal taxes $ 147,890 $ 120,210 Miscellaneous state taxes 45,779 46,649 E 193,669 166,859 State gross earnings (franchise) tax 178,64 1 113,990 Munscspal property taxes 1,118,435 1,693,904
$ 1,4 90, 74 5 $ 1, 974, 753 Charged to other accounts:
Taxes capitalized to plant 33,046 31,705 State gross earnings (franchisc) tan charged to non-operating income and jobbing 1,530 1,086 E Miscellaneous taxes charged to other accounts 2,638 3,083 37,214 35,874
$ 1, 527, 959 $2,010,627 i E
Rents Charged to Operatsons $ 430,309 $ 428,289 E I E !E I
i L., FITCNBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note !1
Dearterig F2nancial Data:
(Unaudi ted) Summarszud quarterly financial data for 1979 and 1978 is as follows: Three Months Ended March 31 June 30 1979 1978 1979 1978 Total operatsng resenues $9,262,880 $8, 913,440 $7,903,958 $6,585,503 Opera t s ng s ncome $ 942,984 $1,032,845 $ 689,517 $ 692,098 Net sncome $ 654,713 $ 689,468 $ 424,545 $ 391,099 f arnsngs per share $1.28 $1.36 $.78 $. 70 E Three Months Ended Sept. 30 Dec. 31 1979 1978 1979 1978 Total operating , resenues $7,790,297 $ 5, 988,814 $9,304,346 $7,589,776 Operalang income $ 667,486 $ 677,117 $ 1,204,131 $ 830,151 Net ancome $ 319,478 $ 365,942 $ 861,970 $ 513,341 farnings per share $.55 $.65 $ 1. 73 $.96 Net income for the quarter ended December 31, 1979 has been increased by $376,478 or
$.83 of earnsngs per common share, resulting from abatements of real estate taxes.
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M M M M M M & M M M 'M M M M M M M M M FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBISDIARY PROPE R T Y, PLANT AND EQUIPMINT FOR THE YE AR [HDED DECEMBER 31, !?78 COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN f Balance at Other Changes Balance Beginning of Addils ons Retarements Debst and/or at End Class 2 f a cation Period at Cost or Sales (Credi t ) Period ELECTRTIC: Product 2on Plant $ 11,159,403 $ 374,798 $2, 910,002 $( 1,169,459)( A ) $7,4 54, 740 Transmission Plant 6,483,861 844,429 3, 7 19 -- 7,324,571 Distributton Plant 12,420,373 703,485 123,466 873,227 (A) 13,873,6 19 General P1 ant 491,811 7,940 5,270 -- 494,481 Un f a n s she d Construction 3,240, 144 805,437 -- -- 4,046,581 OAS: Intangible Plant 36,387 -- -- -- 36,387 Production and Storage Plants 1,037,340 1,026 5,850 -- 1,032,516 Distributnan Plant 7,724,4 11 807,358 44,892 -- 8,486,877 General Plant 147,521 20,551 4, 18 5 -- 163,887 Un fi n a shed Construction 181,540 (73,928) -- -- 107,612 COMMON: Production Plant 9,225 -- -- -- 9,225 General Plant 1, 154, 183 27,650 56,722 296,232 (A) 1,421,343 Un finished Construction 13,989 (4, 533) -- -- 9,456 S Total $44,100,188 $3, 515,213 $3,154,106 $ $44,461,295 g R
~
$ 26,005 $ 26,005 OTHER PHYSICAL PROPERTY:
s (A) Transfer of assets previously used 2n conjunction w2 th abandoned Uns t #6 now used for other purposes.
m W m m e M W W m M M M M M e m e m M FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY ACCUMULA TE D DE PRE CIA T10N, DEPLf T10N AND AMORTIZAIIGN OF PROPE R TY, PL ANT AND L OUIPME NT FOR THE YE AR LNDED DECEMBER 31, 1979 CULUMN A COLUMN B COLUMN C COLUMN D COLUMN E _C_ OLUMN F Additions Balance at Charged Other Changes - Balance at Begsnning to Costs Add (Deduct) - End of Description of Pernod and Expenses Retstements Describe Pernod Gas Plant $1,855,987 $ 264,677 $292,129 $ (41,829)(A) $1,786,706 Electrac Plant 6,909,244 916,865 204,017 ( 12,253)(B) 7,609,839 Common Plant 414,676 45,226 53,4 94 23,057 (C) 429,465 Amort.izalnon af Leasehold Improvements 8, 7 16 8, 7 16 -- -- 17,432 Amortizatnan of Organizatianal Expenses ' 5,458 910 6,368 Total $9,194,081 $ 1, 236, 3 94 $ 549,640 $ (31,025) $ 9,849, 810 (A) Capitalized depreciatson of $9,065 on heavy duty equipment used an plant constructson and net cost of removal ($50,894). (B) Capilla12ed depreciation of $9,863 on heavy duty equipment used in plant construction and net cost of remo va l ($22,116). (C) Insurance Proceeds Reces ved. m 8 M k 2
W W W m W W W W W m W M M ee m m m W FITCNBURG GAS AND LLE CTRIC LIGHT COMPANY AND SUBSIDIARY ACCUMULA TED DL PRL CIA TION, DLPLF TION AND AMORTIZATION OF PROPERTY, PLANT AND LOUIPMENT FOR THE fl AR LNDLD DLCLMBLR 31, 1978 COLUMN A COLUMN D COLUMN C COLUMN D COLUMN L COLUMN f Adds L 2 ans Balance at Charged Other Changes - Balance at Beginning to Cost.s Add (Deduct) - End of Description of Period and Expenses Retsrements Desctsbe Pern od Gas Plant $ 1,689, 967 $ 230,370 $ 73, 8 15 $ 9,46 5(C) $ 1,855, 987 Electrsc Plant 7,065,813 898, 102 3,037,384 1, 982,713 (A )(B)(C) 6,909,244 Common Plant 259,273 43,689 49,662 161,376(A)(B) 414,676 Acquisstaan Cost -- 8,716(D) -~ -- 8, 7 16 4, 54 8 9 10 -- -- 5,458 Organization Lxpenses Total $9,019,601 $ 1,181, 787 $3,160, 861 $2,153, 554 $9,194. 081 (A) Deprec ation transfer af $160,640 betneen pr1 mary accounts. (B) Depreciation reserve adjustments on abandoned property of $2,137,318. (C) Capitalized depreciation of $16,236 on heavy duty equspment used nn plant construction. (D) Additional costs 2ncurred an connection with NLPCO facilitses purchase. R 8
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W W W W W W W M M M mW m m e m FITLdBURG GAS AND LLf CTRIC LIGHT COMPANY AND SUBSIDIARY VALUA TION AND OUALIF YING ACCOUNTS AND RE SE RVL S FOR THE YE AR ENDED DE Cl MBER 31, 1979 COLUMN 8 COL UMN C COLUMN D COLUMN L COL UMN A Adds L n ons Balance at Charged to Charged to Deductsons Balance Other from at f;nd Beginning Costs and of Period Ixpenses Accounts Reserses of Persod Description Reserves Deducted from Accounts Recesvable
$ 145,244 $277, 912 $27,409(A) $321,485(B) $ 129,080 Electrsc Gas 51,031 98,681 23,077(A) 124,964 (B) 47,825 24,205 20,432 3, 544 (A) 47,506(B) 675 Other
$220,480 $597,025 $ 54,0 50 $M 5n 955 $177 J80- .
(A) Collections on Account (B) Bad Debts charged off. EE 4
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M M M M M M M M M M l FITCHBURC CAS Akb tt ECTRIC L ICHT COMPANv AND SUBSIDI ARY CAPli At SHARES DECfMBER 31, 1979 COLLMN A COLIMN 8 COL LMN C C0tuMN D COLiMN E COLUMh F CottMfe G Snares Outstanding as humber of Shares Shown on or Included humber of Shares included in in Related Balance Held for Afftliates humt,er of Shares Column C whic h are Sheet under Caption for Which Statenents Reserved for Options hunteer (1) (2) " Capital Shares" are Filed nerewith varrants, Conversions, of Shares hot Held (1) (2) 71) (2I and Otr.er Rignts Nunter Issued Held by or by and for Amount Persons Directors, of Shares and hot for Account Account of at included in Officers Authorized Retired or of Issuer issuer which Consolidated and Title of issue by Charter Cancelled Thereof Thereof hssnber Carried Sta tement s Other Employees Others Cumulative Preferred Stock:
$100 Par Value 5-1/83 Series 16,880 16.460 None 16,460 16,460 $1,646,000 None hone hone hane 81 Series 25,000 24,250 hor.e 24,250 24,250 2.425,000 hone None hone hone Common Stock, $10 Par Value 1,000,000 455,475 None 455,475 455.475 $4.554,750 hone hone hone hone O
T rrt O C r-rfl w 0=4 M O W l e e
PRELDilNARY PROSPECTUS DATED APRIL 11, 1980
=z 88ens ce5G
!.EEg PROSPECTUS a
IjiE Eg! 100,000 Shares o 8 e "o VI i j"d Fitchburg Gas and Electric Light Company 8Z: 2 g Common Stock pg]j ("o 3 (Par Value $10 Per Share) 5O': E$D$ 5o oa C DD[2 8 se j$ $ TIIESE SECURITIES IIAVE NOT BEEN APPROVED OR DISAPPROVED BY TIIE l~'j SECURITIES AND EXCIIANGE COMhtlSSION NOR llAS TIIE COMhtlSSION oS o- PASSED UPON T11E ACCURACY OR ADEQfiACY OF Tills PROSPECTUS. S, f.h E ANY REPRESENTATION TO TIIE CONTRARY IS A CRIMINAL OFFENSE. C C1Eg C.i n" S 5552 xc oa Ul u oh E)5 E
*SU-=o Price to Underwriting Proceeds to Public Discount (t) Company (2) }o>o-8 8 ~5
[jj g Z j Per Share
$.5 0 Total EI8o3o u8jS
$ 8 5 8 (1) The Company including has the liabilities under agreed to Act Securities indemnny of 1933. the several Underwriters against certain civ oyb
$ i' 8 $ (2) Before deduction of expenses payable by the Company estimated at $
i, $ o E nO C O rE. 8 The Common Stock is ofTered subject to prior sale, when, as and if issued by the Company and e ! S 3 accepted by the Underwriters, and subject to approval of certain legal matters by their counsel, and 85mj by counsel for the Company. The Underwriters reserve the right to withdraw, cancel or modify such 8og8 otter and to reject orders in whole or in part. It is expected that delivery of the Common Stock will be g g gj made in Boston, Massachusetts on or about June 4,1980. n R2 E E ;* Em e89
.odU ei ii=h Merrill Lynch White Weld Capital Markets Group E* %
y[[M Merrill Lynch, Pierce, Fenner & Smith Incorporated
~ 's 8 & .0$E C Euga n8[oS 63 s 2838 <uaw The date of this Prospectus is May ,1980
IN CONNECTION WITIl TIIIS OFFERING, TIIE UNDERWHITERS AIAY OVEH ALLOT OR EFFECT THANSACTIONS WIIICll STABILIZE OH AIAINTAIN TIIE AIAMKET PRICE OF TIIE CONIAION STOCK OF TIIE CONIPANY AT A LEVEL ABOVE TIIAT WIIICII AIICIIT OTIIEllWISE PHEVAIL IN TIIE OPEN AIARKET. SUCII THANSACTIONS AIAY HE EF-FECTED ON TIIE AAIEHICAN STOCK EXCIIANGE, TIIE HOSTON STOCK EXIIANGE OR OTIIERWISE. SUCII STABILIZING, IF COhlAIENCED, AIAY BE DISCONTINUED AT ANY TIAIE. AVAILABLE INFOHAfATION Fitchburg Gas and Electric Light Company (the " Company") is subject to the informational re-quirements of the Securities Ev ,ange Act of 1934 and in accordance therewith files reports and other a information with the Securitir > .d Exchange Commission (the " Commission"). Certain information, as of particular dates, conce .ing its directors and officers, their remuneration and certain other bene-fits, its principal holders of sceurities and any material interest of such persons in transactions with the Company is disclosed in proxy statements distributed to common shareholders of the Company and filed with the Conunission. Such prmy statements, reports and other information may be inspected and copied at the public reference facilities unintained by the Commission at lloom 6101,1100 L Street, N.W., Washington, D.C.; at Hoom 1201, Everett AlcKinley Dirksen Building, 219 South
Dearborn Street,
Chicago, Illinois; at ihmm 1100, Federal Building, 20 Federal Plae.a, New York, New York; and at Suite 1710, Tishman Building,10960 Wilshire Boulevard, Los Angeles, California, and copies of such material can be obtained from the Public lieference Section of the Commission at 500 North Capitol Street, Washington, D.C. 20519 at prescribed rates. No dealer, salesman or any other person has been authorized to give any infonnation or to make any representations, other than those contained in this Prospectus, in connection with the offer made by this Prospectus, and, if given or made, such information or representations must not be relied upcn as having been authorized by the Company or the Underwriters. This Prospectus does not comtitute an offer to sell, or a solicitation of an offer to buy, in any jurisdiction in which such offer or solicitation may not be lawfully made. TABLE OF CONTENTS Page Page The lisue in lirief . 3 Ilusiness 13 The Company 4 Operating Statistics 22 Use of Proceeds 4 hfap of Service Area . . . 24 Construction Program 4 hianagement 25 Financing llequirements 6 Description of Common Stock 26 Common Stock Dividends 7 legal Opinions 27 15im llange of Common Stock . 7 Experts . 27 Capitalization . 8 Auditors
- Report . 27 Consolidated Statement of !i.02- 9 Camsolidated Financial Statements 28 hlanagement's Di cussion and Analysis of the Consolidated Statement of Income 11 Underwriting . 10 2
TIIE ISSUE IN BRIEF The following material is qualified in its entirety by the detailed information and the financial statements and notes appearing elsewhere in this Prospectus. The Offering Company Fitchburg Gas and Electric Light Company Common Stock Offered . 100,000 shares Number of Common Shares to be Outstanding after the Offering 555,475 Use of Proceeds To reduce short-term debt (incurred in con-struction program) Common Stock Listed American and Boston Stock Exchanges (symbol FGE) 1979-1980 Price Range (through April 10, 1980) 23 % - 16 Closing Price as of April 10,1980 20 % The Company Business Generation, transmission, purchase, distribu-tion and sale of electric energy; purchase, distribution and sale of gas Senice Area (See Slap of Service Area) Approximately 170 square miles in North Central hf assachusetts Service Area Population Approximately 80,000 Customers (December 31,1979) Approximately 21,740 (c!ectric); 13,700 (gas) Operating Revenue Distribution (12 months ended December 31,1979) Electric-71%; Gas -29% Summary FinancialInformation Year Ended December 31, 1979 1978 Income Statement Data: Operating Revenues $34,261,481 $29,077,533 Net Income $ 2,260,706 $ 1,959,850 Earnings Applicable to Common Stock $ 1,978,952 $ 1,672,443 Shares of Common Stock Outstanding 455,475 455,475 Per Share of Common Stock Earnings $4.34 $3.67 4':.idends . $1.90 $1.50 su. rent Annualized Dividend Rate-$2.60) As of December 31,1979 Percent of Adjusted Actual As Adjusted
- Capitalization
- Capitalization:
- Long-term Debt (inclnding cur-rent maturities). $16,903,000 $16,903,000 47.0%
Redeemable Cumulative Pre-ferred Stock 4,071,000 4,071,000 11.5 % Common Stock Equity 12,544,901 14,544,901 40.9 % Total Capitalization $33,518,901 $35,518,901 100 %
- As adjusted for estimated net proceeds from the sale of additional Common Stock being offered hereby.
3
l 4 TIIE COhlPANY The Company, a hiassachusetts corporation incorporated in 1852, is an operating public utility pro-viding eketric and gas service to the communities of Fitchburg, Ashby, Lunenburg and Townsend and gas service only to the communities of Cardner and Westminster. The service area encompasses approximately 170 square miles in North Central 51assachusetts. The Company's main ofIiee is located at 655 Alain Street, Fitchburg. Afassacimsetts 01420, and its principal executive ofIlce is at 120 Royall Street, Canton, h1assacimsetts 02021. Problems of the Utility Industry and the Company The Company, as well as the electric and gas utility industries in general, continues to experience significant problems in a number of areas including (a) attracting capital on reasonable terms (see Tinancing Hequirements"), (b) an uncertain rate of growth of energy sales due to changing economic ci neitions, energy conservation measures by customers and pmposed governmental energy conservation programs (see "llusiness - Electric Operations and Energy Supply"), (c) current and prospective limitations on cas sunniv (see " Business - Cas Operations and Supply"), (d) increased fuel costs and diminished availability of certain fuels (see "llusiness - Fuel Supply"), (c) licensing, regulatory and other delays affecting the construction of new facilities, including controversies related to the use of nuclear power (see " Construction Program" and *llusiness-Nuclear Licensing") and (f) the necessity for large scale construction during an inflationary period (see " Construction Program" and "llusiness - Joint Projects and Other Plans"). The Company has an arrangement to purchase electricity produced by a nuclear generating plant. The Company also has participating interests in other nuclear generating plants which are either under construction or phnned in New England (see "Ilusiness - Joint Projects and Other Plans"). The Company cannot predict what effect the events at the Three hiile Island nuclear gen-erating facility in Pennsylvania ("Th11") may ultimately have upon the completion schedules or cost of completion of the planned nuclear units or those under construction, or upon the continued operation of existing nuclear generating plants in New England. The events at Thil have prompted a rigorous reexamination of safety related equipment .nd operating procedures in all nuclear facilities and have generated a multiplicity of legislative proposals in Congress and various state legislatures. While the ultimate effect of these reexaminations and proposals cannot be predicted, cancellation of any of the nuclear generating plants in which the Company has an interest could result in substantial cancellation charges against the Company and might,in the absence of adequate rate treatment, have a material adverse impact on the Company's future carnings USE OF PHOCEEDS The net proceeds % the Company from the sale of the additional Common Stock being offered hereby (the "Additio ' L 'mmon Stock"), estimated at $2,000,000, will be applied to the reduction of short-term bank I orrowings incurred in connection with the Company's construction program (see " Financing Requirements"). Short-term borrowings at h! arch 31,1980 were $4,050,000 and such borrowings are anticipated to approximate $4,650,000 immediately prior to the delivery of the Addi-tional Common Stock. CONSTRUCTION PROGRAh! During the period from January 1,1975 through December 31, 1979, the Company made gross j additions to and rctirements from plant, including an allowance for funds used during construction ("AFUDC") (see note 1 of " Notes ta Consolidated Financial Statements") of approximately $17,062,500 and $6,933,500, respectively. The Company estimates that its construction program will require ex-penditures of approximately $51,980,000 (including AFUDC of approximately $17,160,000) during the five years from 1980 through 1984, of which $11,086,000 is expected to be incurred in 1980, $10,457,000 in 1981, $9,614,000 in 1982, $10,261,000 in 19S3 and $10,562,000 in 1984. These estimates include (i) the cost of faci lities being constructed by the Company, (ii) construction costs related to the six 4
nuclear joint projects in which the Company has an ownership interest, (iii) expenditures for at least an initial nuclear core for each such pmject, and (iv) the Company's cost of acquiring additional ownerrhip interests in the two nuclear Units currently under construction in Seabrook, New IIampshire (the "Seabrook Units"). Assuming consummation of these acquisitions, tFe Company's share of the Seabrook construction expenditures will be approximately $33,018,000 (incl. ding AFUDC of approxi-mately $12,986,000) during the five years from 1980 through 1984, as to which $7,290,000 is expected to be incurred in 1980, $7,157,000 in 1981, $5,877,000 in 1982, $6,338,000 in 1983 and $6,356,000 in 1984. The following table sets forth information with respect to the six nuclear generating facilities now planned or under construction in which the Company has joint ownership interests: Company's Share (l) Estimated Expendi- Total Amount tures Estimated Estimated Proportionate Expended for the Cost of Construc-Joint Estimated Share of through next 5 Construc- tion Ownership In-Service Total 12/31/79 years (3) tion (3) Cost per Units Location Date(2) Ownership (000) (000) (000) KW(3)
% KW Seabrook Unit:, #1 & 2 fg',"m'pshire j/85' O.171 3,900 $1,962 5,807 9,665 2,480 Afillstone Unit #3 Connecticut 5/86 0.217 2,500 1,762 4,139 7,451 2,980 Pilgrim Unit #2 hfassachusetts 12/85 0.19 2,200 827 2,652 0,509 2,960 l!
hiontague Units #1 & 2 hlassachusetts f2fIl/93 0.35 8,100 250 460 16,009 1,976
$4,801 $13,058 $39,634 The above chart does not include the output and expenditures related to the proposed acquisitions of additional ownership interests in each of the Seabrook Units (see " Business-Joint Projects and Other Plans"). Acquisition of these additional interests will require the Company to make payments which will, over time, equal the amount the Company would have expended on such Units had the Company owned the interests uw being acquired since the inception of the Seabrook project. An estimated lump-sum payment of $4,800,000, representing a portion of such amount, must be paid upon consummation of one of these acquisitions. After giving effect to such acquisitions, the Company's proportionate share of construction and related expenditures with respect to the Seabrook Units would be as follows:
Es h d 'I'M Proportionate Expenditures Estimated Share of Amount Expended for the Cost of Total through 12/31/79 next 5 years (3) Construction (3) Ownership (000) (000) (000)
% KW OE5 19,900 $1,962 $33,01S $43,863 (1) A substantial portion of these expenditures consists of AFUDC. These expenditures also include at least an initial nuclear core for each Unit.
(2) These estimates are based in each case upon the most recent ofBeial estimate of the utility supervising construction of the particular Unit. Certain of these Units have not yet been granted all approvals, permits and lis enses necessary for construction by the relevant state and federal authorities. J There is no assurance that these approvals, permits and licenses will be obtained, or that if obtained, they will not be modified or revoked. In addition, the completion of certain of these Units has been intermittently deferred an1 additional deferrals may occur in the future due to licensing delays, economic conditions and other factors. (3) Estimates of corrstruction expenditures relating to the projects shown above are based upon the most recent information furnished by the utility supervising the construction of the Unit. The Company has been adtised by the supervising participant for each project that construction budgets are continually updated in light of increased costs due to deferrals, delays and other factors. These estimated construc*. ion expenditures, as so updated, may be predicated upon different in-service dates than those specified above. 5
The complexity of present-day chetrie utility technology, ths time required for the construction of generating facilities and the completion of licensing and other regulatory pmecedings relating thereto, have compelled the Company, as well as other electric utilities, to make substantial invest-ments in nuclear facilities prior to the completion of licensing and regulatory proceedings. Cancella. tion of any of the six nuclear generating projects for any reason, including the inability to obtain necessary permits or sullicient financing, could result in substantial and possibly unrecoverable charges against the Company's inemne. These charges could include the amounts incurred by the Company prior to cancellation, cancellation penalties and other charges. The scheduling of each of these Units, and the right to cancel the Unit, are the responsibility of the particular New England utility which is supervising construction of the Unit; the determination to cancel a Unit can be made without the consent of the other participating utilities, inchiding the Company. In particular, the Icad participant of hiontague Units No. I and No. 2 has reduced all expenditures to a minimum level, at which no progress is being made toward licensing or construction, and the project schedules and related projected capital expenditures are uncertain at this time. In addition, The Department of Public Utilities of 'he Commonwealth of hlassachusetts (the "DPU") has deferred action relating to approvals necessary before the construction of the Pilgrim Unit can be commenced. In the event that the Stontague, Pilgrim, or any other Units identilled l in the chart above are ultimately cancelled, the Company would request DPU permission to amortize its gross expenditmes relating to the cancelled Unit (s) over a suitable period, and thereby achieve, in the opinion of the management of the Company, adequate rate treatment. A similar request relating to the Company's participation in the now cancel led Charlestown Units No. I and No. 2 was granted by the DPU (see "Husiness - Joint Projects and Other Plans") In the event any of these Units is ultimately cancelled, the magnitude of the Compan/s final costs, and the extent to which rate relief would permit recovery of these costs, can not be determined at this time. Assuming consummation of the Seabrook acquisitions and completion of construction and the on-going operation of all the nuclear generating Units described above, approximately 25% of the Com-panis New England Power Pool requirement (see "Ilusiness-New England Power Pool") at the date of emnpletion of the last Unit sometime in the 19fXfs would be provided by nuclear power. FINANCING HEQUIREhtENTS Subsequent to the issuance of the Additional Common Stock, the Compan/s financing plans for the remainder of 1980 include the issuance of $3,000,(X)0 of unsecured long. term Notes (the " Notes"), the private placement of which is currently being negotiated, to reduce short-term indebtedness in-curred for the Compan/s construction program. The sale of the Notes, presently scheduled for the third quarter of 1980, is contingent upon the approval of the DPU. The balance of the Compan/s cash requirements for its 1980 construction program will be pmvided through internally generated funds and short. term borrowings. The Company presently contemplates a financing program during the years 1981 through 1981 that will include the sale of additional securities, the amounts and types of which have not been determined. Following are summaries of certain provisions of the Compan/s note agreements, indentures and Ily-Laws which may affect the Compan/s ability to issue additional securities (all of which are qualified in their entirety by reference thereto). Under Se agreements and indentures pursuant to which the Companyi long-term notes are outstanding, additmnal Funded Debt (as defined in such agreements and indentures) may not be issued if (i) the Funded Debt of the Company outstanding immediately thereafter shall exceed 55% of the Compan/s Capital Account (as defined) computed immediately thereafter and (ii) Earnings Available for Interest (as defined) shall not have been equal, for at least twelve consecutive calendar months out of the fifteen months next preceding the creation of such Fimded Debt, to at least 200% of all amounts of interest for which the Company will annually thereafter be obligated on account of all l Debt (as defined) to be outstanding immediately thereafter. Earnings Available for Interest (as l defined in such agreements and indentures) includes AFUDC. Pro Forma Earnings Available for Interest amounted to 375% of such interest for the twelve months ended December 31,1979, and
- Funded Debt represented 47% of the Compan/s Capital Account at December 31,1979, after giving l 6 l
l
effect to the issuance of the Additional Common Stock and the reduction of the Company's short-term debt (by giving additional effect to the cash made available through the release of compensating balances) from the proceeds thereof. Accordingly, approximately $6,149,000 of long. term debt could have been issued at such date under.the more restrictive test specified in (i) above, assuming an interest rate of 15% The Company has no authorized but unissued Cumulative Preferred Stock and, accordingly, the issuance of additional Cumulative Preferred Stock would be subject to the approval by the common shareholders of an increase in the number of authorized shares of Cumulative Preferred Stock. In addi-tion, under the terms of the Company's Ily-Laws, the appmval of a majority of the holders of all outstanding series of Cumulative Preferred Stock would be required for the issuance of such Stock unless the following " coverage" requirements were satisfied: (1) net income of the Company for any period of twelve months within the next preceding fifteen months shall have been at least equal to two times the sum of the annual dividend requirements on the Cumulative Preferred Stock and on all shares of stock ranking prior to, or on a parity with the Cumulative Preferred Stock as to dividends or distribution of assets then to be outstanding: (ii) net income of the Company for a similar period (after adding back interest charges on funded debt of the Company deducted in the computation) shall have been at least equal to one and one-half times the sum of the annual interest charges on ftmded debt of the Company to be outstanding at the date of such issue plus the annual dividend requirements on the Cumulative Preferred Stock r.s to dividends or distribution of assets then to be outstanding; and (iii) the aggregate amount of v apital represented by the Common Stock and any ether s'nck ranking junior to the Cumulative Prefe cred Stock (in respect of the capital surplus, earned surplus and premium on capital stock (see note 3 *o " Capitalization") of all classes of the Company) would be at least equal to the aggregate amount payable upon involuntary liquidation, dissolution or winding up of the affairs of the Company on all shares of stock ranking prior to or on a parity with the Cumulative Preferred Stock then to be outstanding. At December 31, 1979, the Company could have issued, without approval of a majority of the holders of Cumulative Preferred Stock, approxi-mately $6,MS,000 of additional Cumulative Preferred Stock, assuming a dividend rate of 12% COMMON STOCK DIVIDENDS The Company has paid regular quarterly dividends on its Common Stock since 1859. The Com-pany's annual dividerd increased from .$1.38 to $1.41 in 1976, to $1.44 in 1977, to $1.50 in 1978, and to $1.90 in 1979. A quarterly dividend of $.65 per share ($2.60 annual rate) was declared by the lloard of Directors at its March 25, 1980 meeting payable May 15, 1980 to holders of record of Common Stock on May 1,19S0. Purchasers of the Additional Common Stock will not be entitled to receipt of this dividend. It is the intention of the Board of Directors to continue to pay cash dividends on its Common Stock on a quarterly basis. IIowever, future dividends will necessarily be dependent upon the Company's earnings, its financial condition and other factors. See " Description of Common Stock" regarding certain restrictions upon the payment of dividends. PHICE 1 ANCE OF COMMON STOCK The Common Stock of the Company is listed on the American and Boston Stock Exchanges. The high and low per share sales prices of the Common Stock, reported by The Wall Street Journal as American Stock Exchange transactions through January 23,1976, and as composite transactions there- ; after, were as follows: High Low High Low l 1975 14 % 8% 1979 l 1976 16 % 13 % 19 16 I 1st Quarter 1977 . . 17 % 15 % 2nd Quarter . 18 % 17 l 1978 3rd Quarter 21 % 17 % l 1st Quarter 16 % 15 % 4th Quarter 19 % 17 % 2nd Quarter . 16 % 15 % 19SO l 3rd Quarter 19 16 % 1st Quarter 23 % 18 % l 4th Quarter 18 % 15 % 2nd Quarter . . . . . . . . . (through April 10,1980) 20 % 19 % l 7
l The last reported sale price 'of the Common Stock on April 10, 1980 on the American Stock Exchange was 20% per share. The Additional Common Stock to be offered hereby is to be sold at a price per share to the Companf which is less than the book value per share of its Common Stock at December 31, 1970 which was $27.51. Such book value, as adjusted to give effect as of that date to the issuance of the Additional Common Stock (assuming net proceeds to the Company of $20.00 per share), would be
$20.18 per share. Any future sales of Common Stock at a price which is less than the book value per share will result in further dilution of such book value.
CAPITALIZATION Th! capitalization of the Company as of December 31,1979, and as adjusted for the issuance of 100,000 shares of the Additional Common Stock, is as follows: Decercher 31,1979 Adjusted (1) Arnount Arnount Percent Long-term Debt (2) (including current maturities) $16,903,000 $16,903,000 47.6 % liedeemable Cumulative Preferred Stock, $100 Par Value 5%% Serieshed,16,880 Shares Authori outstanding,16,460 Shares 1,616,000 1,616,000 l 8% Series: Authorized,25,000 shares Outstanding,21,250 shares 2,425,000 2,425,000 Total lledeemable Cumulative Preferred Stock 4,071,000 4,071,000 11.5 % Common Equity Common Stock, $10 par value Authorized, 1,000,000 shares Outstanding, 455,475 shares; adjusted 5F0,475 shares 4,551,750 5,551,750 Premium on Common Stock (3) 1,751,358 2,751,358 lietained Earnings 6,417,530 6,417,530 Capital Stock Expense (181,737) (181,737) Total Common Equity 12,514,901 14,514,901 40.9 % Total Capitalization $33,518,901 $35,518,901 100 % (1) Assumes net proceeds of approximately $2,000.000 from the sale of the Additional Common Stock. (2) Excludes the effects of the Company's proposed issuance of long-term Notes (see " Financing l llequirements"). (3) " Premium on Common Stock" is sometimes referred to as " Additional Paid-in Capital." On .\ larch 31, 1980, outstanding short-term indebtedness totaled $4,050,000, approximately
$2,000,000 of which is to be repaid from proceeds of the sale of the Additional Common Stock.
l 8
FITCIIBUHC CAS AND ELECTRIC LIGIIT COMPANY CONSOLIDATED STATE 5 TENT OF INCONIE The following consolidated statement of inemne for the five years ended December 31,1979 has been examined by Alexander Grant & Company, independent certilad public accountants, whose report thereon, which contains a <tualification of opinion as is stated therein, appears elsewhere in this ) Prospectus, This statement should be read in conjunction with the other financial statements and related notes appearing elsewhere in this Prospectus. For Year Ended December 31, 1979 1978 1977 1976 1975 Operating Revenues (Note 2) Electric $2 8,475,296 $27,157,542 $19,061,399 $16,601,277 $16,107,067 Cas 9,786,185 7,919,991 6,800,800 5,697,278 4,407,953 Total Operating Revenues 34 261,481 29,077,533 25,922,259 22,298,555 20,515,020' Operating Expenses Operating expenses, other .. 5,132,726 4,833,281 4,627,510 4,338,395 3,998,460 Electricity purchased for resale . 10,470,503 8,538,085 8,240,287 6,389,596 7,163,434 Fuel used in electric generation 3,401,852 2,158,983 2,083,516 1,869,056 1,535,680 Gas purchased for resale 5,850,610 4.334,696 3,709,113 2,985,628 2,172,692 hiaintenance ........ 933,300 738,113 698,187 522,598 521,928 1,236,692 1,181,787 1,093,790 952,981 873,476 Depreciation of (Notecost1)o f aban-Amortization doned properties (Notes C and 3) .. ...... ... .... 657,018 595,937 173,365 176,158 71,358 hmisions for taxes (Notes I and 8) Federal incume tax on net oper-ating income . . 957,816 1,216,342 561,677 762,160 310,790 Deferred Federal income . . . . . 715,030 339,151 410,918 229,972 196,210 Amortization of investment tax credit .... (89,019) (61,766) (52,348) (48,699) (38,504) State franchise . ... 112,318 81,403 88,334 100,334 58,362 Deferred state franchise . . 60,293 32,587 59,492 27,588 33,262 Local property - current .. 1,362,511 1,C33,901 1,528,762 1,381,481 1,253,906
- abatement of prior year (244,076) - - - -
Other 193,669 160,859 159,661 143,883 134,870 Total Operating Expenses 30,757,363 25,845,322 23,378.297 19,810,138 18,281,960 Operating Income 3,504,118 3,232,211 2,543,962 2,458,421 2,233,000 j Non-operating income Allowance for funds used during construction (Notes A and 1) Other funds 116,319 118,573 36,304 - - All funds . . . ... ..
- - - 135,086 451,593 Other (net of income ... taxes)
(Note 8) (27,005) 83,418 75,598 62,660 93,330 Total Non-operating Income 88,714 201.991 111,902 197,746 584,923 Gross income 3,592,832 3,434,202 2,655,861 2,656,167 2.777,983 Income Deductions Interest on long-term debt 1,498,655 1,515,476 1,527,259 1,315,753 1,250,618 Other interest charges . 325,596 233,859 122,745 226,230 343,619 Amortization of debt expense 20,470 16,328 16,781 10,045 19,813 Discuunt on long-term debt pur-chased for sinking fund (3,030) (2,187) (60) (2,968) (14,140) Other 2,816 8,992 1,230 17,652 519 Gross in<ume Deductions . ........ 1,844,507 1,772,488 1,667,955 1,57!,716 1,000,429 Allowance for borrowed funds used during construction (Notes A and 1) (512,381) (298,132) (211,903) - - Net Inernne Deductiom; 1,332,126 1,474,352 1,456,052 1,5~2,716 1,000,429 Net Inanne ... ...... .. 2,260,706 1,959,850 1,199,812 1,N3,451 1,177,554 Dividend Requirements on Preferred Stock 281,754 287,407 289,559 , 291,712 293,861 Net income Applicable to Common Stock $ 1,978,952 $ 1,672,443 $ 910,253 $ 791,739 $ 883,690 Number of Common Shares Out-standing 455,475 455,475 455,475 455,475 455,475 Earnings per Common Sharc Out-standing $4.3 8 $3.67 $2.00 $1,74 $1.94 Dividends paid per Common Share . ' $1.90 $1.50 $1.44 $1.41 $1.38
^
Numbered notes refer to Notes to Consolidated Financial Statements. All such notes and the notes on the following pages are an integral part of the Consolidated Statement of Income. 9 L
FITCilllURG GAS AND ELECTitlC LIGIIT CONIPANY NOT13 TO CONsOI.lDATED STAT 13 TENT OF INCOME (A) Allowance for Funds Used During Construction AFUDC, a non-cash item, is included in construction work in progress. The objective of AFUDC is to present the carnings that wouhl result in the absence of comtruction programs and the related financing require:nents during the period of construction Accordingly, AFUDC capitalizes the cost of debt and equity components emph>yed in meeting these financing requirements, based upon a com-posite rate applied to construction wmk in progress which assumes that funds used for construction were provided by borrowings, preferred stock and common equity. Prior to 1977, AFUDC was reported on the basie of an overall rate applicable to all funds.
- The Company has not reclassified AFUDC into its debt and equity nnnponents for periods prior to January 1,1977 because it believes such reclassification wouhl be inappropriate since the alhica-tion between the debt and equity emnponents for periods prior to January 1,1977 could not be emn-parable 9 the alh> cation between such components determined after December 31,1976 utilizing the rest.ed procedures of the Federal Energy llegulatory Conunission (the "FEllC"), fonnerly the Federal Power Conunission.
AFUDC amounted to 31.8%, 21.9%, 27.3%,17.1% and 51.1% of the net income applicable to common stock for the years 1979,1978,1977,1970 and 1975, respectively. For additional infonnation, see Note 1 of Notes to Consolidated Financial Statements. (11) llegulatory Statters The Company's method of billing and accounting for revenue under its fuel adjustment clause in clicet through September 20, 1971 has been challenged before the DPU by the Attorney General of The Conunonwealth of Alassachusetts. The required monthly fuel adjustment schedule theretofore filed with the DPU had not been disputed by the regulatory authority. The aggregate portion of such fuel adjmtment clause revenues recorded by the Company and challenged by the Attorney General is approximately $721.000 and is equivalent to $.83 per average conunon share outstanding on 1071 carnings, after giving tax cifcet thereto. The Company has vigorously defended its procedures before the DPU, the outcome of which is uncertain. No provision for any liability that may result from such challenge has been made in the consolidated financial statements. The Company's billing and accounting for revenues under the fuel adjustments based on n>sts incurred after September 26, 1978 are being made imder 'a new fuel adjustment clause which took effect on September 27, 1071 and are not being challenged. (C) Unamortized Cost of Abandoned Properties The unamortized cost of abandoned properties is being amortized at various rates as ordered by l the DPU. The amounts to be amortized for all properties over the next five years are as follows:
- 19SO, $S38,309; 1981, $723,.107; 1982, $629,867; 1983, $58,523; 1081, $58,523.
l For additional information, see Note 3 of Notes to Consolidated Financial Statements. (D) Pro Fonna Earnings Per Share On a pro fonna basis, assuming the Additional Common Stock offered hereby was outstanding for the entire twelve months ended December 31,1979, and assuming the net proceeds thereof, esti-mated at $2,000,000 (see "Use of Preeceds"), were applied to the retirement of short term debt, consolidated earnings per average common share wouhl have been $3.80. 10
SIANAGENIENT'S DISCUSSION AND ANALYSIS OF TIIE CONSOLIDATED STATEAIENT OF INCOhfE The following discussion should be read in conjunction with the Consolidated Statement of Income and the information set forth under "Husiness". Electric Operating Recennes increased 16% in 1979. This increase was primarily attributable to the net effect of three major factors: the increase in fuel costs for generation and energy costs of purchased power; the full year effect of the rate increase approved October 5,1978; and a strike that halted the production of one of the Compan/s major industrial customers. The 11% increas- in 1978 was due primarily to the net effect of four factors: the full year's effect of additional rate relief granted effective September 1977; the additional rate relief permitted in October 1977 and subsequently granted as a result of the Company's appeal of the above mentioned rate decision; the sale of 76,747,276 Kilowatt flours ("KWII") to six new industrial customers acquired as of June 1,1977 in connection with the purchase of electric facilities from New England Power Company; and the lower per unit energy cost components of power generated and purchased, resulting from the tempo-rary decrease in oil prices during 1978 with a consequent decrease in total cost recoverable through the Company's fuel expense adjustment clause. Gas Operating Recennes increased 24% in 1979 primarily due to the net effect of three factors: an increase of 391,2S9 Thousand Cubic Feet ("h!CF") in interruptible sales ($1,279,397 increase); the increased cost of purchased gas which is passed on to customers through the operation of a cost of gas adjustment clause; and a decrease in off-system sales of $410,431. The 15% increase in 1978 gas operating revenues was primarily related to three factors: the increased cost of purchased gas (passed on to customers through the cost of gas adjustment clause); the first full year impact of the permanent rate relief of $553,734 granted effective in September 1977; and an increase in off-system sales of 36,892 h!CF. t Electricity Purchased for Ecsale increased $1,932,458 in 1979 over 1978 and $297,758 in 1978 over 1977. The 1979 increase reflects the higher per unit energy cost. The 1978 expenses increased primarily due to a greater reliance on electricity purchased from other utilities. Fuct Used in Lectric Cencration increased in 1979 due to the escalation in the costs of fuel used to generate a level of KWII slightly higher than that of 1978. The 1978 costs increased over 1977 due to a higher Ic.el of KWil generated. Cos Purchased for Resale increased in both 1979 and 1978 due to higher prices charged by the Company's pipeline supplier, the increasing unit cost of the Compan/s supplemental gTses, and a , higher level of total htCF sales. Operating Experucs, Other and Maintenance increased in both 1979 and 1978 as a result of lease obligations, higher wage rates, increased pension and insurance costs and other cost increases that reflect the continuing effect of inflation. ! Depreciation expense rose in 1978 as a result of an oil-fired generating plant in Yarmouth, Alaine, in which the Company has an ownership interest becoming operational. Effective September 1,1977, the Company increased its depreciation rates on all of its plant based upon a depreciation study approved pursuant to an order of the DPU. Amortization of Cost of Abandoned Properties increased in 197, due to the first full year's effect of the amortization of one of the Company's generating units, Generating Unit No. 6, and two months' amortization of Charlestown Units No. I and No. 2 (see "I usiness-Joint Projects and Other Plans"). The increase in 197S was due to the amortization of Unit No. 6. 11 9
Local Property Taxes in 1979 decreased from 1978, principally due to a property tax settlement agreed to by the City of Fitchburg in October,1979. The Company in 1979 received abatements with a value of $733,634, of which $244,076 pertained to the 1978 periml. These abatements increased i 1979 net income by $376,478 or $.83 of earnings per common share. The Company anticipates that 4 the future levels of property tax expense will continue to reflect the lower assessed valuation resulting
- from this settlement. The 1978 increase over 1977 was due to the acquisition of the electric facilities purchased on June 1,1977.
Allottance for Funds Used During Construction increased in 1978 due to the Company's invest-ment in joint nuclear electric generating facilities under construction (see " Business-Joint Projects and Other Plans"). Non-Operating Income, Other decreased by $109,015 in 1979 from 1978 due to a loss sustained by the Company's subsidiary (see "llusiness-Fitchburg Energy Development Company") and to the reduced interest income on commercial and industrial accounts receivable outstanding. Other Interest Charges increased in both 1979 and 1978 due to the interest expenses related to short-term berrowings required to finance the Company's construction program. i j Unaudited results for the twelve-month periods ending February 28,1979 and February 29,1980 are shown in the table below. In the opinion of the Company, all adjustments necessary for a fair presentation of results of operations for such periods are included. 12 Months Ended 12 Months Ended February 28,1979 February 29,1980 Electric operating revenues $21,416,117 $26,365,641 ! Cas operating revenues $ 8,178,141 $11,028,538
- Net income $ 1,976,520 $ 2,344,438 Earnings per share $3.71 -
$4.52 Number of shares used to compute carnings per share 455,475 455,475 Cash dividends per share . $1.59 $2.10 '
, Changes for the twelve month period ended February 29,19S0, compared to the period ended February 28,1979, primarily reflect the factors discussed in " Management's Discussion and Analysis of the Consolidated Statement of Income" as relating to changes for the twelve-month period ending December 31, 1979 over the twelve-month period ended December 31, 1978; recognizing that the
- specific factors discussed in " Management's Discussion of the Consolidated Statement of Income -
l Local Property Tarcs" relating to the October,1979 tax settlement had no impact on the twelve-month- . perimi endi g February 28,1979. 1 I - 12
BUSINESS General The Company is an operating public utility company engaged in supplying electricity and/or gas in various communities in North Central Massachusetts. The estimated population of the Company's service area is 80,000. Electric and gas business accounted for the following peicentages of the Com-pany's total operating revenues and operating income before deducting income taxes in the years 1975 through IW9. Year Ended December 31 1979 1978 1977 1976 1975 Total Operating Revenues Electric 71 % 73 % 74 % 74 % 70 % Cas 29 % 27 % 20 % 20 % 21 % Total Operating Income (before deducting income taxes) Electric 74 % 76 % 75 % 81 % 85 % Cas 20 % 24 % 25 % 10 % 15 % Territory Served Electric service is supplied by the Company to approximately 21,740 customers in the communi-ties of Fitchburg, Ashby, Townsend and Lunenburg. For the twelve months ended December 31,1979, 53.3% of the electric operating revenues was derived from industrial sales,31.2% from residential, 11.5% from commercial,2.7% from public autl orities and 1.3% from other sources. The Company's sales to its largest industrial customer represented approximately 8% of electric operating revenues for 1979, while sales to the Company's ten largest industrial customers represented, in the aggregate, approximately 32% of such revenues. For the twelve months ended December 31,1979, average revenues per KWII sold to industrial, residential, and commercial customers were 5.17 cents,7.78 cents and 8.47 cents, respectively. Gas service is supplied by the Company to approximately 13,700 customers in the communities of Fitchburg, Lunenburg, Townsend, Ashby, Gardner and Westminster. For the twelve months ended December 31, 1979, 52.0 % of the gas operating revenues was derived from residential sales 16.7% from industrial sales,15.4% from commercial sales,13.4% from interruptible sales (which are sales to customers with alternative energy sources who use gas on a seasonal basis, when available), and 2.5% from other sources. For the twelve months ended December 31,1979, average revenues per MCF sold to residential, industrial, commercial and intemiptible customers were 461.61 cents,368.62 cents, 417.68 cents and i 323.94 cents, respectively. New England Power Pool A New England Power Pool Agreement ("NEPOOL"), to which the major investor-owned electric utilities in New England, including the Company, and certain municipal and cooperative utilities are parties, has been in effect since 1971. The objectives of NEPOOL are: (a) to assure that the bulk power supply of New England and any adjoining areas served conforms to proper standards of reliability, (b) to attain maximum practicable economy consistent with such proper standards of reliability and (c) to provide for equitable sharing of the resulting benefits and costs. These objectives 13
1 4 are achieved through joint planning, central dispatching, coolwratina in environmental matters, coordinated construction, operation and maintenance of electric generation and transmission facilities and coordination with other power p<ml and utilities situated in the United States and Canada. Sub-stantially all planning, operation and dispatching of chctric generating capacity for New England is-j done on a regional basis under NEIV)OI At the time of the 1979 1980 NEP(XE winter peak, the l' NEPOOL memlwrs had approximately 21,976 megawatts .("htW") 'of installed capacity to meet the New Englami peak load of about 15,311 AlW, The NEPOOI. Agreement imposes generating capacity reserve obligations and provides for the use of major transmission mal distribution facilities ami payments associt.ted therewith. The Company's capability responsibility under NEPOOI. Involves carrying an allocated share of a New England capacity requirenwnt which is determined for each sis month lwrimi based on certain regional reli-
! ability criteria.
i Electric Operations and Energy Supply 1-The Company has a 4.5% interest (20,115 KW) in an od.Sred generating plant in New Ilaven, , Connecticut, which is operated by The United Illmninating ;ompany as the majority owner. The
- Company also has a 0.1822% interest (1,120 KW) in an oil firect generating plant in Yarmouth, hiaine.
l which is operated by Central Alaine Power Company as the majority owner. In addition, the Company I operates under a long tenn financing lease an oil fired combustion turbine electric peaking generator with a current capability of 27,910 KW A total of 35.11% of the capability of this turbine is sold to llcading Alnnicipal I,ight Department ("Itcading") maler a contract espiring October 31,1980. This contract rerpiires the purchaser to pay monthly demand charges regardless of whether or not it pur-chases any energy, and to make its own arrangements for transmission Iwyond the Company's Flagg Pond electric substation; energy charges are based on the actual cost of fuel for the combustion ! turbine. The Company does not expect to renew this contract, in addition, the Company has three entracts to purchase power from nearby utilities. The first contract is with limton Edison Company ("Iluston Edison"), expiring in 1986, for the purchase of
- 40,(W)0 KW, The supply of energy under this contract is dependent on the operating capability of
; the following four limton Edison Units at 10,(NN) KW each: Pilgrim Unit No.1, New Iloston Unit No.1, New lloston Unit No. 2, and Alystic Unit No. 7; the first lwing a nuclear unit, the latter three heing oil fired units. The second contract, which espires on October 31,1980, proviles for 17,500 KW
! (espandable to 21,000 KW and contractable to 14,(XX) KW under certain conditions; to be supplied by New England Power Company ("New England Power"),50% of which is dependent on the operating capability of lirayton Point Unit No. 3,25% of wlich is delwndent on the operating capability of j lirayton Point Unit No. 4 and 25% of which is dependent on the operating capability of Salem liarbor Unit No. 4. The effect of the expiration of this contract will Ir partially offset by.the effect of the simultaneous expiration of the llcading sale contract discussed almve. The lloston Edison and the New Englan 1 Power contracts provide that, in the event of a reduction in power supplied, the. Company will be entitled to a ratable share of the supplier's NEPOOL entitlement associated with the supplying unit. The third contract is with the hiaine Electric Power Company, Inc.~ ("AlEPCO") and provides for the purchase of 3,080 KW through October,1985 and then for the purchase of 1,540 KW through October,1986. AIEPCO purchases its power, under a long term contract, from the New lirunswick Eketric Power Commission (a Canadian goverun> ental entity). 'As part of the Company's arrangement to purchase power inun NIEPCO, the Company is a participant in the AIEPCO joint
~
- operation and is obligated to make certain supgmrt and other payments in accordance with the
~
- hlEPCO joint operating agreement. All three purchase power contracts require the Company to pay
- l. monthly demand and transmission charges regardless of whether or not it purchases any energy and to pay an energy charge for each KWil of electricity it does purchase.
14 e - k. --
The three oil-fired plants, together with the two purchase power contracts remaining after October 31,1980, provide the Company with a net capability of 92,225 KW. The maximum one-hour demand for the Company, exclusive of sales to other utilities, occurred on August 16, 1978 and was 75,330 KW. The Companis current operational capability is in 4xcess of its customers' present requirements. Current expectations are that load requirements will grow at approximately two and one-half percent per year, and the Company will be able to provide, using currently deactivated fossil-fueled stand.by capability if necessary, a margin over its pmjected capability responsibility to NEPOOL through October 31,1986. Future load growth could, however, be affected by many factors, including the state of the economy, and could sary from this projected level. In order to insure the continuation of such capability upon the termination of certain purchase power contracts on such date, to avoid the necessity of reactivating the Company's stand-by capability so as to minimize the Company's dependence on fossil fuels and to provide long-term base load capability at the lowest possible cost, , the Company has entered into agreements for the partial ownership of six nuclaar facilities (see "Husiness-Joint Projects and Other Plans"). The Company is also actively examining the possibility of obtaining power from renewable resources, including biomass and hydro-electric generation sources. Joint Projects and Other Plans The Company has entered into agreements for the partial ownership of six nuclear facilities which are expected to commence commercial operation at various times imm 1983 through 1993 (see " Con-struction Program"). As an associate participant in each project, the Company is a tenant in common and is severally obligated for all liabilities of the project in proportion to its ownership share. The Company has also agreed to abide by tl.' decisions of the lead participant on all significant matters. The Company's combined share of the output of the six nuclear Units is expected to be approximately , 16,700 KW; this excludes the output related to tha acquisition of additional ownership interests in each of the Seahnmk Units described below, equal to at vroximately 16,700 KW. Thus, if the acquisitions of the additional interests in the Seabrook Units are censummated, and all six nuclear facilities are com-pleted. the Company's combined share of the output of the six Units will equal approximately 32,700 KW. The Company had also entered into two additional contracts with respect to the partial owner-ship of the Charlestown Units No. I and 2 pmposed nuclear generating facilities. On October 9,1979 the lead participant, New England Electric System, thmugh its subsidiary New England Power, announced the indefinite deferral of the in-service dates of these two Units, and subsequently exercised its right under the Charlestown ownership agreement to terminate the project. On November 27,1979 the DPU approved the Compan/s request to amortize approximately $653,000, representing the Company's gross expenditures in the Charlestown Units prior to termination of the project, over a 36 month period. In the opinion of the management of the Company, this form of rate treatment is adequate to insulate the Company's carnings from any significant effects of these expenditures. The Company is unable to estimate with certainty the amount of additional charges, or possible cost recovery from investments in nuclear fuel, which may result from the cancellation of these two Units. The Company will, however, request DPU permission to apply similar treatment to any additional costs resulting from its association with these Units. The Company is in the process of acquiring additional ownership interests in each of the two Seabrook Units imm two sources: The Connecticut Light and Power Company ("CL&P") and Public Service Company of New IIampshire ("PSNII). On January 26, 1979, the common shareholders approved the acquisition of an additional 0A3332% ownership interest in each of the Seabrook Units from CLAP. On .\ larch 25, 1950, the common shareholders approved the purchase of up to an addi-tional 0.260S7tc ownership interest in each of the Seabrook Units from PSNH. An application for approval of these acquisitions is now pending before the DPU. In deciding whether to grant such approval, the DPU is considering, among other factors, the financial viability of the Seabrook project. The Company is unable to predict whether or when such approval will be granted, or the terms or conditions which may accompany such approval. 15 l I
l 1 1 The Seabrook Units will each have an expected net capability of approximately 1,150 hlW. With the acquisition of the additional ownership interests, the Company will be entitled to 0.86519% of each Unit's output, which entitlements are estimated to be a total of 19,900 KW. It is anticipated that the additional interests in the Seabrook Units will partially replace capacity covered by existing pur-chase power contracts which will be expiring in the mid 1980's (see "Ilusiness-Electric Operations and Energy Supply"). The most recent estimate received from PSNII, the lead participant, in Alarch,1980, indicates that the Seabrook Units will be constructed at a total cost, including at least an initial nuclear core, of approximately $1500,000,000 (excluding AFUDC). All approvals and permits from state and federal regulatory bodies required for construction of the Units have been obtained and such construction is in progress. The obtaining of these approvals and permits has been opposed by a number of intervening groups and demonstrators at the Seabrook site and has been time consuming, resulting in significantly increased costs for the project. Several comt appeals from the federal regulatory approvals are pending. In addition, PSNII announced on Alarch 20,1980 that, as a result of instability in the capital markets and delays in obtaining regulatory approvals necessary to consummate sales of a portion of PSNII's share of the Seabrook project, PSNil was reducing its on-site personnel by appmximately one-half. Although PSNII estimates that this personnel reduction will not affect the emnpletion dat'es of the Seabrook Units unless the reduction continues for more than a few months, PSNil has indicated its expectation that the reduction will continue until such time as the difliculties giving rise thereto are no longer present. Fuel Supply Oil. Substantially all the Company's electric power is purchased from other utilities in the New England area (see "llusiness-Elcetric Operations and Energy Supply"). These New England electric utilities make greater use of fuel oil for generation of power than those in other regions of the country.
.\fost fuel oil supplies of the New England utilities are derived from foreign sources and are subject to interference by foreign governments and price increases.
The combustion turbine leased by the Company currently operates exclusively on oil. The Company has no long term contracts for oil supply. Should it be necessary for the Company to re-activate currently deactivated fossil-fueled capacity (See "llusiness-Electric Operations and Energy Supply"), the Company would attempt to insure a supply of oil by entering, to the extent possible, into h,ng-term contracts and bulk fuel purchases, for which the Company has adequate storage facilities. While the Company intends to make substantial replacements of power derived from oil with power derived from nuclear and renewable sources, the Company cannot predict with certainty whether or when such replacements will be effected. (See
- Construction Program" and "llusiness -
Joint Projects and Other Plans".) . Nuclear. The Company has been advised by the companies planning or constructing the l nuclear generating Units in which the Company has an interest that such Units have contracted for certain segments of the nuclear fuel production cycle (see "llusiness-Joint Projects and Other Plans") through various dates. This cycle includes, among other things, mining, enrichment and disposal or reprocessing of used fuel. The Company belives that each nuclear project in which it has an interest has contracted for at least an initial core of enriched radioactive material necessary for fuel assembly. Contracts for various segments of the fuel cycle will be required in the future, and their availability, prices and terms cannot now be predicted. 16
The Company is not aware of any contractual arrangements for reprocessing of spent fuel and there are no reprocessing facilities currently operating in the United States. President Carter has stated the position of his Administration to be that the United States should indefinitely defer com-mercial reprocessing and recycling of spent nuclear fuel. If such ser ices are not available when required for the Units in which the Company has an interest, the spent fuel can be stored pending reprocessing or disposal. The cost of long-term storage of nuclear wastes is not known at the present time. The Company cannot predict at this time what difficulties will be encountered regarding disposal of nuclear waste. The federal Nuclear Regulatory Commission ("NHC") along with other federal agencies, is in the proces; of developing regulations and guidelines in this area. The Company expects that the Units in which it has an interest will develop plans for the disposal of nuclear wastes after promulgation of these regulations and guidelines; such plans will be subject to regulatory approvals. Gas Operations and Supply Gas is distributed to the area served by the Company through approximately 274 miles of steel and cast iron mains. The maximum sendout occurred on February 13, 1979 when a new record of 15,678 htCF was achieved. The Company purchases natural gas from the Tennessee Gas Pipeline Company ("Tennessce") under a firm contract which prwides that the Company may take up to 7,506 h!CF of gas daily. This contract expires on November 1,19SS, but will continue beyond this expiration date until terminated by either party on twelve months' written notice. Reginning in January,1974, Tennessee began to curtail deliveries of gas due to increased overall demand in excess of pipeline capacity. All of Tennessee's curtailments are currently being made pur-suant to a curtailment plan filed with the FERC on September 28,1973, approved by the FERC on Alarch 14,1977, and modified from time to time thereafter with FERC approval. The maximum annual quantity which the Company can purchase under this plan (the " volumetric. purchase limitation") is 2,734,215 h1CF. Curtailments of gas deliveries to the Company for the period November,1979 through h! arch,19S0, were 1.16To below this volumetric purchase limitation; no curtailments below this volumetric purchase limitation are anticipated during the summer season, April,1980 through October,1980. The possibility and extent of any future curtailments, however, cannot be predicted at this time; under governing FERC opinions Tennessee has the right to increase curtailments of certain gas supplies to the extent such gas is being used for interruptibic sales. (Interruptible sales are sales made to customers on a periodic or seasonal basis under tariffs or agreements which permit the Company to interrupt the supply of gas. Interruptible sales are accorded a low priority, while sales to firm customers are ac-corded a high priority, by prevailing FERC policies.) Accordingly, the Company has limited the impact of the Tennessee curtailment by reducing its sales to interruptible customers from time to time, to the extent necessary. The Company has also attempted to increase its sales to high priority firm customers so as to reduce its long-term exposure to future curtailments. The Company intends to continue these policies in the future and seek to obtain additional gas supplies in order to minimize the effects of future curtailments. Although the Company can continue to provide an adequate supply of gas to its firm customers, reducing interruptible sales when necessary, such reductions have an adverse impact on the Company's carnings. The Company has a transportation and underground storage contrtet with Tennessee which pro-vides for storage of 50,000 AICF of gas, which is injected into storage during the summer months and withdrawn during the winter season. This contract expires on July 31,19S0. The Company has executed a Precedent Agreement with Consolidated Gas Supply Corporation (" Consolidated") by which Consolidated will provide approximately 50,000 AICF of underground storage to the Company for a twenty-year period beginning August 1,19S0. This contract is intended to replace the storage provided by the Tennessee contract described above. The Company has also , executed a Precedent Agreement with National Fuel Gas Storage Corporation (" National") by which ) 17 l
National will provide approximately 50,000 htCF of underground storage to the Company. This con-tract, if approved by the FEllC, is intended to double the Company's existing underground storage and will expire on April 1, 2000. The Company has also executed a Precedent Agreement with Tennessee to transport all the gas which is intended to be stored by Consolidated and National. The necessary applications to provide cach of these services have been filed with and noticed by the FEllC, and it is anticipated that the requisite approvals will be forthcoming. 1 As a condition precedent to the enforceability of the Consolidated and National storage agree-ments, the FEllC must approve the arrangements by early 1981. As a condition precedent to the en-forceability of the Consolidated and National storage agreements and the Tennessee transportation agreement, the FEllC must approve the Tennessee transportation agreement prior to April 1,1980. The Tennessee transportation agreement was not approved prior to such date, but in the opinion of the manrgement of the Company there is no substantial likelihood that any of the parties to these agree-ments will exercise their withdrawal rights. It is expected that all necessary FEllC approvals will bc
- forthcoming prior to August 1,1980, when the existing Tennessee transportation and storage agreement expires. In the absence of such timely approvals the Company intends to petition the FEllC for interim relief.
As a supplement to natural ga:, the Company has a pmpane air gas plant with a daily capacity of 7,200 NICF and a storage capacity of 29,725 h!CF, The Company also has a leased liquefied natural gas (" LNG") storage and vaporization facility with a daily capacity of 7,200 AICF and a storage capacity of 4,167 AICF. These plants are used principally during peakload periods to r.ugment the supply of natural gas. The Company had a contract to purchase liquid propane from C.ht. Dining, incorporated, which was terminated by the Company and expired on 51 arch 31,1980. This contract permitted the Company to purchase up to 133,028 htCF during the 1979-19S0 winter season. The Company is currently taking steps to insure the long-term continuation of the supply of this quantity of liquid propane. In addition to this quantity of liquid pmpane, the Company is entitled, under current Federal Energy Administration hlandatory Alh> cation llegulations, to use an additional quantity of liquid pro-pane, if available from market sources, equivalent to 50,459 hlCF cach winter season so long as such llegulations, as presently in cliect, remain applicable to the Company. The Company intends to enter into contracts to acquire a long term supply of this additional quantity of liquid propane, prior to the 1980-81 heating season. The Company also has a contract to purchase gas from llay State Gas Company which expires on Starch 31,1988, but will continue beyond this expiration date until terminated by either party on twelve months written notice. This contract permits the Company to purchase an annual quantity of up to 163,000 h!CF. If the FEllC does not approve additional curtailments by Tennessee of pipeline deliveries of natural gas significantly below presently indicated levels, if the FEllC gives timely approval to the proposed Tennessee transportation and Consolidated and National storage agreements or pmvides adequate interim relief, and if LNG and liquid propane continue to be available from market sources, the capacities of the Company's LNG and propane facilities, together with the natural gas available under the contract with Tennessee, are expected to provide adequate gas supplies to fulfill the require-ments of all existing firm customers served by the Company. There can be no assurance, however, that limitations on interruptible service will not continue to increase or that future restrictions will not be imposed on firm customers, llegtdation and Hates The Company is subject to regulation by the DPU with respect to retail rates, adequacy of service, issuance of securities, accounting and other matters. The Company is also subject to regulation by the 18
FERC with respect to certain matters, including NEPOOL interchanges and other wholesale sales of electricity. As part of such regulation, representatives of the FERC conduct regular audits of the Company relating to the Company's overall compliance with the accounting and reporting require-ments of the FERC. The Company's retail electric and gas sales are made pursuant to rate schedules on file with the DPU at rates which call for lower unit prices as monthly usage increases. See " Operating Statistics" for average annual sales, average annual bills per residential customer and average annual revenues per KWII and per hlCF for various classes of service. Until 1972 the Company had not requested a general rate increase in 52 years and during that period had made several voluntary rate reductions. During recent years the Company has sought rate relief designed to cover the impact of increased costs. The amounts of rate relief granted by the DPU are set forth below: Type of Amount Amount Effective Date Department Increase Requested Granted July 20,1972 Cas Permanent $ 270,000 $ 228,500 August 15, 1972 Electric Permanent 480,000 357,000 hiarch 28,1973 Gas Permanent 27,400 27,400(1) April 21,1974 . Electric Interim 1,000,000 767,500 October 15, 1974 Electric Permanent 2,300,000 2,096,000(2) January 12,1976 Cas , Permanent 663,000 349,451 January 12,1976 Electric Permanent 793,000 793,000 September 15,1977 Gas Permanent 838,000 553,734 October 5,1978 . Electric Permanent 2,795,000 1,804,180(3) (1) Granted to Gardner Gas, Fuel and Light Company, a former affiliate of the Company which supplied gas to the communities of Gardner and Westminster and which was merged into the Company in hiay,1973. (2) Includes the $1,000,000 requested and the $767,500 interim electric rate relief granted effective April 21,1974. (3) $1,062,109 was granted effective September 19, 1977; see Note 2 of Notes to Consolidated Financial Statements. The electric rate schedules of the Company for all retail sales are subject to a cost of fuel ac'.just-ment by which rates are modified to reflect changes in the cost of fuel used for generation and the cost of purchased energy. With the approval of the DPU, the current cost of fuel adjustment schedde has been in effect since September 27, 1974. The Company's total fuel costs are determined on an estimated quarterly basis, subject to review and approved by the DPU. Toward the end of each quarter the Company compares actual fuel expenses incurred with the actual fuel adjustment revenues collected and adds or subtracts that amount from the estimated fuel costs for the next quarter. The gas rate schedules of the Company for all retail sales are subject to a cost of gas adjustment by which the rates are modified to reflect changes in the cost of purchased pipeline natural gas and supplemental gas. The current cost of gas adjustment schedule, which was approved by the DPU, has been in effect since January 1,1974. Changes in the cost of pipeline natural gas are reflected immediately in customer billing; however, there is a two-month delay before customer billings reflect changes in the cost of supplemental gas. 19
Time-of-day rates, a pricing system that reflects the varying costs of providing electrie energy at different times of the day and/or during different seasons of the year, were filed with the DPU in early 1979. The intent of time-of-day rates is to shift demand energy use from on-peak to off-peak penxis thereby reducing the amount of new generating capacity required to serve peak loads. The rates filed by the Company are applicable to residential and commercial customers on an optional basis. In addition, the Company recently filed proposed senior citizen rates which would provide optional reduced rates to certain of the Company's residential customers. Thc Company does not anticipate that any of these optional rates will have a significant impact on the Company's financial condition. Competition While franchise rights of the Company are non-exclusive, statutes restrict competition from other companies without approval of the DPU. Under the laws of 5f assachusetts, a municipality by appropriate vote may enter the gas or electric business and purchase the facilities of the utility serving such municipality. No municipality has taken any such action in hfassachusetts in recent years and the Company is not aware of any municipality which presently intends to seek approval for such action. Environmental Alatters The nombustion turbine operated by the Company, the fossil-fueled and nuclear joint projects in which the Company has an ownership interest (see "Ilusiness-Electric Operations and Energy l Supply"and "llusiness-Joint Projects and Other Plans") and the electric generating units from which the Company purchases power (see "llusiness-Electrie Operations and Energy Supply") under long term contracts are all subject to regulation with regard to air and water quality and other environ-mental factors by governmes.lal authorities, federal, state and local. The Company believes that it is in material compliance with all applicable environmental regu-lations. The Company further believes that no significant expenditures will be required to maintain such compliance in the case of the combustion turbine operated by the Company. The Company may, however, incur increased construction or oi: crating expenditures as a result of environmental requirements applicable to those Units over which it does not have supervisory control, but in which it has an ownership share. In complying with existing environm<ntal regulations and further developments in these and other areas of regulation, the Company as a joint participant in the Units in which it has an ownership interest has incurred, and expects to continue to incur, substantial capital expenditures for equipment i modifications and additions, monitoring equipment, recording devices and general operating expenses. l The total amount of these expenditures is not now determinable. The requirements in these areas may also cause substantial delays in the completion of new facilities, including the six nuclear generating l i Units in which the Company has an ownership interest (see Construction Program"). Nuclear Licensing Nuclear plants require various construction and operating permits from state regulatory authorities, including the DPU and the NilC. These regulatory authorities extensively investigate all proposed nuclear plants in relation to safety, financin viability, and other factors. In addition to the individual safety eviews of each nuclear r,enerating Unit which are conducted by the NilC in connection with constrm tion permit and operating license applications, the NitC may require modifications in Units which aln ady have a construction permit er operating license, or in the fuel for such Units, to take account of new standards or technological developments. Where such 20
I l l modiUcations are required, it may be necessary to reduce or cease operations of a particulai Unit, either on a permanent basis or until the modifications can be effected. The expanding development of nuclear power plants in the United States continues to be a subject of public controversy. Various groups have published articles and reports, filed lawsuits and partici-pated in administrative proceedings such as those described above, claiming that the proliferation of nuclear power plants under the present state of nuclear technology presents unacceptable risks to public health and safety and to the environment. In addition, certain of these groups have proposed re- , strictive legislation in h1assachusetts, Connecticut and New Ilampshire, and others have participated in demonstrations, including demonstrations at the Seabrook Units, and raised questions in public hearings regarding the ultimate cost of energy produced by nuclear plants as opposed to other fuels. Since the events at Thil, these efforts have substantially intensified (see "The Company ' Problems of the Utility Industry and the Company" and " Business-Joint Projects and Other Plans"). It is possible that some of the claims made by such groups, if they should prevail, or the existence of the controversy itself, will cause delays in, or prevention of, the construction of nuclear plants presently planned or under construction, or substantial modifications to or extended shutdowns of plants presently in operation, any of which could have an adverse impact on the results of operations of the Company. Employee Relations As of December 31,1979, the Company had 161 employees, of which 85 were represented by the Brotherhood of Utility Workers of New England, Incorporated. The current two-year collective bargaining agreement terminates on April 30,19S1. Fitchburg Energy Development Company The Company continues to pursue the development of domestic oil and gas supplies in an attempt to insure an adequate long-term supply of fossil fuels through its exploration and development sub-sidiary, Fitchburg Energy Development Company ("FEDCO"), which is a partner in hiinuteman Exploration Company ("Alinuteman"). FEDCO is not expected to realize income in the near-term, and the Company cannot predict whether or when FEDCO's operations will become profitable. The Com-pany's investments in FEDCO, which are not included in its construction expenditures (see "Construc-tion Program"), are made from the general funds of the Company and are being borne by the Company's common shareholders. A joint venture program through Afinuteman has involved the drilling of a number of wells in Alorgan County, Ohio, since exploration was started in July,1978. While most of these wcils are currently producing oil and gas, the Company is unable to predict at this time what amounts, if any, will be transported back to its customers. As of December 31,1979, the Company had an investment of $20,000 in FEDCO, representing 100To of FEDCO's outstanding common stock. In addition, as of December 31,1979, FEDCO had received capital contributions from the Company amounting to $299,820, but a DPU order currently limits the Company's capital con-tributions to FEDCO to $1,000,000. The Company anticipates petitioning the DPU for the right to invest further funds in FEDCO. IIcarings, if required, are expected to be held in the latter part of 1980.
~21-
4 J ELECTRIC OPERATING STATISTICS Year Ended December 31, 1979 1978 1977 1976 1975 Eticnuc Esrncy: CENEnATED & PUncHAhED (thousands of kilowatt hours): Generatal Net Station Output 101,038 100,343 91,688 98,805 68,970 Purchased & Interchanged (net rewived) , 320,272 332,279 289,351 243,188 248.901 Total Generated and Pur-chased 42 t,310_ 432,622 381,039 337,993 317,871 Company ' Use, Loss & Unac-cmmted for 31,619 34,078 31,490 28,736 28,551 Electric Energy Sold 392,691 398,514 3-19,5 89 309,257 289,320 Eircuuc SAIES BILtEn (thousands of KWil hours): Residential 98,342 97,945 96,271 96,895 93,903 Onnmercial 33,258 31,818 29,039 28,229 27,208 Industrial , 252,106 259,527 203,8Gl 164,500 152,920 Other Utilities 1,614 1,667 2,367 1,135 1,126 l Otlwr 7,371 7,557 18,068 18,492 14,163 Total Electric Sales 392,691 398,541 319,549 300,257 289,320 Nusinrn or CusrostEns (end of l twriod): Residential 19,538 19,309 19,066 18,852 18,800 ! Gunmercial 2,020 2,018 1,872 1,845 1,814 l Industrial 172 172 104 154 162 ' Other Utilities 1 2 1 1 - I Other , 7 7 169 '171 172 Total Customers 21,744 21,508 21,272 21,023 20,957 . EircTarc OrEnruxa REvENcE: Hesidential $ 7,647,461 4 6,767,414 $ 6,353,088 $ 6,215,227 $ 6,240,091
- Commercial , . 2,818,385 - 2,445,734 2,142,727 2,029,076 1,935,522 Indtutrial . 13,035,779 11,061,019 8,916,736 0,922,376 6,788,516 Other Utilities . , , 282,988 251,122 473,669 313,856- 146,610' Other , 653,014 601.191 1,140,428 1,048,343 949,094
- Total Hevenue from Energy Sales . 21,437,627 21,126,480 19,026,688 16,558,878 16,068,842 -
. Aliscellaneous Revenue 37,609 31,062 34,751 ~ 42,399 38,225 Total Electric Operating Herenue ,$241,475,296 $21,157,542 $10,061_,399 $16,601,277 _416,107,067 AVEnACE AxxvAt KWil SAlis ' pen HEsmENTIAt/ CUsTMIEn - _ 5,074- 5,116 5,097 5,150 5,004 AvEnACE ANNUA 1' tht.L Ptn REsioENT AL CusToxiEn $391.47 $352.26 $335.73 $338.54 $276.64 l i- AvEnAct HEVENUE pen EWII I Bit. tap: Residential , , 7,78p 6.0le 6.00e - 6.45r - 6.65t Co'nmercial 8A7d 7.68f 7.38g 7,19g 7,Ilt Industrial , , . 5.17f 4.26f 4.38e 4.21e 4.44g .
' Other Utilities . ,, , 17.53c _15.06c - 20.0le . 27.65p ' ' 13.02f '
Other , , ., ,. , 8.86c _ 7.96e 6.31e 5.67p - 6.70g. 22
CAS OPERATING STATISTICS Year L?~l December 31, 1979 1978 1977 1976 1975 TOTAL CAS /URCIIASED Fon RESALE (11CF): 2,127,852 1,832,100 1,861,171 1,896,988 1,873,534 Underground Storage Gas Used 37,846 69,094 72,146 55,600 4,900 Cas hfade - LNG & Propane 302,842 246,393 210.651 240,175 149,175 Total Gas h!ade and Purchased 2,468,540 2,147,587 2,143,968 2,192,763 2,027,609 Less Gas used by Company, Loss & Unaccounted for 125,424 85,196 100,430 222,697 222,901 Gas Sold (h!CF) 2.343,116 2,062,391 2,043,538 1,970,066 1,804,708 GAS RILLED (htCF): Residential 1,102,340 1,120,938 1,049,300 1,084,813 1,007,903 Commercial 361,912 3M,710 374,870 418,768 388,722 Industrial . 442,243 389,136 390,992 440,183 354,940 Interruptible 403,621 12,332 89,993 26,302 53,143 Other 33,000 175,275 138,383 _ - Total Gas Sales . 2,343,116 2,062,391 2,043,538 1,970,066 1,804,708 NUafDER OF CUSTOhtERS (end of period): Residential 12,754 12,174 12,026 11,888 11,979 Commercial 839 801 811 861 869 Industrial 98 93 88 81 88 Interruptible 2 1 2 2 1 Total Customers 13,693 13,069 12,927 12,832 12,937 CAs OPERATINc REVENUE: Besidential 5,088,887 4,514,922 3,734,013 3,339,433 2,622,701 Commercial 1,511,M9 1,343,019 1,248,916 1,174,961 918,832 Industrial . 1,630,192 1,309,849 1,193,870 1,051,612 688,016 Interruptible 1,307,485 28,088 194,940 47,607 99,377 Other 247,972 644,113 489,121 83,665 79,027 Total Gas Operating Revenue 9,786,185 7,919,991 6,860,860 5,697,278 4,407,953 AVERACE ANNUAL htCF SALES PER IIESIDENTIAL CUSTOhtER 89.5 93.0 88.7 91.3 84.5 AVERAGE ANNUAL DILL PER REs1 dea - TIAL CUSTO3tER $370.03 $356.29 $327.79 $274.62 $211.27 AVERACE REVENUE PER hfCF BILLED: Residential 461.6e 402.8g 355.9g 307.8g 260.2d Commecial . 417.7g 368.2d 333.2d 280.6 236.4e InAstrial . 368.6t 357.2e 305.3e 238.9g 193.8g I*.terruptible 323.9e 227.8g 216.6g 181.0p 187.0g
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AfANAGEh!ENT Principal OfIlcers Held Office Name OAice Held Since Charles II. Tenney II Chairman of the Board 1959 of Directors Iloward W. Evirs, Jr. President 1970 Frank L. Childs Vice President; 1979 Treasurer 1980 Charles T. Ellis Vice President 1975 David K. Foote Vice President 1980 Edward D. AlcKenzie . !stant Treasurer 1979 Angela P. Carlson Clerk 1975 William D. .\facGillivray Assistant Clerk 1979 Directors Director Lme Principal Occupation Since Philip II. Bradley Resident hf anager, Northeast, IBh! Corporation 1975 Richard L. Brickley . Partner in the law firm of Brickley, Sears & Cole 1954 Iloward W. Evirs, Jr. President 1969 John Grado, Jr. Vice President, Litton Industries, Inc. (and chief executive of 1976 its Paper, Printing and Forms Group) Thomas W. Sherman . Executive Vice President and Treasurer, Bay State Gas 1975 Company Robert V. Shupe President, R. L. Gourley Co., Inc. (distributors of heating. air 1972 conditioning and water heating equipment) Charles II. Tenney II ( hairman of the Board of Directors and chief executive officer, 1946 Chairman of the Board of Directors, President and chief e-itive officer, Bay State Gas Company; Chairman of the Board of Directors .r.d chic! executive officer, Concord Electric Company and Exeter & IIampton Electric Company Robert L. Wace Partner in the law firm of Ware & Wam 1967 l l Information, as of partiet lar dates, concerning Directors and officers, their remuneration, and any material interest of such pers ans in transactions with the Company, is disclosed in proxy statements distributed to common share holders of the Company and filed .with the Securities and Exchange Commission. Copies of these proxy statements are available for examination and copying at the l Commission's olBees as indicated under "Additioral Information" at page 2. l l 25 l l 1
I DESCHIPTION OF CONIAION STOCK Dividend Hights and Hestrictions Subject to the restrictions set forth below and to the preferential rights of the holders of Cumula-tive Preferred Stock to receive full cumulative dividends, holders of Common Stock are entitled to receive such dividends as may be declared by the Board of Directors from funds legally available. Under the Indenture relating to the Company's loro Notes due September 1,1990, which con-tains the most restrictive provisions in any of the Company's note agreements or indentures, the Company may not declare or pay any dividend (except in Common Stock) on its Common Stock or make any other distribution on Common Stock (including the purchase or retirement of Common Stock other than amounts equal to the net proceeds from the sale of Common Stock) if such dividend or distribution together with all other such dividends or distributions (including dividends on, and purchases of, Preferred Stock of the Company) after December 31, 1975 exceeds Net Income (as defined) after December 31,1975 plus $1,500,000. As of December 31,1979 retained earnings available for dividends amounted to $4,324,106. Pre-Emptive Hights The holders of the Common Stock have no pre-emptive rights to purchase additional shares of Common Stock. Liquidation Hights Upon any liquidation of the Company any net assets remaining after paying to the holders of Cumulative Preferred Etock the full amounts they are entitled to receive are distributable to the holders of Common Stock. Vcting Hights The holders of Common S tock are entitled to one vote per share. If six quarterly dividends on the Cumulative Preferred Stock are in arrears, and until such dividend arrearages shall have been paid, the holders of Cumulative Preferred Stock will be entitled to elect a majority of the Directors. Otherwise the holders of the Cumulative Preferred Stock are not entitled to vote except with respect to certain j matters affecting the rights and preferences of such Stock where the vote of the holders of two-thirds or a specified lesser percentage of such Stock is required. l Other Provisions The outstanding shares of Common Stock are, and the shares of the Additional Common Stock will be, fully paid and non-assessabic. j g I Hegistrar and Transfer Agent The registrar for the Common Stock is New England hierchants National Bank and the transfer agent is The First National Bank of Boston. Reports to Shareholoers The Company distributes to its shareholders current reports three times a . year containing unaudited interim financial statements and an annual report containing audited financial statements. 26 i
)
1 Listing The Company's outstanding Common Stock is listed, and the Additional Common Stock will be listed, upon notice of issuance, on the American and Boston Stock Exchanges. LEGAL OPINIONS The legality of the Additional Common Stock will be passed upon for the Company by hiessrs. l Brickley, Sears & Cole, 75 Federal Street, Boston, hiassachusetts 02110, and by hiessrs. LeBoeuf, t Lamb, Leiby & hiacBae,140 Broadway, New York, New York 10005, and for the Underwriters by hiessrs. Brown, Wood, Ivey, Alitchell & Petty, One Liberty Plaza, New York, New York 10006. hiessrs. LeBoeuf, Lamb, Leiby & hiacRae and Alessrs. Brown, Wood, Ivey, hiitchell & Petty . vill rely as to matters of Afassachusetts law upon the opinion of hiessrs. Brickley, Sears & Cole. hiessrs. LeBoeuf, Lamb, Leiby & hiacRae have reviewed the statements under the heading " Description of Common Stock" as to matters of law and legal conclusions. Richard L. Brickley, Esq., a partner in the firm of i hiessrs. Brickley, Sears & Cole, is a Director of the Company and owns 25 shares of the Company's Common Stock. EXPERTS To the extent set forth in their report appearing elsewhere in this Prospectus, Alexander Grant
& Company, independent certified public accountants, have examined the financial statements included herein. All such statements are included herein in reliance upon the report of such firm and upon the authority of such firm as experts in auditing and accounting.
i REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of Fitchburg Gas and Electric Light Company We have examined the consolidated balance sheet of Fitchburg Gas and Electric Light Com-pany and Subsidiary as of December 31, 1979 and the related consolidated statements of income, retained earnings and changes in financial position for each of the five years then ended. Our examina-tions were made in accordance with generally accepted auditing standards, and accordingly in-I cluded such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. As discussed in note 2 to the financial statements, the Company's method of billing and accounting i for revenues under its fuel adjustment clause in effect from January 1 through September 26, 1974, has been challenged by the Attorney General of the Commonwealth of hiassachusetts. The Com-pany believes its methods are correct and has vigorously defended its procedures, but the ultimate outcome is uncertain and no provision for any liability that may result has been made in the financial ! statements. j in our opinion, subject to the effect of such adjustments, if any, as might have been required had the outcome of the matter discussed above been known, the financial statements referred to above present fairly the consolidated financial position of Fitchburg Gas and Ele'etric Light Company and Subsidiary at December 31,1979 and the consolidated results of their operations and changes in their financial position for each of the five years then ended, in conformity with generally accepted account-ing principles applied on a consistent basis. ALEXANDER GRANT & COhiPAN'Y ! Boston, hiassachusetts l February 7,1980 i 27
FITCHBURG GAS AND ELECTHIC LIGHT COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SIIEET ASSETS . December 31, IIFT9 Utility Plant (at cost): Elcetric . . . . .. ... $29.788,954 Cas . , . . , , . . . 10,783,237 Common . ..... . ..... .... . , 1,395,550 Construction work in progress (Note 9) . , . . .. 5,196,391 Cross Utility Plant . . . . ..... . ........ .. . 47,141,132 Less: Accumulatal Depreciation (Note 1) . 9,849,810 Net Utility Plant , . . 37,294,322 Miscellaneous Physical Property (at cost) . 20,005 Invcatments (Note 1) . . . 348,006 Current Assets: Cai.h (Note 7) 1,727,899 f' tda' ccound S
^
Accounts receivable (including' installment' sales) 'Icss allowance" for ilou'bt'
$177,580 . . .
5,082,572 Heftmdable income taxes . .... . , , . 264.990 hlaterials and supplies (at average cost) . . . 877,721 Prepayments . . .. , ,. 829,875 Property tax abatements 402,821 Total Current Assets . 9.245,878 Deferred Debits: Unamortized debt expense (amortized over term of securities) 275.932 Unamortized cost of abandoned properties (Note 3) 2,970,821 Other (Note 3) , , , , 646,331 Total Deferred Debits 3.899,084 TOTAL, .
$50,813,295 LIAllILITIES AND CAPITALl7.ATION Capitalization:
Common Stock Equity: Common Stock $10 par value: Authorired - 1,(M10,000 shares Outstanding - 455,475 shares 4 4,554,750 Premium on Gmnmon Stock 1,754,358 Capital stock expeme . . . . . (181,737) Hetainnl carnings (Note 5) . . . . ... . 0,417,530 Total Common Stock Equity . 12,544,901 Hedermable cumulatise preferrnt stock (Note 4 ): Cumulative preferred stak, $100 par value: 5Wi Scrics: Authorlin!- 10,880 shares Outstanding-10,460 shares . . . . . 1,646,000 8% Series: Authorized - 25,000 shares Outstanding - 21,250 shares . . . . . . 2,425,000 Total Hedccmable Preferred Stock . . . 4.071,000 Long-term Debt (Note 0) . . .. ., .. , _ 10,780,000 Total Capitalization . . . .. . . . 33,395,901 Current Liabilitics: Long term debt due within one year .. . . . . . . . 123.000 Notes payable (Note 7) . . . . . 5,420,000 Accounts payable .......... , , . . . . , , , 4,995.568 Customer deposits and refunds . . . . . . 258,675 Tases antued . . . ...... ..... ... . . .. . . 167,860 Deferral income taxes (Notes I and 8) . . . 131,266 Interest accrued . , , . , , 495,950 4 Total Current Liabilities , . . . . . .. . .. .. .. 11,592,319 Deferred Credits: [ Unamortized investment tax credit (Note 1) . . ., , .. .. 1,583,001 j Other . . . .. ... . ... ... .. .. 70,219 Total Deferred Credits . . . .. ...... 1,653,820 D;.ferred incomo Taxes (Notes I and 8) . , ... , . . . 4,122,357 Reser es-Other .. . .. . .... .. . . ....... .. 48,898 TOTAL. , , . ... . . ... .. . .. . . .. . .. $50,813,295 See notes to consolidated financial statements 28
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY 4 CONSOLIDATED STATEMENT OF RETAINED EARNINGS Year Ended December 31, 1979 1978 1977 1976 1975 Retained Earnings, Beginning of Year $5,301,422 $4,315,175 $4,060,789 $3,680,921 $3,425,241 Net Income 2,260,700 1,959,850 1,199,812 1,083,451 1,177,554 Total . 7,565,128 6,275,025 5,260,601 4,764,372 4,602,795 Deduct Cash dividends declared: Cumulative preferred stock: 5%% Series at an annual rate of
$5.125 for the years 1975 and 1977 through 1979 and $3.844 in 1976 . 85,434 87,586 89,739 68,619 93,506 8% Series at an annual rate of $8.00 for the years 1975 and 1977 through 1979 and $6.00 in 1970 - 197,000 200,000 200,000 150,000 200,000 Common stock at an annual rate of
$1.90 $1.50, $1.44, $1.065 and $1.38 persliare . 865,161 683,017 655,687 484,934 628,368 Total Deductions 1,147,598 970,603 945,426 703,583 921,874 Retained Earnings, End of Year . $6,417,530 $5,304,422 $4,315,175 $4,060,789 $3,680,921 See notes to consolidated financial statements.
I ? l
FITCIIBURG GAS AND ELECTHIC LIGIIT COMPANY AND SUBSIDIARY CONSOLIDATED STATEhlENT OF CIIANCES IN FINANCIAL POSITION Year Ended December 31, 1979 1978 1977 1976 1975 FuNos PnovinEn liv: Funds from Operations Net income $2,000,706 $ 1,959,850 $1,199,812 $ 1,083,451 $ 1,177,554 Principal Non-Cash Charges (Credits) to Income Depreciation 1,230/192 1,181,787 1,093,790 952,984 873,470 Deferred Federal income tax 687,680 344,606 430,278 450,200 300,273 Deferred state franchise tax 72,435 30,501 02,293 60,006 52,242 Amortization of investment tax credit (89,010) (61,766) (52,348) (48,099) (34,504) Allowance for other and borrowed funds used during construction . (628,700) (410,705) (248,207) (135,080) (451,593) Property tax abatements . (270,813) - - - - Amortization of deferred debits 722,385 618,490 238,309 252,232 190,558 Funds Prmided by Operations 3,991,302 3,680,820 2,723,929 2,027,148 2,174,000 Other Sources - Net 179,010 224.299 893,000 492,679 1,083,017 In(tease (Decrease) in Short-term Debt 4,450,000 (1,530,000) 2,200,000 (4,100,000) 400,000 Proceeds from Sale of Long-term Debt . - - - 3,000,000 - TOTAr. FuNus PnOVIDED . $8,020,918 $ 2,381,125 $5,817,889 8 2,019,827 $ 3,617,023 FeNos ArruEn To: Additions to 1*lant $3,270,000 $ 3,098,508 $4,319,684 $ 2,193,438 - $ 2,886,615 Im estments in Non-utility Operations 233,811 271,222 Common Stock Dividends 805,161 683,017 655,687 484,934 028,368 Preferred Stock Dividends 282,134 287,580 289,739 218,649 293,500 Funds Used for lletirement of Securitic : Lemg-term debt . 198,000 191,000 47,000 288,750 186,250 lieferred stock 117,000 42,000 42,000 42,000 42,000 Inacase (Decrease) in Working Capi-tal, Excluding Short-Term Debt 3,653,870 (2,192,208) 403,779 (I,207,944) (419,716) TuTAt. FvNos Arruto $8,620,93 8 $ 2,381,125 $5,817,889 $ 2,019,827 $ 3,617,023 INCnEAsE ( DECnEAsE) IN COstPONENTS OF WonuNu CAPrrAi, Exctxo:No SmmT-Tens DENT: Cash $1,208,148 $ (312,002) $ 172,402 $ (463,362) $ 624,371 Accounts receivable 1,197,227 71,440 525,979 30,702 (640,814) liefundable inmme taxes 2&l,990 - - - (293,700) Alaterials and supplies 201,691 (20,487) (59,737) (95,453) 27,594 Prepayments 628,553 (29,591) 13,815 23,621_ 71,953 Property tax abatement 402,821 - - - (330,657) Acctmnts payable (1,100,419) (1,090 918) (257,859) (818,529) (90,350) Customer deposits and refunds 304,883 (256,117) (328,748) (2,528) . 153 Taxes accrued 403,245 (508,101) 412,034 (318,350) 19,030 Deferred income taxes , 65,090 (63,885) 22,104 204,705 189,008 Interest accrued (42,953) 17,450 (36,365) (65,085) 14,509 Dividends declared , .
- - - 230,335 530 INCREASE (DECREASE) IN WOnKING CAPI-ran. , $3,653,876 $(2,192,208) $ 403,779 $_( 1.,207,944 ) _$__ __(419,716)
See notes to consolidated financial statements, 30
FITCIIBURG GAS AND ELECTRIC LIGHT COAIPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ltc I. Summary of Significant Accounting Policies The Company is subject to regalation by The Department of Public Utilities of the Commonwealth of Af assachusetts (the "DPU") with respect to its rates and accounting. The Company's accounting policies conform with generally accepted accounting principles, as applied in the case of regulated public utilities, and are in accordance with the accounting requirements of the DPU. A description of the Company's significant accounting policies follows: Principles of Comolidation On February 24,1978, the Company invested $20,000 in the Common Stock of a wholly-owned subsidiary, Fitchburg Energy Development Company ("FEDCO"). FEDCO has imested in oil and gas drilling projects, which investment has been recorded employing the equity method. All inter-company items have been eliminated in consolidation. Revenue Recognition The Company records unbilled fuel adjustment revenue currently to properly match revenues with related costs. Such unbilled revenue for the five years ended December 31,1979 was as follows: 1979 - $756,082,1978 - $389,156,1977 - $258,994, 1976 - $302,131 and 1975 - $811,981. Depreciation Annual provis;ons for depreciation are determined on a group straight line basis. Such provisions were equivalent to the following composite rates based on the average depreciable property balances at the beginning and end of each year: 1979 - 3.11 %, 1978 - 3.01 %, 1977 - 2.88 % , 1976 - 2.64 % and 1975 - 2.65%. It is the accounting policy of the Company, in general, to treat maintenance, repairs and renewals as expenses in cases involving so-called items of non-units of property; if so-called units of property are involved (such as poles, gas mains, etc.), the costs incidental to replacements are capitalized and the units replaced are retired by crediting the original cost (estimated if not known) to the respective property accounts and concurrently charging depreciation reserves. All expenses covering the cost of removal are charged and any salvage realized is credited to the retirement reserves. Accounting for income Taxes For income tax purposes the Company excludes a portion of unbilled fuel adjustment revenue and ancordingly provides deferred income taxes payable in the succeeding year on such revenue which is carried as a current asset. The Company has used an accelerated method of depreciation which presently results in the annual tax depreciation being in excess of book depreciation, and has deducted currently certain ele-ments of construction overheads that are capitalized for book purposes. For each of these differences the Company provides for deferred income tax as approved for rate making purposes. In addition, the Company has recorded deferred income taxes related to certain abandoned properties which are recognized as tax losses at differing times. In addition to the above, the Company, in 1979, capitalized certain maintenance costs for a gen-erating unit, yet continued to deduct these costs currently for tax purposes. Deferred income taxes have been provided for this timing difference. 1 l 31 e
FITCHBURG GAS AND El ECTHIC LIGIIT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 1. Summary of Significant Accounting Policies - (Continued) The annual investment tax credits permitted by additions to the Company's utility property are being amortized into income rateably over the estimated productive lives of the related assets as allowed by the DPU. Such deferrals for the five years ended December 31, 1979 were as follows: 1979-$308,687,1978-$292,457,1977-$100,175,1976-$387,183 and 1975-$494,130. The Company has elected to account for investment tax credits on non. utility property additions, primarily related to FEDCO, by the " flow-through" method. Under this method credits are recognized as a reduction of Federal income tax expense in the year utilized. In 1979 and 1978 these credits amounted to $7,607 and $10,3S0, respectively. In accordance with provisions of the Tax Heduction Act of 1975, as amended, an additional 1% (1 %% in 1979 and 1978) investment tax credit resulting from the Company's election to adopt a federal Tax Heduction Act Employee Stock Ownership Plan ("TRAESOP") has been utilized in reducing federal income taxes payable since the year ended December 31,1976. In accordance with provisions of the Act the resulting tax benefits are not used to reduce current federal income tax expense. The additional credit is accounted for as a payment to the TRAESOP in lieu of an income tax payment to the United States Government. Allorcance for Funds Used During Construction An allowance for funds used during construction ("AFUDC"), a non-cash item, is included in e(mstruction work in progress. The objective of AFUDC is to present the carnings that would result in the absence of construction programs and the related financing requirements during the period of construction. Accordingly, AFUDC capitalizes the cost of debt and equity employed in meeting these financing requirements, based upon a composite rate applied to construction work in progress, which assumes that funds used for construction were provided by borrowings, preferred stock and com-mon equity. Prior to 1977, AFUDC was reported on the basis of an overall rate applicabic to all funds. The combined rates used in calculating AFUDC were approximately 14%,11% and 10% for the years 1979,1978 and 1977, respectively. The rate used in calculating AFUDC was 10% for the years 1976 and 1975. For the years prior to 1977, the caption "All funds" reflects total AFUDC. For the year 1977 and subsequent years, the total of " Allowance for funds used during construction - other funds" and " Allowance for borrowed funds used during construction"is comparable to total AFUDC reported in prior years. AFUDC amounted to 31.8%,24.9%,27.3%,17.1% and 51.1% of the net income applicable to Common Stock for the years 1979,1978,1977,1976 and 1975, respectively. The Company has not reclassified AFUDC into its debt and equity components for periods prior to January 1,1977 because it believes such reclassification would be inappmpriate since the alloca-tion between the debt and equity components for periods prior to January 1,1977 could not be com-parable to the alh> cation between such components determined after December 31,1976 utilizing the revised procedures of FERC. Assuming that funds used to finance construction during the years 1976 and 1975 were obtained from various sources of capital in the same pmportion as the capitalization ratios for those years, the cominon equity component of the allowance for funds used during construction as related to net in-come applicable to Common Stock, after giving tax effect to the interest component relating to long-term debt, is estimated at approximately 11.1% in 1976 and 34.4% in 1975. 32 l
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STA1EMENTS - (Continued) Note 2. Regulatory Matters Recenue Adjustments The Company's method of billing and accounting for revenue under its fuel adjustment clause in effect through September 26,1974 has been challenged before the DPU by the Attorney General of The Commonwealth of Afassachusetts. The required monthly fuel adjustment schedule theretofore filed with the DPU had not been disputed by the regulatory authority. The aggregate portion of such fuel adjustment clause revenues recorded by the Company and challenged by the Attorney General is approximately equal to $724,000 and is equivalent to $.83 per average common share outstanding on 1974 earnings, after giving tax effect thereto. The Company has vigorously defended its procedures in proceedings before the DPU, the outcome of which is uncertain. No provision for any liability that may result has been made in the Consolidated Financial Statements. The Company's billing and accounting for revenues under the fuel adjustments based on costs incurred after September 26, 1974 are being made under a new fuel adjustment clause which took effect on September 27,1974 and are not being challenged. Conclusion of Rate Appeal l On February 14,1977, the Company filed with the DPU revised rates designed to increase electric revenues by $2,795,000 and gas revenues by $838,000, which proposed rates were suspended. In accordance with the Order of the DPU dated August 31,1977 in DPU 19084 and the Supplemental Order thereto dated September 15, 1977, the Company was allowed to file new rates designed to produce annually an additional $1,062,109 in electric revenues and $553,734 in gas revenues. On September 15,1977, the Company appealed this rate decision to the Supreme Judicial Court of Afassachusetts ("SJC"), and on October 21,1977, the SJC granted the Company's request for a stay. This stay allowed the Company to collect an additional $472,831 in annual electric revenues, subject to refund if the Company did not prevailin its appeal. On June 30, 1978, the SJC issued its order instructing the DPU to reconsider how much in revenues the Company should be allowed. On October 5,1978, the DPU issued its final ruling allowing the Company to retain the $472,831 annual amount collected under the stay and, authorized an additional $269,240 in electric rates. The October 5,1978 DPU order concluded the rate action initiated by the Company in February, 1977. Of the $3,633,000 originally requested, the total amount granted was $2,357,914. Note 3. Deferred Debits i Unamorti:cd Cost of Abandoned Properties The unamortized cost of abandoned properties is being amortized at various rates as ordered by by the DPU. On November 1,1979, the Company began amortizing the costs of its investment in the Charles-town Units 1 and 2 proposed nuclear generating plants. This abandonment was precipitated by the announcement on October 9,1979 by the lead participant, New England Electric System, to defer indefinitely the in-service date and the subsequent announced termination of this project. On Novem-ber 27,1979 the DPU approved the Company's request to amortize approximately $653,000 over a
- 36 month period. The Company will request from the DPU permission to apply similar treatment to any additional costs associated with these Units.
33 l l i
FITCIIBURG GAS AND ELECTRIC LICIIT COhlPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEhlENTS - (Continued) Note 3. Deferred Debits - (Continued) The amounts to be amortized for all properties over the next five years are as follows: 1980,
$83S,309; 1981, $723,467; 1982, $629,867; 1983, $58,523; 1984, $58,523.
Other Deferred Debits- At December 31, 1979, other deferred debits are composed of the following: Property tax abatements (Due 1981) $270,813 Preliminary survey and engineering costs 101,088 Deferred maintenance costs (amortized based upon generation) 195,192 Afiscellaneous 78,638 Total other deferred debits $610.331 Note 4. Hedeemable Cumulative Preferred Stock The Cumulative Preferred Stock, 5%% Series, is preferred over Common Stock in vohmtary liquidation at the redemption price in effect at the time of such voluntary liquidation, and in in-voluntary liquidation at $100 per share, both plus accrued dividends. Shares of the 5%% Series are redeemahle at the Company's option at $102.56 per share on or before Alay 31,1981 and at $101.28 thereafter. The Company is required to purchase on June 1 of each year not less than 420 shares, unless a lesser amount of shares is tendered, at $100 per share plus accrued dividends. The Cumulative Preferred Stock,8% Series, is preferred over Common Stock in vohmtary liquida-tion at the redemption price in effect at the time of such voluntary liquidation and in involuntary liquidation at $100 per share, both plus accrued dividends. Shares of the 8% Series are redeemable at the Compan/s option at $108.00 per share on or before August 31,1983 and at diminishing premium rates thereafter. The Company is required to purchase on Jime 1 of each year beginning in 1979 not less than 750 shares, unless a lesser amount of shares is tendered, at $100 per share plus accrued dividends. Purchases of redeemable Cumulative Preferred Stock during the five years ending December 31, 1979 consisted of the following: Dividend Series 1979 1978 1977 1976 1975 , 5%% $ 12,000 $42,000 $42,000 $42,000 $42,000 I 8% $75,000 - - - - The aggregate amount of sinking fund requirements in each of the five years following 1979 is j
$117,000. '
i Note 5. Hestrictions on Hetained Earnings l l Under the most restrictive provisions of the Indentures relating to the Compan/s long-term 1 debt $4,324,106 of retained earnings were available for the payment of cash dividends on Common Stock at December 31,1979. 34
FITCHBURG GAS AND ELECTRIC LIGIIT COAIPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEhlENTS - (Continued) Note 6. Long-term Debt Details of Long-term Debt at December 31,1979 are shown below: Twenty five year notes, 4%%, due February 1,1984 $ 3,183,000 Twenty.five year notes, 9%%, due Alarch 1,1995 6,900,000 Twenty year notes,10%, due September 1,1996 3,000,000 Twenty-five year notes,10%%, due Afay 1,1999 3,820.000 Total 16,903,000 Less: Installments due within one year 123,000 Total Long-term Debt $16,780,000 The aggregate amount of sinking fund requirements for each of the five years following 1979 are: 19S0, $123,000; 1981, $198,000; 19S2 and 1983, $398,000 and 1984, $3,366,000. The Company has satis-fied the 1980 sinking fund requirement for the 9%% Notes in the amount of $75,000. Note 7. Notes Payable The Company has agreed to maintain certain average amounts on deposit or pay certain fees in i lieu of compensating balances. Certain of the lines of credit require that compensating balances be increased in relation to usage. Compensating balances at December 31, 1979, were approximately
$985,000. Information with regard to short-term bank loans at December 31, 1979, and for the year then ended follows:
As of end of year: Weighted average interest rate 15.33 % Unused line of credit $4,230,000 For year ended: Weighted daily average interest rate 13.01% Average borrowings $2,441,400 hiaximum borrowings at month end $5,420,000 Afonth such maximum occurred December Note 8. Federal Income Tax Federal income tax expense comprises the following components: Year Ended December 31, 1979 1978 1977 1976 1975 Current expense charged (credited): Operating expenses $ 957,846 $1,216,342 $561,677 $762,160 $310,790 Non-operating inmme .. (123,736) (78,419) (1,235) 19,224 32,419 Amortization of investment tax credit (89.049) (61,766) (52,348) (48,699) (34,504) 745,061 1,075,627 508,094 732,685 '308,705 Deferred tax expense charged (credited): Deferred unbilled revenue 74,905 61,180 (19,360) (226,288) (170,027) Accelerated tax depreciation . 278,315 284,733 308,288 363,066 279,588 Abandoned properties 39,085 (156,853) - - - Overheads and other 217,473 92,910 100,782 40,700 86,685 Deferred maintenance costs 85,303 - - - - Percer.tage repair allowance 19,949 57,181 21,203 52,494 - 715,030 339,151 410,918 229,972 196,246 Non-operating expense 44,692 67,317 - - - 759,722 406,468 410,918 229,972 196,246 Total expense . 31,504,783 81,482,095 $919,012 $962,657 $504,951 35 , a
FITCIIBURG GAS AND ELECTRIC LIGIIT COMPANY AND SUBSIDLiRY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 8. Federal Income Tax - (Continued) The Federalincome tax amounts included in the Consolidated Statement of Income differ from the amounts which result from applying the statutory Federal income tax rate to Net Income before income tax. The reasons, with related percentage effects, are as shown baw: Year l'nded December 31, 1979 1978 .'977 1976 1975 Statutory Federal income tax rate 40% 48% 48% 48% 48% Income tax offects of timing differences: Allowance for funds used during construction . (5) (4) (4) (3) (14) Miscellaneous (1) (1) (1) 2 (4) Effective Federal income tax rate 40% 43% 43% 47% 30% Note 9. Commitments Lease obligations In accordance with the guidelines of Statement of Financial Accounting Standards No.13 issued by the Financial Accounting Standards Board, the Company is disclosing pertinent information re-garding its capital leases. The Securities and Exchange Commission requires, for rate-regulated en-terprises, disclosure of the effect on the balance sheet and on expenses if such leases had been capital-ized, pending the results of its review of the Statement's applicability to rate-regulated enterprises. The Company has a significant twenty-five year lease which began April 1,1973 for a combustion turbine and a liquefied natural gas storage facility. The lease is subject to a ten year renewal period at the option of the Company at an annual rental of 14%% of the aggregate fair market value as at the end of the initial lease term. Under certain conditions the Company has the right to purchase the units at an independently appraised market value. Under the lease, the Company has the obligation to maintain the equipment in good operating condition and pay all taxes and insurance on said equip-ment. IIad the Company capitalized its capital leases at December 31, 1979 the asset and related liability which would have been recorded on the balance sheet for the Company's capital leases were
.$2,202,922 and $2,538,358, respectively. IInd the Company capitalized its capital leases, Depreciation and Other Interest Charges would have increased and Operating Expenses, Other would have de-creased as follows:
Year ended December 31, 1979 1978 1977 1976 1975 Depreciation . $ 171,721 $ 162,733 $ 143,010 $ 110,720 $ 116,720 Other Interest Charges $ 181,920 $ 179,180 $ 180,854 $ 176,728 $ 180,887 Operating Expenses, Other . . $(307,493) $(287,507) $(274,476) $(236,954 ) $(230,951) The minimum commitments under all non-cancellable long-term leases in effect at December 31, 1979 are as follows: 1980-$309,SS4; 1981-$2S6,325; 1982-$262,930; 1983-$255,073; 19S4-
$249,495; 1985-1989 - $1,141,148 aggregate for the period; 1990-1994 - $1,128,083 aggregate for the period; and 1995 and thereafter-$788,230 aggregate.
! Total rental expenses for the five years ended December 31,1979,1978,1977,1976 and 1975 l amounted to $430,309, $428,289, $445,630, $467,163 and $367,641, respectively. ! As of December 31,1979 the Company had executed a commitment letter to purchase computer system hardware and peripheral equipment, with an acquisition cost of approximately $211,000 to be in operation by the end of 1980. The Company intends to finance this acquisition by means of a third. party sale and leaseback arrangement. 36
FITCIIBURG GAS AND ELECTRIC LIGIIT COAIPANE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATE 5 TENTS - (Continued) Note 9. Commitments - (Continued) Pension Plans T' company has in effect two funded Pension Pas and related Trust Agreements to provide retirement u:".mities for participating employees at age 65. The entire amount of the annual con-tribution under the actuarial requirements of the Plans is borne by the Company. The Company's contribution to the Plans during the five years ended December 31, 1979, 1978, 1977,1976 and 1975 amounted to $519,323, $497,077, $459,8S0, $a39,419 and $425,037, respectively, which includes amortization of prior service costs over a period of thirty years. The Company's policy is to fund the pension cost accrued. The actuarially computed value of vested benefits as of January 1,1979, the date of the latest actuarial valuation, exceeded the total of the pension fund by $3,969,379. The aggregate amount of unfunded prior service costs as of the same date was $5,105,390. Joint Onencrship Units and Construction The Company is participating on a tenancy-in-common basis with other New England utilities in the construction and ownership of eight generating units. New IIaven IIarbor and Wyman Unit
#4, both oil-fired stations, have been in commercial operation since August 1975 and December 1978, respectively. The remaining six nuclear units are planned or under construction.
Details relating to the various units are as follows: Company's Share in Thousands of Dollars Proportionate Am unt Share of Amount of Accumu- pended Estimated Ownership Utility lated through Cost of Plant m Depreci- 12/31 Construc-Joint Ownership Units State % AlW Service ation 1979 tion Seabrook Units #1 & 2 New Ilampshire 0.1710 3.9 - - 1,962 5,851 Afillstone Unit #3 Connecticut 0.217 2.5 - - 1,762 7,037 Pilgrim Unit #2 ...... hfassachusetts 0.19 2.2 - - 827 5,565 Alontague Units #1 & 2 Kfassachusetts 0 35 8.1 - - 250 12,293 Wyman Unit #4 . hiaine 0.1822 1.1 396 19 New Ilaven Ilarbor Connecticut 4.5 20.1 6.930 828 37.9 $7.326 $847 $4,801 $30,746 The Company's share of direct operating expenses of the joint ownership units is included in the corresponding operating expense on its income statement. On January 26,1979, the common shareholders approved the acquisition of an additional 0.43332%
- ownership interest in each of the Seabrook Units from The Connecticut Light and Power Company.
l The Company has made an agreement to purchase up to an additional 0.26087 % ownership in each of the Seabrook Units from Public Service Company of New IIampshire, subject to the approval of the common shareholders. The purchase of both additional interests, representing approximately an additional 16 MW, has been excluded from the information presented herein, pending final approval of the purchases by the DPU. The Company expects to finance the cost of its participation in the Units initially through the use ! of short-term borrowings. At the appropriate times, short-term borrowings are expected to be replaced l by permanent financing. The Company estimates construction requirements relative to these Units of approximately
$10,160,000 during the next five year period ending December 31,1984.
Reference is made to ~rhe Company" and " Construction Program" for additional information regarding the Company's joint ownership in several nuclear units and the problems faced by the nuclear facilities. 37 1
FITCIIBURG GAS AND ELECTHIC LIGIIT COhfPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Note 10. Electric Facilities Purchased New England Power Company received final regulatory approval from the Securities and Ex-change Commission and on June 1,1977, the Flagg Pond and lleech Street substations and associated 69KV and 13.8KV lines were integrated into the Company's electric system. The purchase of this equipment located within the Company's service area ended a 68-year old arrangement under which New England Power had served six large industrial customers within the Company's service area. Note 11. Segment Information Electric Operations 1979 1978 1977 Operating resenues $24,475,296 $21,157,542 $19,061,399 Operating income before in-ome taxes $ 3,910,716 $ 3,654,896 $ 2,691,154 Identifiable assets as of December 31 $32,460,207 $30,724,323 $29,387,092 Depreciation $ 955,004 $ 932,260 $ 886,491 Construction expenditures $ 1,841,551 $ 2,339,849 $ 3,664,804 Cas Operatiom 1979 1978 1977 Operating revenues $ 9,786,185 $ 7,919,991 8 6,860,860 Operating income before income taxes $ 1,355,870 $ 1,185,032 $ 916,881 Identifiable assets as of December 31 $11,097,002 $ 8,987,224 $ 8,131,480 Depreciation $ 281.688 $ 249,527 $ 207,299 Construction expenditures $ 1,429.049 $ 758,659 $ 654,880 Total Company 1979 1978 1977 Operating revenues $34,261,481 $29,077,533 $25,922,259 Operating income before income taxes . $ 5,266,580 $ 4,839,928 $ 3,608,035 Income taxes (1,762,468) (1,607,717) (1,064,073) Non-operating income ,, 88,714 201,991 111,902 Net income deductions .. (1,332,126) (1,474,352) (1,450,052) Net income , $ 2,260,706 $ 1,959,850 $ 1,199,812 Identillable assets as of December 31 , $43,557,209 $39,711,547 $3'7,518,572 Unallocated assets, primarily working capital 8 7,256,086 g4,513,480 $ 4,916,140 Total assets as of December 31 $50,813.295 $4 e,225,027 $42,434,712 Depreciation , $ 1,236,692 $ 1,181,787 $ 1,093,790 Construction expenditures .. $ 3.270,600 $ 3,098,508 $ 4,319,684 38 e _-
1 l FITCHBURG GAS AND ELECTRIC LIGHT COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEAIENTS - (Continued) Note 11. Segment Information - (Continued) Expenses used to determine operating income before taxes are charged directly to either segment or are allocated in accordance with factors contained in cost of service studies which were included in rate applications approved by the DPU. Assets allocated to each segment are based upon specific identification of such assets provided by Company records. Assets not so identified represent primarily working capitalitems. Note 12. Supplementary Income Statement Information Amounts recorded for maintenance and repairs and depreciation are set forth separately in the Consolidated Statement of Income. There were no fees or royalties. Information as to taxes other than federal taxes on income is as follows: Year Ended December 31, 1979 1978 1977 1976 1975 Taxes Other Than Federal Income Taxes: Charged directly to operating ex-penses: Other Taxes Aliscellaneous Federal taxes $ 147,890 $ 120,210 $ 117,409 $ 101,291 $ 102,657 Aliscellaneous state taxes 45,779 ' 46,M9 42,255 42,592 32,213 193,669 166,859 159,664 143,883 134,870 State gross earnings (franchise) tax 178,641 113,990 143,826 133,922 87,624 Alunicipal property taxes 1,362,511 1,693,904 1,528,762 1,384,481 1,253,906 Abatement of prior year . (244,076) - - - - 1,490,745 1,974,753 1,832,252 1,662,286 1,476,400 Charged to other accounts: Taxes capitalized to plant . 33,046 31,705 26,878 31,701 35,545 State gross earnings (franchise) tax charged to non-operating income and Jobbing . . 1,530 1,086 (179) 2,784 5,201 Afiscellaneous taxes charged to other accounts 2,638 3,083 2,579 12,574 9,986 37,214 35,874 29,278 47,059 50,732
$1,527,959 $2,010,627 $1.861,530 $1,709,345 $1,527,132 Rents Charged to Operations $ 430,309 $ 428,289 $ 445,630 $ 467,163 $ 367,M1 Note 13. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1979 and 1978 is as follows: Three Afonths Ended Alarch 31 June 30 Sept.30 Dec. 31 1979 1978 1979 1978 1979 1978 1979 1978 Total operating revenues $9,262.880 $8,913,440 $7,903,958 $6,585,503 $7,700,297 $5,988,814 $9,3M,346 $7,589,776 Operating income $ M2,984 $1,032,845 $ 689,517 $ 692,098 $ 667,486 $ 677,117 $1,204,131 $ 830,151 , Net income $ 654,713 $ 689,468 $ 424,545 $ 391,099 $ 319,478 $ 365,942 $ 861,970 $ 513,341 l Earnings per share $1.28 $1.36 4.78 $.70 $.55 8.65 $1.73 $.96 Net income for the quarter ended December 31, 1979 has been increased by $376,478 or $.83 of earnings per common share, resulting from abatements of real estate taxes. 39
i UNDERWRITING The Underwriters named below have severally agreed, subject to the terms and conditions of a purchase agreement, to purchase from the Company the following respective numbers of shares of Additional Common Stock: Undermiter Number of Shares Aterrill Lynch, Pierce, Fenner & Smith Incorporated 100,000 The purchase agreement provides that the Underwriters are committed to purchase all of the shares of Additional Common Stock if any are purchased. hierrill Lynch, Pierce, Fenner & Smith Incorporated, One Liberty Plaza, New York, New York 100SO, the Ilepresentative of the Underwriters, has advised the Company that sales of shares of Addi-tional Common Stock to certain dealers may be made at a concession of $ per share and the ' Underwriters may allow, and such dealers may reallow, discounts of not in excess of $ per share on sales to certain other dealers. After the initial public offering, the public offering price, concession and reallowance may be changed. The Company has agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933. 40
r Fitchburg Gas and Electric Light Company 100,000 Shares Common Stock ($10 Par Value) l l 1 PROSPECTUS Merrill Lynch White Weld Capital Markets Group Merrill Lynch, Pierce, Fenner & Smith I icorporated Dated May ,1980
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37-y,W ADDITIONAL FINANCIAL INFORMATION SEABROOK STATION, UNIT NOS. 1 & 2 3A. Table I indicates our total cost for this project. From 4/1/80 to completion Table II shows the total expected capital costs of the Department thru 1985. A 5% depreciation rate is assumed. .
- 38. At present no bond financing is anticipated to meet our projected costs for Seabrook. Should borrowing become necessary the principal and interest would be paid out of current operating funds derived from the sale of energy.
3C. Last borrowing took place on July 15, 1962. Amount was $450,000.00 at a rate of 3%. These were general obligation bonds. We had no problems at that time in floating this issue. We have no outstanding long term debt at present. 3D. Copies attached. 3E. The participants percentage ownership share in the facility is equal to its percentage entitlement in the electrical capacity and output of the Plant. 3F. "The Mayor of a City, or the Selectmen or Municipal Light Board, if any, of a Town acquiring a gas or electric plant shall appoint a Manager of municipal [ lighting, who shall under the direction and control of the Mayor, Selectmen l apter, have full or Municipal charge of the Light Board, operation andif management any, and subject of thetoplant". this cg1 SCHFDULE OF PRICES FOR GAS AND ELECTRICITY There shall be fixed schqdules of prices for gas and electricity, which shall not be changed oftener than once in three months. Any change shall take effect on the first day of a month, and shall first be advertised in a newspaper, if any, published in the municipality. No price injsaid schedules shall, without the written consent of the department,9 be fixed tion cost as it may be defined from time to time by order at lessDepartment.? of the than produg/ Such schedules of prices shall be fixed to yield not nt, as it.may be more than from determined eighttime pertocent timeper annum by order on Department,_ of the the cost of the pig! after the payment ' of all operating expenses, interest on the outstanding debt, the requirements l of the serial debt or sinking fund established to meet said debt, and also I depreciation of.the plant reckoned as provided in section fifty-seven and losses; but any losses exceeding three per cent of the investment in the plant may be charged in succeeding years at not more than three per cent per annum. The gas and electricity used by the municipality for any purpose l except street lighting shall be charged for in accordance with the prices in the fixed schedules. The gas and electricity used by the municipality for street lighting shall be charged for at a cost to be determined as follows: the sum of all operating expenses, interest on the outstanding .. , debt, the requirements of the serial debt or sinking fund established to t i meet said debt, and also depreciation of the plant reckoned as provided in section fifty-seven, and losses, shall be the dividend; the kilowatt hours i sold including those supplied for street lighting shall be the divisor, and
, the resulting quotient multiplied by the kilowatt hours supplied for street 1/ Chapter 164, Section 56, Massachusetts General Laws 2/ Department - Massachusetts Department of Public Utilities l
, y 1 . Lighting shall be the cost to'be charged to the municipality fo'r street lighting. In lieu of the method of determining charges for electricity used '
by the municipality for street lighting, as set forth in the preceding sentence, electricity so used may be charged for at a cost in accordance I with a street lighting schedule filed with and approved by the Department. 2/3j[ NOTICE OF CHANGE OF PRICE TO DEPARTMENT When a town fixes or changes a price, a notice thereof in form specified by the Department shall be filed within sixty days with the Department by the Manager of municipal lighting, and for the failure to do so he shall forfeit not more than twenty-five dollars. 4/ al Chapter 164, Section 56, Massachusetts General Laws 2 Department - Massachusetts Department of Public Utilities 3/, Chapter 164, Section 58, fiassachusetts General Laws 4/ Chapter 164, Section 59, Massachusetts General Laws 8 e
TABLE I HUDSON LIGHT AND POWER DEPARTMENT ESTIMATED TOTAL CASH FLOW REQUIREMENTS SEABROOK UNITS 1 & 2
~
ESTIMATED PERIOD UNIT EXPENDITURES (1) 4/1/80 - 12/31/80 $ 316,333 1981 346,555 1982 260,868 1983 196,651 1984 99,730 1985 8,279 (1) Included Fuel O
, - -1,
TABLE II HUDSON LIGHT AND POWER DEPARTMENT ESTIMATED TOTAL CAPITAL REQUIREMENTS SEABROOK AND OTHER PROJECTS TOTAL PERIOD CAPITAL EXPENDITURES 4/1-12/31/80 $712,193 1981 728,460 1982 823,713 1983 802,115 1984 748,658 1985 779,802
~
TABLE III ESTIMATED INTERNAL FUNDS-AVAILABLE TO MEET CAPITAL EXPENDITURES TOTAL FUNDS PERIOD AVAILABLE DURING PERIOD 4/1 - 12/31/80 $1,941,000 1981 , 1,735,000 1982 1,526,000 1933 1,PPS,000 1984 962,000 - 1985 800,000 i I I l
' l L _- _J
'l 30 town OF HUD30!! LICllT AND Fo#ER DEPAR'114ENT ye,t..................................................................................
.s ,. ; .. . . .
- l I COMPARATIVE 11ALANCE SilEET Aseets med other Debits Selence Seqlnning of s lacrecee ,
Title of Account Year En. ofole nce Year er (Decree,e) L888 (a) (b) (c) (.) fee. ! I
?
! UTILITY l'LANT '*
$4,962,170.50 $ 4,939,641,56 -
2 8 101 Utility Plant - Electric (P.17) . . . . . . . . 101 Utility Plant - Cas (P. 20). . ....... None None $(22,528.94)l' None~
.i (d) .
i 4
~4,979,64T 55-- ~(P2,52u.ve; .
6 Total Utility 1'lant. . . ~ 4,962,170. 50 , 8 . , 7 l 8
. l 10 i 11 FUND ACCOUNTS None j l None Hone ,
12 125 Slaking Fundo. . . .... . 1,380.208.42 225,840.51 ' s
.ag. ,;)
1,154,367.91 , 2: 126 Depreclation Fund (P.14). . .... 54,041.70 66,884.56 12,842.86f 12s other special runde. . . . . 14 1s Total ruma . . . . . . . . . . . . . . . . . . . . . . . 1,zus 409.51 1,447,092.96 ras,oas. r - E vl tM CWRRENT AND ACCRUED ASSETS 81,974.00.7 ~ (h i*,828l$f
* & c .,) h""'S
- I'315,852.52" ~
EM
'. ~
'1s 131 Chell(P.14
' las adedet DM) . . . . . . . . . . .Y. . . 100.00 C.182,379. 94 -
88,374.42 U .'5'9941483
' . 00.h . ,'7% l
-'. A !
.100.00' n zu Workins Funds. . . . ... ... .........
. ,None -
None None .. - -4 20 141 Nbtes Ree,1veble. . ... . ... .. .. 73 500,477.93 591.477.74 9Q3 999.81: : l 21 14: OustomdAccounts Recolebte. . .. .
' 13,293.92 26,450.78 -13,158.88. <
.:)1
'2 22 '143 0ther Aecounta Receivable. . .. ..
15,710.53 20,129.72 4,419.19 ~ -
'a2 14s nee'iv e bies trorn Municip.tity. .. ..
392,914.59 454,174.00 61,260.21 24 as 151 Mate rials anil Supplies (P.14). 171 Interest Receivable 26,113.12
, 98,250.61 37,910.01 157,898.30' 11,796.89.,
59,647.69 , 9} no is5 Prepaym ni,. . . None None None , , 27 174 Miscellaneous Current Assets. .. . . _ is,4ye.oi 5 .i 28 Total Current and Accrued Assets.. . li445,093.16 1,458,491.// 29 DEFERRED DEBITS ' None None None ' 80 181 Unamortased Debt Discount. ..... .. None None None ' 182 Entraordinary Property Loenes. . . . . 31
' 23,862.75 41,477.39 17,614.64 , '
s2 las other D.ferred Debits. .. . i7,di4.64 23,504./b 4I.4//.Jy 33 Total Deferred Debits. . . . 34 . Total Assets and Other Debits. ... 72639,536.02 7,886.703.70 ~~747,157.esi c> 35 . z d
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COMPAl(ATIVE IIAI.ANCE SilEI;T !.lablHties .ind Other Credits cal.n<. 1 Title of Account Bes;lnning of Balance ' increase (gn, voar ind of Year or (Decrease) (") (b) (r) (d) 1 APPit0PillATIONS
- 2 201 Appropriations for Construction.
3 None None ,___ None SUltPLUS 4 205 Sinking Fund Iteserves. . . . None None None 6 an itepayinent . 1,925,000.00 1,925,000.00 .00 6 20c 207 pnve,stment of. NUicipalit.y' n ' 20,093.39 20,093.39 .00 7 208 Unnppropriated Earned Surphan (P.12). 5,009,491.83 5,108,903.44 99,411.61 s Toiai.surpiu. ... T,E4 585.22-~ ~ ~ ~ - ~ ~~
'7,053,'996.83"
' ~ ~ ~ ~ ~ ~ ~ ~
~~ ~ 97,~4TT .~ 61 9 LONG TEllM DEllT 10 221 llonds (P. G). . . . . None None None 11 231 Notes Payable (P. 7). . ..
None None None 12 Total lionds and Notes. . .. NOTie fterie: None 13 CUltHENT AND ACCilUED LIABILITIES 14 232 Accounts Payable. . 505,598.84 703,347.22 197,748.38 15 231 Payables to Munfripality. . . .. . None None None 16 235 Customers' Deposits. . .. 82,379.94 88,374.42 5,994.48 17 2.16 Taxes Accrued. . . None None None 18 237 Interent Accrued. . None None None 19 24 Miscellaneous Current and Accrued L! abilities 58,822.02 2,885.23 (55,936.79) 20 Total Current and Accrued Liabilities. 646,800.80 M4~6F6 BT~ ~ l47,806.07 21 DEI'EltitED CitEDITS
,. 22 251 Unamortized Premium on Debt. . None None None 23 2.*4 Cusannier Advances f,.r Const ruction. 38,150.00 38,100.00 (50.00) 24 ra oth. r p<fcired Gn, hts. None None None 25 Total Deferred Credits -- ~~38 150. 00 '-~ ~38,T00.~00~~
~ ~ -
2G ItESEILVES .
~ ' ' - ~ ~ ~ ~~ ~~~ ~~ T50'.W)~~ ~ ~
27 260 iteserves for Uncollectible Accounts. . 23 261 Property Insurance Itevrve. . 29 2G2 Injuries and D. mages Itewrves. 30 263 Pensions and lienefits Heserves. 31 265 Miscellanenus Operating Iteserves. . . 32 Total Heserves. .. . None~~
. ... . .... ~ ~~ ~'one
~
N ~ None 33 CONTRIBUTIONS IN AlD OF
~ ~
CONSTitUCTION 34 271 Contributions in Aid of Constnietion.. None Rone None 35 Total I.iabilitiev and Other Credits. ~~7,639,536 0F ~ ~ T,~S85~,~703 70- ~747,167.68 State la low if ..ny carnings of the ruunicipal lighting plant have Iwn uwd for any purpost other than discharging indebted. nens of the plar.t. tl e purpow fnr which used and the amount thereof. TRANSFERRED $175,000.00 TO TOWN l .. l l l D
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>e.en.4 ' . . . .T.gN. .N. . .O. .F. . .N. .U..D. 5. 0. .N. ., . .L. .I.9. .f.t.?. . .A. .N. .D. 'PO,W5, .R. . .D EFA. M. . . .E.. . .R. .. . . . . .
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- STATEMENT W BNOOME FOR TffE YEAR T
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- q. .
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, . -I4 Accoutit i ***) E Line Current Year Preceding Year . f. '( ' ,I. ,.
No. (a) (b) j
, (c) g
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i
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1 OPEllATING INCOME . ( . J;.* l 2 400 Operating Rennues (P. 37 and 43) . . . . ................ 5.563,763.98 801,520.67 ,I.. ;
- Operating Esponses:
4 401 Operation Expense (P. 42 and 47) . . ................ 4,,692,145.85 1,054;604.41d* ' N. . 6 402 Maintenanee Expense (P. 42 and 47) . .. ..'............. 236,506.87 49,487.35 ; 6 403 Depreciation Expense.. . ........... ... 487,186.23 7,805.83 *e, ;Q, 7 407 Amortization of I'peperty Losses. . ............... . None None ,z g ,. . .. . 9 408 Tazes (P. 49). . .... ...... .....h......... None , ,. N6 tie #, g...y 30 Total Operating Espenses. . ..........g ........ 5,415,83.5.95 1 Titspui.DB T. . d 11 " t)perating Income . . . . . . .. . .... .
.y'. ........ 147,925.03 TIU,3/5.VE M ~ 'J...[[p:. "
lione - i 12 1) 414 Other Utility Operating Income (P. 50). . . . . 7. .. j . . . . . . . . 5.,- N$ne -
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.O( m T4 14 Total Operating Income. .... ., ./.'....... . 147,925.03 (N Us375.yz]T
.. .' .,J'y '
15 OTHER INCOME . ~
. s. l le 415 Income from Merchandihing, Jobbing and ContracNoris (P. 51) 126,060.28 362.53 . .j362.53 G 47 765.896 ';
.t D s
., it 41s:InteresUncesie. .h.. . . . . . . . . . d' c; '. . . . . . . . . MfC 7 "[ 'is 4:1 Miscallareon's Nonoperating Income. ,
.......;t.......... 63.77 i(g63.77..j- :M 19
.20 Total otp In come . . . . . . . . . . . . . . . . . , . . .,. . . . . . . . .
'roest Ineem. . . ... .... .... .....
4............ ize.we.on. 274.411.61 go .) m sa y ',,.- (252?154.7 M E '< ;,p , w f 21 [ MISCELLANCOUR INCOME DEDUCK8a
+
I g 22 425 Miscellaneous Amortization. . .... .. ...... . 'Y 23 420 Other Income Deductions. . '. .. .... . . , . - 24 Total Income Dedactions. ....... ...... None - Mone 25 Income nefore Interent Charge.. . . a t. ............
~fT4)ll . 61 _( 262,l BT. 73 ) 3
. 28 .
INTEREST CllAltGES 17 427 Interest on Bonds and Notes. . ....................... , . 28 428'Amortisation of Debt Discount and Expense. . . . . . . . . . . . . . s,,
~
29 429 Amortisation of Premium on Debt - Credit. . . . . i. . . . . . . . . . h 30 431'Other Interest Expense. . . . .. ... .. ................ ,. 21 4 32 Intercet Charged to Construetlo'n - Credit . . . , . . . . . . . . . . . . .
' .,N0ne (10.02)
- s. 1 3p t 3t 83 Total Interest Charges. .
' NET INCOME.
. . ........ ..... 7 74.411.61 (252,174.'717 W '-
-(10 QZ) JJ.
'W lQ '
y qc EARNED SURPI.UJ .
.: s ,2
', . ,. 3 one .. n bu. c,.a. m e4-No.
(a) * (b) (e) ', , [, 34 208 Unnppropriated Earned surplus (nt i eginning of period). . . . 5,009,491.83. ,d. ' 35 f:. ,w ..g@.'t '
.: , <: : p. .,3.
SG . a . :, . , af 43:111.*lainv Transferrnt from Income. . . . ...... ..,.......... E74,4ll[.$I' 1'. fj 4[',a 3.1 ta t,Mie41aneuen Credit s to Surplus (P. 21) . . . . . .'. , . . . . . . . . . . . ., g,e p ., I, 30 435.M i.in41ancows I klilt a to Surplus (l'. 21) . . . . . . . . . . . . . . . . . . . . '
'. 'U '
t t 175,000.00 40 4aa. Appn.pri.itten. of surplus (P. mi). . . . . . . . ...'............. . 9 ".
~
Il s t7 f.urph. 5 ppilo i to t h ptn iatio.: . ... .. . .. .. i e yu vi.arni..pri.uu carunt surpinnat end ..f periea). .. . 5,108,903.44 ; 9, i 41 3, To m s ~5,283,903.44 5,283,903.44
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m V 1
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i }/\u)11 ,1 l 1 l 1 l l l l l C
e Responses of the Massachusetts Municipal Wholesale Electric Company (MMWEC) to Requests for Additional Financ3cl I.' formation - Seabrook Station, Unit Nos.1 and 2: 3a Q: Provide a detailed statement of the projected sources of funds and respective dollar amounts for the applicant's total contributions to the capita' costs of Seabrook Station, Units 1 and 2. Include a detailed explanation of the assunptions upon which the projected sources of funds are based. A All funds projected to be required for MMWEC's share of the capital cost of the Seabrook Station will be raised through the issuance of tax-exempt debt obligations. MMWEC is a public corporation and political subdivision of the Commonwealth of Massachusetts. As such, MMWEC has no stockholders, operates on a non-profit basis with no net income or retained earnings and is exempt from State and Federal taxes.
- b. Q: If the applicant is to finance its ownership share with bonds, indicate the source of funds for payment of interest charges and principal.
A The principal and interest are payable from the revenues derived by MMWEC from its Power Supply System. Such revenues include all payments to be made to MMWEC by signatories to Power Sales Agreements with WWEC. MMWEC is the joint action power supply agency for 31 member Massachusetts municipal electric systems (Members). Members and others (Non-member Participants) enter into Power Sales Agreements with WWEC with respect to the output of specific electric generating facilities (Projects). These Power Sales Agreements require each Participant in a Project to pay its share of all of MMWEC's costs associated with the Project, including debt service on obligations issued by MMWEC to acquire or construct the project, whether or not the Project is completed or operating.
- c. Q: Describe the nature, amount, rating, and success of the applicant's most recent revenue and general obligation bond sales. Indicate the current t7tal outstanding indebtedness in each category for each entity.
A MMWEC is atthorized to issue revenue bonds under Chapter 775 of the Massachuset:s Acts of 1975. In August 1979, MMWEC issued Power Supply Systtm Revenue Bonds,1979 Series A, in the amount of
$150,000,000. These bonds were rated A by Moody's Investors Service and A+ by Standard and Poors. These bonds were marketed,in an orderly fashion. At the present time, MMWEC has outstanding Power Supply System Revenue Bonds in the amount of $560,870,000 and Notes Payable in the amount of $35,000,000.
m e
- d. Q: Provide copies of the most recent (December 1979 Annual and most
. recent six-month and 12-month) Financial Statements of the applicant.
A Copies of the audited Financial Statements of WWEC as of December 31, 1979 and 1978 are attached.
- e. Q: Is each participant's percentage ownership share in the facility equal to its percentage entitlement in the electrical capacity and output of the plant? If not, explain the difference (s) and any resultant effect on any participant's obligation to provide its share of design and construction costs.
A MMWEC's percentage ownership share is equal to its percentage entitlement in the capacity and energy from the plant.
- f. Q: Describe the rate-setting authority of the applicant and how that authority may be used to ensure the satisfaction of financial obligations under the Purchase and Ownership Participation Agreements for Seabrook Station.
A MMWEC is required to fix and collect charges sufficient to pay the costs of each Project, including debt service. W WEC's ability to ensure satisfaction of its financial obligations arises from the Power Sales Agreements. Signatories to Power Sales Agreements - covenant to fix electric rates sufficient to provide revenues to meet their obligations under the Power Sales Agreement and to pay all of their other electric system obligations. MMWEC charges under the Power Sales Agreements, and the rates of Member Participants are not subject to Massachusetts Department of Public Utilities' - approval. 1 L}}