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g( T f' ~" | g( T f' ~" | ||
g ,. | g ,. | ||
. t . g .. e :: - | . t . g .. e :: - | ||
*y.fa.? | *y.fa.? | ||
Line 54: | Line 53: | ||
,f ,14tchburg GoA gIfyggkc ; l_' , i. . k .' g [h 9/ b=two anup ,,4L !. - 1j 1 , , .*g .. | ,f ,14tchburg GoA gIfyggkc ; l_' , i. . k .' g [h 9/ b=two anup ,,4L !. - 1j 1 , , .*g .. | ||
& ?:hfff N - | & ?:hfff N - | ||
,h._a:l.? :A' | ,h._a:l.? :A' | ||
. ;; F .:\ { :- ' | . ;; F .:\ { :- ' | ||
Line 65: | Line 63: | ||
}; ,. | }; ,. | ||
a . | a . | ||
RTm.? ' | RTm.? ' | ||
' _ , _ ' . f, N | ' _ , _ ' . f, N | ||
Line 104: | Line 101: | ||
The past year can best be characterized as one of | The past year can best be characterized as one of | ||
( " | ( " | ||
y' | y' financial growth and of providing the groundwork for improving the company's financial structure in the future. | ||
financial growth and of providing the groundwork for improving the company's financial structure in the future. | |||
As indicated by the Financial Highlights on the opposite g v,. . | As indicated by the Financial Highlights on the opposite g v,. . | ||
page, the company's actions produced an unusual number of desirable factors which pushed eamin;s, net income | page, the company's actions produced an unusual number of desirable factors which pushed eamin;s, net income | ||
Line 203: | Line 198: | ||
[/e producer. -y W ' | [/e producer. -y W ' | ||
For Fitchburg Gas and Electric, the most important benefit of increased gas supplies is that it is allowing us | For Fitchburg Gas and Electric, the most important benefit of increased gas supplies is that it is allowing us | ||
(( | |||
A company-s$nsor~ed Energy Fair provIded yet another i | A company-s$nsor~ed Energy Fair provIded yet another i | ||
to return to the retail marketing of natural gas. opportunity to personal contact with cus.'omers. | to return to the retail marketing of natural gas. opportunity to personal contact with cus.'omers. | ||
Line 266: | Line 261: | ||
,.w ahQ, l | ,.w ahQ, l | ||
As . | As . | ||
1 | 1 | ||
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~ | ~ | ||
* Member of Compensation Committee. | * Member of Compensation Committee. | ||
k' TRUSTEE: The First National Bank of Boston, P.O. Box ANNUAL MEETING: The annual meeting of common 1897, Boston, Massachusetts 02105, is Trustee under | k' TRUSTEE: The First National Bank of Boston, P.O. Box ANNUAL MEETING: The annual meeting of common 1897, Boston, Massachusetts 02105, is Trustee under | ||
[ shareholders National BankisofscheduledBoston,100 to be held Federal Street, at The First Boston, indentures covering the Company's Notes due March 1, Massachusetts, in the Directors Room on the Second 1995 and May 1,1999, respectively. | [ shareholders National BankisofscheduledBoston,100 to be held Federal Street, at The First Boston, indentures covering the Company's Notes due March 1, Massachusetts, in the Directors Room on the Second 1995 and May 1,1999, respectively. | ||
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-- . .. .. _ m._. _ . ._, . . . _ _ ._ __ .. . _ _ _ . _ _ | -- . .. .. _ m._. _ . ._, . . . _ _ ._ __ .. . _ _ _ . _ _ | ||
FITCHBURG GAS AND ELECTRIC' LIGHT COMPANY SEC and Indenture Interest Coverages During the Period of Construction Ratio of Earnings Availabic for Earnings Interest as a Percentage To of Annual Interest on Fixed Existing Year-End Year Charges (SEC) Debt (Indenture) | FITCHBURG GAS AND ELECTRIC' LIGHT COMPANY SEC and Indenture Interest Coverages During the Period of Construction Ratio of Earnings Availabic for Earnings Interest as a Percentage To of Annual Interest on Fixed Existing Year-End Year Charges (SEC) Debt (Indenture) | ||
-1979 3.20 276% | -1979 3.20 276% | ||
Line 582: | Line 574: | ||
l Gross income (incl. AFUDC) & current and deferred FIT - long-term interest charges and amortization of debt discount & expense 3.4 2.6 2.9 i | l Gross income (incl. AFUDC) & current and deferred FIT - long-term interest charges and amortization of debt discount & expense 3.4 2.6 2.9 i | ||
Bond ratings (end of period) | Bond ratings (end of period) | ||
Standard and Poor's BBB BBB BBB | Standard and Poor's BBB BBB BBB Moody's Baa Baa Baa Times interest and preferred dividends earned after FIT: | ||
Moody's Baa Baa Baa Times interest and preferred dividends earned after FIT: | |||
Gross income (incl. AFUDC) - total interest | Gross income (incl. AFUDC) - total interest | ||
* charges & amortization of debt discount and expense & preferred dividends 1.8 1.5 1.4 | * charges & amortization of debt discount and expense & preferred dividends 1.8 1.5 1.4 AFUDC $ 0.417 $ 0.248 $ 0.135 Net income af ter preferred dividends $ 1.672 $ 0.910 $ 0.792 Market price of common $15.875 $15.75 $16.375 Book value of common $25.09 $23.15 $22.36-l Market-book ratio (end of period)* .63/1.00 .68/1.00 .73/1.00 Earnings avail, for common less AFUDC plus depreciation and amortization, deferred taxes, and investment tax credit adjust.- | ||
AFUDC $ 0.417 $ 0.248 $ 0.135 Net income af ter preferred dividends $ 1.672 $ 0.910 $ 0.792 Market price of common $15.875 $15.75 $16.375 Book value of common $25.09 $23.15 $22.36-l Market-book ratio (end of period)* .63/1.00 .68/1.00 .73/1.00 Earnings avail, for common less AFUDC plus depreciation and amortization, deferred taxes, and investment tax credit adjust.- | |||
deferred $ 3.343 $ 2.347 $ 1.993 Common dividends paid $ .683 $ .656 $ .642 Ratio 20.4% 28.0% 32.2% | deferred $ 3.343 $ 2.347 $ 1.993 Common dividends paid $ .683 $ .656 $ .642 Ratio 20.4% 28.0% 32.2% | ||
Short-term debt: | Short-term debt: | ||
Line 646: | Line 634: | ||
~,, j a n - :--- | ~,, j a n - :--- | ||
" 1 1 i Iv!!a! 131e iII 1 | " 1 1 i Iv!!a! 131e iII 1 | ||
' llI$ | ' llI$ | ||
oi I I 2 15ib p # n . s,l , -e li ny}y | oi I I 2 15ib p # n . s,l , -e li ny}y | ||
Line 1,094: | Line 1,081: | ||
1 l | 1 l | ||
l i | l i | ||
l l I | l l I | ||
l l 1 | l l 1 | ||
Line 1,148: | Line 1,134: | ||
l | l | ||
, 36 1 | , 36 1 | ||
e | e | ||
-,-w.m-ww m | -,-w.m-ww m | ||
Line 1,398: | Line 1,383: | ||
Maintenance and Renewal Covenant The First Mortgage contains a specific maintenance and renewal covenant providing that the Company will, during each calendar year, in the aggregate expend for, or allocate Additional Prop-erty to, or deposit in cash with the Trustee on account of maintenance, repairs, renewals and replace-ments, a total of nct ned than 15% of the gross operating revenues (after deduction of the aggregate cost of electric energy, gas and steam purchased for resale) during such period from the physical properties, other than leased properties, covered by the First Mortgage e-d used for the Primary Purposes of the Company's Business. Expenditures, deposits and allocations from insurance and eminent domain proceedings and certain other sources may not be included. (FM Art. V, Sec.1). | Maintenance and Renewal Covenant The First Mortgage contains a specific maintenance and renewal covenant providing that the Company will, during each calendar year, in the aggregate expend for, or allocate Additional Prop-erty to, or deposit in cash with the Trustee on account of maintenance, repairs, renewals and replace-ments, a total of nct ned than 15% of the gross operating revenues (after deduction of the aggregate cost of electric energy, gas and steam purchased for resale) during such period from the physical properties, other than leased properties, covered by the First Mortgage e-d used for the Primary Purposes of the Company's Business. Expenditures, deposits and allocations from insurance and eminent domain proceedings and certain other sources may not be included. (FM Art. V, Sec.1). | ||
Security and Priority The Series C Bonds will ba secured by the G&R Indenture equally and ratably with G&R Bonds of other series by a mortgage lien on substantially all the properties and franchises owned by the Com-pany at the time of the execution and delivery of the Second Supplemental Indenture and on substan-tially all property and franchises subsequently acquired by the Company, except real property in Maine and Massachusetts acquired after the filing of the Second Supplemental Indenture and before the filing of a further supplemental indenture specifically subjecting such after-acquired property to such lien; subject, however, to the payment of the Trustee's charges, to the lien of the First Mort-gage, to liens on after-acquired property existing at the time of acquisition or created in connection with the purchase thereof not exceeding 60% of the Cost or Fair Value, whichever is less, to certain exceptions set forth in the descriptions of properties in the G&R Indenture and in the deeds referred to in such descriptions, and to Permitted Liens. Certain types of pmperty are excepted from the lien of the G&R Indenture, including, among others: fuel, nuclear cores and materials; all gas, oil, and | Security and Priority The Series C Bonds will ba secured by the G&R Indenture equally and ratably with G&R Bonds of other series by a mortgage lien on substantially all the properties and franchises owned by the Com-pany at the time of the execution and delivery of the Second Supplemental Indenture and on substan-tially all property and franchises subsequently acquired by the Company, except real property in Maine and Massachusetts acquired after the filing of the Second Supplemental Indenture and before the filing of a further supplemental indenture specifically subjecting such after-acquired property to such lien; subject, however, to the payment of the Trustee's charges, to the lien of the First Mort-gage, to liens on after-acquired property existing at the time of acquisition or created in connection with the purchase thereof not exceeding 60% of the Cost or Fair Value, whichever is less, to certain exceptions set forth in the descriptions of properties in the G&R Indenture and in the deeds referred to in such descriptions, and to Permitted Liens. Certain types of pmperty are excepted from the lien of the G&R Indenture, including, among others: fuel, nuclear cores and materials; all gas, oil, and other mineral properties and personal property related thereto; supplies; ensh; securities; contracts; and accounts receivable. While the principal currently operating generating stations, dams, and substations are on land owned by the Company, the principal transmission lines are mostly on lands of others pursuant to easement rights. Ownership of generating stations now under construction is held in undivided joint ownership with other utility participants. (GR Granting clauses). | ||
other mineral properties and personal property related thereto; supplies; ensh; securities; contracts; and accounts receivable. While the principal currently operating generating stations, dams, and substations are on land owned by the Company, the principal transmission lines are mostly on lands of others pursuant to easement rights. Ownership of generating stations now under construction is held in undivided joint ownership with other utility participants. (GR Granting clauses). | |||
No debt may be carated by the Company ranking prior to or on a parity with the Series C Bonds with respect to the security provided by the G&R Indenture, except additional G&R Bonds issued in the manner summarized below, First Mortgage Bonds pledged with the Trustee under the G&R Inden-ture, obligations supported by additions and enlargements to property already subject to certain types of prior liens (none of which currently exists), and purchase money obligations existing or created in connection with the acquisition of after-acquired pmperty not to exceed 60% of its cost or value. | No debt may be carated by the Company ranking prior to or on a parity with the Series C Bonds with respect to the security provided by the G&R Indenture, except additional G&R Bonds issued in the manner summarized below, First Mortgage Bonds pledged with the Trustee under the G&R Inden-ture, obligations supported by additions and enlargements to property already subject to certain types of prior liens (none of which currently exists), and purchase money obligations existing or created in connection with the acquisition of after-acquired pmperty not to exceed 60% of its cost or value. | ||
l Prior liens and purchase money obligations, other than First Mortgage Bonds, shall not exceed 25% | l Prior liens and purchase money obligations, other than First Mortgage Bonds, shall not exceed 25% | ||
Line 1,424: | Line 1,407: | ||
Dividend Restriction So long as any of the Series C Bonds are outstanding, the Company may not declare or pay any l dividend (other than dividends payable solely in shares of common stock), or make any other distri- I bution on, or purchase, any shares of its common stock at any time outstanding (other than by new common stock financing), if after such action the amount of such dividends, distributions, and pur-chases (at cost) subsequent to December 31, 1977, would exceed its Net Income subsequent thereto, hss the amount of all dividends paid or declared on its preferred stock, plus $32,000,000 (2S Sec.1.M). | Dividend Restriction So long as any of the Series C Bonds are outstanding, the Company may not declare or pay any l dividend (other than dividends payable solely in shares of common stock), or make any other distri- I bution on, or purchase, any shares of its common stock at any time outstanding (other than by new common stock financing), if after such action the amount of such dividends, distributions, and pur-chases (at cost) subsequent to December 31, 1977, would exceed its Net Income subsequent thereto, hss the amount of all dividends paid or declared on its preferred stock, plus $32,000,000 (2S Sec.1.M). | ||
Modification of the G&R Indenture The G&R Indenture may be modified with the consent of the holders of 66%7o of the G&R Bonds at the time outstanding (or, if one or more but less than all the series of G&R Bonds would be ma-terially advemely affected,66%9c of the total bonds of the one or more series so affected). No such modification shall (a) affect the payment of principal, premium, and interest on any G&R Bonds, or extend the maturity or time of payment, without the consent of the holder of the G&R Bond affected, (b) reduce the above specified percentages of G&R Bondholders, or (c) permit the creation by the Company of any lien not otherwise permitted ranking prior to or on a parity with the lien of the G&R Indenture. No modification may be made which would conflict with the Trust Indenture Act of 1939 as then in effect. The Trustee is not obligated to execute a supplemental indenture which would affect its own rights, duties, or immunities under the G&R Indenture. (GR Art.13). | Modification of the G&R Indenture The G&R Indenture may be modified with the consent of the holders of 66%7o of the G&R Bonds at the time outstanding (or, if one or more but less than all the series of G&R Bonds would be ma-terially advemely affected,66%9c of the total bonds of the one or more series so affected). No such modification shall (a) affect the payment of principal, premium, and interest on any G&R Bonds, or extend the maturity or time of payment, without the consent of the holder of the G&R Bond affected, (b) reduce the above specified percentages of G&R Bondholders, or (c) permit the creation by the Company of any lien not otherwise permitted ranking prior to or on a parity with the lien of the G&R Indenture. No modification may be made which would conflict with the Trust Indenture Act of 1939 as then in effect. The Trustee is not obligated to execute a supplemental indenture which would affect its own rights, duties, or immunities under the G&R Indenture. (GR Art.13). | ||
The Trustee If the Trustee acquires any conflicting interest it shall either eliminate it or resign. There are j limitations on the rights of the Trustee in respect of certain payments and property received by the | The Trustee If the Trustee acquires any conflicting interest it shall either eliminate it or resign. There are j limitations on the rights of the Trustee in respect of certain payments and property received by the Trustee within four months prior to default. The Trustee may become the owner or pledgee of G&R Bonds as freely as if it were not the Trustee. (GR Art.11). | ||
Trustee within four months prior to default. The Trustee may become the owner or pledgee of G&R Bonds as freely as if it were not the Trustee. (GR Art.11). | |||
I The holders of a majority in principal amount of the G&R Bonds outstanding may require the Trustee to take certain action, except when forbidden by law or when the Trustee in good faith shall 55 1 | I The holders of a majority in principal amount of the G&R Bonds outstanding may require the Trustee to take certain action, except when forbidden by law or when the Trustee in good faith shall 55 1 | ||
? | ? | ||
Line 1,471: | Line 1,452: | ||
lj . 00.. | lj . 00.. | ||
o! ' | o! ' | ||
REPORT ji.. on November 27, 1979, the Public Service Company of New H =pshire. | REPORT ji.. on November 27, 1979, the Public Service Company of New H =pshire. | ||
il y an electric utility company, filed an application or authority to alter exis:- | il y an electric utility company, filed an application or authority to alter exis:- | ||
Line 1,483: | Line 1,463: | ||
] , | ] , | ||
On November 29, 1979 the Commission issued an Order of Notice | On November 29, 1979 the Commission issued an Order of Notice | ||
.' providing for a public hearing on this application to be held en Oc:c:ber 11, | .' providing for a public hearing on this application to be held en Oc:c:ber 11, | ||
!! 1979 and for publication of said notice. The notice was duly published and i | !! 1979 and for publication of said notice. The notice was duly published and i | ||
Line 1,495: | Line 1,474: | ||
<l Bank of Boston. . | <l Bank of Boston. . | ||
t The Legislative Utility Consumers' Ccuncil /hcreinafte- -- ' | |||
t | |||
The Legislative Utility Consumers' Ccuncil /hcreinafte- -- ' | |||
"-r i | "-r i | ||
y LUCC) presented tes:icony of Professor J. ?ater rillic son cf 22r:::::h - | y LUCC) presented tes:icony of Professor J. ?ater rillic son cf 22r:::::h - | ||
Line 1,562: | Line 1,538: | ||
I completion dates are also rejected by the Ccapany as being both against the j public interest and of little value in solving inadequate cash flow. The : | I completion dates are also rejected by the Ccapany as being both against the j public interest and of little value in solving inadequate cash flow. The : | ||
Company cencludes that only through a surcharge can :nese pros;ers :egin :c ; | Company cencludes that only through a surcharge can :nese pros;ers :egin :c ; | ||
be resolved. | be resolved. | ||
!k PSNH takes exception to the contention that the requested rate | !k PSNH takes exception to the contention that the requested rate | ||
Line 1,589: | Line 1,564: | ||
. 4_ i | . 4_ i | ||
!. .. 1 | !. .. 1 | ||
: 1. a t o | : 1. a t o | ||
Line 1,636: | Line 1,610: | ||
" e | " e | ||
-S-C. Positien of Cc uni:;. Action Progra: l. | -S-C. Positien of Cc uni:;. Action Progra: l. | ||
; The Cen: unity Ac:icn Pro;ran (CA?) sets fer:h a nus':er f :rnsicer - | ; The Cen: unity Ac:icn Pro;ran (CA?) sets fer:h a nus':er f :rnsicer - | ||
Line 1,650: | Line 1,623: | ||
ll personnel for purposes of construction =eni:cring and the possibili:y of l | ll personnel for purposes of construction =eni:cring and the possibili:y of l | ||
*; I llincreaseddividendstostockhoicersasunreasonasteifcensumersareasked 4, | *; I llincreaseddividendstostockhoicersasunreasonasteifcensumersareasked 4, | ||
i to pay higher rates to relieve an e=ergency. ; | i to pay higher rates to relieve an e=ergency. ; | ||
t ' , | t ' , | ||
Line 1,733: | Line 1,705: | ||
, Public Service the inability to finance generally, inability to pay present ] | , Public Service the inability to finance generally, inability to pay present ] | ||
*i . | *i . | ||
j b.ank loans and/or issue common stock have been recognized as sufficient i I | j b.ank loans and/or issue common stock have been recognized as sufficient i I | ||
i 1 . !! grounds by the Supreme Court for the finding of an emergency. The Renison , | i 1 . !! grounds by the Supreme Court for the finding of an emergency. The Renison , | ||
Line 1,775: | Line 1,746: | ||
in excess of :he ra:es ! | in excess of :he ra:es ! | ||
I | I | ||
:g presently being charged, the burden of proving the necessi:7 of :he increase 1 I.I is clearly on the utility. | :g presently being charged, the burden of proving the necessi:7 of :he increase 1 I.I is clearly on the utility. | ||
t' Ij | t' Ij | ||
Line 1,814: | Line 1,784: | ||
, , - 5 | , , - 5 | ||
: l '* - '.' I r 9 | : l '* - '.' I r 9 | ||
: l. l | : l. l | ||
, ,: .-ommercial bankers have no reasen :o either renew or ex:end shor tar: | , ,: .-ommercial bankers have no reasen :o either renew or ex:end shor tar: | ||
Line 1,831: | Line 1,800: | ||
, ! to rate relief. However, the circumstance,s. involving :his Ccepany have l | , ! to rate relief. However, the circumstance,s. involving :his Ccepany have l | ||
. l' i i! changed. First, at the time the Company was last before the Co==ission the l s !i | . l' i i! changed. First, at the time the Company was last before the Co==ission the l s !i | ||
!, prime interest rate was below 10%; now it is at 15k'; . Second, during the i | !, prime interest rate was below 10%; now it is at 15k'; . Second, during the i | ||
fi | fi | ||
Line 1,850: | Line 1,818: | ||
Fourth, the stock market has had a steady downward slide. This l, | Fourth, the stock market has had a steady downward slide. This l, | ||
l 4 overall market condition, a symptom of the recession and the high interest ! | l 4 overall market condition, a symptom of the recession and the high interest ! | ||
t 3 | t 3 | ||
.' rates, has had a particularly chilling effect on stocks of c:ilities. Those : | .' rates, has had a particularly chilling effect on stocks of c:ilities. Those : | ||
Line 1,870: | Line 1,837: | ||
.i d i | .i d i | ||
; portions of Seabroek and then backed off provided an cddi:icnal ris? fa::or - | ; portions of Seabroek and then backed off provided an cddi:icnal ris? fa::or - | ||
l j , that neither the Company or this Consission c:uld ccn:::1. Hewever, a risk 8 | l j , that neither the Company or this Consission c:uld ccn:::1. Hewever, a risk 8 | ||
i e factor to which inves: ors and bankers respend. Cbviously, if :he Company is i | i e factor to which inves: ors and bankers respend. Cbviously, if :he Company is i | ||
Line 1,942: | Line 1,908: | ||
e . . | e . . | ||
l | l | ||
' l. . 9 l | ' l. . 9 l | ||
Line 1,965: | Line 1,930: | ||
proper subject for experts. Debt costs and preferred stock costs that have | proper subject for experts. Debt costs and preferred stock costs that have | ||
* E | * E | ||
(( been the subject of hearings by this Cot =ission would not be addressed by a the caliber of witnesses such as Harrison and Williamson, since :here portions of the rate of return are rarely, if ever, in dispute. | |||
i | i | ||
, This leaves a rate base under CW P based ra:es on a New F.anpshire-jurisdictional basis of S648,522,763 as opposed to the recues:ed non-CTI? ' | , This leaves a rate base under CW P based ra:es on a New F.anpshire-jurisdictional basis of S648,522,763 as opposed to the recues:ed non-CTI? ' | ||
Line 2,030: | Line 1,995: | ||
l . . . | l . . . | ||
.. .i p 11 l | .. .i p 11 l | ||
,; I | ,; I 0: Emercencv Measures - PSNH | ||
0: Emercencv Measures - PSNH | |||
. i I CA? AND LUCC are concerned tha: if censumers are paying higher ; | . i I CA? AND LUCC are concerned tha: if censumers are paying higher ; | ||
I, t | I, t | ||
Line 2,051: | Line 2,014: | ||
[ that must be considered before reaching a decision in the permanent rate i' | [ that must be considered before reaching a decision in the permanent rate i' | ||
'; request. However, the Supreme Court has clearly indicated : hat "energency | '; request. However, the Supreme Court has clearly indicated : hat "energency | ||
* 1 il. relief does not depend upon the answers to these ques: ions but upon the | * 1 il. relief does not depend upon the answers to these ques: ions but upon the I - | ||
I - | |||
i l; needs of the company..." New England Telechone and Teleerach _C_o.. v. State i | i l; needs of the company..." New England Telechone and Teleerach _C_o.. v. State i | ||
i 95 N.H. 58, 62 (1948). !. | i 95 N.H. 58, 62 (1948). !. | ||
Line 2,065: | Line 2,026: | ||
.[ permanent rates. The court then stated the following: l i | .[ permanent rates. The court then stated the following: l i | ||
li. | li. | ||
I, "Until.such permanent ra:es can be established, ll< | I, "Until.such permanent ra:es can be established, ll< | ||
I l 0 stockholders must expec: to share the burden lI Ii i f of abnormal costs without transferring the whole-to the public under the guise of emergency relief." | I l 0 stockholders must expec: to share the burden lI Ii i f of abnormal costs without transferring the whole-to the public under the guise of emergency relief." | ||
Line 2,118: | Line 2,078: | ||
oil fired stations to l I 1 % l I | oil fired stations to l I 1 % l I | ||
i | i | ||
' l | ' l l | ||
l | |||
$c; I ! | $c; I ! | ||
I L i | I L i | ||
Line 2,148: | Line 2,106: | ||
" submitted by the Company will not be accepted for purposes of this proceeding. | " submitted by the Company will not be accepted for purposes of this proceeding. | ||
Instead, the Commission will allow the following increases to the following customer classes and service charges. It should be noted that l Il the full S11,970,591 is being allowed but because of the $1.S2 fuel adjustment ' | Instead, the Commission will allow the following increases to the following customer classes and service charges. It should be noted that l Il the full S11,970,591 is being allowed but because of the $1.S2 fuel adjustment ' | ||
charge as opposed to the test year average fuel adjus: en: charge of $1.33 | charge as opposed to the test year average fuel adjus: en: charge of $1.33 d the overall percentage is lower. (4.9S%) . The Commission will spread the n emergency surcharge as shown on the a:: ached rsport of proposed ra:e changes. | ||
d the overall percentage is lower. (4.9S%) . The Commission will spread the | |||
n emergency surcharge as shown on the a:: ached rsport of proposed ra:e changes. | |||
'. i-d The proposed' change is to be placed on a per kilowat: hour basis ' each l-The Company will use the at:unt of kilowa:: hours | '. i-d The proposed' change is to be placed on a per kilowat: hour basis ' each l-The Company will use the at:unt of kilowa:: hours | ||
]customerclassofservice. | ]customerclassofservice. | ||
Line 2,180: | Line 2,134: | ||
1.: | 1.: | ||
l. | l. | ||
l 'I i | l 'I i I | ||
4,! | |||
r }. l' 1 5: | r }. l' 1 5: | ||
he * | he * | ||
Line 2,242: | Line 2,195: | ||
, Ra:es D & C , | , Ra:es D & C , | ||
51,3'42,275 5894,350 200.0.: | 51,3'42,275 5894,350 200.0.: | ||
: i. j | : i. j TCTI.'dS Increase 270,05L | ||
TCTI.'dS Increase 270,05L | |||
, $240,110,566 S252,0B0,872 511,970,591 4.95 | , $240,110,566 S252,0B0,872 511,970,591 4.95 | ||
] '' | ] '' | ||
Line 2,261: | Line 2,212: | ||
.. Io consideration of -. report issued December 21, 1979, sinich iu 3 | .. Io consideration of -. report issued December 21, 1979, sinich iu 3 | ||
*: =ade a part hereof; it is OTu)ERED, that the Public Service Gsapany of New na=pshire be, and | *: =ade a part hereof; it is OTu)ERED, that the Public Service Gsapany of New na=pshire be, and | ||
- hereby is, allowed emergency rate relief in the amount of Sll,970,59), to | - hereby is, allowed emergency rate relief in the amount of Sll,970,59), to becone effective with all billings issued on or af ter Dece ber 2G,1979 and to continue until permanent rates are ordered under this docket; and it is FURTHER ORDERED, that said ravenue be gained by increasing service charges and applying a surcharge to each kilowatt-hour of energy sold, with the er.ceptions noted within the report; and it is | ||
becone effective with all billings issued on or af ter Dece ber 2G,1979 and to continue until permanent rates are ordered under this docket; and it is FURTHER ORDERED, that said ravenue be gained by increasing service charges and applying a surcharge to each kilowatt-hour of energy sold, with the er.ceptions noted within the report; and it is | |||
* FUETiis.R OT.DERED, that surcharges for each class be :alculated accordic; to the Iteport of Proposed Race Change attached to the afore=entione.d Ker,c r t; and it is FURTHER OED.= ED. that the resulting rates be docuranted by filing Supplement No. 7 to the Enblic Service Cc:gany of ;;ev Hamps;. ire's tariff 2;F.?UC :;o. 22 - E1cetricity: and it is TURTHER ORDERC, that public ner. ice be given accordini; t.o rarif f Filir.; Rule 27. said notice to su==arice Supplement lio. 7. | * FUETiis.R OT.DERED, that surcharges for each class be :alculated accordic; to the Iteport of Proposed Race Change attached to the afore=entione.d Ker,c r t; and it is FURTHER OED.= ED. that the resulting rates be docuranted by filing Supplement No. 7 to the Enblic Service Cc:gany of ;;ev Hamps;. ire's tariff 2;F.?UC :;o. 22 - E1cetricity: and it is TURTHER ORDERC, that public ner. ice be given accordini; t.o rarif f Filir.; Rule 27. said notice to su==arice Supplement lio. 7. | ||
By order of the Public Utilities Concission of New Ha=sshire, thf a | By order of the Public Utilities Concission of New Ha=sshire, thf a | ||
Line 2,291: | Line 2,240: | ||
interest of Seabrook by reducing its ownership interests and increasing the | interest of Seabrook by reducing its ownership interests and increasing the | ||
~ | ~ | ||
l ownership interests of the following Companies in the indicated percentages. 1 | l ownership interests of the following Companies in the indicated percentages. 1 i l | ||
i l | |||
j', - | j', - |
Latest revision as of 03:48, 16 March 2020
ML19322E140 | |
Person / Time | |
---|---|
Site: | Seabrook ![]() |
Issue date: | 12/31/1978 |
From: | FITCHBURG GAS & ELECTRIC LIGHT CO. |
To: | |
Shared Package | |
ML19322E137 | List: |
References | |
NUDOCS 8003200244 | |
Download: ML19322E140 (400) | |
Text
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1978 1977 RtM h --
, aslDectricUghtCempany Net income $ 1,959,850 $ 1,199,812 Earnings Per Common Share $ 3.67 $ 2 00 Dividends Paid Per Corrmon l Share $ 1.50 $ 1.44 Present Quarterly Dividend is Equivalent to an Annual a a Rate of $1.80 Electric Operating Revenues $21,157,542 $19.061,399 i Gas Operating Revenues $ 7,919,991 $ 6.860,660 l . Total Operating Revenues $29,077,533 $25,922,259
! Kilowatt Hours of Electricity Sold 398,543,732 349,548,949 The Communications Challenge Average Annual Kilowatt Hour Sales per Residenital Fitchburg flas and Electric is concerned with the main. Customer 5,073 5.049 tenance of open Unes of communications, both within the Number of Electric Cus-company and with trie various publics we serve. We con. tomers 21,508 21,272 centrate on creating a climate for a treer exchange of Thousands of Cubic Feet of ideas, not only with the media, but also with employees and Gas Sold 2,062,391 2,043,538 civic, business and " grass roots" groups in our service Average Annual Cubic Feet area. In this report we have highlighted pictorially a number Sales per Residential Cus-of ways in which we communicate with our customers. On tomer 92,076 87,253 the cover: (1) News stories in the press cover a wide range, Number of Gas Customers 13,069 12,927 embracing virtually every phase of company operations. Net Utihty Plant $35,267,214 $35,080,587 (2) Friendly, well-trained employees provide a person-to- Number of Employees 185 181 person hnk with various audiences. (3) Members of man- Number of Shareholders 2,236 2,243 agement address community groups on many energy-related topics. (4) Our customer affairs department re- 126 Years of Continuous Operation Dividends Paid Each Year Since 1859 sponds to customer concerns with speed and accuracy.
Dividends Paid Per Share on The Common Stock of The Company 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter The Year 1978 $.36 $.36 $.39 $.39 $1.50 1977 $.36 $.36 $.36 $.36 $1.44 Price Range of Common Stock 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1978 High 16% High 16% High 19 High 18%
Low 15W Low 15% Low 16% Low 15%
1977 High 17% High 16% High 17% High 157/s Low 16% Low 15% Low 15 % Low 15W The Common Stock of the Company is listed on the American Stock Exchange (Symbol: FGE) and the Boston Stock Exchange.
AREA SERVED The area served by the company encompasses approximately 170 square miles in North Central Massachusett: with a population in excess of 80,000. Fitchburg is the shopping and financial center for surrounding communities drawing on an estimated 225.000 people.
Proximity to commercial markets, expanding transportation facilities and the availability of a skilled labor force make the area most attractive to industry. Wide industrial diversification encourages a well-balanced economy and a key attraction of the area is its unique location with respect to major markets.
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The past year can best be characterized as one of
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y' financial growth and of providing the groundwork for improving the company's financial structure in the future.
As indicated by the Financial Highlights on the opposite g v,. .
page, the company's actions produced an unusual number of desirable factors which pushed eamin;s, net income
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the first time in many years that the company was able to b a .1. Mn M b 3.k ki approach a realistic earnings level.
It was a year of breakthrough, and a bringing together of many strands to form a pattern for the future. The many factors which caused the beneficial effects in 1978 should favorably influence the company's operations in the years ahead.
These major events are of significance:
- While much of this improved performance is the result of our direct efforts to control costs and obtain adequate and timely rate increases, some of the gains are dt.e to the rebirth of the economy in northern Worcester County where the growth in employment has led the rest of the state.
- The addition of severallarge industrial electric customers through the acquisition of electric facilities from New England Power Company increased our industrial sales by 42 per cent and total sales by 24 per cent in 1978.
- Although the company is operating with a 25 per cent reduction in employees compared to the 1975 level, we have scored impressive gains in productivity in recent years.
By almost any measure then,1978 was one of the most successful years in the company's history.
With the August 15 payment, the quarterly common dividend was increased from S.36 to S.39 per share, an effective annual rate of $1.56, as compared with $1.44 paid in 1977. Common stock dividends paid in 1978 amounted to S1.50 per share. No part of the dividends paid during the year constitutes a tax-free return of capital.
Reflecting the improved 1978 performance, the Board of Directors again increased the quarterly common dividend from S.39 to S.45 per share, effective with the February 15,1979 payment. This is equivalent to an annual rate of $1.80. A continually increasing dividend gives recognition to the higher return expected by existing shareholders and should also enable us to attract the new shareholder investment we will require in the future.
Any future common dividend increases will, of course, depend upon the continued satisfactory financial condition of the company.
As we look ahead, we are buoyed by the success of our recent past. We have gained experience in coping with a number of very difficult problems and are confident that we will continue to find ways in which to deal with the problems of the future.
We plan to invest substantial funds in jointly owned nuclear plants to ensure an adequate supply of reasonably priced electric power so necessary to meet the needs of the communities we serve. This can only be accomplished by attracting new capital from investors.
The principal elements of management's long range financial objective continue to be a sound capital structure; strong cash flow; high quality earnings and maintenance of good credit ratings for our securities.
1
Add tionally, we will continue to strive for a fair return on invested capital in order to properly compensate the shareholders for the use of their funds. We have made significant progress in 1978 toward achiesng these goals.
As noted earlier, the company fulfilled its responsibility to the public and its investors in 1978. The year was one of decided improvement and we are firmly committed to strengthening the company intemally and externally through both a disciplined and an imaginative approach. However, we are never satisfied with, or complacent about, gains made as we strive to better manage the challenges which face us now and l prepare for the challenges of the future.
Certainly there have been problems which required resolution, just as there will be questions to answer and problems to solve in 1979 and beyond. We expect to succeed in the future just as we have done in the past. We serve a vital part of the Commonwealth and we see the company as an integral part of the region's economy. We expect to continue in this role and to grow and prosper in the years to come.
You will find further evidence of our performance during 1978 documented in the Silowing pages of this report, including management's discussion and analysis of the company's summi,y of operations.
BUILDING ON THE FUTURE Construction and Financing One of the challenges facing a utility such as Fitchburg Gas and Electric is r ;t of providing the capacity to meet the present and future needs of its customers. Facilities must be built if customers are to continue to receive the reliable service on which they depend. In addition to providing new facilities to p m~~ meet increased demand, we must also replace obsolete and wom out equipment.
The company's 1978 construction ex-p . penditures amounted to $3,099,000. Gains g' 4 ] h. made toward our corporate goal of operating j o
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an efficient, financially sound company have been reflected in improved cash flow.
a h & Consequently, these expenditures have been
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It is estimated that construction expendi-tures will amount to approximately $8,839,200 )
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$5,485,300 in the company's present and
%~ proposed additionalinterest in the Seabrook l
- _ nuclear project.
- , There was no permanent financing in 1978. l However, because our increasing comrnitment i g
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^~V'> stantial increase in construction expenditures, j2 The company's energy advisors assist customers issues of common stock and long-term debt In conservation measures. are anticipated in the latter part of this year.
Rates in October the company concluded a rate actlon initiated in February 1977 when it filed for rates I designed to increase annual electric and gas revences by $3,633,000. The total electric and gas rate increase granted by the Massachusetts Department of Public Utilities was $2,357,914.
As shareholders have been informed in quarterly raports in 1978, the initial electric amount granted by I the DPU was appealed to the Supreme Judicial Court of Massachusetts which granted a stay allowing the I company to collect additional electric revenues, subject to refund.
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In a subsequent ruling, the Court upheld the DPU's decision to remove a generating unit from the
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company's rate base, but instructed the Department to reconsider the amount of revenut the company ;
should be allowed. The DPU's October decision reflected its final ruling which allowed the company to retain the amount allowed by the court's action, as well as granting additional revenues.
i Time-of-day rates, a pricing system that reflects the varying costs of providing electric energy at different times of the day and/or during different seasons of 'he year, were filed with the DPU in early.1979. The intent of time-of-day rates is to shift demand and energy use from on-peak to off-peak periods thereby reducing the amount of new generating capacity required to serve peak loads. The rates recently filed by the company will, when approved, be applicable to residential and commercial customers on an optional basis.
Nuclear Power -
Keystone of the Region's Electric Energy Future To provide the electric facilities needed to meet forecasted increases in demand, the company must l always look ahead. Given the pressing need for development of additional energy supplies which will be needed early in the 1980's, the company cannot afford to waste time Consequently, to assure reliability of service, we have moved more and more toward joint ownership of generating facilities outside of our franchise area. These include partial ownership in two oil-fired units already in operation and a percentage ownership in every nuclear unit now under construction or in the planning stage in Now England.
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79 Early in 1979, the company's common share-holders approved the acquisition of an additional j 0.4348 per cent ownership interest in each of the two 7 g v
units being constructed in Seabrook, New Hamoshire,
[ by the lead participant in the project, Public Service
[ .1 . Company of New Hampshire, which will, when i hg ! approved by the DPU, bring the company's interest p x to a 0.60555 per cent ownership share in each of Q
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these two units.
. % Construction of this nuclear project has been M M* '
subject to numerous regulatory de'ays since its
- inception. However, full scale construction resumed in Monthly bill enclosures help the company August following favorable action by the Nuclear respond to public concerns about energy supply.
Regulatory Commissicn on the acceptab!!ity of tne cooling water system proposed for the units, thereby upholding the design of the plant's cooling system for the second time. In a separate action in August, the U.S. Court of Appeals rendered a decision denying four separate petitions for review sought by opponents of the plant.
With these favorable rulings, Public Service now appears to have cleared many of the major legal and regulatory obstacles which have delayed this project. At the present time, construction of the first unit is approximately 17 per cent complete with commercial operation targeted for 1983. The second unit is nearly 3 per cent complete and scheduled for operation in 1985.
Although nuclear generating plants have been under extreme pressure from their opponents through-out the country, resulting in serious delays and increased costs, they are essential for the economy and well being of New England.
We must work our way wt of our dependence upon imported oil, and nuclear energy is the only source of capacity which will allow this to happen in the New England region. Nuclear energy, even with its heavier capital requirements, has a 20 per cent cost advantage over coal and an unquestionable advantage over ever-increasing costs of oil.
An unresolved issue in the future financing of nuclear plants is whether the capital costs of the investment in new capacity not yet in service should be charged to current rate payers. There are obvious benefits to including Construction Work in Progress in rate base so that customers would receive small 3
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annual base rate increases over the life of the construction period in lieu of a major rate increase at the ,
completion of construction.
A New Ere for Natural Gcs After several years of concerted efforts to obtain new gas supplies, the company can look forward to an easing of its supply problems in the future.
Numerous projects undertaken by our pipeline supplier, along with the passage of the National Energy Act, promise adequate deliveries of natural gas in the future.
Conservation by our customers also has made an important improvement in the company's supply position. Of even greater significance, however, are our available supplies of liquefied natural gas and propane and our contract for underground storage. As a .,9 result, our company is currently in the enviable position of having for sale an abundant supply of natural gas 4[ ;( gf
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at retail prices which are competitive with other energy .
i ,[ b sources. 4 s 2 .t In 1978 we formed an exploration and Ovelopment e .
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subsidiary, Fitchburg Energy Developmen' Jompany,
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- e which is participating in a joint venture it' .ne Appalachian "
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Basin in Ohio. Gas and oil from this venture is already 'u '
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being marketed. Experience gained in this venture will , _, _
j help determine our future involvement as an energy j Q',)h ,
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For Fitchburg Gas and Electric, the most important benefit of increased gas supplies is that it is allowing us
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A company-s$nsor~ed Energy Fair provIded yet another i
to return to the retail marketing of natural gas. opportunity to personal contact with cus.'omers.
The company's program, consistent with the _
objectives of the national energy policy, is directed toward the ,__,
residential and commercial markets since these comprise the highest priority and best use of natural gas.
The company's new marketing stance is fully justified by the long-term outlook for natural gas supplies, both within our own y
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company and industry wide. -
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Further impetus to the return to marketing was given by a '
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Energy to state utility commissions encouraging them to take action to " foster natural gas residential hookups" 6 - ,
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Responding to Today-Planning for Tomorrow .
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Among our corporate goals for 1979 are improved customer service and a greatly strengthened communications program
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which will stimulate community service activities by employees at
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- 6 Ett:coent and highly tnotivated service personnel ars excellent pubhc relations representatives for the company.
4
all levels; regular and consistent use of all media to tell the company's story; community outreach seminars; a stepped up information program for alllevels of employees and a strengthening of the personal service and attitudes of all employees toward customers.
As utility bills have risen over the past few years, so has the need to communicate with customers. Today it is more important than ever that the company be able to respond to customer concerns and help foster mutual understanding.
To answer this need from our customers, in February of 1979 the company initiated " Operation Outreach" As the name implies, " Operation Outreach" is concerned with the maintenance of open lines of communi-cation, both within the company and with the various publics it serves. One important phase of this program is the reorganization of our customer affairs department to increase the speed and accuracy with which we respond to customers' concerns.
The focus of our communications effort will be on a person-to-person link with various audiences. We are convinced that this person-to-person focus, together with an intensive program of fact-by-fact response to requests for information and media interviews with the company's management, plus a continuing program to promote better understanding of the company through bill enclosures, will help our customers keep the company and its plans in a more positive perspective.
The company will participate actively in community programs, particularly those dedicated to developing the area's industrial resources.
In short, the driving force behind our " Operation Outreach" program in the coming year will be the realization that the issues facing the company must be clearly understood by all those who look to us for continuity of service in the years ahead.
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Charles H. Tenney ll Chairman of the Board of Directors The scope of rnanagement's communications ettorts includes appearances on local radoo intervoew programs.
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Consolidated Balance Sheet December 31, ASSETS 1978 1977 (Note G)
Utility Plant (at cost):
Electric $33,193,992 $33,795,592 Gas 9,827,279 9,127,199 Common 1,440,024 1,177,397 Gross Utility Plant 44,461,295 44,100,188 Less: Accumulated depreciation (Note A) 9,194,081 9,019,601 Net Utility Plant 35,267,214 35,080,587 Miscellaneous Physical Property (at cost). 26,005 26,005 270,748 11,000 Investments (Note A)
Current Assets:
Cash (Note E) 459,751 771,753 Accounts receivable (including instafiment sales)-less allowance for doubtful accounts of $220,480 and $109,314 (Note A) 3,885,345 3,813,905 Materials and supplies (at average cost) 676,030 696,517 Prepayments 201,322 230,913 Total Current Assets 5,222,448 5,513,088 Deferred Debits:
Unamortized debt expense (amortized over term of securities) 296,402 312,726 Unamortized cost of abandoned properties (being amortized through 1995) 2,981,332 1,422,318 Preliminary survey and engineering . 52,189 33,913 Other 108,689 35,075 Total Deferred Debits 3,438,612 1,804,032 TOTAL $44,225,027 $42,434,712 i l
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(The accompanying notes are an integral part of this statement) .
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December 31, LIABILITIES 1978 1977 (Note G)
Capitalization:
Capital stock and retained earnings:
Cumulative preferred stock, $100 par value (Note B) 5%% Series:
Authorized - 17,300 and 17,720 shares Outstanding - 16,880 and 17,300 shares $ 1,688,000 $ 1,730,000 8% Series:
Authorized and outstanding - 25,000 shares 2,500,000 2,500,000 Common stock, $10 par value:
Authorized - 1,000,000 and 455,475 shares Outstanding - 455,475 shares 4,554,750 4,554,750 Premium on common stock 1,754,358 1,754,358
, Capital stock expense (183,744) (184,264)
Retained earnings (Note C) 5,304,422 4,315,175 Total Capital Stock and Retained Earnings 15,617,786 14,670,019 Long-term debt (Note D) . 16,978,000 17,176,000 Total Capitalization 32,595,786 31,846,019 Current Liabilities:
Long-term debt due within one year 123,000 116,000 Notes payable to banks (Note E) 970,000 2,500,000 Accounts payable 3,835,149 2,744,231 Customers' deposits and refunds 623,558 367,441 Taxes accrued 571,105 63,001 Deferred income taxes (Note A) 196,956 133,071 Interest accrued 452,997 470,453 Total Current Liabilities 6,772,765 6,394,197 Deferred Credits:
Unamortized investment tax credit (Note A) 1,361,332 1,138,235 Other 73,746 25,276 Total Deferred Credits 1,435,078 1,163,511 Deferred Income Taxes (Note A) 3,362,276 2,987,106 Reserves - Other 59,122 43,879 TOTAL $44,225,027 $42,434,712 (The accompanying notes are an integral part of this statement) 7
C. SMement of incom:.
Year Ended December 31, 1978 1977 Operating Revenues: (Note G)
$21,157,542 $19,061,399 Electric .
7,919,991 6,860,860 Gas Total Operating Revenues 29,077,533 25,922,259_
Operating Expenses:
4,833,281 4,627,510 Operating expenses, other 8,538,045 8,240,287 Electricity purchased for resale 2,158,983 2,083,546 Fuel used in electric generation 4,334,696 3,709,113 Gas purchased for resale 734,113 698,187 Maintenance 1,181,787 1,093,790 Depreciation (Note A)
Amortization of cost of abandoned properties 595,937 173,365 Provisions for taxes (Notes A and F):
Federal income tax on net operating income 1,216,342 561,677 339,151 410,918 Deferred Federal income Amortization of investment tax credit (61,766) (52,348)
State franchise 81,403 84,334 Deferred state franchise 32,587 59,492 Local property 1,693,904 1,528,762 Other 166,859 159,664 Total Operating Expenses 25,845,322 23,378,297 Operating Income 3,232,211 2,543,962 Non-operating Income:
Allowance for other funds used during construction (Note A) 118,573 36,304 83,418 75,598 Other (not of income taxes) (Note F)
Total Non-operating income 201,991 111,902 Gross income 3,434,202 2,655,864 Income Deductions:
Interest on long-term debt 1,515,476 1,527,259 Other interest charges 233,859 122,745 Amortization of debt expense 16,324 16,781 Discount on long-term debt purchased for sinking fund (credit) (2,167) (60)
Other 8,992 1,230 Gross income Deductions 1,772,484 1,667,955 Allowance for borrowed funds used during construction (Note A) (298,132) (211,903)
Net income Deductions 1,474,352 1,456,052 Not income 1,959,850 1,199,812 Dividend Requirements on Preferred Stock 287,407 289,559 l Not income Applicable to Common Stock $ 1,672,443 $ 910,253 Number of Common Shares Outstanding 455,475 455,475
! Earnings per Common Share Outstanding $3.67 $2.00 (The accompanying notes are an integral part of th!s statement) 8 l
l Conso:idctcf Statement of Changes in Financict Position l Year Ended December 31, 1978 1977 Funds Provided By: (Note G)
Funds from Operations:
Net income $ 1,959,850 $1,199,812 Principal non-cash charges (credits) to income (Notes A and F)
Depreciation 1,181,787 1,093,790 Deferred Federal income tax 344,666 430,278 Deferred state franchise tax 30,504 62,295 Amortization of investment tax credit (61,766) (52,348)
Allowance for other and borrowed funds used during construction (416,705) (248,207)
Amortization of deferred debits 648,490 238,309 Funds Provided by Operations 3,686,826 2,723,929 Other Sources-Net 224,299 893,960 Decrease (Increase) in Working Capital, Excluding Short-term Debt 2,192,208 (463,779)
Total Funds Provided $ 6,103,333 $3,154,110 Funds Applied To:
Additions to Plant $ 3,098,508 $4,319,684 Investments in Non-utility Operations (Note A) 271,222 -
Common Stock Dividends 683,017 655,687 Preferred Stock Dividends 287,586 289,739 Funds Used for Retirement of Securities:
Long-term debt 191,000 47,000 Preferred stock 42,000 42,000 Decrease (Increase) in Short-term Debt 1,530,000 (2,200,000)
Total Funds Applied S 6,103,333 $3,154,110 increase (Decrease) In Components of Working Capital, Excluding Short term Debt:
Cash $ (312,002) $ 172,462 Accounts receivable 71,440 525,979 Materials and supplies (20,487) (59,737)
Prepayments (29,591) 13,845 Accounts payable . (1,090,918) (257,859)
Customers' deposits and refunds (256,117) (328,744)
Taxes accrued (508,104) 412,034 Deferred income taxes (63,885) 22,164 Interest accrued 17,456 (36,365)
(Decrease) Increase in Working Capital $(2,192,208) $ 463,779 (The accompanying notes are an integral part of this statement) 9
Ccm u!d Statement of Retained Earnings.
Year Ended December 31, 1978 1977 (Note G)
Retained Earnings, Beginning of Year S 4,315,175 $4,060,789 Net income 1,959,850 1,199,812 Total . 6,275,025 5,260,601 Deduct:
Cash dividends declared:
Cumulative preferred stock:
5% % Series at an annual rate of $5.125 por share 87,586 89,739 8% Series at an annual rate of $8.00 per share 200,000 200,000 Common stock at an annual rate of $1.50 and $1.44 per share 683,017 655,687 Total Deductions 970,603 945,426 Ratained Earnings, End of Year (Note C) $ 5,304,422 $4,315,175 (The accompanying notes are an integral part of this statement)
Notes to Consolidated Financial Statements Note A: Summary of Significant Accounting Policies - The justment revenue and accordingly provides deferred income Company is subject to regulation by the Massachusetts De- taxes payable in the succeeding year on such revenue which partment of Public Utilities with respect to its rates and is carried as a current asset.
accounting. The Company's accounting policles conform with generally accepted accounting principles, as applied in the for Federal income tax purposes the Company has adopted case of regulated public utilities, and are in accordance with double declining balance depreciation and the shorter lives as the accounting requirements of the Massachusetts Department provided under the asset depreciation range system for eligible of Public Utilities. A description of the Company's significant property additions, and the percentage repair allowance which accounting policies follows. is available under this system. As a result of the above elec-tions, deferred income taxes have been charged to income Principles of Consolidation-On February 24,1978, Fiichburg and credited to deferred income taxes. In addition, through invested $20,000 in the Common Stock of a new wholly-the use of guideline depreciation, the Company is claiming owned subsidiary, Fitchburg Energy Development Company for Federal income tax purposes an amount in excess of its (FEDCO). At December 31,1978, FEDC0 had invested in oil and booked depreciation. The Company is also providing deferred gas drilling facilities, which investment had been recorded on income taxes on the difference between the amortization of the equity method. All inter-company items have been elimi-an abandoned generating unit and the related accelerated tax nated in consolidation.
depreciation. The Company provides for deferred income taxes Revenue Recognition-The Company records unbilled fuel ad. resulting from the use of guideline depreciation and certain justment revenue currently to properly match revenues with elements of overhead deducted for tax purposes but capitalized related costs. Such unbilled revenue aggregated $389,156 for book purposes in order to conform with the accounting and $258,994 at December 31,1978 and 1977, respectively for rate making purposes.
(See Note G).
In accordance with provisions of the Tax Reduction Act of Depreciation- Annual provisions are determined on a group 1975, as amended, an additional 1% investment tax credit straight line basis. Provisions for depreciation were equivalent resulting from the Company's election of an Employee Stock l to the following composite rates based on the average depre. Ownership Plan (TRAESOP) has been utilized in reducing Fed-ciable property balances at the beginning and end of each eral income taxes payable, in accordance with provisions of year: 1978-3.01% and 1977-2.88%. the Act the resulting tax benefits are not used to reduce cur-rent Federal income tax expense. The additional 1% credit is Accounting for income Taxes-For income tax purposes the accounted for as a payment to TRAES0P in lieu of an income Company excludes a substantial portion of unbilled fuel ad- tax payment to the U.S. Government.
10
e The investment tax credits related to utility property addi- at the Company's option at $108.00 per share on or before tions in 1978 and 1977 and non-utility property additions August 31,1983 and at diminishing premium rates thereafter prior to January 1,1978 have been deferred by making charges The Company is required to purchase on June 1,1979 and on to income equivalent to the tax reductions and credits to each June I thereafter not less than 750 shares, unless a unamortized investment tax credit which is subsequently lesser amount of sh;res are tendered, at $100 per share plus amortized over the productive lives of the related assets as accrued dividends.
ordered by the Massachusetts Department of Public Utilities.
Such deferrals for the years 1978 and 1977 amounted to
$292,457 and $166,175, respectively. Beginning in 1978, the Note C: Restrictions on Retained Earnings-Under the most Company has elected to account for investment tax credits restrictive provisions of the Indentures relating to the Com-on non utility property additions, primarily related to FEDCO, by pany's long term debt, $3,120,077 and $2,132,784 of retained the " flow through" method. Under this method credits are earnings were available for the payment of cash dividends recognized as a reduction of Federal income tax expense in the on Common Stock at December 31,1978 and 1977, respectively.
year utilized. In 1978 these credits amounted to $10,380.
Note 0: Long term Debt-Details of Long term Debt at Decem-Allowance for Funds Used During Construction- An allow-ber 31,1978 and 1977 are shown below:
ance for funds used during construction (AFUDC), a non-cash item, is included in construction work in progress and based December 31, upon a composite rate applied to construction work in prog- ig7, gg77 ress, which assumes that funds used for construction were provided by t,orrowings, preferred stock and common equity. Tngfe rgotes, 4%%, due The allowance for funds used during construction amounted Tw nt ve yea ' '
to 24.9% and 27.3% of the net income applicable to common ,, l,l995 6.975,000 7,123,000 stock for the years 1978 and 1977, respectively. Twenty year notes,10%, due septem-ber 1,1996 3,000,000 3,000,000 Effective January 1,1977, the Company began calculating Tw ,yntyjig9 gar notes,10%%, due its rate used for recording AFUDC in compliance with the T tal 17,101,000 17,292,000 Federal Power Commission (FPC) Order No. 561 issued Feb.
Less: Installments due within one year 1 1.000 116.000 ruary 2,1977. In further compliance with FPC Order No. 561, Total Long-term Debt $16,978,000 $17,176,000 the Company in 1977 had reflected separately the portion of AFUDC associated with borrowed funds as a credit related to " income Deductions", and the portion of AFUDC associated with other funds under "Non-operating income". The annual The aggregate amount of sinking fund requirements for each rates of approximately 11% and 10% were used for the of the five years following 1978 are: 1979, $123,000,1980
& 1981, $198,000 and 1982 & 1983, $398,000. The Company years 1978 and 1977, respectively.
has satisfied the 1979 sinking fund requirement for the 9%%
Notes in the amount of $75,000.
Note B: Cumulative Preferred Stock- The Cumulative Pre-ferred Stock,5%% Series, is preferred over Cornmon Stock Note E: Notes Payable - The Company follows the practice in voluntary liquidation at the redemption pnce m effect at of borrowing for a one to three month period at the prevailing the time of such voluntary liquidation, and m involuntary prime interest rate. Compensating balances are required on all liquidation at $100 per share, botn plus accrued dividends. borrowings and other arrangements are observed for lines Shares of the 5%% Series are redeemable at the Company's of credit.
option at $102.56 per share on or before May 31,1981 and at $101.28 thereafter. The Company is required to purchase Short-tern Bank Loans D N h " " -
on June 1 of each year not less than 420 shares, unless a 197s 1977 lesser amount of shares are tendered, at $100 per share plus accrued dividends. On June 1,1978 and 1977, 420 shares As of end of year: )
were tendered and purchased. Weighted average interest rate 11.52 % 7.75 %
Unused line of credit $5,630,000 $4,100,000 The Cumulative Preferred Stock,8% Series, is preferred For year ended:
over Common Stock in voluntary liquidation at the redemp- Weighted daily average interes . te 8.61 % 7.11 %
tion price in effect at the time of such voluntary liquidation Average borrowings $1,491,700 $1,693,700 and in involuntary liquidation at $100 per share, both plus Maximum borrowings at rnenth end $1,945,000 $2,900,000 accrued dividends. Shares of the 8% Series are redeemable Month such maximum occurred March October 11 1
1
Note F: Federal income Tax-Federalincome tax expense is Conclusion of Rate Appeal- The Company on October 5 was comprised of the following components: authorized by the Massachusetts Department of Fublic Utilities Year Ended (DPU) to increase its electric rates by $269,240. With this most U""h' 3I' recent action by the DPU, the Company has been granted a
" 78 " 77 total of $2,357,914 of the amount it originally requested. This Currer't tan espense charEed (creditedh concludes a rate action initiated by the Company in February, Operating expenses $1,216.342 $561,677 1977, when it filed for rates designed to increase electric and Ncn cperatarg income (78,949) (1.235) gas revenues I,y $3,633,000.
Amortiration of investment tax credit (61,766) (52.348) 1,075,627 508.094 The DPU,in orders dated August 31 and September 15,1977, Deferred tan e> pense charged (creditedh allowed the Company to file rates designed to produce an Deferred unbilled revenue 61,180 (19,360) additional $1,615,843 in electric and gas revenues.
Accelerated tan depreciation 284,733 308,288 Amortization of at:andoned asset (156.853) - The Company appealed the decision to the Supreme Judicial Overheads and other 92,910 100,782 Court (SJC) of Massachusetts, and on October 21,1977, the Percentage repair aflonance 57,181 21.208 Court granted a stay allowing the Company to collect annually 339,151 410,918 an additional $472,831 in electric revenues, subject to refund.
Non-operating espense 67,317 -
406,468 410.918 On June 30,1978, the Court issued its order upholding the Total expense -$1,482,095 $919.012 DPU's decision to remove a generating unit from the Com-pany's rate base, but instructed the DPU to reconsider how The Federal incom', tax amounts included in the Statement much in revenues the Company would still ye allowed.
of Income differ fro n the amounts which resuit from applying The DPU's recent decision reflected its final ruling allow-the statutory Fed:ial income tax rate to Net income before ing the Company to retain the $472,831 annual amount col.
income tax. Thr reasons, with related percentage effects, are lected under the Court stay, as well as granting the additional as shown below: $269,240.
Year Ended 77 On October 18, 1978, the Company filed with the DPU its proposed accounting treatment relative to the book abandon-Statutory Federal income tax rate 48 % 48 % ment of a generating unit ordered by the DPU, which treat-Income tax effects of timing differences: ment was approved by the DPU on November 7,1978. As a
'" "'" " result, the Company commenced amortization of the abandoned st uctYonIs'ee Note A) (4) (4)
Escenaneous (1) (1) property in September, retroactive to January 21,1978, at an 43 % 43 %
annual amortization amount of $447,432.
Effective Federal income tax rate Additionally, in its June 30,1978 opinion, the SJC affirmed a Note G: Regulatory Matters: directive by the DPU in its August 31,1977 order, whereby the Revenue Adjustments - The Company's method of bilFng and Company was instructed to reflect amortization of a retired accounting for reverne under its fuel adjustment clause in unit with a net book value of $512,828 commencing January, 1976. The Company had commenced amortization of this unit effect through September 26, 1974 has been challenged be.
fore the Massachusetts Department of Public Utilities (DPU) in September,1977, subsequent to the DPU's order 19084 by the Attorney General of the Commonwealth of Massachu. dated August 31,1977. As a result, the Company has recorded setts. The required monthly fuel adjustment schedule hereto- such amortization for 1977 and 1976, in such years, which has reduced net income and earnings per common share out-fore filed with the DPU had not been disputed by the regula-standing m those years, as follows:
tory authority. The portion of such fuel adjustment clause Year ended Dumkr 31, revenues recorded by the Company and now challenged by the Attorney General aggregats approximately $724,000 and # 77 8 78 A" I"' "'
is equiva!ent to $.83 per average Common Share outstanding As previously reported $1,267,783 $1,188,251 on 1974 earnings, after giving tax effect thereto. The Company AdNstment (67371) (104.800) has vigorously defended its procedures in proceedings before As rutated sl. m 812 $1.083.451 the DPU, the outcome of which is uncertain.
Earnings per Share The Company's billing and accounting for revenues under As previously reported $2.15 $1.97 the fuel adjustments based on costs incurred after September As restated $2.00 $1.74 26,1974 are being made under a new fuel adjustment clause which took effect on September 27,1974 and are not being Nets N: Electric Facilities Purchased-New England Power challenged. Company received final regulatory approval from the Securities 12
and Exchange Commission and on June 1,1977 the Flagg Pond which would have been recorded on the balance sheet for the and Beech Street sub stations and associated 69KV and 13.8KV Company's capital leases were $2.374,643 and $2,665,328, lines were integrated into the Company's electric system. The respectively. For the year ended December 31, 1977, Depreci-purchase of this equipment located within our service area ation and Other Interest Charges would have increased ends a 68 year old arrangement under which New England $143,010 and $180,854, respectively, and Operating Expenses, Poner has served six large industrial cust3mers within the Other would have decreased $274,476. At December 31,1977 Company's service area. the asset and related liability which would have been recorded on the balance sheet were $2,452,476 and $2,690,415, re-spectively.
Note I: Commitments:
The minimum commitments under all non-cancellable long-Lease Obligations - In accordance with the guidelines of term leases in effect at December 31, 1978 are as follows:
Statement of Financial Accounting Standards No.13 issued by 1979 - $312,080; 1980-$306,497; 1981-$282,938; 1982-the Fir,ancial Accounting Standards Board, the Company is
$259,542; 1983-$251,686; 19841988-51,196,336 aggregate disclosing pertinent information regarding ,ts i capital leases.
for the period; 19891993 - $1,126,043 aggregate for the The Securities and Exchange Commission requires, for rate-period; and 1994 and thereafter-$1,013,439 aggregate for regulated enterprises, disclosure of the effect on the balance the period.
sheet and on expenses if such leases had been capitalized, pending the results of its review of the Statement's ap- Total rental expenses for the years ended December 31,1978 plicability to rate. regulated enterprises. and 1977 amounted to $428,289, and $445,630, respectively.
The Company has a significant twenty five year lease which Pension Plans-The Company has in effect two funded Pen-began April 1,1973 for a combustion turbine and a liquefied sion Plans and related Trust Agreements to provide retirement natural gas storage facility. The lease ,is subject to a ten year annuities for participating empicyees at age 65. The entire renewal period at the option of the Company at an annual amount of the annual contribution under the actuarial require-rental of 14%% of the aggregate fair market value as at ments of the Plans is borne by the Company, the end of the , m itial lease term. Under certa,ni conditions the Company has the right to purchase the units at an inde- The Company's contribution to the Plans during the years pendently appraised market value. (hder the lease, the Com- ended December 31,1978 and 1977 amounted to $497,077 and pany has the obligation to maintain the equipment in good $459,880 respectively, which includes amortization of prior operating condition and pay all taxes and insurance on said service costs over a period of thirty years.
equipment.
The Company's policy is to fund the pension cost accrued.
Had the Company capitalized its capital leases, Depreciation The actuarially computed value of vested benefits as of Jan-and Other Interest Charges would have increased $162,733 uary 1,1978, the date of the latest actuarial valuation, ex-and $179.180, respectively, and Operating Expenses, Other ceeded the total of the pension fund by $3,759,849. The aggre-would have decreased $287,507 for the year ended December gate amount of unfunded prior service costs as of the same 31,1978. At December 31,1978 the asset and related liability date was $5,000,528.
Joint Ownership Units and Construction-The Company is participating on a tenancyin-common basis with other New England utilities in the construction and ownership of ten generating units. New Haven Harbor and Wyman Unit #4, both oil-fired stations, have been in commercial cperation since August 1975 and December 1978, respectively. The remaining eight nuclear un;ts are planned or under construction.
Details relating to the various units are as follows:
rtissate Company's Share in Thousands of DeHars s ,anl ef Amount of Amount Total ownenblp Utility expended Estimated Plant in Accumulated through Cost of joint ownership units g % mw Service _ Depreciation 12/31/78 Construction Seabrook Units #1 & 2 New Hampshire . .17075 3.9 - - 1,132 4,903 Millstone Unit #3 Connecticut .217 2.5 - - 1,327 6,539 Charlestown Units #1 & 2 Rhode Island .. 1.13 26.0 - -
548 36,888 Pilgrim Unit #2 Massachusetts .. .19 2.2 - - 606 4,083 Montague Units #1 & 2 Massachusetts . ... .35 8.1 - - 215 10,167 Wyman Unit #4 Maine . .. .. .1822 1.1 359 7 370 -
New Haven Harbor Connecticut . . .. 4.5 20.7 6,980 596 6,980 -
13
Operating expenses included in the Consolidated Statement The Company estimates constructicn requirements relative of Income and proportionate amounts charged to specific oper- to these units of approximately $13,430,000 during the next ating expenses are as follows: five year period ending December 31,1983.
Thessands of cellars On January 25, 1979, the commen shareholders approved Wyman New Haven % to the acquisition of an additional .4348% ownership interest in Unit 4 Marker M each of the Seabrook units from the Connecticut Light &
5% Power Company. The purchase of this interest has been ex-Operating expenses, other - 234 cluded from the information presented above, pending final Fuel used in electric genera-1,987 92 approval of the purchase by the Massachusetts Department tion 6 0' C 8' Maintenance - 97 13 Local property tax - 120 7 The Company expects to finance the cost of its participation 3
in the units initially through the use of short-term borrowings.
Other taxes - 5 e approMah Gnn, SWerm krowings wW be con-To'ai operating expenses 6 2,443
== verted into senior capital.
Note J: Segment Information-In accordance with Financial Accounting Standard No.14, the following information is presented relative to the gas and electric operations of the Company:
Electric Bas Total Operations Operations Company 1978 1977 1978 1977 1978 1977 Operating revenues $21,157,542 $19,061,399 $7,919,991 $6,860,860 $29,077,533
$25.922.25]
Operating income before income taxes $ 3,654,896 3 2,691,154 $1,185,032 $ 916.881 $ 4,839,928 $ 3,608,035 Income taxes (1,607,717) (1,064,073)
Non-operating income 201,991 111,902 Net income deductions (1,474.352) (1,456,052)
Net income $ 1,959,850 $ 1,199,812 Identifiable assets as of December 31 $30,724,323 $29,387,092 $8,987,224 $8,131,480 $39,711,547 $37,518.572 Unallocated assets, primarily working capital $ 4,513f80 $ 4,916,140 Total assets as of December 31 $44,225,027 $42,434,712 Expenses used to determine operating income before taxes to each segment are based upon specific identification of such are charged directly to either segment or are allocated in assets provided by Company records. Assets not so identified accordance with factors contained in cost of service studies represent primarily working capital items. The 1977 figures which were included in rate applications approved by the have been restated in accordance with information reported Massachusetts Department of Public Utilities. Assets allocated in Note G.
4ete K: Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1978 and 1977 is as follows:
Three Months Ended March 31 June 30 Sept.30 Dec.31 1978 1977 1978 1977 1970 1977 1970 1977 Total operating revenues $8,913,440 $6,995,697 $6,585,503 M93,397 $5,988,814 $5,768,434 $7,589,776 $7,464,731 Operating income $1,032,845 $ 674,633 $ 692,098 e 488,974 $ 677,117 $ 468,387 $ 830,151 $ 911,968 Net income $ 689,468 $ 347,951 $ 391,099 $ 156,860 $ 365,942 $ 109,111 $ 513,341 $ 585,890 Earnings per stare $1.36 $.60 $.70 $.19 $.65 $.08 $.% $1.13 The 1978 and 1977 quarters have been restated in accordance with information reported in Note G.
14
- _._- _.a....
/M
- In L M To the Shareholders of FITCHBURG GAS AND ELECTRIC LIGHT COMPANY:
We have examined the consolidated balance sheets of Fitchburg Gas and Electric Light Company and Subsidiaries as of December 31,1978 and 1977 and the related consolidated statements of income, retained earnings and changes in financial position for the years then ended. Our examinations were made in accor fance 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.
In our report dated February 2,1978, our opinion on the 1977 financial statements was qualified at being subject to the outcome of an appeal before the Supreme Judicial Court of Massachusetts concerning a rate order of the Massachusetts Department of Public Utilities. As discussed in Note G, the appeal challenged, among other things, the retroactivity of a Department directive to amortize a retired generating unit (Unit #4), its instruction to abandon another generating unit (Unit #6) and its determination of the revenues necessary to provide for the recovery of Unit #6 amortization. In its Order of June 30, 1978, the Court upheld the Department's positions with respect to the abandonment of both units, but directed the Department to increase operating revenues to provide for the recovery of Unit #6 amortization.
Accordingly, our present opinion upon the 1977 financial statements, as presented herein, is different from that expressed in our previous report.
As further discussed in Note G to the financial statements, the Company's method of billing and accounting 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 Massachusetts.The Company 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.
In our opinion, subject to the effects, if any, on the financial statements of the ultimate resolution of the matter discursed in the preceding paragraph, the financial statements referred to above present fairly the financial position of Fitchburg Gas and Electric Light Company and Subsidiaries at December 31,1978 and 1977 and the results of its operations and changes in its financisI position for the years then ended, in conformity with generally accepted accounting principles applied ori a consistent basis.
Boston, Massachusetts February 7,1979 Alexander 3 rant & Company Management's Discussion and Analysis of the Summary of Operations Electric Operating Revenues increased by 11% in 1978 which is attributable to the net effect of four major factors: the full year's effect of additional rate relief granted effective September 1977; the addi- .
tional 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 hours to the 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 component of power generated and purchased with a resulting decrease in total cost recoverable through the Company's fuel expense adjustment clause. The 15% increase in 1977 is due primarily to four factors: permanent rate relief of
$1,062,109 granted effective September 1977; additional electric rate relief of $472,831 allowed in October 1977 by the Supreme Judicial Court of Massachusetts; the sale of 37,228,925 kilowatt hours to the six new industrial customers acquired as of June 1,1977; and a higher per unit energy cost component of power generated and purchased which resulted in a higher total cost recoverable through the Company's fuel expense adjustment clause. See Note G-Conclusion of Rate Appeal of the Notes to Consolidated Financial Statements.
! Gas Operating Revenues increased 15% in 1978 primarily due to three factors: the increased cost l of purchased gas which is passed on to customers through the operation of a cost of gas adjustment clause; the first full year impact of the permanent rate relief of $553,734 granted effective in September 15
f 1977; and an increase in off-system sales of 36,892 MCF. The 20% increase in 1977 gas operating revenues is primarily related to three factors: permanent rate relief granted effective in September,1977; the increased cost of purchased gas which is passed to customers through the operation of a cost of gas adjustment clause; and off-system sales of 138,383 MCF. Gas operating revenues increased 29% in 1976 due to: a 156,000 MCF increase in gas sales resulting from industrial activity improvement and the colder than normal weather experienced in the latter part of 1976; the permanent rate relief of $349,451 l
granted effective in January,1976; and the increased cost of purchased gas which is passed on to customers through the operation of a cost of gas adjustment clause.
Electricity Purchased for Resale increased $297,758 in 1978 over 1977, and $1,850,691 in 1977 over 1976. The increases resulted from a greater reliance on electricity from other utilities which is needed to enable the Company to meet its dernand requirements. The increase also reflects a higher per unit energy cost in 1977 as compared to 1976. The 1976 decrease from the 1975 level reflects lower per unit energy costs due to changes effected in 1976 in the long'-term agreement with Boston Edison.
Fuel Used in Electric Generatic screased due to a higher level of kilowatt hours generated com-bined with a slightly lower per umt energy cost of generation in 1978. The increase in 1977 is solely attributed to the escalation in the costs of fuels used to generate a level of kilowatt hours below that generated in 1976. The 1976 increase over 1975 was due to the first full years operation of the New Haven Harbor Plant. Since November,1973, the cost of fuel oil has escalated sharply as a result of the Arab oil embargo.
Gas Purchased for Resale continues to increase due to higher prices charged by our pipeline sup-plier, the increasing unit cost of our supplemental gases, and a higher level of total MCF sales.
Operation, Other and Maintenance increases are associated with lease obligations, higher wage rates, increased pension and insurance costs and other costs increases that reflect the continuing effect of inflation.
Depreciation expense has risen due to the Company's new generating facilities and the purchase of certain electric facilities from New England Power Company. 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 Massachusetts Department of Public Utilities (DPU).
Amortization of Cost of Abandoned Properties includes the amortization, commencing January 1, 1976 and January 21,1978, of generating units ordered abandoned by the DPU. See Note G - Conclusion of Rate Appeal of the Notes to Consolidated Financial Statements.
Local Property Taxes continued to increase due to higher assessment valuations and rate increases and the acquisition and construction of plant. The Company has appealed to the Appellate Tax Board the property tax assessments received from the City of Fitchburg for the Fiscal Years 1977,1978 and 1979. A hearing on these appeals has been scheduled in early May,1979. The 1977 increase is due prin-cipally to increased property tax rates and the acquisition of the electric facilities previously discussed.
The 1976 increase is attributable to the commencing of commercial operation of a new generating plant i
l in August,1975.
The Allowance for Other and Borrowed Funds Usr?1 png Construction has increased since 1976 due to the Company's continued investment in electrie gWrasng facilities under construction. From 1973 through 1975, the increase was due to the constddM cf a Mw generating plant which was completed in August,1975. See Note A - Allowance for 6 og UN During Construction of the Notes to Consoli-dated Financial Statements.
Gross Income Deductions increased due to the Comparip's issuing $3,900,000 of 10%% Notes in May,1974 and $3,000,000 of 10% Notes in September,1976. The inetesse also reflects the interest expense related to short-term borrowings required to finance the Company's construction program and, in 1978, the expense includes interest related to pipeline refunos due customers which the Company used in lieu of short-term borrowings. During 1976, the Company experienced a lowering of Otime interest rates applica-ble to its short-term borrowings.
16
i b Statement of Income (000's) 1978 1977 1976 1975 1974 Operating Revenues:
Electric $21,158 $19,061 $16,601 $16,107 $15,653 Gas 7,920 6,861 5,698 4,408 4,610 Total Operating Revenues 29,078 , 25,922 22,299 20,515 20,263 Operatir,g Expenses:
Operation, other and maintenance 5,568 5,326 4,861 4,516 4,395 Electricity purchased for resale 8,538 8,240 6,390 7,163 6,734 Fuel used in electric generation 2,159 2,083 1,869 1,536 2,377 Gas purchased for resale 4,335 3,709 2,986 2,173 2,188 Depreciation 1,182 1,094 953 873 785 Amortization of cost of abandoned propertie3 596 173 176 71 84 Federal income tax (carry back refund) 1,216 562 762 311 (350)
Oeferred income taxes 371 470 258 230 508 Amortization of investment tax credit (62) (52) (49) (34) (16)
State franchise tax 81 84 106 54 62 Local property tax 1,694 1,529 1,384 1,254 1,241 Other taxes 167 160 145 135 136 Total Operating Expenses 25,845 23,378 19,841 18,282 18,144 Operating income 3,233 2,544 2,458 2,233 2,119 Non-operating Income:
Allowance for funds used during construction - -
135 452 371 Allowance for other funds used during con-struction 118 36 - - -
Other (not of income taxes) 83 76 63 93 15 Total Non-operating income 201 112 198 545 386 Grt ss income 3,434 2,656 2,656 2,778 2,505 income Deductions (Net) 1,474 1,456 1,573 1,600 1,584 Net income 1,960 1,200 1,083 1,178 921 Preferred Stock Dividend Requirements 288 290 291 294 206 Net income Available for Common Stock $ 1,672 $ 910 $ 792 $ 884 $ 625 Common Stock Data Shares of Common Stock:
Year end (000's) 455 455 455 455 455 Average (000's) 455 455 455 455 422 Earnings per Average Common Share Outstand-ing $ 3.67 $ 2.00 $ 1.74 $ 1.94 $ 1.48 Dividends paid per Common Share $ 1.50 $ 1.44 $ 1.41 $ 1.38 $ 1.38 Balance Sheet Data (000's)
Utility Plant (at cost) $44,461 $44,100 $39,829 $37,957 $37,015 Accumulated Depreciation S 9,194 $ 9,020 $ 7,125 $ 6,365 $ 7,440 Total Assets $44,225 $42,435 $39,271 $38,777 $37,587 Capitalization and Short-term Notes:
Common stock equity $11,430 $10,440 $10,185 $ 9,805 $ 9,548
- Preferred stock equity $ 4,188 $ 4,230 $ 4,272 $ 4,314 $ 4,356 Long-term debt $16,978 $17,176 $17,294 $14,414 $14,703 Short-term' note payable $ 970 $ 2,500 $ 300 $ 4,400 $ 4,000 Electric Statistics Sales-Thousands of KWH 398,544 349,549 309,257 289,320 343,681 Electric Customers-Year End 21,508 11,272 21,023 20,957 20,952 Avg. Annual KWH Sales per Residential Customer 5,073 5,0A9 5,140 4,992 5,005 Avg. Revenue per Hundred KWH-Residential $ 6.91 $ 6.60 $ 6.45 $ 6.65 $ 5.71 Gas Statistics Sales-Thousands of MCF 2,'J62 2,044 1,970 1,805 1,.o2 Gas Customers-Year End 13,069 12,927 12,832 12,937 12,954 Average Annual Cubic Feet Sales per Residential Customer 92,076 87,253 91,253 84,139 86,792 Average Revenue per MCF-Residential 8 4.03 $ 3.56 $ 3.08 $ 2.60 $ 2.50
- _ _ . ..,_ _ _ _ _ ~ _
_ ,m.
' m.
Charles H. Tenney II, Chairman of the Board of D-rec-t' Philip H. Bradisy, Resident Manager, Northeast, of lors and Chief Executive Officer of the Company."
IBM Corporation. Walinam, Mass Howard W. Evirs, Jr., President of the Company."
Richard L Brickley, Lawyer; partner in the tan firm of BricMey, Sears & Cole Boston, Mass (Director of sub- Charles T. Ellis, Vice President of the Company; Direc-s tary), tor and Vice President of subsidiary; Vice President of L
Howard W. Evirs, Jr., President of the Company; Direc- Bay State Gas Company, Canton, Mass.
f .
W and Pres cent of subsidry Thomas W, Sherman, Vice President and Treasurer of the Company.'
"
- John Grado, Jr., Vice President of Litton industries, t Inc., Fitchburg, Mass (a diversified ndustry), and chief George A. Carlson, Assistant Treasurer of the Com-executive of its Paper. Pnnt:ng and Forms Group. pany and subsidiary; Assistant Treasurer of Bay State Gas Company, Canton, Mass., Concord Electne Com-Thomas W. Sherman, Vice President and Treasurer of par /, Concord, N.H., and Exeter & Hampton Electric L the Company, Director, Vice President and Treasurer of Company, Exeter, N H.
subsidiary; Director, Vice President and Treasurer of b Bay State Gas Company, Canton, Mass., Concord Joseph A. Raffaele, Assistant Treasurer of the Com-Electric Company, Concord, N H., and Exeter & Hamp. pany and sutisidiary; Control ler and Assistant Trea-tor' Electric Company, Exeter, N.H. surer of Bay State Gas Company, Canton, Mass ; As-
, sistant Treasurer of Concord Electric Company, Con-L 1 Robert V. Shupe, President of R L Gourley Co., Inc., cord, N H , and Exeter & Hampton Electric Cornpany, WeMesley, Mass (d:stobutors of heating, air condition-Exeter, N.H.
ing and water heating equ.pment).
Angela P. Carlson, Clerk of the Company; Secretary of
' Charles H. Tenney 11, Chairman of the Board of Direc.
tors and Chief Executive Officer of the Company; Di- subsidiary; Clerk of Bay State Gas Company, Canton, Mass.; Secretary of the Board of Directors of Concord rector, Chairman of the Board of Directors and Chief Electric Company, Concord, N.H., and Exeter & Hamp-Executive Officer of subsidiary; Director, Chairman of ton Electric Company, Exeter, N.H.
the Board of Directors, President and Chief Executive Otheer of Bay State Gas Company, Canton, Mass.; Di- Roger A, Young, Assistant Clerk and Assistant Vice rector, Chairman of the Board of Directors and Chief President of the Company; Director and Assistant Sec-Executive Officer of Concord Electric Company, Con. retary of subsidiary; Director, Vice President and L_
cord, N.H., and Exeter & Hampton Electric Company, Assistant Clerk of Bay State Gas Company, Canton, Exeter, N.H.
Mass.: Executive Assistant of Concord Electric Com-L tRobert L Ware, Lawyer; partner in the law firm of Ware pany, Concord, N.H., and Exeter & Hampton Electric Company Exeter, N.H.
& Ware. Fitchburg, Mass.
'See Director listing for other principal occupations.
[ t Member of Audit Committee.
' Subsidiary. Fitchburg Energy Development Company.
~
- Member of Compensation Committee.
k' TRUSTEE: The First National Bank of Boston, P.O. Box ANNUAL MEETING: The annual meeting of common 1897, Boston, Massachusetts 02105, is Trustee under
[ shareholders National BankisofscheduledBoston,100 to be held Federal Street, at The First Boston, indentures covering the Company's Notes due March 1, Massachusetts, in the Directors Room on the Second 1995 and May 1,1999, respectively.
n Floor, on Tuesday, March 27,1979, at 11:00 A.M. This report, includ:ng the financial statements con-toined herein, is submitted for the general iniormation b ... < . <
_~ . w. _ .
TRANSFER Oft STOCK:The Company's Transfer A0ent " ~ of 1ne shareholders of the Company as such, and is not intended to induce, or for use in connection with, any is The First National Bank of Boston,100 Federal Street, safe or purchase of any securities.
Boston, Massachusetts 02110.
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(1) FITCHBURG GAS AND ELECTRIC LIGHT COMPANY Applicant: (1) Nuclear Plant: Seabrook 1 & 2 Sources of Funds For System-Mide Construction Expenditures During Period of Subject Nuclear Power Plant (millions of dollars) 1979 1980 1981 1982 1983 1984 1985 Security Issues and Other Funds Common Stock $ - $ 2.65 $2.13 $ - $ - $ - $ -
Preferred Stock -
1.50 -
1.00 - - -
Long-term Debt -
5.00 4.00 4.00 -
6.00 -
Notes Payable 4.12 (.03) (2.58) (2.01) 2.41 (2.10) .50 Contributions from parent-net - - - - - - -
Other Funds (.31) (.31) (.52) (.52) (.52) (3.48) (.47)
Total- $3.81 $ 8.81 $3.03 $2.47 $1.89 $ .42 $ .03 Internal Funds Retained Earnings:
Net Income $2.37 $ 2.72 $4.13 $5.14 $4.36 $4.96 $4.29 Less: , preferred dividends .28 .36 .45 .46 .55 .54 .53 common dividends .87 1.39 1.74 1.99 2.13 2.28 2.43 Retained Earnings $1.22 $ .97 $1.94 $2.69 $1.68 $2.14 $1.33
, Deferred Taxes .49 .32 .32 .34 .66 .66 .71 Investment Tax Credit .33 .86 .61 .51 .79 .40 .41 Depreciation and Amortization 1.94 2.12 2.10 1.71 1.80 2.08 2.37 Working Capital Requirements and Others (3.60) (.83) .86 .42 (.57) .19 (.20)
Less: AFUDC (.61) (.97) (1.94) (2.70) (1.69) (2.14) (1.32)
Total $(.23) $ 2.47 13.89 $2.97 $2.67 $3.33 $3.30 4
TOTAL FUNDS $3.58 $11.28 $6.92 S.S.44 $4.56 $3.75 $3.33 Construction Expenditures **
Nuclear Power Plants * $1.02 $ 7.92 $4.81 $3.58 $2.44 $1.79 $ .86 Other 2.56 3.36 2.11 1.86 2.12 1.96 2.47 Total .$3.58 -$11.28 $6.92 $5.44 $4.56 $3.75 $3.33 Seabrook Nuclear Plant * $ .57 $ 7.63 $4.48 $3.03 $1.62 $ .96 $ .03 4t' D'
- Assumes the purchase by Fitchburg Gas and Electric Light Company of an additional 8 megawatts of capacity );{
in each of tle two Seabrook Units. ~
- _ Exclusive of Allowance for Funds Used During Construction (AFUDC).
Page 1 of 2 F1TCHBURG GAS AND ELECTRIC LIGHT COMPANY Summary of Assumptions Used to Develop the
" Source of Funds for System-Wide Construction Expenditures During Period of Construction of Subject Nuclear Power Plant"
- 1. Sales Growth -
See Page 2 of 2.
- 2. Financing - Assumes new issues of long-term debt will be at a 13.5% rate and that new issues of preferred stock would be at a 12% rate.
Common stock issues were priced to achieve a 10% yield based on the then existing dividend, less $1.00 per share for the cost of issue.
Assumes a 14% rate for short-term borrowings throughout the fore-cast, with the exception of the actual rates experienced during 1979.
- 3. Dividend Payments - Provides an increasing dividend compounded annually at 7% using 70% of 1978 earnings per share as the base amount.
- 4. Rate Relief - Rate adjustments have been reflected to provide pre-AFUDC earnings available for common equivalent to that year's dividends paid on common stock.
- 5. Depreciation - Calculated based on the rates so;;ovad by the Depart-ment in the Company's-1977 rate proceeding (DPU No. 19084).
- 6. Other Operation and Maintenance Expenses -
Trended at a 7% increase over the previous year for each year 1981 and beyond, exclusive of Transmission of Electricity by Others.
- 7. Taxes Other Than Income Taxes - Forecasted to increase at 7% annually, with increases to reflect the in-service costs associated with major new ' facilities.
- 8. Allowance for Funds Used During Construction - Calculated in accordance with F.P.C. Order No. 561.
- 9. Construction Forecast - Expenditures reflect the Company's investments in jointly-owned generating facilities, which are detailed by unit in Ex,hibit FGE-17. All expenditures in jointly-owned facilities are based upon information provided to the Company by the lead participant. Additionally, Exhibit FGE-17 reflects "Fitchburg Local" construction expenditures for productions, transmission, distribution and general plant and equipment neccessary to pro-vide the Company's customers with safe, reliable service. All expenditures are justified by engineering studies and are sub-ject to final approval by the Company's Board of Directors.
- 10. Targeted' Capital Structure,- as follows:
Long-Term Debt 50%
Preferred Stock- 10%
Common Stock Equity 40%
100%
Page 2 of 2 FITCIIBURG GAS AND ELECTRIC LIGIIT COMPANY KWil AND MCF SALES (000's) AS INDICATED Firm Firm Year KWil Sales MCF Sales 1979 409,000 2026 1980 432,000 2185 1981 453,000 2444 1982 477,000 2638 1983 491,000 2771 1984 504,000 2832 1985 518,000 2893
1
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'FITCHBURG GAS AND ELECTRIC LIGHT COMPANY Nuclear Plant: Seabrook 1 & 2 Estimated Annual Amounts of AFUDC Associated With Subject Nuclear Plant Amount Year (000's) 1979 165.1 1980 574.2 1981 1,484.8 1982 2,146.6 1983 1,081.1 1984 1,367.3 1985 265.4
b
.i FITCHBURG GAS AND ELECTRIC LIGHT COMPANY j List of Generating Units and Other Plant to be Constructed During the Period of Construction of the Subject Nuclear Power Plant In-Service .
Dates 1979 1980 1981 1982 1983 1984 1985.
Completed J.O. Units $ 35.0 $ 6.0 $ 16.0 $ 15.0 $ 6.0 $ 6.0 $ 9.5 Seabrook 1 & 2 4/83 & 2/85 574.2 7628.7 4481.4 3028.1 1621.6 961.1 28.5 Millstone #3 5/86 230.3 216.3 229.5 399.4 430.6 380.1 300.0
'NEP #1 & 2 11/91 & 11/93 66.0 - - - - - -
Pilgrim Unit #2 12/85 109.1 53.6 73.6 120.4 347.6 355.8 352.0 Montague #1 & 2 11/91 & 11/93 5.2 9.0 9.9 19.0 29.0 83.6 167.2 1019.8 7913.6 4810.4 3581.9 2434.8 1786.6 857.2 Fitchburg Local 2562.2 3364.4 2106.3 1861.9 2121.8 1964.0 2470.2-
- Total $3582.0 $11278.0 $6916.7 $5443.8 $4556.6 $3750.6 $3327.4
- Inclusive of Nuclear Fuel, but exclusive of AFUDC. .
r 3
-- . .. .. _ m._. _ . ._, . . . _ _ ._ __ .. . _ _ _ . _ _
FITCHBURG GAS AND ELECTRIC' LIGHT COMPANY SEC and Indenture Interest Coverages During the Period of Construction Ratio of Earnings Availabic for Earnings Interest as a Percentage To of Annual Interest on Fixed Existing Year-End Year Charges (SEC) Debt (Indenture)
-1979 3.20 276%
1980 2.53 227%
1981 2.93 289%
1582 3.14 315%
1933 2.80 285%
191.4 3.05 282%
1985 2.77 283%
,- ' FITCHBURG GAS AND ELECTRIC LIGHT COMPANY FINANCIAL STATISTICS
- Twelve Months Ended 1978 1977 1976 Earnings available to common equity $ 1.672 $ 0.910 $ 0.792 Average common equity $10.935 $10.365 $ 9.994 Rate of return on average common equity 15.3% 8.8% 7.9%
Times total interest earned before FIT:
Gross income (incl. AFUDC) & current and deferred FIT . total interest charges &
j amortization of debt discount and expense 2.9 2.4 2.4 I
Times long-term interest earned before FIT:
l Gross income (incl. AFUDC) & current and deferred FIT - long-term interest charges and amortization of debt discount & expense 3.4 2.6 2.9 i
Bond ratings (end of period)
Standard and Poor's BBB BBB BBB Moody's Baa Baa Baa Times interest and preferred dividends earned after FIT:
Gross income (incl. AFUDC) - total interest
- charges & amortization of debt discount and expense & preferred dividends 1.8 1.5 1.4 AFUDC $ 0.417 $ 0.248 $ 0.135 Net income af ter preferred dividends $ 1.672 $ 0.910 $ 0.792 Market price of common $15.875 $15.75 $16.375 Book value of common $25.09 $23.15 $22.36-l Market-book ratio (end of period)* .63/1.00 .68/1.00 .73/1.00 Earnings avail, for common less AFUDC plus depreciation and amortization, deferred taxes, and investment tax credit adjust.-
deferred $ 3.343 $ 2.347 $ 1.993 Common dividends paid $ .683 $ .656 $ .642 Ratio 20.4% 28.0% 32.2%
Short-term debt:
Bank loans .$ .97 $ 2.5 $'0.3 l
Commercial paper ,
Capitalization (Amount & Percent):
Long-term debt $16.978 52.1- $17.176 53.9 $17.294~ 54.4 Preferred stock- 4~.188 12.8 4.230 13.3 4.272 13.5
- Common equity. _11.430 35.1 10.440 3?,8 10.185 32.1
$32.596 100.0 $31.846 100.0 $31.751 100.0 l
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No dealer, salesman or any other person has been authorized to gise any information or to make any representations other than those con-tained in this Prospectus and, il given or made, $30,000,000 such information or representations must not be relied upon as hasing been authorized by the Company or the Underwriters. This Prospectus does not constitute an offer to sell, or a solici'.a- PUBLIC SERVICE tion of an offer to bu3, any of these securities 1y companyof Narw h any Underwriter in any jurisdiction to any per-son to whom it is enlawful to make such offer or solicitation in such jurisdiction. 'Ibe delivery of this Prospectus does not imply that the informa- . tion herein is correct as of any time subsequent General and Refunding .. to t, daie. t Mortgage Bonds - eries C MV2% Me M@
- TABLE OF CONTENTS 2
l The Company 3 i Prospectus Bummary - 4 Problems racing the Company 9 rn Industry Problems ~- 10 Use of Proceeds Construction Program 10 rinancing 13 PROSPECTUS ' M Capitsli 4 tion Statement of Earning, 16 hinnagement's Discussion and Analysis of the Statement of Earnings 20 Operating Statistics 22 23 - , t.E Business Power Su. le and Properties 23 " New Eng d Power Pool 23 iA',AiPo'ckrso3ect n 27 Kidder, Peabody & Co. Incorporated
'f'!$
Regulation . . ... ..... Rates-New Ilampshire Retail 28 a
!? Blyth Eastman Paine Webber A M'ei"si " . .
33 Nati,ona nergy Policy IncoFPorated ,:1 Enttronmental Matters . . 33 35
.g Employees, Salaries and Wages ... ^
Voluntary Wage sud Price Guidelina 35 Municipalities and Cooperatives 35 Accountants
- Report 37 ..
Pinancial Statements 38 -'f' Descri tion of The Bonds 51 January 22,1980 legal Opinions 57 , 57 J Experts Underwriting 58 .G 3y
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60)
$30,000,000 g Public Service Company of New Hampshire General and Refunding Mortgage Bonds, Series C 14%% due 2000 Interut is payable January 15 and July 15, commencing July 15,1980. The Series C Bonds are entitled to a mandatory annual sinking fund payment of $2,250,000, payable in cash or Series C Bonds, beginning in 1990 with a redemption price of 100% of the principal amount plus accrued interest and an also redeemable at the option of the Company at any time, in whole or in part, at the prices set forth herein, except that prior to January 15,1985, the Series C Bonds are not refundable at the option of the Company at an interest cost less than 14.85(/c per annum. The Company may make an additional sinking fund payment in any year in an amount not exceeding the mandatory sinking fund payment for that year. See " Description of the Bonds".
The Series C Bonds are secured by a mortgage on substantially all of the Company's properties which is subordinate to the lien of a fint mortgage on substantially the same pmperties and are also secured by a pledge of certain First Mortgage Bonds. At October 31,1979 there was outstand. ing $196,495,000 aggregate principal amount of First Mortgage Bonds (exclusive of pledged Fint Mortgage Bonds). See " Description of the Bonds" for information with respect to the participation of holders of the Series C Bonds in the lien of the first mortgaze. See "Pmblems Facing the Company" for a description of the Company's financial difficulties. Application will be made to list the Series C Bonds on the New York Stock Exchange. Listing will be subject to meeting the requirements of the Exchange, including those relating to distribution. THESE SECURITIES IIAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF TIES PROSPECTUS. ANY HEPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Underwriting Price to Discounts and Proceeds to Public(1) Commissione(2) Company (l)(3) Per Bond 100.00 % 2.20 % 97.80 % Total $30,000,000 $660,000 $29,340,000 (1) Plus accrued interest, if any, from the date of original issue. (2) The Company has agreed to indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933. (3) Before deduction of expenses payable by the Company estimated at $178,000. The Series C Bonds are offered by the several Underwriters when, as and if issued by the Com-pany and accepted by the Underwriters and subject to their right to leject orders in whole or in part. It is expected that the Series C Bonds will be ready for delivery at the office of Kidder, Peabody & Co. Incorporated,10 Hanover Square, New York, New York, on or about January 29,1980. Kidder, Peabody & Co. Blyth Eastman Paine Webber Incorporated Incorporated , The date of this Prospectus is January 22,1980. ! l l 5
C IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER.AllDT l OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF Tile HONDS OFFEHED IIEREHY AT LEVELS ABOVE THOSE WHICH MIGitT OTHER-WISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFOILMATION Public Service Company of New Hampshire (the " Company") is subject to the informa-tional requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports and other information with the Securities and Exchange Commission. Information for the year 1978 and prior years concerning directors and officers of the Company, remuneration cnd any material interests of such persons in transactions with the Company, is disclosed in proxy statements distributed to stockholders of the Company aml filed with the Commioion. Such reports, proxy statements and other information can be inspected at the office of the ( Commission at Room 6101 at 1100 L Street, N.W., Washington, D. C.t Room 1100, Federal Huilding, 26 Federal Plaza, New York, N.Y.t Suite 1710, Tishman Building,10960 Wilshire Boulevard, Los Angeles, California; and Room 1228, Everett McKinley Dirksen Building,219 l South
Deartmrn Street,
Chicago, Illinois. Copies of such material may also be obtained at i prescribed rates from the Public Reference Section of the Commission at 500 North Capitol Street, N.W., Washington, D. C. 20549. Cenain of the Company's securities are listed on the l New York Stock Exchange where reports, proxy material and other information concerning the Company may also he inspected. THE COMI ANY I The Company was incorporated in New Hampshire in 1926. The mailing address of the Com- , pany is 1000 Elm Street, Post Offlec Box 330, Manchester, New Hampshire 03105 and the Company's telephone number is (603) 669-4000. The Company is the largest electric utility in New Hampshire. It operates a single integrated system furnishing electric service in Manchester, Nashua, Portsmouth, Berlin, Dover, Keene, Laconia, Franklin, Hochester, Somersworth and 187 other New Hampshire municipalities including about 83% of the total population of the State. It also sells electricity to other utiEies and distributes and sells electricity in 6 towns in Vermont and 13 towns in Maine. The area wrved at retail has a popula-tion of about 746,000. The Company is presently experiencing serious dif!!culties in financing its construction program. See " Problems Pacing the Comt,any" for a description of the external financing and rate relief required in order to enable the Company to maintain its construction program and continue its business opera- , tions, pending commencement of the proposed reduction in its construction program whleh would (' reduce substantially the Company's financing requirements. See " Construction Program". 2 1
PHOSPECTUS SU3LMARY O The folluteing material is qualiftd in its entirety by the detailed information and the fnon-cial statements and notes apptaring elsewhere in this Prospectus. See especially " Problems Facing the Company". TIIE OFFEftING Company Public Service Company of New Hampshire Bonds Offered $30,000,000 General and Refunding 3!ortgage Bonds, Series C 14%9 due 2000 Sinking Fund . $2,250,000 annually, commencing January 15, 1990, to retire 757c of the issue prior to maturity. Use of Proceeds To reduce short-term debt incurred for construction and for other corporate purposes. Bonds to be listed New York Stock Exchange TIIE COMPANY Business Electr c utility i Energy Sources (12 months ended October 31,1979) Oil-48%, Coal-37%, Nuclear-10% and Hydro-5% Estimated 1980-1985 Construction Expenditures (excluding allowance for funds used during construction): Assuming proposed reduction of ownership interests in nuclear plants under construction (see " Problems Facing the Company") $620,200,000 Assuming no such reduction $946,600,000 Estimated Required Permanent Financing in 1980 (after sale of Series C Bonds) $216,000,000 FINANCIAL INFORMATION (Amounts in thousands except ratios) Twel e M nths Year ended December 31, October 31,1979 1978 1977 Operating Revenues . $289,522 $260,751 $214,787 Operating Income 44,637 48,338 29,174 Net Income 39,708 36,507 21,722 Ratio of Earnings to Fixed Charges- Actual 2.39 2.87 2.38 Pro Forma 1.69 - - Capitalization and short-term debt as of October 31,1979, and as adjusted for the proceeds from the sale of the Series C Bonds (see" Capitalization"): Percent of Adjusted Actual As Adjusted Capitalization. Long-Term Debt (including current ma-turities) $346,909 $376,249 47.4 9 Preferred Stock 112,543 112,543 14.2 Common Stock Equity 305,200 305,200 38.4
$746,652 $793.992 100.07c Short-Term Debt $ 73,100 $ 43,7t3 i
E 3 l 1
m PROBLEMS FAGNG THE COMPANY The Company is presently experiencing serious difficulties in obtaining external financing for its s construction program and in maintaining cash flow adequate to fund this program and the costs of the Company's current business operations. The major portion of the Company's construction pro-gram is the Company's present 50% ownership interest in the 2300 31W nuc! car generating plant at Seabrook, New IIampshire. Although the Company has commitments from other utilities which would reduce the Company's interest to about 35%, these commitmenta are subject to several contin-gencim, principally obtaining the necessary regulatory approvals. As a result of delays in obtaining such appmvals, the Company must continue to finance 50% of construction costs, possibly until January,1981 or beyond. If the Company's ownership interest is not mduced in 1980, the Company will have to raise approximately $216,000,000 in permanent financing in 1980, after the sale of the Series C Bonds offeml hereby. Cost increases, delays and changes in ngulatory p>oceedings and mluirements, market conditions and other factom have in the past necessitated revisions in the Company's construction program and the timing and amount of the "ompany's projected financings and may mquire such revisions in the future. Rate Proceedings The Company's finaccing program had been based upon the inclusion in the Company's rate base of a portion (approximately 50% on average) of the expenditures for construction work in progress ("CWIP") associated with major generating facilias, and in 1978 the Company's request for such inclusion was granted by the New IIampshire Public Utilities Commission ("NHPUC"). After passage of a New Hampshire statute prohibiting the inclusion of CWIP in rate base, the NHPUC excluded CWIP from the Company's rate base as of 31ay 7,1979. At the same time, the NHPUC allowed the existing rates to remain in effect, determining that the Company's rates could not be changed without an investigation to establish new rates which would provide a just and reason-able rate of return for the Company. Such an investigation was ordered, and the NHPUC has stated that intervenon' rights with respect to possible rebates would be preserved. On August 31,1979, the Company filed a new retail tariff with the NHPUC providing permanent rates designed to generate revenues of approximately $18,500,000 (about 8.4%) on an annual basis l - I above those currently received. This filing has been suspended by the NIIPUC pending full investi-gation and has been consolidated with the rate investigation initiated by the NHPUC in connection with the elimination of CWIP from rate base. See " Business- Rates- New Hampshire Retail". Hearings are underway in these rate proceedings but the Company is unable to predict when the pniecedings will be concluded and a decision rendered. In order to provide the Company with the revenues necessary for it to obtain external financing for its construction program, and in particular to obtain sufilcient revenues to satisfy the earnings test contained in the Company's General and Refunding 3Iortgage Indenture for the issuance of the General and Refunding Stortgage Bonds needed during 1980 (see " Financing-Stortgage Bonds"), on November 27, 1979, the Company filed a request with the NUPUC for an emergency surcharge designed to increase annual revenues by appmximately $11,970,000 (about 5.5%) based on a test year ending 3 fay 31,1979. This surcharge represents a portion of the 8.4% permanent rate increase requested by the Company in August. On December 21,1979, the NHPUC granted the Company the 4 t
full amount of its request to take effect under bond on December 28,1979, the bond being an agreement to make refunds to customem in the event the NIIPUC ultimately determines that the Company is not entitled to the full amount so granted. See " Business- Rates-New Hampshire Retail" On December 21, 1979, the Company filed with the Federal Energy Regulatory Commission ("FERC") new rates for its wholesale-for-resale customers that would increase revenues from such customers by approximately $4,294,000, or 10.19 on an annual basis. See " Business - Rates- Other". The Company is seeking to expedite action by the 31aine Public Utilities Commission on its presently pending requests for rate increases. See " Business- Rates-Other" Reduction of Construction Program In view of the cash stringency which would result from the anticipated elimination of CWIP (see Note D to the Statement of Earnings and " Business-Rates-New Ilampshire Retail") and the resultant difficulty of financing the 509 interest in Seabrook, the Company decided in Starch, 1979 to reduce its ownership interest in the Seabrook plant to 289 and thereafter offered ownership interests aggregating 229 to other utilities (the "31 arch offer"); it also offered to other utilities its ownership interests in the Pilgrim #2 and 31illstone #3 projects. Reduction of Scabrook Ownership. The full amount of the 3farch offer was accepted by nine other New England utilities, but three have since informed the Company that they will be unable to take part or all of the amount accepted. 3fassachusetts 31unicipal Wholesale Electric Company ("3131WEC") agreed to take the major portion of such offer (13.874469 of the plant) but was able to obtain power purchase commitments from its constituent town and city electric departments which permit it to commit for only approximately 6% of the plant. Central Vermont Public Service Corporation and Green Slountain Power Corporation each accepted 1% but neither will proceed with its acquisition because of conditions contained in th( opinion of the Vermont Public Service Board approving the acquisitions which would place the en, ire risk of the investment on the utilities' stockholders until the plant is placed in operation. Consequently, the 31 arch offer has resulted in commitments for about 12% out of the 22% of the ownership interest in Seabrook originally offered.' In mid-October,1979 the Company re-offered the remaining 109 ownership interest in the Seabrook plant to other participants in the plant and to
'The sewn utilities committed under the 31 arch offer and their respective commitments are as follows:
Bangor IIydro Electric Company 1.80142 Central 3faine Power Company 1.00000 Town of Hudson,3fassachusetts Light and Power Department 0.01957 l 3131WEC 6.00091 l Afontaup Electric Company 1.00000 New Bedford Gas and Edison Light Company 2.17390 Taunton 31unicipal Lighting Plant Commission 0.13065 Total 12.12645 5 E
l the Company's New IIampshire wholesale customers (the " October offer"); commitments for owner-ship interests aggregating appmximately 3% of the plant were received." Each utility acquiring an ownership interest under either offer will acquire its interest gradually ' over an Adjustment Period. During the Adjustment Period, the accepting utilities will share pro rata the costs otherwise attributable to tho Company's ownership interest until their aggregate invest-ment in the Seabrook project has been increased to approximately 15% and the Company's invest-ment decreased to approximately 35%"* of the totalinvestment of all participants. Until the Adjust-ment Periods begin, the Company must continue to finance its construction program at its present 50% ownership interest in Seabrook. The Adjustment Period for the 3farch offer will begin only after receipt by the accepting utilities of all required regulatory and stockholder approvals (and in the case of 3131WEC, the obtaining of finaming for its increase). The Adjustment Period for each accepting offeree of the October offer will begin only after the Adjustment Period for the 3farch offer begins, and after the accepting offeree obtains its required regulatory approvals (and in the case of Fitchburg Gas & Electric Light Com-pany, the approval of its stockholders), whether or not other accepting offerees have obtained their approvals, and in the case of New IIampshire Electric Cooperative, Inc. (the "NII Coop"), which ! accepted 2.17391 9 , after it has obtained satisfactory financing. The Company has no knowledge of the financing plans or prospects of any of the participants and there can be no assurance that they can obtain financing in the necessary amounts or in a timely manner; however, only the commitmenta of 3131WEC and the NII Coop are contingent upon the consummation of necessary financing. The financing arrangements of all of the other participants will of necessity await receipt of the regulatory approvals described below. Action by the NIIPUC, the 3tassachusetts Department of Public Utilities ("3tDPU") and the Nuclear llegulatory Commission ("NitC") is required, as drseribed below. In New Ilampshire, NIIPCC approval is required to be obtained by the Company and by the Nil Coop. The Company has obtained such approval but the NIIPUC's decision has been appealed to the New Ilamp3 hire Supreme Court by an intervenor. The Nil Coop is awaiting the Itural Elec. trification Administration's agreement on financing before seeking NIIPUC approval. Under 31assachusetts law, the increases of 3fontaup Electric Company, New Bedford Gas and Edison Light Company, and Fitchburg Gas and Electric Light Company must be approved by their respective stockholders (which in the case of 3fontaup and New Bedford are their parent companies), amt by the Company's stockholders, who approved the increases of 3fontaup and New Bedford under the 31 arch offer at a meeting held in September,1979. Approval by the 3tDPU is also required for "The three utilities committed under the October offer and their respective commitments are as folhm s: Tr mton 3tunicipal Lighting Plant Commission 0.20380 Pi hburg Gas & Electric Light Company 0.26087 New IIampshire Electric Cooperative, Inc. 2.17391 Total 2.63858
'"The Company's actual ownership percentage woubl be 35.23497 % , and figures for the Company's financing and construction programs have been calculated using this percentage.
6 I I
these increases, as is MDPU approval of the financing for MMWEC's increased intermt; petitions 1 have been filed with the MDPU for the Montaup, New Bedford and Fitchburg increases and for the O MMWEC financing, and hearings have commenced. The proceeding involving Montaup, and Fitchburg has been consolidated with two other proceedings relating to transfers of Seabrook interests by other participants. The Massachusetts Attorney General and others have intervened in these proceedings in opposition to the several proposals; in the proceedings relating to other trans. fers, the Attorney General has challenge d the other Massachusetts utilities' need for the power fmm the Seabrook plant, among other things. The EDPU has recently decided that the proceeding relating to MMWEC's financing will involve consider ation of the " financial viability" of the Seabrook project and the " economic and financial impact of the proposed purchase and bond issue upon the municipal entities which ecmprise MMWEC"; the scope of this inquiry will not be defined until the proceedings ha.e progressed further. Consequently,it new appears that the several proceedings before the MDPU will take much lenger than originally anticipated. On the present schedule, the proceedings may not be concluded until June,1980 at the earliest, and perhaps not before January,1981, or later. If the Adjustment Period of any accepting offeree under the October offer has not commenced by January 1,19S1, such offeree's commitment may be terminated by the offeree or by the Company. Filings have been made with the NRC with aspect to the offers but clearance has not yet been received. No other regulatory approvals are required for the increases for which the Company has received commitments. Possible Slowdown of Scabrook Construction. The Company has been considering the possibility of a deferral for up to four years of the completion date of Unit #2 of the Seabrook plant as a means of reducing the Company's immediate cash needs; under the Joint Ownership Agreement relating to Seabrook, the agreement of holders of 75% of the ownership interests would be required for a deferral. A four year deferral of Unit #2 would reduce the Company's requirements for external financing in 19S0 and 1981 by approximately $27,000,000 and $33,000,000, respectively, assuming 50% ownership in both years. However, the Company estimates that the oeferral would increase the total cost of the project by approximately $740,000,000 and the Company believes that the cost of replace-ment power would greatly exceed the cost of the power which would have been produced by the Unit. Another possibility being considered by the Company as a means of reducing its immediate cash needs is a reduction in the overall level of Seabrook construction. Such an action could reduce the Com-pany's immediate cash needs, but it would result in deferral of the completion dates of both Units and would result in cost increases similar to those which would follow from deferral only of Unit #2. The Company believes that the power from both Units of the Seabrook plant is needed in its service area and in the New England region at the 1983 and 1985 scheduled completion dates. Ofc r of Pilgrim and Milhtone Interests. No expressions of interest were received by the Company with respect to its offer of its interest in the Pilgrim #2 project. The Company has contracted for the sale of approximately two-thirds of its intenst in Millstone #3 to Taunton Municipal Lighting Plant (1.09) and Connecticut Municipal Electric Energy Cooperative (1.7391%), subject to the receipt of necessary regulatory approvals, including that of the NRC. Applications for regulatory approvals are in preparation but have not yet been filed. Proceeds from the sale are required to be deposited with the First Mortgage Trustee under the terms of the Company's First Mortgage Inden-7 l m
O ture. The Company has reoffered and received expressions of interest in purchasing the balance of the Company's interent in 31illstone. Only a relatively small portion of the proposed reduction in the Company's construction program is attributable to the propmed sale of the Company's interest in Stillstone #3 ($31,097,000 for the period 1981 1985). See " Construction Prugram". Immediate Financing Program The Company has a revolv%g credit agreement with a group of eight commercial banks under which the Company may borrow to $130,000,000 through June 30,1980 subject to periodic review by the banks; amounts outstanding under the agreement mature on July 1,1980. One additional commercial bank recently joined the revolving aredit, increasing the amount available under the credit from $115,000,000 to $130,000,000. The Company believes that the availability of such credit to June 30, 1980 will depend principally upon the success of the Company's financing program de-scribed below, and the occurrence of no adverse developments in rate and other regulatory proceedings or in the program to reduce the Company's ownership interest in the Seabrook plant. The original seven commercial banks in the revolving credit have extended the maturity date of the Company's existing $25,000,000 term credit to January 5,1981. The Company has additional lines of credit aggregating $5,350,000 with New Ilampshire banks. On the date of the sale of the Series C Bonds offered hereby, the Company's aggregate short-term borrowings are expected to be appmximately
$124,350,000.
If the necessary approvals for commencement of the Adjustment Periods for the 31 arch and October offers are not obtained until January,1981, the Company estimates that it must raise ap-proximately $216,000,000 in permanent financing during 1980 after the sale of the Series C Bonds, assuming full utilization of the Company's short-term bank credit by the end of 1980 and without giving effect to the emergency surcharge granted to the Company by the NilPUC effective December 28,1979 or to any other requested rate increase which may be granted the Company during the period. If all regulatory approvals are received before January,1981, these financing requirements will be reduced. In July,1979, the Company received advance payments aggregating $10,600,000 from the other Seabrook participants against their present ownership interests in the project. These advances were to be eredited against amounts payable by such participants commencing in January,1980, and are - secured by the Company's interest in nuelmr fuel for the Seabrook project. Except for The United Ilhuninating Company, all of the affected Seabrook Participants have agreed to extend the date after which credits are to be made against their accounts to July 1,1980; United Illuminating's advance in the amount of $3,000,000 has been fully credited against the amount of Seabrook construction costs payable by it in January,1980. l At the pnment time, the Company is unable to issue any significant amount of First 31ortgage l Ilonds and the amount of General and Refunding 5fertgage llonds which the Company can issue is also limited to the extent doncribed under" Financing-31ortgage Bonds". l Necessity of Adequate Rates, Required Approvals and Financing The Company may be unable to obtain the external financing necessary for its 50fo interest in the Seabnmk plant if it does not obtain adequate rates from its pending rate pmecedings, and there 8 i
1 1 can be no assurance that the required approvals for the proposed reduction in the Company's interest in the Seabrook project to 35.23497% will be obtained or that the Company or other Seabrwk partici-9 pants can obtain financing in the necessary amounts or in a timely manner. The Company's ability to obtain necessary financing may also be adversely affected if regulatory and other approvals for signifi-cantly less than the 14.76503 % of the Seabrook plant committed for by other utilities should be obtained. Adequate rates and timely approvals and financing are all essential to enable the Company to maintain its construction program and continue its business operations. INDUSTRY PROBLEMS The Company has experienced and may in the future experience in varying degrees a number of problems generally common to the electric utility industry. These problems include obtaining ade-quate and timely rate increases, uncertainties caused by increasing political involvement in utility regulation, financing large construction programs during an inflationary period, obtaining sufficient capital on reasonable terms, compliance with environmental regulations, high costs of fossil fuel, delays in licensing and constructing new facilities, and effects of energy conservation. Events at the Three Mile Island Nuclear Unit No. 2 in Pennsylvania ("TMI") resulted in damage to the plant and release of radioactivity into the surrounding environment and caused widespread concern about the safety of nuclear generating plants. The Company has interests not only in the Seabrook project but also in six other nuclear generating plants which are either operating or planned or under construction in New England (see " Business-Joint Projects"); its interests in the four such operating plants represent approximately 8% of the Company's present generating capacity. The Company cannot predict what effect the events at TMI which have precipitated increased oppo-sition to nuclear power may ultimately have upon the completion or the cost of completion of the Seabrook project or such other planned nuclear units or upon the continued operation of the existing nuclear generating plants in New England or upon its planned reduction of its interest in the Sea-brook project. Neither the Seabrook Units nor any of these six other New England plants utilize a nuclear steam supply system furnished by the vendor which supplied TMI. United Engineers & Con-structom Inc., the engineer-constructor A r the Seabrook project, was constructor of TMI but was not involved in its design. The TMI incident has prompted a rigorous reexamination of safety related equipment and operating procedures in all nuclear facilities. On October 30,1979, Pnsident Carter's Commission on TMI issued its final report which, among other things, contained extensive recommendations on aspects of nuclear power; on December 7,1979, the President, while reaffirming his support for continued inclusion of nuclear power in his national energy policy, announced his agreement tith the spirit and intent of those recommendations and his initiation of steps toward their implementation. The NRC has already promulgated numerous requirements in response to TMI and the report on an independent study of TMI instituted by the NRC is expected in the near future. The plants in which the Company has an interest are being reviewed by thcir owner-operators, and those plants and all other nuclear facilities are being reexamined by the NRC. Based upon a preliminary engineering review, the Company believes that the new mquirements already promulgated by the NRC will result in design changes which increase the capital cost of the Seabrook project by approximately $2,000,000 l E 9 5
l and will require modifications in the operating nuclear plants in which the Company has an interest, the capital cost of which modifications has not yet been determined but which can be expected to be of a larger magnitude. The T31I incident has also generated a multiplicity of legislative proposals in Congress and various state legislatures. While the ultimate effect of these reexaminations, studies and proposals cannot be specifically predicted, they could cause delays in construction and costly modifications of both the operating and planned nuclear plants in which the Company has an interest. 1 I USE OF PROCEEDS The proceeds to the Company from the sale of the Series C Bonds will be used to reduce short-term debt incurred for construction and for other corporate purposes. On the date of issue of the Series C Bonds, short-term borrowings are expected to be approximately $124,350,000. CONSTRUCTION PROGILOt The area served by the Company has experienced relatively rapid population and economic growth in the last several years. According to statistics compiled by the United States Department of Com-merce, Bureau of the Census, the average annual rate of population growth in the State of New Hamp-shire was approximately 2% during the period 1970-78, the second highest rate of growth for any state cast of Colorado. Figures released by the New Hampshire Department of Employment Security show that New Hampshire is experiencing one of the lowest unemployment rates in the nation, and the lowest in New England-2.84 (not seasonally adjusted) for the month of September,1979. As a result, the electric needs of the Company's customers have increased (an average annual increase of 6.9% and 4.39 in the Company's annual peak load during the ten-year and five-year periods, respectively, ending October 31, 1979). While there is some controversy concerning the rate of growth the Company will experience in the future, the Company has projected the needs of its customen to increase at an average annual rate of approximately 5.19c' at least through 1988, which is anticipated to be the highest increase of any major electric utility in New England furnishing , estimates to the New England Power Pool. The Company's forecasts indicate that its net purchases of capacity will have increased to 306 31W at the time of scheduled completion in 1983 of the first unit of the Seabrook plant described below, of which a 35.23497?c share would be 405.2 31W. If the Seabrook plant is not completed on schedula, there can be no assurance that the Company would be able to purchase sufficient power to render adequate service to its customers. The Company proposes to meet the projected needs of its customers primarily through its share of the 2,300 SIW Seabrook nuclear plant, with two unita each having a capacity of 1,150 31W currently planned for completion in 1983 and 1985, respectively. The Seabrook plant is the only major base load generating station in New England now scheduled to begin service before 1986. In the view of the Company, the plant is essential to meet not only the Company's needs but the New England load as well. As described under " Problems Facing the Company", the Company and other New England utilities have agnni to adjust their ownership interests in the Seabrook project, subject to receipt of the necessary regulatory apptuvals. Assuming an adjustment of the Company's share to 10
35.23497 % , its share of the total cost of Seabrook upon completion, including the initial nuclear fuel, i 9 (sseeestimated Note D to theat $701,800,000, Statement of Earnings),excluding anyisallowance which allowance estimated to be for funds used
$361,100,000.
Company's ownership interest should remain at 50%, these estimated amounts would be $1,000,000,000 during co If the and 6-125,100,000, respectively. See " Problems Facing the Company" and " Financing" for a discussion of the factors affecting the financing of the Seabrook plant, and we " Business-Seabrook Nuclear Project" for a discussion of administrative proceedings and litigation relating to the Seabrook plant. The Company's aggregate construction prragram for the six-year period 1980 through 1985, which is subject to continuing review and adjustment, is currently estimated to be about $620,200,000 (excluding AFUDC) if its ownership interest in Seabrook is reduced to 35.234979 as described above under " Problems Facing the Company" and its ownership interest in Millstone #3 is sold. Such con-struction expenditures would total $946,600,000 if such interests remain at their present levels. The following table sets forth the Company's estimated construction expenditures for 1980 (assuming no effect in 1950 of its reduced construction program) and the unadjusted and adjusted 1981-1985 construction programs as described above based on current construction schedules and cost projections (including an inflation factor, which in the case of Seabrook is 89 per annum, and excluding AFUDC): Estimated Construction Expenditures (Millions of Dollars) I'nadjusted Adjusted 1980 1981 1985 1981 1985 Generating Facilities Company's Share of Seabrook Nuclear Project Plant $173.4 $372.5 $103.1 Nuclear Fuel 14.1 44.5 18.6 Total 187.5 417.0 121.7 Participation in Other Plants
- Nuclear Plants 5.9 58.0 30.3 Nuclear Fuel 1.1 5.5 2.1 Total 7.0 63.5 32.4 Other Generation 5.2 20.4 20.4 Total Generating Facilities 199.7 500.9 174.5 Transmission Facilities 11.0 104.0 104.0 Distribution and General Facilities 21.6 109.4 109.4 Total $232.3 $714.3 $387.9
'See " Business - Joint Projects." <
11
C The following table shows the aggregate amount for each of the years 1980 through 1985 of the Company's estimated construction program before and after adjustment to reflect the maximum redue-tion of the Company's ownership interest in Seabn=>k to 35.23497% commencing in January,1981 and the sale of its interest in alillstone #3 as of that date: Unadjusted Adjusted Construction Construction Progrant Prograrn 1980 $232,300,000 $232,300,000 1981 216,000,000 43,200,000 M2 168,400,000 73,500,000 1983 146,400,000 113,500,000 1984 111,300,000 91,400,000 1985 72,200,000 66,300,000 Total $946,600,000 $620,200,000 Actual construction expenditures couhl vary fn>m these estimates because of changes in the Company's plans and h>ad forecasts, cost fluctuations, delays und other factors; the Company is in the process of reviewing the construction budget for the Seahnmk project and expects to complete the review in the first <ptarter of 1980. The Company estimates that the ultimate cost of its share of Seahn>ok would increase between $7,"60,000 and $9,940,000 for a 35.234979 ownership interest (and between
$10,300,000 and $14,100,000 for a 509 ownen. hip interest) for each month's delay in completion.
Delays of more than one month may result in a higher per month cost; the increase in cost in each case depends upon the cause and length of the delay. It is also possible that additional expenditures may be requin d to meet regulatory ami environmental requirements at the Seahniok nuclear plant and at the Company's other generating facilities. See " Industry Problems" and "Ilusiness - Environ-mental Matters". The complexity of present-day electrie utility technology and the time required for the construc-tion of generating facilities and for the completion of th necessary licensing and regulatory proceed-ings, which have become increasingly extensive, have compelled the Company, as well as other electric
- utilities, to make substantial investments in the construction of such facilities before the licensing and regulatory proceedings are final. At October 31, 1979, the Company had invested approximately
$434,200,000 (including AFUDC of approximately $56,900,000 and nuclear fuel of $28,200,000) in the Seabrook nuclear plant. While it is possible that future developments could lead to cancellation of the ;
project, the Company considers such a possibility unlikely not only because the necessary construction ! permits and approvals have been received (although certain of them are subject to further court appeal and administrative proceedhgs, see " Business-Seabrook Nuclear Project") and construc-tion is proceeding but also because of the projected need for the plant's power in the Company's service area and in New England generally. Ilowever, if the Seabrook project were cancelled, the l Company estimates that at the present time its share of the total <osts would be substantially more than its investment; the precise amount would depend upon a number of factors, including the amount of termination charges and salvage and the results of negotiations in connection with contract terminations. The Company would apply to regulatory authorities for approval to amortize its share of total costs over an appropriate future period and to recover such costs through the Company's 12 l
retail and wholesale rates. While the Company cannot predict whether and to what extent regulatory authorities would permit such recovery, construction of the plant was authorized by the New Hamp-G shire Public Utilities Commission based upon its finding that the plant was required to meet the demand for electric power. See " Business-Seabrook Nuclear Project - NHPUC" FINANCING Financing of the Company's 1930-1985 construction lirugram estimated at $620,200,000 (aasuming its construction program is reduced as described above), and the refinancing at maturity of certain long term debt aml required sinking fund payments together aggregating $108,99,000 during this period (see Notes 5 and 7 of Notes to Financial Statements), represents a major undertaking for the Company. The Company estimates that approximately $280,000,000 will be generated from internal funds during this period (principally after 1982). The balance is expected to be financed from external sources. During 1979, the Company raised approximately $166,060,000 from permanent financing, con-sisting of $39,640,000 from the sale of 2,000,000 shares of Common Stock in January, $30,000,000 from the sale of 1,200,000 shares of Preferred Stock ($25 Par Value) in May, $37,740,000 from the sale of 2,000,000 shares of Common Stock in .luly and $58,680,000 from the sale of General and Refunding Mortgage Bonds in September. The Company's financing plans for the 1980-1985 period include the issnance of common stock, preferred stock and long term debt, nuclear fuel financing and intermediate-term del.t financing. The success of the Company's financing plan is dependent upon a number of factors, including the Company's ability to obtain adequate and timely rate increases, conditions in the securities mar-kets, economic conditions and the Company's level of sales and particularly resolution of the matters , discussed under " Problems Facing the Company". Mortgage Bonds. Due to certain restrictions in the Company's First Mortgage Indenture, no significant amount of First Mortgage Bomis may be issued thereunder until an operating license is obtained for Seabrook Unit **1, now anticipated in late 1982. The Company is considering seeking the consent of the holders of its First Mortgage Bonds (759 in principal amount required) to amend that Indenture by modifying or eliminating these restrictions, but no assurance can be given that such consent will be sought or obtained. If these amendments are made, the Company is required to redeem all outstanding General and Refunding Mortgage Bonds, including the Series C Bonds offered hereby, by exchange for First Mortgage Bonds; until such time, such First Mortgage Bonds as may be issued will be pledged as additional security for the General and Refunding Mortgage Bonds. At October 31,1979, the Company had $196,495,000 of First Mortgage Bonds outstanding (exclusive of I dedged First Mortgage Bonds) and $857,640,000 of Net Utility Plant, including $484,626,000 of Unfinished Construction. ( Because of the restrictions in the Company's Fint Mortgage Indenture, the Company has entered l into the General and Refunding Mortgage Indenture dated as of August 15,1978 (the "G&R Inden-l turo"), constituting a second mortgage on the Company's properties to secure General and Refunding Mortgage Bonds. The Company sold $60,000,000 of such Bonds to institutional investors in Septem-ber,1978 and $60,000,000 pursuant to a public offering in September,1979. The terms of the G&R Indenture are generally similar to those of the Fint Mortgage Indenture except for elimination of the I l E 13 l E i I 1 l l
O above mentioned restrictions on issuance of bonds and the inclusion of a lirnitation on the amount of other income (including AFUDC) includible in earnings coverage under the G&R Indenture. See
" Description of the Bonds". For the twelve months ended October 31, 1979, the earnings coverage of interest on bonds was approximately 2.34, as compared with the requimments for the issuance of additional bonds contained in the O&R Indenture of 2.0. At October 31,1979 the earnings coverage test would have limited the principal amount of General and Refunding Mortgage Bonds (14%fe annual interest rate) which could have been issued to approximately $34,000,000.
Bar.k Financing. The Company has a revolving credit agreement with a group of eight commer. cial banks under which the Company may bortvw up to $130,000,000 through June 30,19S0 subject to periodic review by the banks; amounts outstanding under the agreement mature on July 1,1980. One additional commemial bank recently joined the revolving endit incrusing the amount available under the credit from $115,000,000 to $130,000,000. See " Problems Facing the Company-Immediate Financing Program". The original seven commemial banks in the revolving endit have extended the maturity date of the Company's existing $25,000,000 term credit to January 5,1981. The Company has additional lines of credit aggregating $5,350,000 with New IIampshim banks. As of October 31, 1979, the Company could have incurred approximately $146,480,000 of short. term unsecured indebtedness under its Atticles of Agreement without obtaining the approval of holders of the Preferred Stock. The NIIPUC has approved up to $146,500,000 of short-term borrowings. Preferred Stock. Under the Company's Articles of Agreement additional Preferred Stock may be issued without the afllrmative vote of the holden of a majority of either class of the Preferred Stock provided that the ratio of earnings to fixed charges and preferred dividends, including dividends on Preferred Stock to be issued, is at least 1.50. For the twelve months ended October 31,1979, the ratio of earnings to fixed charges and preferred dividends computed under the method prescribed by the Company's Articles of Agreement was 1.98; and based thereon, the Company could issue, without such vote of the holders of the Preferred Stock, approximately $69,740,000 of additional Preferred Stock (14?o annual dividend rate assumed). E 14
CAPITALIZATION The capitalization and short. term debt of the Company as of October 31,1979 was, and adjusted O as of that date to reflect the issuance of $30,000,000 principal amount of Series C Bonds offered hereby and the application of the pmeeeds thereof (aggngati.., $29,340,000) would have been, as follows: Amount Outstanding October 31,1979 Adjusted Amount Percent Amount Percent Long. Term Debt (including current maturities) (Thousands of Dollars)
$196,006 $196,006 First Mortgage Bonds (a)
General and Refunding Mortgage Bonds (b) 118,656 149,028 25,000 25,000 Promissory Note 7,215 7,215 Pollution Control Revenue Bonds 346,909 45.4 % 376,249 47.4 % Total Long-Term Debt Preferred Stock-Cumulative
$100 Par Value, Authorized, 1,350,000 shares Outstanding, 675,432 shares (c) 67,543 67,543 $25 Par Value, Authorized,5,000,000 shares Outstanding, 1,800,000 shares (c) 45,000 45,000 112,543 14.7 112,543 14.2 Total Preferred 8tock Common Stock Equity Common Stock-$5 Par Value Authorized, 18,000,000 shares Outstanding, 13,932,209 shares (d) 69,661 69,661 Other Paid In Capital 166,202 166,202 Retained Earnings 69,337 69,337 305,200 39.9 305,200 38.4 Total Common Stock Equity Total Capitalization (e) 8764,652 100.0 % $793,992 100.0 %
Bhort-Term Debt 8 73,100 $ 43,760(f) (a) Because of certain restrictions in the First Mortgage Indenture no significant amount of bonds may now be issued thereunder. See " Financing". For a description of the outstanding series, see Note 7 of Notes to Financial Statements. Amounts shown exclude pledged First Mortgage Bonds. (b) The amount of bonds issuable under the General and Refunding Mortgage Indenture is subject to certain restrictions. See " Description of Bonds- Additional G&R Bonds" and " Financing". For a description of the outstanding series, oce Note 7 of Notes to Financial Statements. (c) For a description of the outstanding series, see Notes 4 and 5 of Notes to Financial Statements. (d) In addition, as of October 31,1979 there were reserved for issuance upon conversion of the 48,432 shares of Convertible Preferred Stock,5.50% Dividend Series, 214,585 shares of Common Stock based upon the conversion price of $22.57 per share (the Convertible Preferred Stock being taken at its par value of $100 per share). (e) See Note 8 of Notes to Financial Statements with respect to Commitments and Contingencies. (f) On the date of the issue of the Series C Bonds, short. term bank borrowings are expected to be approximately $124,350,000. See "Use of Pmeeeds" and Note 3 of Notes to Financial Statements. E 15 5
O STATEMENT OF EARNINGS The following Statement of Earnings, so far an it relates to the five years in the period ended December 31,1978, has been examined by Peat, Marwick, Mitchell & Co., independent certified public accountants, whose report thereon appears elsewhere in this Prospectus. The information for the twelve months ended October 31,1979 is unaudited and, in the opinion of management, includes all adjustments (consisting only of normal recurring accruals) necessary to a fair statement of results of operations for such period. This statement should be read in conjunction with the other financial statements and the related notes appearing elsewhere in this Prospectus. Twelve Montha Oc o 31 1979 1978 1977 1976 1975 1974 (Unaudited) (Thousands of Dollars) Operating Revenues (A)(B) $289,522 8260,751 8214,787 $196,674 $186,393 8155,930 Operating Expenses Operation Fuel (B) 110,188 71,996 70,500 54,881 58,511 43,161 Purchased and Interchanged Power 33,735 43,422 37,810 36,468 27,153 32,505 Other 35,809 31,490 27,641 25,058 22,048 19,283 Af aintenance ( A) 19,027 17,502 14,550 12,930 10,727 8,575 Depreciation (A) 15,369 14,752 14,117 13,791 13,522 11,624 Federal and State Taxes on Income (A)(C) 16,437 19,666 8,399 9,733 9,916 3,702 Other Taxes, Principally Property Taxes 14.320 13,585 12,596 11,860 10,018 9,756 Total Operating Expenses 244,885 212,413 185,613 164,721 151,895 128,606 Operating Income 44,637 48,333 ':9,174
. 31,953 34,498 27,324 Other Income and Deductions Allowance for Equity Funds Used During Construction (D) 13,601 7,828 6,093 3,205 1,573 1,785 Equity la Earnings of Affiliated Com-panies ( A) 903 870 802 1,007 821 870 Other - Net 1,614 983 491 391 498 2,644 Total Other Income and Deductions 16,118 9,681 7,386 4,603 2,892 5,299 Income Before Interest Charges 60,755 58,019 36,560 36,556 37,390 32,623 Interest Charges Interest on Long Term Debt 26,866 21,073 18,980 17,932 16,680 13,547 Other Interest 12,948 8,201 2,029 290 1,209 4,672 ,
Allowance for Borrowed Funds Used During Construction (D) (18,767) (7,762) (6,171) (2,661) (1,307) (1.896) Net Interest Charges 21,047 21,512 14,838 15,561 16,582 16,323 Net Income 39,708 36,507 21,722 20,995 20,808 16,300 Preferred Dividend Requirements 7,829 6,391 5,120 4,848 3,604 ?P9 Earnings Available for Common Stock $ 31,879 8 30,116 $ 16,602 $ 16.147 8 17,204 $ T2322 Average Shares of Common Stock Outstand. Ing (Thousands) 11,944 9,275 7,680 6,372 6,124 5,134 Earnings Per Share of Common Stock (E) $2.67 $3.25 $2.16 $2.53 82.81 $2.52 Dividends Per Share of Common Stock $2.12 31.94 31.88 $1.86 $1.72 31.64 Ratio of Earnings To Fixed Charges (F) Actual 2.39 2.87 2.38 2.61 2.66 1.93 Pro Forma 1.69 - - - - - (See" Management's Discussion and Analysis of the Statement of Earnings".) ( A) See the applicable portion of Note 1 of Notes to Financial Statements. g y (B) For the period December 3,1977 through May 6,1979 the Company's New Hampshire retail rates were based in part upon the inclusion in the Company's rate base of a portion of the costs i 16 l 5
of construction work in progress (CWIP) associated with major generating projects. The inclu-sion of CWIP in rate base increased revenues from customen to cover the costs of financing such 6 CWIP. On 31ay 7,1979 a New Hampshire statute prohibiting the inclusion of CWIP in the Company's rate base became effective. By order dated August 29, 1979 the NHPUC excluded CWIP from the Company's rate base as of Stay 7,1979, but determined that the Company's rates
- {!-
would remain unchanged pending an investigation to determine the Company's revenue require-ments and to establish fair and reasonable rates. The NHPUC has stated that intervenon* rights with respect to possible rebates will be preserved. See " Business- Rates- New Hampshire Retail" for information concerning a new tariff filed with the NHPUC on August 31,109. g ~ See " Business-Rates- )th-r" for a discussion of increased rates to wholesale customem put into effect by the Company on July 29,1978. In August,1976, the Company and a fuel supplier reached agreement on the amount of a fuel inventory adjustment. As a result of this settlement, operating revenues and fuel expense for 1976 are each approximately $4,598,000 less than they otherwise would have been. (C) See Note 2 of Notes to Financia? Statements for information regarding income taxes. (D) AFUDC is the estimated cost, during the period of construction, of funds invested in the con-struction program which are not recovered from customers through current revenues. Suel allowance is not realiv > N cash currently but under the rate-making process the amount of the allowance will be recove - in cash over the service life of the plant in the form of increased revenue collected as a resuh of higher plant rats. The NHPUC, for the period December 3, 1977 through 31ay 6,1979 permitted the Company to include in rate base a portion of the costs of CWIP associated with major generating projects. Therefore, AFUDC for this period did not include the cost of funds invested in the construction program which were provided by revenues of the Company. To the extent CWIP is not included in the Company's rate base, the cost of funds invested in CWIP (interest on debt and return on eq'aity, including dividends) is not provided by revenues and APUDC is added to the cost of the plant being constructed with offsetting credits in the Statement of Earnings. Since the credits are not cash items, cash for interest and dividends may need to be provided in whole or in part by additional financing during the construction period. As described in Note B above, as of 31ay 7,1979, the Company was precluded from basing its rates upon CWIP .in the rate base. Therefore, as of 5 fay 7,1979, consistent with the August 29,1979 rate order, the Company began recording AFUDC for CWIP previously included in the Com-pany's rate base, thereb3 increasing AFUDC by approximately $4,100,000 for the twelve months ended October 31,1979. AFUDC net of applicable deferred income tax provisions equalled 32.59 and 59.8% of net income for 1978 and the twelve months ended October 31, 1979, respectively. The Company capitalized AFUDC at a net-of-tax rate of 7%7e for 1974. Effective January 1,1975, the Com- , pany began using a pre-tax rate of 9%7o (increased to 10c/o effective January 1,1979) and began recognizing deferred income tax expense applicable to the current tax reduction resulting from interest expense associated with construction, but then changes had no significant effect on net income. E 17 E
I The Company began compounding AFUDC on February 1,1977 resulting in an increase in the gross amount of AFUDC capitalized durint 1977 and subsequent periods. This change increased 1977 net income and earnings per share of common stock by approximately $816,000 and $0.11, respectively. (E) Earnings per share are based on the average number of common shares outstanding, after recognition of preferred stock dividend requirements. (F) Earnings represent the aggregate of Net Income, less undistributed income of unconsolidated com-panies, plus provisions for Federal and stato taxes on income and fixed charges. Fixed charges repre. sent interest, related amortization and the interest component of annual rentals. The pro forma ratio of earnings to fixed charges is 1.69 after giving etTect to (1) the annual interest requirements on long. term debt outstanding at October 31, 1979, (2) the annual interest requirementa on the Series C lionds being offered (aggregating $4,350,000) and (3) the annual interent requirements on the esti. mated average short-term debt expected to be outstanding during the twelve months ending October 31,1980 ($141,000,000 at 16.70% effective interest rate assumed). Supplemental ratios of earnings to fixed charges have been calculated pursuant to Accounting Series Itelease No.122 of the Securities and Exchange Commission. Such ratios include in earnings the undistributed income of unconsolidated companies, and include in fixed charges the Company's allocablo portion of the fixed charges of the regional nuclear generating companies in which the Com-pany has investments. The supplemental ratios are not materially different from the basic ration. (G) The following quarterly information is unaudited, and, in the opinion of management, is a fair sum-mary of results of operations for such periods. Variations between quarters reflect the seasonal nature of the Company's business, and beginning with the fourth quarter of 1977, additionally includes the effect of rate increases. See " Management's Discussion and Analysis of the Statement of Earnings." The fourth quarter of 1977 also includes an adjustment which decreased maintenance expenses recorded in the first three quarters of 1977 by approximately $1,000,000. Quarter Erided Year 1979 Year 1978 Yeme 1977 Sept. June' March Dec. Se pt. _ June March th Sept. June March (Housande except Per Share Amounts) Operating Revenues $72,919 $65,866 $80,072 $69,346 $62,397 $57,038 $71,930 $57,091 $$2,678 $47,491 $57,527 Operating income . 10,291 9,302 14,758 12,324 11,700 10,119 14,195 9,109 6,611 5,252 8,202 Net income 11,049 8,335 12,217 9,359 8,872 7,192 11,084 7,390 5,098 3,244 5,990 Pnferred Dividend Ratuirements 2,420 1,952 1,586 1,594 1,598 1,599 1,600 1,516 1,199 1,197 1,208 firnings Availatste for Common Stock 8,629 6,383 10,631 7,765 7,274 5,593 9,484 5,874 3,599 0,047 4,152 Average shares of Common Stock Outstanding . 13,460 11,823 11,319 9,770 9,755 9,109 8,447 8,444 7,823 7,230 7,209 lhrnings Per Share of Common Stock $0.64 $0.54 $0.94 $0.79 $0.75 30.61 $1.12 30.70 30.50 $0.28 $0.66
'Amounta restated to be consistent with the August 29, 1979 rate order of the NIIPUC described in Noto B above.
18
Recent Hesults of Operations Information with respect to the results of operations for the twelve months and eleven months ended November 30,1979 and 1978 is as follows: Twelve Months Ended Eleven bath Ended Novembec 30, November 30, 1979 1978 1979 1978
~
(Thousande eseept Pee Share Amounts)
$292,427 $258,182 $266,418 $234,742 Operating Revenues 44,637 49,026 40,457 44,158 Operating Income 40,533 37,239 37,357 33,331 Net Income Preferred Dividend Requirements 8,1M 6,393 7,573 5,860 Earnings Available for Common Stock 32,429 30,846 29,784 27,471 Average Shares of Common Stock Outstanding 12,287 9,162 12,520 9,228 Er.rnings Per Share of Common Stock $2.639 $3.367 $2.378 $2.977 Ratio of Earnings to Fixed Charges Actual 2.35 3.01 - -
Pro Forma 1.72 - - - The foregoing information is unaudited and, in the opinion of management, includes all adjust-ments (consisting only of normal recurring accruals) necessary to a fair statement of results of operations for such periods. Information for the twelve and eleven months ended November 30,1979 may not be indicative of results for the full year ended December 31,1979. I E l
O MANAGEMENT'S DISCUSSION AND ANALYSIS OF TIIE STATEMENT OF EARNINGS Twelve Months Ended October 31,1979 as Compared with Calendar 1978:
" Operating Revenues" increased $28,771,000 principally due to (1) the operation of the fuel adjustment clause ($18,081,000), (2) an increase in unit power sales ($3,924,000) and (3) an increase in prime energy sales. " Fuel Expense" increased $38,192,000 because a larger percentage of total power supply was generated by Company-owned fossil fuel plants and due to increases in the unit costs of coal and oil. " Purchased and Interchanged Power" decreased $9,687,000 due to the increased generstion by Company-owned fossil fuel plants. "Other Operating Expenses" increased principally because of the effect of inflation on wages, si pplies and services and employee benefits, the exact amount of which cannot be determined indi-vidually. " Federal and State Tares on Income" decreased primarily due to a decrease in taxable income. " tilowance for Equity Funi, Und During Ccnstntction" and "atllowance for Horrowed Funds l' sed During Construction" increased due to an increase in the Company's construction program, primarily the Seabrook nuclear plant and because AFUDC has been accrued from May 7,1979 through October 31,1979 on CWIP included until May 6,1979 in New IIampshire rate base. " Interest Charges" increased principally due to (1) additional long-term debt outstanding and (2) an increase in the rates and level of short-term bortuwings from banks as an interim method of financing construction of new facilities.
1978 as Compared with 1977:
" Operating Revenues" increased $45,964,000 principally due to a rate increase to New IIampshire retail cus* omen on December 3,1977 ($27,000,000 on an annual basis), increased to $30,000,000 on an annua $ asis on June 1,1978; a rate increase to wholesale customers on July 29,1978 (approxi-mately $L ' 00,000 on an annual basis); increased revenue associated with the operation of a fuel adjustmen. clause ($10,000,000), and an increase in prime energy sales. " Purchased and Interchanged Power" increased $5,612,000 principally due to increases in capa-city and energy purchases necessary to meet the Company's increased KWII sales and replacement power as required during the shutdown of Merrimack Station. "Other Operating Expenses" increased principally because of the effect of inflation on wages, supplies and services and employee benefits, the exact amount of which cannot be determined indi-vidually. "3/aintenance Expenses" increased principally due to increased cost of maintenance at Merrimack Station (approximately 60% of the total increase) and because of the effect of inflation on wages and materials (approximately 3Cc) and on costs of annual maintenance at other generating stations (approximately 6%).
20 i l
" Federal and State Taxes on Income" increased $11,267,000 principally due to an increase in current taxable income due to increased operating revenues, and an increase in deferred taxable G income. "Other Tazes, Principally Property Taxes" increased due primarily to higher real estate property assessments and tax rates. " Allowance for Equity Funds Used During Construction" and " Allowance for Borrowed Funds Ustd During Construction" increased due to an increase in the Company's construction program, primarily the Seabrook nuclear plant. "Other income and D(ductions- Ot/ar-Net" increased $500,000 primarily as a result of in-creased interest income from short term invudments. " Interest Charges" increased principally due to (1) additional long-term debt outstanding (ap-proxinmtely 255; of the total increase) and (2) an increase in the rates and level of short-term borrowings from banks as an interim method of financing construction of new facilities (approxi-mately 759).
1977 as Compared with 1976:
" Operating Rcrenues" increased $18,113,000 in 1977 principally due to increased revenue associ-ated with the operation of a fuel adjustment clause ($7,685,000), an increase in unit power sales
($3,268,000), a rate increase to New IIampshire retail customers on December 3,1977 ($27,000,000 on an annual basis) and an increase in prime energy sales.
" Fuel Expenst" increased $15,619,000 in 1977 because a larger percentage of total power supply was ganerated in Company-owned fossil fuel plants (approximately 49% of the total amount) and due to increases in the unit costs of coal and oil (approximately 21%), and also because of the inven.
tory adjustment referred to in Note B to Statement of Earnings (approximately 30%).
"Other Operating Expenses" increased in 1977 principally because of the effect of inflation on wages, supplies and services, employee benefits, and additional cost for transmission services a nociated with additional power purchased. "#aintenance Espenses" increased in 1977 principally due to increased costs of maintenance at 5ferrimack Station (approximately 12% of the total increase) and because of the effect of inflation on wages and materials (approximately 48%) and on costs of annual maintenance at all generating stations (approximately 40%). " Federal and State Taxes on income" decreased $1,334,000 in 1977 primarily due to a decrease in taxablo income. "Other Tarcs, Principally Property Taxes" increased in 197r due primarily to higher real estate property tax rates. " Allowance for Equity Funds Used During Construction" and " Allowance for Borrowed Funds Used During Construction" increased substantially in 1977 due to (1) an increase in the Company's construction program, primarily the Seabrook nuclear plant and (2) the effect of compounding of AFUDC semi-annually, effective February 1,1977 as permitted by Federal Power Commission Order No. 561. See Note D to Statement of Earnings.
21 l l l l
O __ OPERNMG SnBSUCS Toolve Months Ended Year Ended Decesht 31, October 31, 1979 1978 1977 19M 1975 1974
~~ -
MWII Generated and Purchased- Net Generated by Water Power 280,052 291,972 332,523 328,701 335,521 347,129 Generated by Fuel 5,265,169 3,849,853 4,033,704 3,5G6,002 3,669,800 3,385,098 Total Generated . . . . . ...... 5,545,221 4,141,825 4,366,227 3,924,733 4,005,321 3,732,227 Power Purchascul- Naclear Antliates . . . . 608,991 674,337 629,116 670,994 618,787 530,129 Other Power Purchased and Interchanged 501,065 1,374,245 999,082 1,092,414 819,437 1,138,423 Total Generated and Purchased 6,655,277 6,190,407 5,994,425 5,658,111 5,443,545 5,400,779 Disposition of MWII Output Bold .....;... 6,209,680 5,752,784 5,586,378 5,286,507 5,055,673 5,054,271 Used by the Company . 30,543 22,734 15,217 13,476 13,047 23,821 Absortal in Dehrery 415,054 414,889 392,830 388,128 374,825 322,687 Total Output 6,655,277 6,190,407 5,994,425 5,6s8,111 5,443,545 5,400,779 MWit Bold Residential 1,803,161 1,765,553 1,709,528 1,676,980 1,552,212 1,552,714 Indust rial 1,851,902 1,743,131 1,568,068 1,539,489 1,396,957 1,470,307 Unit Power . .... .. ... 600,632 368,785 545,755 372,321 524,831 502,715 Wholesale, Commercial and Other 1,953,985 1,875,315 1,763,027 1,697,717 1,581,673 1,528,535 Total MW11 Sold 6,209,680 5,752,7s4 5,586,378 5,236,507 5,055,673 5,054,271 Bourers of Electric Revenue (Thousands of Dollars) Residential Hales 8 102,572 $ 98,331 $ 81,551 8 77,153 8 72,167 8 57,866 Industrial Sales 72,390 63,565 48,878 45,361 42,049 34,807 Unit Power Sales . .. ... .... 13,028 9,104 10,297 7,029 9,130 6,746 Wholesale, Commercial and Other 92,335 82.549 69,278 63,392 55,992 44,742 Miscellaneous Operating Revenue 9,197 7,202 4,783 3,739 7,055 11,769 Total Electric Revenues 8 2s9,522 $ 260,751 4 214,7s7 $ 196,674 8 186,393 4 155,930 Electric Customers (End of Period) Residential 247,978 244,008 238,830 232,358 226,215 221,737 Industrial 1,096 1,080 1,046 1,018 987 982 Unit Power . .... ... 1 1 1 1 1 1 Wholesale, Commercial and Other 32,362 31,766 30,871 30,115 29,268 28,853 Total Electric Customers 281,437 276,855 270,748 263,492 256,471 251,573 Diversity of Industrial Revenues Textile Products 3.3% 3.7% 3.9% 4.1% 4.5% 5.6% Paper Products . 17.7 17.2 16.5 16.8 15.7 17.9 leather Products 2.7 3.0 3.2 3.4 3.6 3.5 Chemicals .. .. .. ... 9.8 9.3 9.0 8.3 7.9 8.1 Other Non-Durable Products 6.8 7.4 7.9 7.6 7.7 7.5 Total Non. Durable Products 40.3 40.6 40.5 40.2 39.4 42.6 Machinery .. .... .. 17.1 16.8 16.3 15.2 14.8 14.7 Other Durable Products 13.2 13.2 13.0 12.4 12.1 12.0 Total Durable Products 30.3 30.0 29.3 27.6 26.9 26.7 Total Manufacturing Commercial and Service W 70.6 69.8 67.8 "MT 69.3 29.4 29.4 30.2 32.2 33.7 30.7 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Customer Statistics (Annual) Average Customers - Residenttal .. ... 245,818 242,416 236,453 230,390 224,886 220,937 Average KWII Per Customer-Res;lential . 7,335 7,283 7,230 7,279 6,902 7,028 Average Rate-Cents Per .7WII Residential 5.69 5.57 4.74 4.60 4.65 3.73 Industrial ... 3.91 3.65 3.12 2.95 3.01 2.37 Other Utilities .. .. .... .. 3.63 3.20 3.07 2.85 2.44 2.12 ( Average Annual Bill-Residential $417.27 8405.63 3344.90 $334.88 $320.90 $261.91 Average Nuclear Fuel Cost per KWII Generated 0.4127d 0.3638d 0.3181d 0.285D( 0.3506f 0.2248d Average Fossil Puel Cost per KWII Generated 2.0927( 1.8701( 1.7575( 1.6540( 1.5944( 1.2902( U
BUSINESS Power Supply and Properdes. The electric properties of the Company form a single integrated system including transmission facilities which are part of the New England. wide t-ansmission grid. The maximum one-hour prime peak load experienced to date by the Company's system was 1,173 net 3nV on February 13,1979. At E that time the Company had available to meet such load 1,154 31W of its own generating capacity,97 MW from its participations in the four Yankee nuclear generating companies described below under
" Joint Projects" and 217 31W of purchased capacity. Because the generation and transmission systems of the major New England utilities, including the Company, are operated as if they were a single system, the ability of the Company to meet its load is dependent on the ability of the New England utilities to meet the New England load. See "New England Power Pool" below.
The Company has one coal fired 456 31W electrie generating station (31errimack Station), from which the Company has agreed to sell to another utility 100 31W on a single unit basis from Unit #2 through April,1998, and four oil-fired electric generating stations with an aggregate effective capability of 64131W, consisting of the Newington plant (420 31W), the Schiller plant (180 31W) and two smaller plants. See " Environmental 3f atters" below. The Company also has other generating facilities with an aggregate effective capability of 162 31W as follows: hydroelectric (48 3RV), combustion turbine (11131W) and diesel (3 31W). The Company has participations with other New England utilities in five generating units recently com-pleted, under construction or in design stages, including the two Seabrook units. See " Construction Program", and see " Joint Projects" and "Seabrook Nucler.r Project" below. The Company purchases capacity and energy from cther utilities as necessary, together with its own generating capacity, to meet its load growth and !ts reserve obligations under NEPOOL dis-cussed below. These purchases are expected to increase from 217 31W to approximately 306 31W by April,1983 when Seabrook Unit #1, in which the Compcny's reduced interest will be 405.2 31W, is currently scheduled to be completed. See " Problems Facing the Company" New England Power Pool. A New England Power Pool Agreement ("NEPOOL") to which the major investor. owned utilities in New England, including the Company, and certain municipal and cooperative utilities are parties, has been in effect since 1971. This Agreement provides for joint planning and operation of generating and transmission facilities and also incorporates generating capacity reserve obligations and provisions regarding the use of major transmission lines and payment for such use. Substantially all planning, operation and dispatching of electric generating capacity for New England is done on a regional basis under NEPOOL. At the time of the 1978-1979 NEPOOL winter peak, the New England utilities had about 21,500 31W of installed capacity to meet the New England peak load of about 14,956 31W. J The Company's capability responsibility under NEPOOL involves carrying an allocated share l of a New England capacity requirement which is determined for each period based on certain regional reliability criteria. It is expected that the Company's capacity will be sufficient through its own generating facilities, its participations and through purchases to meet itt NEPOOL obligations in the 1 l l I foreseeable future. 23 g 1 l
P a _ . _ joint Projects. The Company is a part owner with other New England electric utilities of four nuclcar generating companies. The Company owns a 7% interest in Yankee Atomic Electric Company, a 5% interest in Connecticut Yankee Atomic Power Company, a 5% interest in 3faine Yankee Atomic Power Company and a 4% interest in Vermont Yankee Nuclear Power Corporation, each of which owns an operating nuclear generating plant with present net capabilitus of 175 31W,575 31W,78131W and 528 3fW, respectively. The stockholders of each of the four nuclear generating companies are entitled to the entire output of the plant in proportion to their respective ownerships, and are obligated to pay their proportionate shares of the generating company's operating expenses and return on invested capital. The Company is participating on a tenancy in. common basis with other New England utilities in the ownership of five other generating units. One of thest Wyman Unit #4, a 600 31W oil fired generating unit in 31aine in which the Company has a 3.1433% interest, commenced operation at full capacity in February,1979; the other units are planned or under construction as follows: Company en Estimated Construction Cost (3) Completion Capacity Capacity Total Per Type Date (1) (MW) Percent (2) (MW)(2) (Millions)(2) KW Seabrook #1 & #2 Nuclear 1983 & 1985 2,300 35.23497 810.4 $1,065.9 $1,315 (New IIampshire) Pilgrim #2 Nuclear 1986 1,150 3.4700 39.9 68.3 1,712 (3fassachusetts) 5tillstone #3 Nuclear 1986 1,150 3.8910 44.7 100.7 2,253 (Connecticut) (1) The completien dates of the four nuclear units have been deferred from time to time and addi-tional deferrals may occur due to licensing delays, economic conditions and other factors. Due to the time required for the construction of generating facilities and the completion of licensing and regulatory proceedings relating thereto, substantial investments in the above units , will be required prior to the completion of licensing and regulatory proceedings. There is no assurance that all necessary approvals, permits or licenses will be obtained, or if obtained, will not be nmdified or revoked. See " Industry Problems". l (2) See "Pn.blems Facing the Company" for information concerning the proposed reduction of the i Company's internt in Seahnmk to 35.23497 % and sale of the Compan/'s interest in 3fillstone !
#3. If the Company's ownership interest in Seabrook should remain at 509, the capacity would I be 1,150 31W and the estimated total cost, $1,425,100,000.
(3) Including the cost of the initial nuclear fuel and AFUDC on the estimated costs of unfinished construction not included in the Company's rate base. AFUDC was discontinued on December 3, j 1977 on the portion of unfinished construction included in rate base. For purposes of this table l
, I such portion of unfinished construction has b*n excluded from rate base effective 3 fay 7,1979 and it has been assumed that AFUDC will be capitalized thereafter on all unfinished construc-tion. See Note D to the Statement of Earnings for a discussion of AFUDC.
I 24 l
I 4 l Estimated construction expenditures for the jointly owned units used in calculating the estimated cost per KW are based upon information furnished by the utility rc#ponsible for the construe-G tion of such unit. The Company has been advised by each of the spormoring utilities that con-struction budgets are continuously under revicw in light of increased costs due to deferrals, delays and other factors. The estimated expenditures and completion dates of the nuclear units may also be affected by the licensing and regulatory proceedings relating to each unit and to nuclear power generally and may also be affected by events and conditions which cannot now be predicted. Seabrook Nuclear Project. The Company is the lead owner of the Seabrook project now under construction in Seabrook, New Hampshire and has entered into contracts covering the purchase of equipment and services in connection with the project. The project is planned to consist of two Westinghouse pressurized water nuclear reactors utilizing ocean water for condenser cooling purposes. Other owners of the project ! presently include The United Illuminating Company ("UI") (209), New England Power Company (109) and a nut %r of other utilities with smaller participations. UI has made available for sale to other utilities one half of its 20% ownership interest in accordance with a reco amendation of the ! Connecticut Department of Business llegulation, Division of Public Utility Control contained in a l December,1978 rate decision; however, the UI offering has not been fully subscribed. See " Problems l Facing the Company" for information concerning the proposed reduction of the Company's ownership interest in the project. The project has required numerous approvals and permits from various state and federal regu-latory bodies consisting principally of a certificate authorizing construction of the plant (which incor-porates related state permits) from the New Hampshire Public Utilities Commission ("NHPUC") under New Hampshire's power plant siting law; approval of the once-through cooling system for the project by the Environmental Protection Agency (" EPA"); and construction permits from the Nuclear Regulato y Commission ("NitC"). All of these approvals and permits have been obtained and, except as described below, there are no appeals or proceedings relating thereto. Construction of the project is continuing and, at September 30,1979, Unit #1 and the portion of the projact common to both units were approximately 27% complete and Unit #2 was 59 complete. The process of obtaining these approvals and permits has been long and complex, has been con-sistently opposed by a number of intervening groups, has included demonstrations at the Seabrook site, and has been plagued by lengthy delay which have resulted in greatly increased costs for the project. Court appeals from these federal regulatory approvals have been decided in the Company's favor, but one appeal described below is still pending and further appeals are possible. The Company is unable to predict what effect adverse legislative action, financing problems, work stoppages or further administrutive or court decisions relating to actions of regulatory agencies may have nn the completion of the project, on the cost of the project or on the Company. See " Problems Facing the Company" and " Construction Prograrc". NHPUC. The state siting proceedings began in 1972, involved lengthy hearings during 1972 and 1973 and culminated in issuance of the requisite certificate on January 29,1974. A subsequent appeal to the Nw Hampshire Supreme Court resulted in a remand for further findings but did not invali-25 b I
O date the certificate. The supplemental findings were issued on December 30,1975; no further appeals were taken. The certificate has recently been modified to reflect the extension of the cooling water intake tunnel onleml by the EPA, transmission line relocations ordered by the NRC, and certain other transmission line relocations. NRC. The NRC proceedings commenced with the docketing of the application for construction permits on July 9,1973. The hearings before an Atomic Safety and Licensing Board (the " Licensing Board"), in which seven intervenors in opposition participated, consumed over sixty days during 1975 and 1976 and culminated on June 29,1976 in the issuance by the Licensing Board of its Initial Deci-sion (one member dumet '*ng), approving the issuance of construction permits for the Seabrook project. The NRC issued the permits on July 7,1976, and construction commenced shortly thereafter but was subsequently suspended in 1977 and 1978 for periods of seven months and three weeks, respectively, as a result of administrative proceedings and court' appeals. The Initial Decision was aflirmed by an NRC Atomic Safety and Licensing Appeal Board (the
" Appeal Board") (with one member dissenting) and by the NRC. The dissenting member of the Appeal Board issued his dissenting opinion which relates to the seismic issue on August 3,1979 and the majority issued a supplemental opinion in response to the dissent on September 6,1979. One intervenor has filed a timely renewal of its petition for review of the seismic issue which is now pend-ing beforv the NRC.
There is presently pending before the United States Court of Appeals for the First Circuit an appeal by intervenors from a decision of the NRC challenging the NRC's refusal in 1976 to suspend the Seabrook construction permits despite a court decision in litigation not involving the Company which ret aside the NRC's rule with respect to the envimnmental effects of reprocessing spent fuel and disguing of nuclear waste. (Natural Resources Defense Council, Inc. v. NRC, D. C. Cir. Nos. 74-1385 and 741586, which was reversed and remanded by the United Ststes Supreme Court on April 3,1978 in Vmnont Yankee Nuclear Power Corporation v. Natural Raources Defense Council, Inc., No. 76 419). Effective September 4,1979, the NRC (one member dissenting) has promulgated its final rule (which supersedes the interim rule in place since March,1977) covering the environmental impact of reprocessing spent fuel and disposing of nuclear waste. A petition for review of the final rule is pending before the United States Court of Appeals for the District of Columbia Circuit (State j of New York v. NRC., D.C. Cir. Non. 79-2110 and 79-2131). The Company believes that the environ-mental effects of the fuel cycle, determi'wl in acconlance with the new rule, are too small to affect the environmental cost benefit evaluation of the project. In March,1979, after the Company announced its decision to reduce its ownership interest in the Seabrook project, an intervenor filed a request with the NRC staff for issuance of a show cause onler as to why the construction permits should not be suspended or revoked because of the Company's alleged lack of financial qualifications and lack of review of financial qualifications of the partici-pants whose ownership interests are proposed to be increased. On November 16,1979 the NRC Direc-tor of Nuclear Reactor Regulation issued a decision denying the petition. On May 2,1979 the same interrenor filed a further request with the NRC staff for issuance of a show cause onler as to why the construction permits should not be suspended or revoked because of the NRC's failure to require development of evacuation plans beyond the low population zone and to evaluate the consequences of certain types of accidents including the possibility of auch evacuation. The Company cannot predict when the staff will act on that request or what action it will take. 26
Before either of the Seabrook units can be put into operation, the Company must obtain the requisite operating license from the NRC. The Company intends to file the necessary applications e therefor in mid-1981 well in advance of the projected in-service date for Unit #1; however, the Company cannot predict the extent of the regulatory proceedings which will result or their outcome. See " Industry Pmblems". E EPA. Under the Federal Water Pollution Control Act, as amended, the EPA has jurisdiction over discharges from the cooling system of the Seabrook plant. In August,1874, the Company applied to EPA for approval of the once-through cooling system utilizing ocesn water. After adjudicatory proceedings, a court appeal and a further hearing resulting from a raurt remand, the EPA Adminis-trator on August 4,1978 reaffirmed his previous approval of the once.through cooling system and that decision was affirmed by the United States Court of Appeals for the First Circuit on May 2,1979. Ot/a r. The Company is also involved in proceedings or disputes concerning title to a portion of the Seabrook site, the undergrounding of the Seabrook transmission lines and the use of the Com-pany's water wells on the Seabrook site. The Company believes that none of these matters will have a material advene effect upon the Seabmok project. Insurance. The Federal Price-Anderson Act provides, anmng other things, that the maximum liability for damages resulting from a nuclear incident would be $560 million, to be provided by private insurance and governmental sources. As required by NRC regulations, prior to operation of the Seabrook project, the owners of the Seabrook project will insure against this exposure by pur-chasing the maximum available private insurance (presently $160 million), the remainder to be cov-ered by retruspective premium insurance and by an indemnity agreement with the NRC. Under recent amendments to that Act, owners of operating nuclear facilities may be assessed a retrospective premium of up to $5 million for each reactor owned in the event of any one nuclear incident occur-ring at any reactor in the United States, with a maximum assessment of $10 million per year per reactor owned. As a part owner of other operating New England facilities (see " Joint Projects" above), the Company would be obligated to pay its proportionate share of e.ny such assessments, which presently amounts to a maximum of $1,050,000 per incident. While it is not yet 70ssible to evaluate the claims beint asserted as a result of the TM1 incident, the Company does not anticipate any assess-ments being les wl under these provisions as a result of that incident. Regulanon. The Company, as to retail rates, security issues, and various other matters, is subject to the regulatory authority of the NHPUC. A management tadit report pnpared by an independent management consulting firm at the direction of the NHPUC released in October,1978, identified the following management strengths: tight control of staff levels and employee compensation, sound finan-cial planning, sound management of the Seabrook project, and a strong transmission and distribution ' system planning and engineering function. According to the report, the mon significant opportuni-
- - : ties for improvement are in the following areas: the overburdening of top management, correction of operating problems at Merrimack Station, fuel procurement and storage, and public ralations. In 27 k,#'
s.
W additio i to recommending expansion of the top management group by the creation of several new executive positions, the report recommends reorganization and strengthening; of the fuel management function, strengthening of S public . ffairs tu.rtion, and a comprehens.ve review of Sierrimack Station operations. The Company acce ted most of the audit report recornmendations and is in the process of implementin t those recomr. ndations which were accepted. While the implementation of any particular reems. :ndation is n >t expected to have a material effect upc.n the Company's opera-tions, overall implementation is expected to improve the efficiency of the Company's operations at an annual cost of approximately $3,000,000. As to properties.and business in 3faine and Vermont, the Company is subject to the regulatory authority of the Public Utilities Commission of 3Iaine ("31PUC") and the Vermont Public Ser-
/ ice Hourd, respectively. Additionally, both the Connecticut Department of Business Regulation, Division of Public Utility Control and the 5fassachusetts Department of Public Utilities have limited jurisdiction over the Company based on the Company's ownership as a tenant-in-common of portions of the 31illstone #3 and Pilgrim #2 nuclear units. See " Joint Projects" above. The Company is also subject, as to some phases of its business, including accounts, certain rates, and licensing of its hydnwelectric generating plants, to the jurisdiction of the Federal Energy Regulatory Commission
("FERC") under the Federal Power Act. The various nuclear generating units in which the Com-pany has an ownership interest are subject in their construction and operation to the broad regulatory jurisdi< tion of the NRC under the Atomic Energy Act of 1954, particularly in regard to public healdi, safety, environmental and antitrust matters. See also " Environmental 3fatters" below. Rates - Nese llampshire Retail. On 3tay 25,1978, the NIIPUC granted the Company an increase in its New Hampshire retail rates of approximately $30,000,000 on an annual basis based on a test year ending in April,1977. The order allowed the Company a return on common equity of 149, an overall rate of return of 10.199, and included in rate base CWIP associated with major generating facilities. The order of the NIIPUC was affirmed by the New Ilampshire Supreme Court on 31ay 17,1979. The rates filed with the NIIPUC in April,1977 were placed in effect on December 3,1977 subject to refund; under the NIIPCC's 3 fay " ,1978 order, no refunds were necessary. On 3 fay 17,1979 the New Hampshire Supreme Court decided that the Company had unlawfully applied the new higher rates to bills rendered -fter December 3,1977 for service rendered before that date, and pursuant to an NHPUC crder ne Company has made refunds to its New Hampshire retail customers of approximately
$1,000,000.
After passage of a New Hampshire statute prohibiting the inclusion of CWIP in rate base, the N!!PCC excluded CWIP from the Company's rate base as of 3 fay 7,1979. At the same time, the NilPUC allowed the existing rates to remain in effect, determining that the :ompany's rates could not be changed without an investigation to establish new rates which would provide a just and reason-able rate of return for the Company, and noted its preliminary conclusion that the exclusion of CWIP by increasing the overall risk to investors justifies an overall rate of return to the Company higher than that allowed in the 1978 proceeding. On intervenor application for rehearing, the NIIPUC, on December 11, 1979, refused to order immediate refunds based on the exclusion of CWIP, but stated that interrenor rights with respect to possible rebates would be preserved. On 28 l
I l 1 l January 10, 1980, the interrenor appealed the NIIPUC's decision to the New IIampshire Supreme Court. G The Compan3 filed with the NIIPUC on August 31,1979, a new tariff intended to establish new permanent rates designed to generate revenues approximately $18,500,000 (about 8.49) on an annual basis higher than those presently in effect. These rates would be based on a test year ending May 31, 1979 and in part on pro forma adjustments to reflect changes since that date, deletion of CWIP from rate base, an increase in depreciation rates for distribution plant, normalization of the income tax effect of liberalized depreciation with respect to property placed in service after 1970, and an 18% return on common equity. The new tariff has been suspended for investigation, and evidentiary hear-ings have begun. On November 27, 1979, the Company filed a request with the NIIPUC for an emergency sur-charge designed to increase annual revenues by appruximately $11,970,000 (about 5.57c) on an annual basis above those currently received. This surcharge represents a portion of the 8.4% permanent rate increase requested by the Company in August. On December 21,1979, the NIIPUC granted the Company the full amt unt of its requested ine ease to take effeat under bond on December 28,1979. Applications for reher. ring have been filed with the NIIPUC by intervenom. The Company his a fuel adjustment clause which is designed to recover, after a two months' lag, all fuel costs cbove lase, including the energy portion of the cost of purchased power. A hearing and prior approval by t le NIIPUC is required with respect to each month's fuel adjustment rate. In January,1975, the NIIPUC ordered an investigation into the rate structures of the electric utilities under its jurisdiction. IIcarings began in July,1975 and continued from time to time through 1978. While the investigation has not becn concluded, the proceeding has involved enly the proper distribution of rates among the various customers and customer classes and not overall revenue re-quirements. Pursuant to an interim order of the NIIPUC issued in January,1977, the Company performed peak. load pricing rate experiments involving certain of its customers and reported the results to the NIIPUC. legislation w.,s enacted in 1978 requiring the Company to offer time of day and seasonal rates on an optional basis, and such rates have been made available to its residential customers and have been filed for its other customers. Rates - Other. Rates to the Company's wholesale-for-resale customers increasing revenues from these customers by approximately $3,865,000 on an annual basis became effective as of April 11,1976. On April 28, 1978, the Company filed new rates with FERC proposed by the Company to be effective on May 29,1978 that would increase revenue from the Company's wholesale-for-resale customers by approxi. mately $2,400,000 or 7.77c on an annual basis based on a 1978 test year; the new rates went into effect subject to refund on July 29, 1978. A settlement agreement in principle regarding these new mtes and several other matters pending before FERC is described below. The Company has also filed with FERC a petition requesting the inclusion of CWIP in rate base. After trial of the CWIP issue, the Administrative 1,aw Judge issued an initial decision on January 25, 1979, which authorized the Company to include in rate base CWIP associated with major generating facilities and which allowed t the Company a return on common equity of 139. That decision has been appealed to FERC. The Company cannot place wholesale rates based on CWIP into effect unless and until FERC issues a final favorable decision on the CWIP issue. 29
o U In another proceeding before FERC, the Company's right to collect through a surcharge approxi-mately $1,850,000 of accrued but unbilled fuel clause revenue was coatested by certain wholesale for-resale customers, and FERC ruled against the surcharge and ordered the Company to refund approxi-mately $1,622,000 with interest, the balance not having been billed. FERC's decision was affirmed by the United States Court of Appeals for the District of Columbia Circuit, and the Company's request for Supreme Court review has been denied. The Company intends to amortize the after-tax cost of this refund over the twelve-month period ended December 31, 1980. In another phase of the seme proceeding, FERC has ordered a refund of the higher cost of spot market purchases of coal by the Company; the Company's request for a rehearing on the order has been denied. The Company has ihcided not to appeal the order and will make refunds at a later date estimated at approximately
$250,000 plus acemed interest.
On December 21,1979, the Company filed with FERC new rates for its wholesale.for-resale cus-tomers that would increase revenues fmm such customers by approximately $4,294,000, or 10.1%, on an annual basis. The Company hr.s proposed that the new rates be made effective in two steps parallel to the steps the Company has taken to increase its retail rates in New IIampshire. The Company has requested that the first step emergency increase of approximately $3,567,000, or 8.4%, be allowed to become effective on January 22, 1980, after a one-day suspension. The Company has requested a second step additic.nal rate increase of approximately $727,000 to be allowed to become effective on April 1,1980, after a short suspension. FERC is empowered to suspend each proposed increase for up to five months from the proposed effective date, and such increases will be subject to refund. On January 11,1980, the Company reached an agreement in principle with its wholesale-for-resale customers which would settle several aspects of the pending FERC proceedings described above. With respect to the rates currently being billed subject to refund, it was agreed that rates will be reduced from their current level by $450,000 on an annual basis and that refunds retroactive to July 29,1978, based on the agreed rate level will be made. The agreement, which is subject to FERC approval, also provides that the refunds required by both the rate settlement and FERC's order relating to spot-market purchases of coal described above vill be deferred until the beginning of the Adjustment Period for reduction in the Company's ow ership interest in the Seabrook plant or January 1,1981, whichever is earlier. In addition, the whalesale-for. resale customers agreed not to oppose the Com- ' pany's request for prompt effectiveness on January 22,1980, and April 1,1980, subject to refund, of the two-step inertase filed on December 21,1979. Rates essentially identical to those in effect in New IIampshire prior to December 3,1977 were placed in effect in Vermont on 3 fay 1,1975, and in 3faine on 3farch 2,1976. On an annual basis, about $65,000 of additional revenues results from the Vermont increase and approximately $592,000 results from the 3taine increase. In its decision allowing the increase to become effective in 3faine, the 3f PUC commented on the disparity between the allos ed rates of the Company and those of Central 3faine Power Company (031P), which serves adjacent ter itory at lower rates. The decision requested the managements of the two companies to discuss the possibi?.y of a transfer of the Company's 3faine business to C3fP and stated that in the future the 31PUC might use C31P's rates as a yardstick to determine the reasonableness of the Company's rates. While preliminary discussions have been held between the two managements, no conclusions have been reached concerning the desirability of such a transfer. A complaint was filed with the 31PUC in April,1976, by two 31aine municipalities and a 30 l l i t t
number of their residents who are customers of the Company alleging that the Company's rates are unreasonable and discriminatory and requesting that the ratm be reduced to a level no higher than the rates of C31P. Hearings began in December,1976, and the proceeding is still pending. In 1978 the Company obtained from its 3laine customen approximately 1.4% of its operating rev(nues. On August 20,1979, the Company filed with the MPUC a petition requesting a temporary rate adjustment for its 3faine customers which would increase revenues approximately 99 or $340,000 on an annual basis; this proceeding is pending. On October 31, 1979, the Company filed new rates with the 31PUC proposed by the Company to be effective on December 1,1979 which would increase revenues from the Company's 3faine customers by approximately $1,000,000 or 27% on an annual basis on a test year ending 31ay 31,1979; the new rates have been suspended pending investigation. The requested 27% permanent increase includes the requestal 9% interim increase. The Company and Green 31ountain Power Corporation have agreed upon the sale of the Com-pany's retail business and properties in Vermont for approximately $727,000 (the price to be adjusted to reflect changes occurring after fiscal 1978), subject to the receipt of necessary regulatory approvals. Revenues from the Company's Vermont business in 1978 amounted to approximately $672,000, or about 0.259 of the Company's operating revenues. Fuel Supply. For the twelve months ended October 31,1979, the Company's firm net output was derived 48% from oil,379 from coal,10% from nuclear, and 5% from hydro. As indicated above under " Pour Supply and Properties" and "New England Power Pool", substantially all of New England's genera-tion and transmission systems, including those of the Company, are operated as if they were a single system. Oil. The New England electric utilities, including the Company, make greater use of fuel oil for generation of power than those in any other region of the country. 31ost 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 Company he a contract expiring on December 31,1981 with a supplier for fuel oil for the Company's two large oil-burning plants. The storage capacity for the Company's two large oil-burning plants is approximately 30 days operating at full load, and inventory varies substantially depending upon oil shipments. During 1979, the avnge inventory through December 15,1979 was approximately 15 days operating at full load. The two small plants have limited storage capacity. See " Environmental Matters" below. Coal. Coal for the Company's only coal-burning unit, the 456 31W hierrimack plant, is presently being furnished from West Virginia sources under a contract which expires in April,1983. The contract generally provides that a 45-day supply of coal is to be maintained for the Company, that the base price of the coal may be changed by the seller annually but the Company's disagreement with the change will result in termination of the contract at the end of the year, and that the price of the coal is subject to certain adjustments for changes in the seller's costs. The Company's policy is to maintain a 60-day supply of coal on hand for the hierrimack plant; at December 8,1979, a 62-day supply was on hand. The plant, with 119 31W and 337 31W units, presently requires a total of approximately 1,000,000 tons of coal per year. Future annual tonnage mquirements of the Company may be more 31 l 1
O ~ . _ . _ or less than that figure depending upon a number of variables including particularly the relative cost and availability of coal and other fuels and possible conversion of units presently burning oil. See
" Environmental Matters" below.
The Company's approximate 4verage costs of oil and coal for 1973 through October 31,1979 were as follows: Coal Oil Per Oil Per CoalPer CoalPer Spot Price llarrel Million llTU Ton Million HTU Per Ton 1973 $ 3.75 $0.61 $13.78 $0.51 1974 11.32 1.83 21.97 0.82 $40.67 1975 11.49 1.88 32.55 1.24 37.50 1976 10.95 1.77 34.33 1.25 35.27 1977 12.97 2.09 35.54 1.31 1978 12.13 1.95 39.09 1.47 38.54 1979 (through October 31) 15.27 2.45 41.28 1.53
*No spot purchases by the Company during the period.
NucIcar. The cycle of production of nuclear fuel consists of (1) the mining and milling of uranium ore, (2) the conversion of uranium concentrate to uranium hexafluoride, (3) the enrichment of the uranium hexafluoride, (4) the fabrication of fuel assemblies and (5) the reprcetasing, storage, or disposal of spent furt. With respect to the Seabrook units, the Company has long. term contractr. for enrichment. The Company also has contracts for conversion services and for the fabrication of the initial cores and six reload regions (each region consisting of one-third of a complete core). These contracts are expected to meet the Company's requirements for fuel cycle services as follows: enrichment through 2008, conversion through 1987, and fabrication through 1986. The Company has contracted for all of the uranium concentrates required to commence operation of the Seabrook units and is actively seeking additional sources thereof, which it expects will be avail-able when needed. The Company has no 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 defer indefinitely com-mercial reprocessing and the recycling of spent nuclear fuel. If such services are not available when required for the Seabrook units, the spent fuel can be stored pendi.' reprocessing or disposal. Although the eut of such storage is not known at the present time, it is anticipated that such cost would be substantial. The Company cannot predict at this time what dif!!culties will be encountered regarding disposal of nuclear wastes. The NRC, along with other federal agencies, is in the process of developing regulations and guidelines in this area. The Company expects to develop plans for the disposal of its nuclear wastes after promulgation of these regulations and such plans will be subject to regulatory approvals. The Company has been advised by the companies operating, planning or constructing the other nuclear generating stations in which the Company has an interest that they have contracted for certain segments of the nuclear fuel production cycle through various dates. The Company has further been advised by the sponsors of the foue 9perating nuclear generating stations that they have or will have 3 1 l l i l l I l l 1
l l storage capacity to meet the spent fuel storage needs of the units through various dater, raaging from 1985 to the late 1990's. Contracts for other segments of the fuel cycle will be required in the future, and their availability, prices and terms cannot r ,w be predicted. National Energy Policy. A national energy act was recently enacted dealing with coal conversion, gas deregulation, energy conservation, cnergy taxes and utility rate regulation; the effect of this act on the Company, including its rates and fuel supply, cannot be predicted at this time. Enrironmental Masters. The Company is subject to regulation with regard to air and water quality, and may be subject to regulation with regard to other environmental considerations, by various federal, state and local authorities. The Company cannot forecast the effect of all such regulations upon its generating, trans-mission and other facilities, or as operations. The application of federal, state and local standards to protect the environment, including but not limited to those hereinafter described, involves or may involve review, certification or issuance of permits by various federal, state and local authorities. Such standards, particularly in regard to emissions into the air and water, thermal mixing zones and water temperature variations, may halt, limit or prevent operations, or prevent or substantially increase the cost of construction and operation of installations and may require substantial investments in new equipment at existing installations. They may also require substantial investments above the figures stated under " Construction Program" for proposed new projects. Air Quality Control. Pursuant to the Federal Clean Air Act of 1970, as amended, the State of New Ilampshire acting through the New Ilampshire Air Resources Commission (" ARC") has adopted regulations containing standards limiting emissions of particulates, sulphur oxides and nitrogen oxides, which are generally designed to achieve and maintain Federal primary ambient air quality standards. The Company believes that its fr il fuel generating units are being operated in compliance with AllC's regulations. Pursuant to the 1977 amendments to .he Clean Air Act, ARC has proposed lists showirg those areas of New IIampshire which have attained or f: led to attain national ambient air quality standards, and revised the State implementrtion plan, which the EPA has conditionally accepted. It does not appear that the revised State imple nentation plan will require the Company either to modify operations at any of its fossil fuel genera.ing plants or expend funds for additional air pollution contn>l equipment. While coal now available and expected to be available in the future for tbc Company's Merrimack Station presently meets all applicable requireme its, if more stringent requirements become effective which could not be met by such coal, the Company might have to install sulphur removal equipment at substantial capital cost or take such other actions es may be required by regulatory authorities. The installation of such equipment would increase operating costs and reduce the net capability of the units. In July,1979, the NIIPUC instituted an investigation to determine whether any of the five Schiller Station units should be converted from br ning oil to burning natural gas or coal. IIcarings have been held at which the Company has espreud its willingness to proceed @ conversion to coal 33 g 1
O provided certain environmental and economie questions are satisfactorily resolved, but the Company has requested the NIIPUC to suspend further consideration of the matter pending developments in the fede al proceedings described below. The Econcmic Regulatory Administration of the United States Department of Energy (" DOE") on November 19, 1979, issued a notice of proposed pmhibition or-ders under the Fuel Use Act of 1978 pmhibiting three 50 MW units of the five units at the Company's Schiller Station from burning oil or natural gas as their primary fuel. It is expected that DOE will, following expiration of certain comment periods and public hearings, issue its order prohibiting the burning of oil or natural gas and thereby requiring conversion of the three unita to the burning of coal. Such conversions would require substantial expenditures and reduce the capability of the units affected; no amounts for such expenditures have been included in the construction budget described tbove under " Construction Pmgram". Water Quality Control. The Company has received from EPA, or from the Maine Department of Environmental Protection in the case of cne generating station located in the State of Maine, all permits required under the Federal Water Pollution Control Act, as amended, for discharges of thermal and other effluents from its generating stations. Such permits have varying expiration dates and the Company has made and expects to make timely applications for renewal. The EPA issued effluent limitations guidelinee for steam electric power plants based on application of the best practicable contml technology (to be met by July 1,1977) and of the best available technology eco. nomically achievable (to be met by July 1,1984), and alternate effluent standards with respect to thermal discharges from steam electric power plants. The guidelines and standards impose rigomus limitations upon the industry. An industry group filed an appeal in a Federal Court of Appeals ch.llenging the guidelines and standards, and the Court of Appeals remanded the guidelines and standards to the EPA for reconsideration of certsin of them. The Company is in compliance with the July 1,1977 guidelines. The discharge permit for the Company's Newington plant contains conditions requiring installa-tion of some type of closed-cycle condenser cooling system if an exemption is not obtained. The Com-p ny has been studying the effects of the plant's operation on the aquatie environment of the Pisca-t qua River and will apply to EPA for an exemption to permit continuation of the present once-through cooling. While it cannot be known what action EPA will take on such application when filed, the Company believes that the results of its studies will support the granting of such exemption. If the Company should be unable to obtain such requested exemption, it would have to make substantial - capital expenditures to install the closed-cycle condenser cooling system. The Company has Sn ongoing requirement in the discharge permit for its Merrimack plant to monitor the effect of the plant's operation on the Merrimack River. The Company has thus far been able to show as mquired by the permit that the plant's present once.through cooling system does not interfere with resident fish in the affected portion of the Merrimack River. The permit requires that additional biokgical studies be performed by the Company at such time as significant numbers of migratory fish are restomi to the Merrimack River fsr the purpose of showing as nquired by the permit that the present cooling system does not interfen with migratory fish. The Company's construction and operation of the Seabrook plant, including environmental con-ciderations, is subject to regulation by the NRC and the EPA. See "Seabrook Nuclear Project" above. Othe Entironmental Expenditures. The Company's capital expenditures for environmental pmtection facilities amounted to approximately $8,630,000 for 1978, the major portion of which was f:r facilities to reduce the thermal effect of the discharge of the Seabrook plant condenser cooling 34
4 systems, with $250,000 for the control of water pollution at other Company facilities, and approxi-mately $13,600,000 during 1979. For the yeam 1980 and 1981 and for the years 1982-1983, there will be approximately $10,000,000,
$8,850,000 and $1,950,000, respectively, of further expenditures for these pollution contml facilities.
The foregoing amounta are included in the construction expenditures set forth under the captions "1980" and " Unadjusted 1981 1985" in the table under " Construction Program " Any expenditures nas,ciated with the conversion at the Schiller Station refermd to above would be in addition to these amounts. Employees, Salaries and W' ages. The Company has approximately 1,730 employees, of whom 35% are represented by unions with which the Company has contracts. Such contracts became efective June 1,1979, and will expire on July 31,1981. The contracts reflect a 7.5% general wage increase edective June 3,1979 and an addi-tional 7.9% increase efective June 1,1980. Increases comparable to the June 3,1979 increase to union. represented employees have been and will be granted to non-represented employees. Voluntary W'ags and Price Guidelines. The Company is subjwt to the volunte.ry Wage and Price Standards of the Federal Council on Wage and Price Stability. The guidelines, now in the second program year, provide that annual increases of wage and benefit payments should not exceed 79, basically the same pay standards which applied the first pmgram year, and that price increases during 1979-1980 can be no greater than the base period (1976-1977) price change or 199, whichever is less. The regulatory agencies are asked to assure compliance to the fullest extent possible. The Company is unable to pudiet what effect these standards will have upon its operations in the future. blunicipalities and Cooperatives. New Ilampshire law permits municipalities :o engage in the ;roduction and sale of electricity, including the power to condemn the plant and pioperty of any existing public utility which is located in the municipality. Under legislation enacted in 1975, intended primarily to enable all electric sys-tems (including municipalities) to participate in regional bulk power supply projects, New IIamp-shire municipalities now have broader powers with respect to contracting and extra-territorial activity, as well as the power to finance through the issuance of revenue bonds the owne ship of new generating units of at least 25 MW and new transmission facilities of at least 69 KV. The City of Berlin took preliminary action in 1969 and 1970 authorizing the City to engage in the production, distribution and sale of electricity, but the matter has not been finally determined. The Company's revenues imm sales in the City of Berlin in 1978 were about $6,220,000 including revenues of about $3,229,000 from a single large industrial customer. If the City of Berlin were to acquire ownemhip of the Company's property, the Company would be entitled to compensation for the fair value of its property and any severance damages. No other municipality served at retail by the Company is, so far as is known to the Company, taking steps to engage in such business. New Hampshire Electric Cooperative, Inc., a cooperative association financed by the Rural Elec-trification Administration, as well as five small municipal electrie utilities, operate in areas adjacent to anas served by the Company. The Cooperative purchases most of its electricity frem the Company and is subject to regulation by the NHPUC as a public utility. The Cooperative has agreed to pur-chase a 2.17391 % interest in the Seabrook plant. See " Problems Facing the Company". 35 1 l
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REPORT OF INDEPENDENT CERTIFIED PUBUC ACCOUNTANTS , i G The Board of Directon i I Pusuc Szavice COMPANY OF New HAMP81IIRE I We have examined the balance sheet of Public Service Company of New Hampshire as of Decem-ber 31,1978 and the related statements of earnings, retained earnings, other paid-in capital and changes in financial position for each of the five yean in the period then ended. Our examinations l 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 neceseary in the l circumstances. In our opinion, the aforementioned financial statements present fairly the financial position of Public Service Company of New Hampshire at December 31, 1978 and the results of its operations and the changes in its financial position for each of the five years in the period then ended, in con-formity with generally accepted accounting principles applied on a consistent basis. PRAT, MARWICK,31rrCHEI4 & CO. Boston, Massachusetts February 16,1979, except as to Note 8, which is as of March 5,1979 37 L
d W PUBLIC SERVICE COMPANY OF NEW IIAMPSIIIRE BALANCE SHEET ASSETS October 31 December 31, 1979 1978 (Unaudited) (Thousands of Dollars) Utility Plant, at Original Cost (Note 1): Electric Plant $519,737 $507,711 Ima Accumulated Provision for Depreciation 146,723 134,373 373,014 373,338 Unfinished Construction (Principally Nuclear Generating Projecta) (Note 8) 484,626 346,382 Net Utility Plant . 857,640 719,720 Investments (Note 1): Nuclear Generating Companies 9,622 9,529 Real Estate Subsidiary . 3,951 4,472 , Other, at Cost , 184 184 Total Investments 13,757 14,185 Current Assets: Cash (Note 3) 2,259 1,879 Temporary Cash Investmenta, at Cost Approximating 3tarket 1,500 - Accounts Receivable 27,731 27,588 Unbilled Revenue, Estimated (Note 1) , 21,624 18,057 Puel, Staterials and Supplies, at Cost 27,321 20,743 , Prepayments 577 3,330 Total Current Assets 81,012 71,597 Other Assets: 31iscellaneous Properties 251 314 Deferred Debits 8,312 5,359 Unamortized Debt Expense . 963 926 l Total Other Assets 9,526 6,599
$961,935 $812,101 See accompanying Notes to Financial Statements.
38 D t
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE BALANCE SHEET CAPITALIZATION AND LIABILITIES October 31 December 31 I* I '" Capitalization: Common Stock Equity: (U""did)
,, m Common Stock-$5 Par Value (Note 4)
Authorized: 18,000,000 Shares Outstanding: 13,932,209 Sbares (1978 - 9,786,969) $ 69,661 $ 48,935 Other Paid In Capital 166,202 108,232 Retained Earnings (Note 6) 69,337 71,140 Total Common Stock Equity 305,200 228,307 Preferred Stock (Note 4) 52,543 53,562 Preferred Stock - Redeemable (Note 5) 60,000 30,000 Long Term Debt-Net (Note 7) 319,813 287,252 Total Capitalization 737,556 599,121 l Current Liabilitiec Notes Payable-Banks (Note 3) 73,100 85,325 Long-Term Debt to be Retired Within One Year (Note 7) 27,096 5,231 Accounta Payable (Note 3) 45,747 68,035 Dividends Payable 9,806 - Accrued Taxes 4,423 12,349 Accrued Interest 6,019 6,215 Other. 1,749 1,145 Total Current Liabilities 167,940 178,300 Deferred Credits: heumulated Deferred Inymtment Tax Credits (Note 1) 28,081 12,488 Accumulated Deferred Taxes on Income (Note 1) 27,873 21,716 Other . 485 476 Total Deferred Credita . 56,439 34,680 Commitments and Contingencies (Note 8)
$961,935 $812,101 .
I l l See accompanying Notes to Financial Statements. 39 i l l l
un PUBUC SERVICE COMPANY OF NEW HAMPSHIRE , STATEMENT OF RETAINED EARNLNCS fee Meaths Ended Year Ended December 31, Odober 31, 1979 ISM 1977 19M 1975 1974 (Unsedited) (Thousands of Dollars) 8 71,140 $59,725 $56,084 $51,936 $45,070 $40,613 Balance at Beginning of Period 33,407 36,507 21,722 20,995 20,808 16,300 Net Income 104,547 95,232 77,806 72,931 65,878 56,913 Deduct: Dividends Declared: Preferred 8tock, at Required Annual Rates 7,966 6,394 4,925 4,854 3,416 3,379 27,244 17,698 14,156 11,993 10,526 8,464 Common Stock Total Dividends 35 210 24,0 5 19,081 16,847 13,942 11,843
$ 69,337 $71,140 $58,725 $56,084 $51,936 $45,070 Bilance at End of Period (Note 6)
STATEMENT OF OTHER PAID.IN CAPITAL Ten Menthe Ended Year Ended December 31, October 31, 1979 1975 1977 ISM 1975 1974 (UnaudMed) (Thousands el Dellers) Balance at Beginning of Period $108,232 8 90,409 $70,821 $54,411 $53,102 $38,348 Excess of Proceeds over the Par Value on the Issuance of. Common Stock: Bold - 1,650,000 Shares in 1974, . 1,000,000 Shares in 1976, 1,200,000 Shares in 1977, 1,321,284 Shares in 1978 and 4.100,736 Shares in 1979 59,449 17,461 18,961 15,781 (24) 14,665 Conversions-5.50% Convertible Pre-ferred Stock, 3,632 Sharee in 1974, 97,545 Shares in 1975, 35,000 Shares in 1976, 37,092 Shsree in 1977, 21,171 Shares in 1978 and 44,504 Shares in 1979 796 407 751 739 2,061 89 Preferred Stock Issuance Expenses (1,275) (45) (124) (110) (728) Balance at End of Period $166,202 $108,232 $M,409 $70,821 $54,411 $ 33,102 See accompanying Notes to Financial Statements.
- D
PUBLIC SEltVICE COMPANY OF NEW IIAMPSHIRE STATEMENT OF CIIANGES IN FINANCIAL POSITION Twelve Months Fried Year Ended Demeber 31, Octneer 31, 1979 1978 1977 1976 1975 1974 (Unsueted) (Thousands of DeRors) Source of Funds: From Operations: 8 16,300 3 39,708 8 36,507 8 21,722 8 20,995 3 20,808 Net Income Principal Non-Cash Charges (Credits) to Income 14,117 13,791 13,522 11,624 Depreciation 15,369 14,752 Allowance for Equity Funds (3,205) (1,573) (1,785) Used During Construction (13,601) (7,828) (6,093) Deferred Taxes and Investment 7,024 5,610 2,517 6,400 4,136 Credit Adjustmente 23,075 50,455 35,356 34,095 39,157 30,275 Total from Operations 64,551 From Outside Sources: Bale of Long Term Bonds and 25,000 15,000 22,300 45,000 Notes 60,000 60,000 30,000 - 18,000 - 15,000 - Bale of Preferred Stock 23,022 79,579 24,309 25,092 20,870 - Bale of Common Stock (20,880) 19,475 30,212 55,113 - (28,400) Change in Short Term Borrowing Advance Paymente from Joint - - - - Project Participante 10,628 - 123,205 35,870 8,900 47,142 Total from Outside Bources 199,6s2 114.521 33,510 44,939 5,100 - Decrmee in Working Capital - - l 819s,4so $158,561 8114,90f 8 53,157 8 77,417 Total 8264,233 Application of Funds:
$173,539 $114,310 8 70,252 8 38,313 8 46,926 Property Additions $210,836 Allowance for Equity Funds Used (3,205) (1,573) (1,785)
During Construction (13,601) (7,828) (6,093) 19,081 16,847 13,942 11,81.3 Dividende 35,210 24,092 5,947 9,271 29,517 947 883 Reduction of Long Term Debt 2,758 20,378 - - 19,528 Increase in Working Capital 23,766 - 1,614 1,496 1,528 23 Other Applications-Net 5,264 2,736 4158,561 8116,907 8 $3,157 8 77,417 Total 4264,233 $198,4 s6 Incresse (Durcase) in Working Capi-tal Other Than Short Term Debt: 8 1,625 8 1,167 8 (3,050) 8 (442) 8 (2,467) 4 1,370 Cash and Cash Investments 10,481 5,596 2,195 (1,157) (3,414) Receivablu 5,334 (3,020) 2,564 3,696 6,814 Inventories 8,171 3,707 LonpTerm Debt to be Retired 3,397 20,332 (28,911) 95 35
%ithin One Year 1,771 (5,053)
(33,125) (1,520) (13,338) (6,344) Accounts Payable (4,024) - - Isividends Payable (3,038) - (11,470) 3,090 (1,054) (2,220) (270) Accrued Taxes 10,867 1,717 5,906 Other 3,518 1,435 (257) (576) l Total Increase (Decrease) In Working Capital Other $ 20,378 8(44,939) 8 (5,100) $ 19,528 i Than Short Term Debt 8 23,766 8(33,510) l See accompanying Notes to Financial Statements. 41 l
a IWyrES TO FINANCIAL STATEMENTS (Information related to periods subecquent to December 31,1978 Is unaudited)
- 1.
SUMMARY
oF ACCOUNTDiO Poucas Regulations and Operations: The Company is subject, as to rates, accounting and other matters, to the regulatory authority of the New IIampshire Public Utilities Commtanion (NIIPUC), the Federal Energy Regulatory Commission (FERC) and, to a lesser extent, the public utilities commiaaions in other New England states where the Company does business. Investments: The Company follows the equity method of accounting for its investments in nuclear generating companies and in its wholly owned real estate subsidiary. The Company's invest. ment in this subsidiary is principally in the form of advances. The Ccapany's investments in nuclear generating companies are: Ownership October 31 December 31, Company Percent 1979 1978 (nomaands of Dollars) Yankee Atomic Electric Company 7% $1,480 $1,443 Connecticut Yankee Atomic Power Company 5% 2,435 2,335 Maine Yankee Atomic Power Company 5% 3,372 3,427 Vermont Yankee Nuclear Power Corporation 4% 2,335 2,324
$9,622 $9,529 In the case of each of the nuclear generating companies, pursuant to provisions of purchased power contracts which are regulated by the FERO, the Compar.y is entitled to its ownership percent of total plant output and is obligated to pay a similar share of each company's operating expenses and return on invested capital. Appmximately 10.9% and 10.5% of the Company's total energy require-m:nts were furnished by these companies in 1978 and 1977, respectively.
Utility Plant: Provision for depreciation of utility plant is computed on a straight line method et rates based on estimated service lives and salvage values of the several classes of property. The depreciation provisions were equivalent to overall effective rates ranging fmm 3.11% to 3.19% of , depreciable property for the five years ended December 31,1978. The rate for 1978 was 3.19%. Maintenance and repairs of property are charged to maintenance expense. Replacements and betterments are charged to utility plant. At the time properties are retired, the cost of property retired plus costs of removal less salvge are charged to the accumulated provision for depreciation. l Operating Revenues: Revenum are based on billing rates authorized by applicable federal and str.te regulatory commissions which are applied to customers' consumption of electricity. The Com-pany records estimated unbilled revenue, including amounts to be billed under a retail fuel adjust-ment clause, at the end of accounting periods. Income Tares: The tax effect of diferences between pretax income in the financial statements and income subject to tax, which are the result of timing differences, are accoanted for as prescribed by and in accordance with the ra,temaking policies of the NIIPUC. Accordingly, provisions for de-firred income taxes are recognized only for specified timing diferences. Tax reductions attributable 42
NOTES TO FINANCIAL STATEMENTS-Continued (Information related to periods subsequent to December 31,1978 is unaudited)
- 1.
SUMMARY
Or ACCOUNTINo PouCIES- Continued to other timing diferences are flowed through to net income as reductions of income tax expense. See Note 2. Investment tax credits earned are deferred and amortized to income over the lives of the related properties. Allowance for Funds Used During Construction: Allowance for funds used durinr construe-tion is the estimated cost, during the period of construction, of equity funds and bcrrowee at, s used for construction purpmm which are not recovered from customers through revenues. See Note D to Statement of Earnings. Pension Plan: The Company has a non. contributory pension plan covering all full. time em-ployees who have met a minimum service requirement. The Company's policy is to fund current pension costa accrued. Pension plan costs were as follows: 1974 - $1,320,000,1975 - $1,650,000,1976 - $1,850,400,1977 - $2,112,000,1978 - $2,400,000 and the twelve months ended October 31, 1979 - $2,744,000. At December 31, 1978, vested benefits under the plan exceeded the market value of the plan's assets by approximately $5,296,000. At that date, the total unfunded past service liability was approximately $4,943,000. Earnings Per Share: Earnings per share are based on the average number of common shares outstanding, after recognition of preferred dividend requirements.
- 2. INOoME TAXEB The components of income tax expense are as follows:
Tsehre Month Ended Year Ended December 31, 1979 1978 1977 1976 1975 1974 Federal: Operating Income 8(10,370)* $10,166 8 1,297 8 5,815 8 2,038 8(1,342) Other Income and Deductions 292 (46) (113) (96) 159 (2,333) (10,078) 10,120 1,184 5,719 2,197 (3,675) State, Included in Operating Income 2,689 2,468 1,492 1,407 1,480 987 Total Current Income Taxes (7,389) 12,588 2,676 7.126 3,677 (2,688) Deferred Federal: Operating Income 7,746 5,527 3,882 1,709 2,183 3,754 Other Income and DMuetione 3 (8) - 6 2 79 7,749 5,519 3,882 1,715 2,185 3,833 Operating Income 199 93 3 (37) 60 278 Total Deferred Income Taxes 7,948 5.612 3,885 1,678 2,245 4,111 Investment Tax Credit Adjustment 16,173' 1,412 1,725 839 4,155 25 Total Income Taxes 8 16,732 819,612 8 8,286 8 9,643 810,077 8 1,448
'During 1979, the Company made elections under certain provisions of the Internal Revenue Code which resulted in the availability of approximately $9,500,000 of additional investment tax credits 43 E
e NOTES TO FINANCIAL STATEMENTS-Continued (Information related to periods subacquent to December 31,1978 is unaudited)
- 2. INcous: Taxis - Continued for 1978 and prior years. Approximately $1,100,000 of such amount relates to a recently formed sh>ck ownemhip plan for Company employees which does not affect net income but does result in additional funds for the Company from issuance of additional shares of the Company's common stock. The remaining $8,400,000 does not affect net income but has reduced the amot.nt of income taxes paid by the Company for 1978 by approximately $6,900,000 and resulted in a claim for refund of taxes paid in yean prior to 1978 of appn>ximately $1,500,000.
The Company estimates that investment tax credits of approximately $18,700,000 will be gen. erated for 1979. There are limitations on the amounts of such credita which can be used, however, and baseil on these limitations the Company estimates that approximately $9,700,000 of the credits will be recognized for financial statement purposes. The Company estimates that only $4,600,000 of such credits will be used for income tax purposes in 1979 with the balance available for use on sulmequent years' returns through 1986. l In accordance with the requirements of the NIIPUC, provisions for deferred income taxes are recognized only for the following timing differences: Twelve Wnths Ended Year Ended December 31, October 31, 1979 1978 1977 1976 1975 1974 (Thousands of Dollars) A portion of Depreciation and Amortization of Plant Facilities * .$ 355 $ 858 8 895 8 815 $ 948 $ 904 Accrued and Unteilled Fuel Adjustment 2,149 1,049 36 (417) 669 3,129 Charges The Interest Cornponent of Allowance for Funds Used During Construction (See ~ota D to Statement of Earnings) 8,641 3,713 2,954 1,274 626 - Investment Tax Credit Used to lleduce Deferred Taxes (3,700) - - - 3 (9) - 6 2 79 Other 8 7,948 $5,612 $3,885 $1,678 $2,245 $4,111
' Current income tax reductions attributable to (1) the tax depreciation permitted under the Class Life Adit System of the 1971 Itevenue Act in excess of the tax depreciation permitted under the Guideline Lives provisions of the 1969 Itevenue Act and (2) the amortization of certain pollution control facilities over five year periods.
- D 1
1 l l l
4 NOTES TO FINANCIAL STATEMENTS - Continued (Information related to periods subsequent to December 31,1978 is unaudited)
- 2. INCOME TAxts- Continued The principal reasons for the difference between the total tax expense and the amount calculated by applying the Federalincome tax rate to income before tax are as follows:
Twelve Merrths
' Ended Year Ended December 31, October 31, 1979 1978 1977 1976 1975 1974 (Thousands of Dellars) $56,440 $56,119 $30,008 $30,638 $30,885 $17,749 Income Before income Tax Federal Statutory Rate (1979 Approx.) 46.347 % 48 % 48 % 48 % 48 % 48 %
26,158 26,937 14,404 14,706 14,825 8,519 Expected Tax Expense Increases (Reductions) in Taxes Resulting from: Interest and Ourhead Charged to Con-struction ar d Exper ed for Tax Pur-(7,291) (4,544) (3,377) (1,859) (979) (2,109) poses Excess of Tax Over Book Depreciation (1,716) (2,265) (2,318) (2,773) (3,019) (3,924) State Taxes Net of Federal Income 800 658 Tax Bene 6ts 1,55o 1,332 777 712 Unbilled Revenues (577) (629) (2u0) (181) (457) (501) Other Deductions, each less than 5% of Expected Tax Expense (1,402) (1,219) (1,000) (962) (1,093) (1,195) Total Income Taxes $16,732 $19,612 $ 8,236 8 9,643 $10,077 $ 1,445
- 3. COMrENSATINo BALANCES AND SHORT-TERM BORRoWINGS The Company uses borrowings from banks as an interim method of financing construction of new facilities. At December 31,1978, the Company had a revolving credit agreement which permitted the Company to borrow up to $95,000,000 through April 30,1979 and also had line of credit agreements which aggregated $5,350,000. See" Problems Facing the Company-Immediate Financing Program" for information concerning an extension of and increase in the revolving credit agreement. The Company pays commitment fees on the revolving credit agreement and maintains compensating balances for certain line of credit agreements. The effective cost of borrowing under the revolving credit agreement, including fees and assuming the available credit is fully utilized, is 116% of the pri.ue interest rate of a specified bank. Compensating balances amounted to $305,000 at December 31,1978 and October 31,1979.
The average interest rate on short-term borrowings at December 31,1978 and October 31,1979 was 12.64% and 16.149, respectively. During 1978, maximum short-term borrowings were $88,112,500; the average amount outstanding (based on month-end balances) was $66,911,458; and the weighted average interest rate was 11.36% computed with commitment fees included in interest expense. Dur-ing the twelve months ended October 31, 1979, maximum short-term borrowings were $114,100,000; the average amount outstanding was $83,052,083, and the weighted average interest rate was 14.32%. At December 31,1978, accounts payable included deferred payments to vendors of approximately
$7,500,000. Such deferrals, with interest, were paid in January,1979. At October 31,1979, accounts l ,
payable included advance payments aggregating $10,600,000 from other Seabrook participants against their present ownership interests in the project. These advances were to be credited against amounts payable by such participanta commencing in January,1980, and are secured by the Company's interest in nuclear fuel for the Scabrook project. 45 l
1 I j l l i NOTES TO FINANCIAL STATEMENTS-Continued j (Information related to periods subsequent to December 31,1978 le unaudited) 1
- 4. PREFERRED STocx , I The Articles of Agreement authorize the Company to issue 1,350,000 shares of Preferred Stock, l
$100 Par Value and 5,000,000 shares of Preferred Stock, $25 Par Value. The dividends of all series {
outstanding are cumulative. Preferred Stock outstanding is as follows: October 31 December 31, Dividend Par Valee Shares Outstanding 1979 1978 (musandsof Dollare) 3.35 % $100 102,000 $10,200 $10,200 4.50 % $100 75,000 7,500 7,500 5.50 % $100 48,432 (1978 - 58,622) 4,843 5,862 7.92 % $100 150,000 15,000 15,000 , 11.00 % $ 25 600,000 15,000 15,000 1 Total Preferred Stock $52,543 $53,562 l During the five years and ten months ended October 31, 1979, the Company issued (in October 1975) $15,000,000,11% Dividend Series Preferred Stock. Oeneral redemption prices of preferred stocks are: 3.35% Series $100.00,4.50% Series $102.00, 5.50% Series $100.00,7.92% Series $105.94 and 11% Series $27.75. At October 31, 1979 there were reserved for issuance upon conversion of the 48,432 shams of Convertible Preferred Stock,5.50% Dividend Series,214,585 shares of Common Stock based upon the conversion price of $22.57 per share (the Convertible Preferred Stock being taken at its par value of
$100 per share).
- 5. PREFERRED SMCK - REDEratasue Redeemable Preferred Stock outstanding is as follows:
October 31, December 31, Dividend Par Value Shares Outstanding 1979 1978 (husandsof Dollare) 7.64% $100 120,000 $12,000 $12,000 , 9.00 % $100 180,000 18,000 18,000 11.24 % $ 25 1,200,000 (1978-None) 30.000 - Total Preferred Stock - Redeemable $60,000 $30,000 lledeemable preferred stocks issued during the five years and ten months ended October 31,1979 were $18,000,000, 9% Dividend Series in October 1977 and $30,000,000,11.24% Dividend Series in May,1979. Sinking Fund provisions require the Company to redeem all shares at par on the basis of 4,800 shares annually beginning in 1984 for the 7.64% series,10,800 shares annually beginning in 1982 for the 9% series and 60,000 shares annually beginning in 1985 for the 11.24% series. The annual . Sinking Fund requirementa are as follows: 1979 th augh 1981 -none,1982-$1,080,000,1983-l $1,080,000 and 1984 ~ $1,560,000. Subject to certain refunding limitations, Redeemable Preferred l Stocks are redeemable for other than Sinking Funds at redemption prices of $106.12, $109.00 and ! $27.81 for the 7.64%,9.00% and 11.24% series, respectively. o l l s-
NOTES TO FINANCIAL STATEMENTS-Continued (Information related to periods subsequent to December 31,1978 is unaudited)
- 6. DmDEND RmrRICTION Pursuant to terms of the General and Refunding Mortgage Indenture, dividends may not be paid on the Common Stock in excess of Net income accumulated after January 1,1978 less the aggregate amount of all dividends paid or declared .m the Preferred Stock of the Company during such period plus $32,000,000. At December 31,1978, and at October 31,1979 Retained Earnings of $44,415,000 and $42,612,000, respectively, were not subject to dividend restriction.
- 7. LONo-TEau Dzar UY93I' Ng' 81' (Thousands of Dollare)
First Mortgage Bonds: $ 3,556 Series E- 3 Fo, Due 1979 $ - 10,483 10,483 Series II- 3%7o,Due1984 6,972 7,M7 Series I- 3%7o, Due 1986 21,952 22,149 Series M- 4%7o,Due1992 15,847 15,910 Series N- 6%%,Due1996 14,086 14,173 Series 0- 6%7o,Due 1997 14,242 14,277 Series P- 7%7o,Due1998 19,168 19,206 Series Q- 9 %, Due 2000 19,398 19,455 Series R- 75/87o,Due 2002 19,628 19,778 Series S- 9 Fo, Due 20M 25,000 24,719 Series T-12847o,Due1981 15,000 15,000 Series U-10%7c, Due 1985 15,000 15,000 Series V- 9%7c,Due2006 10,000* 10,000* Series W - 10%7o, Due 1993 9,302' -
- Series X - 12 Fo, Due 1999 215,797 210,834 Less-First Mortgage Bonds (*) deposited with Trustee of the General and Refunding Mortgage Indenture as additional 19,302 10,000 security for General and Refunding Bonds 196,495 200,834 Total First Mortgage Bonds General and Refunding Mortgage Bonds:
60,000 60,000 Series A-10%7o, Due 1993 Series B-12 %, Due 1999 60,000 - Promissory Note, tDue January 3,1980 with interest at 1167o of a 25,000 25,000 specific bank's prime rate plus 0.257o Pollution Control Revenue Bonds: 1,500 1,500 8%7o, Due December 1979 5,800 5,800 9 %, Due December 1984
~ 348,795 293,134 Total Long-Term Debt 27,096 5,231 Less: Long-Term Debt To Be Retired Within One Year 651 1,886 Unamortized Premium and Discount 5,882 28,982 $319,813 $287,252 Long-Term Debt-Net tThe maturity of this Note has been extended to January 5,1981.
47 l l i
i e NOTES TO FINANCIAL STATEMENTS - Continued ! Information related to periods subsequent to December 31,1978 la unaudited) !
- 7. LoNo-TEau DEnr - Continued The annual Sinking Fund requirements with respect to First Mortgage Bonds, which may be met by the payment of cash or bonds or, up to one-half of their amounts, by the certification of additional property, are as follows: 1979 - $2,213,241,1980 - $2,463,241,1981 - $2,636,318,1982 - $2,052,984, 1983 - $2,052,984 and 1984 - $2,052,984. Annual Sinking Fund requirements with respect to Gen-eral and Itefunding Mortgage Bonds during the five years through 1984 are $5,460,000 payable in cash in 1983 and 1984.
Long. terra debt maturities, excluding the aforementioned Sinking Fund requirements, are as follows: 1979 - $4,856,000,1980 - None,1981 - $49,719,000,1982 - None,1983 - None and 1984 -
$16,283,000.
Under the terms of the First Mortgage Indenture and the General and Refunding Mortgage Indenture, substantially all utility property of the Company is subject to the liens thereof.
- 8. Conu!TMENTS AND CoNTINoENCIES The Company (both as sole and as joint owner of facilities) and the nuclear generating companies in which the Company has investments, in common with other electric utilities, are subject to present and developing regulations with regard to air and water quality, nuclear plant licensing and safety, land use and other environmental matters by various Federal, state and local authorities. It is pos-sible that compliance with such regulations may require additional capital expenditures and increased operating costs not now determinable in amount.
If the Company's construction program is not reduced as described in the next paragraph, con-struction program expenditures are forecast to be $171,700,000 for 1979, $232,300,000 for 1980 and
$714,300,000 for 1981 through 1985 (excluding allowance for funds used during construction). Thee estimates included $145,600,000, $187,500,000 and $417,000,000, respectively, for the Company's inter-est in a nuclear generating station under construction in Seabrook, New IIampshire, and $5,300,000, $7,000,000 and $63,500,000, respectively, for the Company's interests in other nuclear generating units '
owned on a tenancy in-common basis with other New England utilities. The Company's ownenhip interests and its share of total expenditures included in Unfinished Construction for the jointly-owned
'tuelear facilities in which it is participating are as follows:
Ownerehlp October 31, December 31 Percent 1979 1978 (Thousande of Dollars) Seabrook #1 and #2 50.0000 % $434,200 $307,800 Pilgrim #2 3.4700 11,600 9,600 Millstone #3 3.8910 26,200 21,200
$472,000 $338,600 On March 3,1979, the Company's Board of Directors directed management to proceed to sell all ,
of the Company's Pilgrim #2 and Millstone #3 ownership interests and to reduce its ownership inter-4e l l
4 NOTES TO FINANCIAL STATEMENTS-Continued (luformation related to periods subsequent to December 31,1978 le unaudited)
- 8. COMMITMENTS AND CONTINoENC'.ES - Continued est in the Seabrook nuclear plant by offering 2271 to other Seabrook participants. Thmugh October 31, 1979, subject to receipt of requisite regulatory approvals, other utilities have committed to ac.
quire only 14.765039e of the plant. See "Pmblems Facing the Company-Reduction of Construction Program" for a description of the proposed arrangements for the reduction of the Company's interests. See " Problems Facing the Company - Immediate Financing Program" and " Construction Program" for the effect of such agreementa on the Company's financing plans for 1980 and subsequent years. Construction of the Seabmok project has required numerous approvals and permits imm various state and Federal regulatory agencies. The process of obtaining these approvals and permits has been long and complex, has been consistently opposed by a number of intervening groups, has included demonstrations at the Seabrook site and has been plagued by lengthy delays which have resulted in greatly increased costs for the project. One court appeal from Federal regulatory approvals is pending and further appeals are possible. The Company is unable to predict what effect financing problems or further administrative or court decisions relating to Nuclear Regulatory Commission or Environ-mental Protection Agency actions may have on the Company's ability to complete the project or on the cost of the project.
- 9. UNAL,DITED REruerMENT Cost INroRMATIoN The replacement cost data described in this note has been compiled in response to regulations promulgated by the Securities and Exchange Commission and represents, in the opinion of manage-ment, reasonable estimates of replacement costs given the guidelines of the regulations. IIowever, imprecisions exist and subjective judgments have been made in the estimating process. Also, certain income effects which might result from the replacement of productive capacity are not required to be described by the regulations and have not been evalaated, including the impact of replacement on capital costs and taxes. Furthermore, the regulations do not call for a description of all facton which may result from inflation, including the impact of long. term debt outstanding in a time of inflation and these have not been evaluated or included in the replacement cost data presented.
Consequently, in the opinion of management this note is of limited usefulness in the evaluation of the impact of inflation on the financial position or results of operations of the Company. Furthermore, the disclosure of this replacement cost data should not be construed as a plan to replace existing productive capacity, and the actual replacement of productive capacity may not take the form implied by the techniques used to develop the estimates. Finally, the replacement cost data presented in this note should not be taken to be management's estimate of the current value of existing prop-erty, plant and equipment. The Company's operating costs and the recovery of its investment in utility property are signifi-cantly affected by inflation and the current and expected more stringent environmental regulations. Replacing existing utility property with equivalent productive capacity will require substantially greater dolle" of capital investment than was required to construct or acquire the property originally; l but replaeci ct cost is not normally considered in the rate waking process, since only the historical cost of uti' uroperty is normally included in the rate base upon which the Company is allowed 1 - to earn a i : ate of return. IIowever, the cost of replacement property, when existing productive capacity is . tally replaced, is expected to be included in the rate base. l 49
NOTES TO FINANCIAL STATEMENTS-Continued (Information related to periods subsequent to December 31,1978 le unaudited)
- 9. UNAl!DFTED Rzrt.ACEMEFr CO6T INFOaMNTION - Continued The computed replacement cost of the Company's productive capacity, depreciated replacement cost and related depreciation expense and corresponding historical cost data are presented below for December 31,1978 and 1977:
December 31,1978 December 31,1977 Estimated Estimated Heplace. Replace-Historical ment Historical ment Cost Cost Cost Caos Utility Plant: (nousande of Dollars) Plant in Service Subject to Replacement Cost Disclosure $493,080 $1,452,671 $472,510 $1,345,446 Construction Work in Progress 346,382 346,382 196,825 106,825 Other Property, at IIistorical Costa . 14,631 14,631 14,558 14,558 Total 854,093 1,813,684 683,893 1,556,829 Accumulated Provision for Depreciation 134,373 435,985 122,364 381,292 Net Utility Plant $719,720 $1,377,699 $561,529 $1,175,537 Depreciation Expense $ 15,417 $ 45,479 $ 14,731 $ 42,163 Generating Plants: Fuel generation replacement costs were estimated on the basis of current construction cost per megawatt at December 31,1978 and 1977 developed by engineering studies and Opplied to essentially the generation mix at the end of each year. Ilydro generation replacement costs were calculated using the IIandy-Whitman Index. Transmission and Distribution Plant: IIigh voltage transmission line replacement costs were computed based on engineering studies which determined the cost per mile of line at the end of each year. The replacement costs of certain transmission substations were computed based on costs and technology at the end of each year. The replacement costs of the remainder of transmission facilities along with the replacement costs of all distribution plant were calculated using the IIandy-Whitman Index. General Plant: Estimated replacement costs of buildings were developed by applying the estimated cost per square foot at the end cf each year to the then present facilities. Estimated re-placement costs for all other general plant were developed by applying unit prices or the appropriate Wholesale Price Index at the end of each year. Other property consists primarily of land and land rights. Reserve For Depreciation: Related accumulated depreciation based on replacement costs was developed by applying the same percentage relationship that existed between depreciable plant and ' accumulated depreciation by functional groups on an historical cost basis at December 31,1977 and 1978 to the current replacement costs of the sanie groups. Depreciaiion Expense: Depreciation expense for the replacement costs of utility plant was developed by applying the actual average rates and methods by functional groups in use to the average of beginning and year end balances of depreciable replacement costs.
- 50
DESCRIPTION OF THE BONDS The Series C Bonds will mature on January 15,2000 and will be issued under and secured by a General and Refunding Mortgage Indenture dated as of August 15, 1978 and supplements thereto G including a Second Supplemental Indenture to be dated as of January 15,1980 (the "G&R Inden-ture") between the Company and New England Merchants National Bank, as Trustee. The lien of the G&R Indenture is subject to the prior lien of the Company's First Mortgage (see " Security and Priority" below). Interest on the Series C Bonds will accrue from the date of their initial issue and will be payable semi-annually on each January 15 and July 15 to holders of record on the preceding January 1 or July 1, respectively. Principal and interest will be payable at the principal corporate trust office of the Trustee in Boston, Massachusetta, and at an office of Manufacturers Hanover Trust Company, Paying Agent, in New York City. -The Series C Bonds will be issued only in fully registered form without coupons in denominations of $1,000 or multiples thereof. No service charge will be made for any transfer or exchange of Series C Bonds. The brief summary herein of certain provisions of the G&R Indenture is merely an outline and does not purport to be complete. It uses terms defined in the G&R Indenture and is qualified in its entirety by reference to the G&R Indenture which is an exhibit to the registration statement. Where references are made to the Company's Firs +. Mortgage Indenture dated as of January 1,1943 and supplements thareto (the "First Mortgage"), such references ara qualified in their entirety by refer-ence to the First Mortgage, which is an exhilit to the registration statement. The applicable articles and sections of the G&R Indenture (GR) an<l indentures supplemental thereto (IS and 2S) and of the First Mortgage (FM) are indicated below in the summary of the terms thereof. Redemption Series C Bonds will be redeemable at tae option of the Company as a whole or in part at any time prior to maturity, on at least 30 days' notice given as provided in the G&R Indenture, at the general redemption prices shown in the table below, expressed as percentages of the principal amount; provided, howmr, that neither the Series C Bonds nor any portion thereof shall be redeemed prior to January 15, 1985, if such redemption is for the purpose or in anticipation of refunding such Bonds, or any portion thereof, through the use, directly or indirectly, of funds borrowed by the Company at an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 14.85% per annum, and the Series C Bonds will also be redeemable for the sink-ing fund on January 15, 1990, or any Jr.nuary 15 thereafter (and at any time prior to maturity through the application of certain release, insurance, eminent domain, and replacement fund moneys and certain other moneys required to be deposited with and held by the Trustee, as a whole or in part) on like notice, at the principal amount thereof, together in each case with accrued and unpaid interest to the redemption date. (2S Sec.1.02(1)). If redeemed at any time in the respective twelve-month period beginning January 15 in each of the following years: General General Redemption Redemption Year Price Year Price 1980 114.50 % 1982 112.98 % l 1981 113.74 1983 112.22 1 51
e General General , Redemption Redemption Year Price Year Price 1984 111.45 % 1992 105.35 % 1985 110.69 1993 104.58 1986 109.93 1994 103.82 1987 109.16 1995 103.06 1988 108.40 1996 102.29 1989 107.64 1997 101.53 1990 106.87 1998 100.77 1991 106.11 1999 100.00 All outstanding G&R Bonds, including the Series C Bonds, may also be redeemed in whole but not in part on at least 30 days' notice at the option of the Company, by issuance in exchange there-for of an equal aggregate principal amount of First 31ortgage Bonds; and the Company covenants that, if the First 31ortgage is amended to permit the issuance of First 5fortgage Bonds against un-licensed or disconnected property additions, it will so redeem all outstanding G&R Bonds by exchange of First 31ortgage Bonds. The First 31ortgage Bonds exchanged for the G&R Bonds shall bear inter-est at the same rate, shall have the same maturity, interest payment dates and redemption prices, shall be so dated that no gain or loss in interest shall result from the exchange, and shall be entitled to the benefits of the same sinking funds (except as the First 31ortgage may otherwise require) and the same dividend limitations and the same restrictions on the right of redemption, shall be entitled to the benefits of the same replacement fund or maintenance and renewal covenant. (GR Sec. 2.12(B); 28 Sec.1.02(2)). Sinking Fund The G&R Indenture requires that the Company shall on or before January 15, 1990 and each January 15 thereafter, up to and including January 15, 1999, deposit with the Trustee the sum of
$2,250,000, payable in cash or an equivalent principal amount of Series C Bonds. The Company may, at its option, pay to the Trustee prior to any sinking fund date as an additional sinking fund payment an amount payable in cash or in Series C Bonds .ot exceeding the amount of the mandatory sinkinir fund payment; the right to make such additional sinking fund payment in any year shall not be cumulative. (28 Sec.1.03).
Heplacement Fund So long as any First 3fortgage Bonds remain outstanding, the Company will comply with the requirements of the maintenance and renewal covenant under the First 3fortgage, as described below. When said requirements cease, the Company will be obligated under the G&R Indenture to pay to the Trustee as a replacement fund 2%% of the average of its investment in depreciable property on the last day of each month of the previous calendar year. The replacement fund requirement may be satisfied by cash, G&R Bonds of any series, or Available Amount of Additional Property. Additional property evidenced under either the maintenance and renewal covenant of the First 3fortgage or the replacement fund under the G&R Indenture may be used to offset certain retirements in computing Available Net Additional Property. (GR Art. 8). 52 h W
Maintenance and Renewal Covenant The First Mortgage contains a specific maintenance and renewal covenant providing that the Company will, during each calendar year, in the aggregate expend for, or allocate Additional Prop-erty to, or deposit in cash with the Trustee on account of maintenance, repairs, renewals and replace-ments, a total of nct ned than 15% of the gross operating revenues (after deduction of the aggregate cost of electric energy, gas and steam purchased for resale) during such period from the physical properties, other than leased properties, covered by the First Mortgage e-d used for the Primary Purposes of the Company's Business. Expenditures, deposits and allocations from insurance and eminent domain proceedings and certain other sources may not be included. (FM Art. V, Sec.1). Security and Priority The Series C Bonds will ba secured by the G&R Indenture equally and ratably with G&R Bonds of other series by a mortgage lien on substantially all the properties and franchises owned by the Com-pany at the time of the execution and delivery of the Second Supplemental Indenture and on substan-tially all property and franchises subsequently acquired by the Company, except real property in Maine and Massachusetts acquired after the filing of the Second Supplemental Indenture and before the filing of a further supplemental indenture specifically subjecting such after-acquired property to such lien; subject, however, to the payment of the Trustee's charges, to the lien of the First Mort-gage, to liens on after-acquired property existing at the time of acquisition or created in connection with the purchase thereof not exceeding 60% of the Cost or Fair Value, whichever is less, to certain exceptions set forth in the descriptions of properties in the G&R Indenture and in the deeds referred to in such descriptions, and to Permitted Liens. Certain types of pmperty are excepted from the lien of the G&R Indenture, including, among others: fuel, nuclear cores and materials; all gas, oil, and other mineral properties and personal property related thereto; supplies; ensh; securities; contracts; and accounts receivable. While the principal currently operating generating stations, dams, and substations are on land owned by the Company, the principal transmission lines are mostly on lands of others pursuant to easement rights. Ownership of generating stations now under construction is held in undivided joint ownership with other utility participants. (GR Granting clauses). No debt may be carated by the Company ranking prior to or on a parity with the Series C Bonds with respect to the security provided by the G&R Indenture, except additional G&R Bonds issued in the manner summarized below, First Mortgage Bonds pledged with the Trustee under the G&R Inden-ture, obligations supported by additions and enlargements to property already subject to certain types of prior liens (none of which currently exists), and purchase money obligations existing or created in connection with the acquisition of after-acquired pmperty not to exceed 60% of its cost or value. l Prior liens and purchase money obligations, other than First Mortgage Bonds, shall not exceed 25% t of the sum of all outstanding G&R Bonds and obligations (other than Pledged Bonds) representing l liens prior to the G&R Indenture. (GR Sec. 4.15). G&R Bonds are further secured by First Mortgage Bonds which the Company is obligated to issue and pledge with the G&R Trustee. Upon any application to issue G&R Bonds (including the Series C Bonds) or certain other actions, the Company is required (GR Sec. 3.07) to deposit as a pledge with the G&R Trustee First Mortgage Bonds (" Pledged Bonds") in the maximum amount then issuable, subject to the Company's option not to so issue and deposit a limited amount of First l Mortgage Bonds otherwise issuable. The Pledged Bonds are secured, together with all First Mortgage 53
Bonds now issued and outstanding under the First 5fortgage, by a direct first mortgage lien on sub-stantially all the property of the Company, and after acquired property to the extent permitted by 1:w, subject only to excepted property and Permitted Encumbrances. Under the First 31ortgage (FM Art. II), additional First Stortgage Bonds may be issued against the retirement at maturity of a like amount of First 5fortgage Bonds or against 60% of the Net Amount of Additional Property; how-ever, in the G&R Indenture (GR Sec. 4.16) the Company has covenanted not to issue First 31ortgage Bonds except for pledging with the G&R Trustee. The Company has also covenanted in the G&R Indenture (GR Sec. 4.16) not to permit certain modifications to the First 3fortgage which could reduce the amounts of Fint 5tortgage Bonds issuable in the future, for the purpose of pledging under the G&R Indenture. The Pledged Bonds are nontransferable. In 1978, when $60,000,000 of G&R Bonds, Series A, were issued, the Company deposited
$10,000,000 of Pledged Bonds; in September,1979, when $60,000,000 of G&R Bonds, Series B, were issued, the Company deposited $9,302,000 of Pledged Bonds. The Company intends to issue no additional Pledged Bonds upon the issuance of the Series C Bonds. Because of provisions in the First 5fortgage which limit the availability of property additions to support issuance of additional bonds (see " Financing- Sfortgage Bonds"), there can be no assurance that the deposit of significant cmounts of Pledged Bonds will occur when subsequent series of G&R Bonds are issued. The Company does not pay interest on the Pledged Bonds. The principal benefit to holders of G&R Bonds provided by the Pledged Bonds will be that, in the event of a reorganization or insolvency of the Company, the allocation to the holders of G&R Bonds may be increased by reason of their participation in the lien of the First 3fortgage through the Pledged Bonds. Upon the retirement of all non. pledged First 3fortgage Bonds (in 2006, or earlier if such First 31ortgage Bonds are called for redemption), the First 3fortgage will be discharged and the G&R Bonds will become first mortgage bonds. 'inder the Atomic Energy Act, neither the Trustee nor any other transferee of the Company's properti may operate a nuclear generating station without authorization from the Nuclear Regulatory Commissiet.
Release and Jubstitution of Pruperty The G&R Indenture (GR Art. 6) provides that subject to various limitations property may be released fmm the lien thereof on a sale or other disposition upon the deposit with the Trustee of cash, , purchase money obligations or Additional Property equal to the Fair Value of the property released. Additional GAR Bonds Additional G&R Bonds of ar.y series may be issued as follows: (A) against 60% of the Av.Jlable Net Additional Property, (B) to refund a like amount of First Mortgage Bonds of any series which are not then Funded, (C) to refund a like amount of bonds which are not then Funded originally issued under a mortgage (the lien of which is prior to the lien of the G&R Indenture) existing on property at or immediately prior to the time of acquisition by the Company of such pmperty, (D) to refund a like amount of G&R Bonds of any series which are not then Funded, and (E) against the I deposit of money (GR Art. 3). Money so deposited may be withdrawn in amounts equal to the principal amount of G&R Bonds otherwise issuable against Available Net Additional Property or to refund bonds (GR Sec. 7.02). 54
l
.g When issuing G&R Bonds against Additional Property or the deposit of money, the Company must demonstrate that Net Earnings (not including any AFUDC in excess of 10% of Net Operating ,
Revenues but including revenues subject to refund unless there has been issued a final decision, which I I has not been stayed, of a regulatory commission or a court ordering a refund of such revenues) for any 12 consecutive calendar months within the preceding 15 calendar months are at least twice the annual interest charges on all G&R Bonds outstanding and applied for and on all equal or prior lien indebtedness (excluding Pledged Bonds). Except in certain instances, no earnings test is required in connection with the refunding of a like amount of bonds. (GR Sec.1.27 and Art. 3). The Series C Bonds will be issued against 609 of Available Net Additional Property. As of October 31,1979, the Available Net Additional Property against which G&R Bonds might be issued (based on property additions through July 31,1979) was $219,397,642, which will be reduced to
$169,397,642 after giving effect to issuance of Series C Bonds. The actual earnings coverage ratio under the G&R Indenture is 2.34 for the twelve months ended October 31, 1979. The pro forma earnings coverage ratio is 2.M after giving effect to the issuance of the Series C Bonds.
Dividend Restriction So long as any of the Series C Bonds are outstanding, the Company may not declare or pay any l dividend (other than dividends payable solely in shares of common stock), or make any other distri- I bution on, or purchase, any shares of its common stock at any time outstanding (other than by new common stock financing), if after such action the amount of such dividends, distributions, and pur-chases (at cost) subsequent to December 31, 1977, would exceed its Net Income subsequent thereto, hss the amount of all dividends paid or declared on its preferred stock, plus $32,000,000 (2S Sec.1.M). Modification of the G&R Indenture The G&R Indenture may be modified with the consent of the holders of 66%7o of the G&R Bonds at the time outstanding (or, if one or more but less than all the series of G&R Bonds would be ma-terially advemely affected,66%9c of the total bonds of the one or more series so affected). No such modification shall (a) affect the payment of principal, premium, and interest on any G&R Bonds, or extend the maturity or time of payment, without the consent of the holder of the G&R Bond affected, (b) reduce the above specified percentages of G&R Bondholders, or (c) permit the creation by the Company of any lien not otherwise permitted ranking prior to or on a parity with the lien of the G&R Indenture. No modification may be made which would conflict with the Trust Indenture Act of 1939 as then in effect. The Trustee is not obligated to execute a supplemental indenture which would affect its own rights, duties, or immunities under the G&R Indenture. (GR Art.13). The Trustee If the Trustee acquires any conflicting interest it shall either eliminate it or resign. There are j limitations on the rights of the Trustee in respect of certain payments and property received by the Trustee within four months prior to default. The Trustee may become the owner or pledgee of G&R Bonds as freely as if it were not the Trustee. (GR Art.11). I The holders of a majority in principal amount of the G&R Bonds outstanding may require the Trustee to take certain action, except when forbidden by law or when the Trustee in good faith shall 55 1 ? l
by its responsible officers determine that such action would involve the Trustee in personal liability or would be unjustly prejudicial to the other G&R Bondholders. (GR Sec.10.20). The G&R Indenture (GR Sec. 9.M) requires the Trustee to transmit to G&R Bondholders annual (and in some circumstances interim) reports relating to its eligibility and qualifications, advances, if any, of the Trustee to the Company, releases and substitution of pmperty securing the G&R Bonds, and other matters. Defaults The following are termed events of default: (a) failure to pay principal, premium or sinking fund installment when due; (b) failure for . days to pay interest; (c) failure for 30 days to pay any replacement or analogous fund installment; (d) default under the First Mortgage or certain other mortgages; (e) failure for 30 days after notice from the Trustee to perform any other covenant or agreement; and (f) certain events of bankruptcy, insolveney, or reorganization (GR Sec.10.01). The Trustee may withhold notice to the G&R Bondholders of any default, except default in the payment of principal, interest, or any sinking, replacement, or analogous fund installment, if its responsible officers in good faith determine that withholding such notice is in the interests of the G&R Bondholders. (0R Sec.10.02). Evidence to be Furnished Trustee Evidence is required periodically as to the absence of default in connection with certain annual sinking and replacement fund requirements and as to compliance with certain other terms of the G&R Indenture. Further, prior to issuance of additional G&R Bonds, release of property, withdrawal of cash, and various other actions under the G&R Indenture, evidence as to the absence of default and as to compliance with certain terms o.' the G&R Indenture is required.
- -' .. . l.:. .
LEGAL OPINIONS The validity of the Series C Bonds will be passed upon for the Company by Ralph H. Wood, Esquire, Vice President and General Counsel of the Company, and by Messrs. Ropes & Gray, Boston, 3fassachusetts, and for the Underwritem by Messa. Choate, Hall & Stewart, Boston, Massa. chusetts, both of which firms, as to the organization and existence of the Company, approvals of state commissions and legal conclusions affected by the laws of New Hampshire, Vermont, Maine and Connecticut, may rely upon Ralph H. ' Wood. Ralph H. Wood owns, jointly with his wife,300 shares I of the Company's Common Stock, and also has rights to approximately 140 additional shares of Common Stock under the Company's Employee Stock Ownership Plan. EXPERTS Th- financial statements included herein so far as they pertain to each of the five years in the period ~nded December 31,1978 have been so included in reliance upon the report of Peat, Marwick, Mitchel & Co., in& pendent certified public accountants, and upon the authority of said firm as experts a accounting and auditing. Ralph H. Wood, Esquire, Vice President and General Counsel of the Company, has reviewed the statements made herein as to matters of law and legal conclusions under the subcaptions " Joint Projects", "Seabrook Nuclear Project", " Regulation", " Rates-New Hampshire Retail", " Rates-Other ", " Fuel Supply", " Environmental Matters", " Employees, Salaries and Wages" and "Municipali-ties and Cooperatives" under the caption " Business", and under the caption " Description of the Bonds" Messrs. Ropes & Gray have reviewed the statements made herein as to matters of law and legal conclusions under the subcaptions " Mortgage Bonds" and " Preferred Stock" under the caption
" Financing", under the eubcaptions "New England Power Pool" and "Seabrook Nuclear Project" under the caption " Business", under the caption " Description of the Bonds" and concerning the jurisdiction of FERC, the NRC and the Massachusetts Department of Public Utilities under the caption " Business- Regulation." Such statements are included on the authority of such person and firm as experts.
57
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t -e* I
. e f
UNDERWRITING The names of the several Underwriters and the respective principal amounts of Series C Bonds which they have severally agreed to purchase from the Company, subject to the terms and conditions specified in the Underwriting Agreement filed as an exhibit to the Registration Statement, are as follows: Principal Principal Name Amount Name Amount Kidder, Peabody & Co. Incorporated . ... S 4,000,000 Robert W. Baird & Co. Incorporated . . . . . 3 200,000 Blyth Eastman Paine Webber Incorporated 4,000,000 Bateman Eichler,IIillRichards Incorporated 200,000 Bache IIalsey Stuart Shielda Inec7 rated 600,000 Sanford C. Bernstein & Co., Inc. 200,000 The First Boston Corporation 600,000 W lliam Blair & Company .... 200,000 Bar, Stearns & Co. . 600,000 Blunt Ellis & Loewi Incorporated 200,000 Dillon, Read & Co. Inc. . ........... 600,000 Boettcher & Company . 200,000 Donaldson, Lufkin & Jenrette Securities J. C. Bradford & Co. .... 200,000 Corporation ........ ... 600,000 Burgess & Leith Incorporated . 200,000 Drexel Burnham Lambert Incorporated..... 600,000 Butcher & Singer Inc. . . . . . . 200,000 Goldman, Sache & Co. ... 600,000 Dain Bosworth Incorporated . 200,000 E. F. Hutton & Company Inc. 600,000 Fahnestock & Co. . . . 200,000 Lazard Freres & Co. . . . . . . . . . . .... 600,000 First of Michigan Corporation 200,000 Lehman Brothers Kuhn Loeb Incorporated 600,000 Janney Montgomery Scott Inc. . . . . . . 200,000 Merrill Lynch, Pierce, Fenner & Smith Johnston, Lemon & Co. Incorporatal . . . 200,000 Incorporated . .. ..... ..... . 600,000 Legg Mason Wood Walker, Incorporated 200,000 L. F. Rothschild, Unterberg, Towbin . 600,000 Mcdonald & Company 200,000 Halomon Brothers .. 600,000 The Ohio Company . . 200,000 8hearson Loeb Rhoades Inc. . . . .. 600,000 Prescott, Ball & Turben . . . 200,000 Smith Barney, Harris Upham & Co. Rauscher Pierce Refsnes, Inc. ... 200,000 Incorporated . . ..... . 600,000 The Robinson-IIumphrey Company, Inc. 200,000 Warburg Paribas Becker Incorporated..... 600,000 Rotan Mosle Inc. . ... 200,000 Wertheim & Co., Inc. . . . 600,000 Sutro & Co. Incorporatal . 200,000 Dean Witter Reynolds Inc. 600,000 Wheat, First Securities, Inc. 200,000 Advest, Inc. ...... 400,000 Barrett & Company .. 100,0t,0 A. E. Ames & Co. Incorporated..... 400,000 Robert C. Carr & Co., Inc. 100,000 Alex. Brown & Hons . . 400,000 Ferris & Company, Incorporated.. 100,000 A. O. Edwards & Sons, Inc. . . 400,000 First Albany Corporatioe ... 100,000 Ladenburg, Thalmann & Co. Inc. 400,000 Freeman Securities Comp my, Inc. 100,000 Moseley, Hallgsrten, Estabrook & Oruntal & Co. 100,000 Weeden Inc. . . . 400,000 Herzfeld & Stern . . 100,000 Oppenheimer & Co., Inc. 400,000 Josephthal & Co. Incorporated. ... 100,000 W m. E. Pollock & Co., Inc. . 400,000 Laidlaw Adams & Peck Inc. . . . . 100,000 Htuart Brotheia 400,000 A. E. Masten & Cc,. Incorporated 100,000 Thomsoc McKinnon Securities Inc. 400,000 Neuberger & Berman ..... 100,000 Tucker, Anthony & R. L. Day, Tue. cio,0N Parker /Hanter Incorporated 100,000 Wood Gundy Incorporated 400,001 Thomas & Company, Inc. . . . 100,000 . American Securities Corporation 200,bM, Burton J. Vincent, Chesley & Co. 100,000 Bacon, Whipple & Co. 200,000 Total $30,000,000 The Underwriting Agreement provides that tLe several Underwriters are required to take and pay for all of the Series C Bonds ofered hereby if any are taken. The obligations of the Under-writers are subject to certain conditions precedent, The Company has been advised by Kidder, Peabody & Co. Incorporated and Blyth Eastman Paine Webber Incorporated, as Representatives or the several Underwriters, that the Underwriters , propose to oEer the Series C Bonds to the public initially at the ofering price set forth on the cover l page of this Prospectus and to certain dealers at such price less a concession of not in excess of 1.5%, and that the Underwriters and such dmlers may reallow a discount of not in excess of 1.0% to other dealers. The public ofering price and the concessions and discounts to dealers may be changed by l the Reprewntatives. l 58 b
6
.. LE 79-187 6(d)
- PUBLIC SERVICE CC"PANY OF SEW EA"PSE:7.I t
, Request fer Rate Increase Application for authority to alter e::istin; - ...
emergency circumstances. g . 00.. j' Appearances,: for the Company, Martin Gross, Esquire, Fr:n<~i.- I!
,, Esquire and Philip Ayers, Esquire; for the Legislative '.*tili:. C:ns_mers P. ,; Council, William Shaine, Esquire and Gerald Lynch, Esquire; fer C:.munit;.
H h Action Program, Gerald Eaton, Esquire; for the U S Air Force and General it l'
,a 1 Services Administration, Captain Jefferson M. Shaffner, Esquire.
lj . 00.. o! ' REPORT ji.. on November 27, 1979, the Public Service Company of New H =pshire. il y an electric utility company, filed an application or authority to alter exis:- c ing rates on account of emergency circumstances to produce an annual increas. d's [ of. revenues of 5.5% in the amount of $11,970,591 cr 7.5% over the present
,, base revenues computed in accordance with Tariff No. 22 but exclusice cf the is ll i'
fuel adjustment charge. The application is filed pursuant to RSA 375:9, n
, or in the alternative RSA 378:27 or 29.
Il..
] ,
On November 29, 1979 the Commission issued an Order of Notice
.' providing for a public hearing on this application to be held en Oc:c:ber 11, !! 1979 and for publication of said notice. The notice was duly published and i
l i t. the hearings were held on Decenber 11, 12, 13, and 14, 1979. y The Company presented testimony from Robert J. Harrison, Vice Presi. , and Chief. Financial Officer of the Company, Willia = Q. Harty, Vice President and the Head of the Public Utilitics Department of Morgan Guaranty Trust Company and Eugene W. Meyers, Vice President of the Kidder Peabody Ccmpany, 1 i, Hanover Square, New York, New York. li
! The Commission requested the testimony of Jor.athan 2. Horne of the j f
First National Bank of Boston and Philip H. McLaughlin of Shawmut_5:tional
<l Bank of Boston. .
t The Legislative Utility Consumers' Ccuncil /hcreinafte- -- '
"-r i
y LUCC) presented tes:icony of Professor J. ?ater rillic son cf 22r:::::h - College. I a i
.j Varicus members of the public and representa:ives of consumer :
bl i groups gave orcl or written statements to the Cc==ission. 81 1 I! {! I. Position of the ?arties ?
- l. I A. Position of Public Service Company ,
t N Public Service Cc=pany (hereinefter referred to as the Ccepany or l I! :
- ' PSNH) contends that without an increase in the basic rates i: will ne Icnger i e'
'i I
be able to sell long term securities nor will it be able to finance 1:s con-struction or its day-to-day cperations. This inability to meet its cbliga: ions, c i
'y is cited as confronting ?SNH with immediate and substa.'tial financ:a_
18 ! l lj disaster both as to the completion of Seabrook and the co .".inuaticn of PSNH as !, flj a corporate en:ity. l l l l! PSNH in its memorandum states that it has carried 1:s burde: I p a under both RSA 378:9 (emergency) and RSA 37S:27 and 29 (:e:perary). The 21
,. Company cites the Commission's attention to Petition ei Public Servi:e 97 N.H.
I! d 549'(1951) and Concord Electric DR 74-1 (1974) for support of its con:en:icn U I D that under either RSA 378:9 or 2.7, an inability to finance'1:s capi:al t l li: requirements is a sufficien: ground for relief. ! l
*i
y PSNH relies upon evidenc* submitted in this proceeding for :he
.I 1: proposition that it has esde a good faith effort to reduce its cash dcrands, a
I i The Company charges that the failure to reduce these~ cash demands can net *
. i l
be laid at the Company's doorstep given the appeals taken by c:her par:ies , j
}'til to this proceeding.
i
.' t ;j The proble=s.the Co:pany faces are delineated in their ec ::andun , l 9,
as follows: (a) the need to raise S290 million by December 31, 1910, (s) i i ; l- ' i-
't t.
i
- 4
. 'I !
[ the term loan is up for renewal, (c) access :o the shcr:-:er :redi: .:rke: , n : 4 has been curtailed, (d) co=non stock access is limi:ed, (e) ;eneral cnd ,
- f. '
refunding bonds are not a possibility a: :his :fre, and (f) caly lini:cd yl amounts of preferred stock could be issued. 8 i j PSNH contends that alterna:ives to :he surchcrge are no: feasible :: f I an adequate replace =en: for rate relief. The Cc pany indicates :ha: regula:ory. I I I.! approvals which reduce PSNH ownership in Seabrook to 35% will n:: scive .
! I.
the problem since 28% is the level that is manageable by the Ccmpany 0:her i i
, alternatives such as shutting down cons:ruction or altering :he scheduled ;
I completion dates are also rejected by the Ccapany as being both against the j public interest and of little value in solving inadequate cash flow. The : Company cencludes that only through a surcharge can :nese pros;ers :egin :c ; be resolved.
!k PSNH takes exception to the contention that the requested rate ,i
- e. I Supper:ing this ;
pl relief is a departure from cost of service principles. position, the Company cites, tha: cost of service includes not only a ; i
. utility's cost of operation but also its cost of capital. That further :his i .
i gi e i cost of capital is not to be determined solely in terns of return en a= cunts ; I i pinvestedinplant actually in service. i
'{I The Company finds solace and support for its contentiens as to cost j of service principles in L'JCC witness Willianson's testineny. ~
If Prefesser h Williamson finds a 4.2 :o 6.2% increase necessary under a narr:w concep: cf i e'
'l Ij cost of service, the company contends its 5.5% is clearly jus:ified. :
- o. i j ll Finally, the Company centends that while it has submit:ed a varie:y i: .
{ of proposed rate structures to the Commission, i: believes its original filing i i ' 4 to be the strongest. However, the Cocpany will accept :he methed the il' Commission finds appropriate. . i ll
.?
l l
, o ll 1:
3
. 4_ i
!. .. 1
- 1. a t o
! B. Position of LUCC '
I d , li The LUCC objects to the Company's applica:i:r and sc:s fer:h . - i number of arguments for the censidera:io- ^# -ke Cennissicn. ' The first argument is that the application ciscussed ecs:: tha: , are associated with the Company's uncomple:ed construe:icn 2: Seabrrok, and ! il
- ' are, thus irrevelant to the establistment o: ra:es wae:ner :ney :e in: erin,
'I temporary, energency or otherwise. LL'CC takes :he position tha the level li.,:
h of rates and charges to be assessed by PS::H may not be based on any manner en i [. the cost of construction work in progress; nor may the level of ra:es and I
; i , i ;l charges be based upon any costs associated wi:h construe:4cn work if said . l construction work is not completed. To do so would violate the language of H RSA 378:20-a.
n I: The second argument advanced by the LUCC is that Escrgency rates ti i should be denied because it is unlikely :ha: PSNH w:11 be abic to subs:an:iate j I an increase of 5.5% over their current levels of revenues in the nearings I I l concerning rate relief requested by PSNH. This contention basically alleges j 4
;l that PSSH can not meet the burden of proof necessary :o justify-a rc:e increase l; ': I ~l of any kind in light of the f act that they canno: shew tha : hey can maintain I -l their present level of revenues.
In this cen: ext the LUCC aise suggests !.
. i. . .j that the Commission should not grant the Cc=pany's request to fully nor:alize 1 its income tax accoun:s. l s
[ The third contention of the LUCC is tha: :here is no :estincny tha
'i' l , the requested increase will avert the crisis. L'JCC se:s for:h :ha: it would i i ! 3 O be an abuse of. discretion to grant an increase.wi:hout evidence ef a permanen:
I O financing package designed to allow PSSH to cen:inue cons:ructi:n Of Seabrook
~ .i :
y on schedule, at its current level of cwnership. If I. t' Generally, the LUCC alleges tha: the Company has no: pleaded a :
~; t
- factual basis for the granting of energency rate relief and if such relief i
- l t
- ! vere granted a bond should be required to pro:ec: residen:ial ccasurers. l
't i .e l' " e
-S-C. Positien of Cc uni:;. Action Progra: l. ; The Cen: unity Ac:icn Pro;ran (CA?) sets fer:h a nus':er f :rnsicer -
o tiens for the Cennission :c evalus:e in arriving at a decisic in :his pro- ! i
? ceeding.
is The firs: cencern expressed by CAP is if the Co :ission finds tha: l
't l l
t, i an e=ergency exists, the C:::ission should not allcw a rate increast withou: a i i n j h conco:itant effor: by Public Service Company.
. CAF vie s :he addi:icns of f;
ll personnel for purposes of construction =eni:cring and the possibili:y of l
*; I llincreaseddividendstostockhoicersasunreasonasteifcensumersareasked 4,
i to pay higher rates to relieve an e=ergency. ; t ' ,
,I I The seccnd contention put forth by CAP is that Public Service has t #
ll si= ply not carried its burden of proof pursuant to RSA 378:8. In addi: ion, h yCAPallegesthat
'i the e=ergency, if it exists, relates direc:1y to financing i. ;; construction costs, generating cash for construction and preventing defaul:
It on lending agreements for construction. Therefore, CAP contends tha: this i;
;i exp'ense of construc, tion financing is directly prohibited from being passed on to the ratepayer by RSA 378:30-a.
q The third concern expressed by CAP is tha: the Cc==issica mus: j d first deter =ine if there is a crisis of sufficient severity to warran: i relief i i and then deter =ine the extent of the relief. Pe:ition of Public Service 1
]Co:pany, 97 N . F. 549 (1951) - Blandin opinien. CAP alleges tha: even if there is an emergency, the e=ergency rate reques: will no: cure-the financial , dif ficulties f aced by the Cc=pany. CAP alleges that there is a significent ,, probability that =any of the Co:pany's plans will ne: bear fruitien in 1930, . thus worsening the emergency. Among those cited by CAP are:
1 (1) sale'of :he
,. Ver:ent facilities; (2) the approval of the divestiture by other regula:cr.-
4 ll bodies; . (3) the refusal of the various banks to provide assurances tha: the !
. 4 'l loans will be renewed or extended; (4) the nuclear fuel agreement will occur; s,
j' and (5) that a renege:iation of the uni: sale of power f ren ::e:ri---k 11 will 4 f
. be successful. .: i it l
.., .. i.
I . i
'! CA? poin:s to the fact that many cf 1:s clien:s face erer;in:1cs ! ,{oftheirown. If :hese people are faced te par: vi:h a pertien of their
- i limited resources, CAP contends :ha: there is no assurcnce tha: :he Ocepany ;
, will succeed in re=aining s:able during 1960, er :ha: there wen't he fur:her t
si requests.
,I lI CAP's fourth contention is tha: :e:perary rc:es canne: be gran:ed
- l h
because of the failure to adequately inform the public :ha: :e:porary rates si 4 would be addressed.
.i l
1 CAP's final concern is that if the Cennission ignores CAP's ' l g other concerns and finds an emergency, the ra:es gran:ed should be applied I
.i !! on a per kilowatt hour basis.
- t se ei l
- II. Statutory Concerns i
! A. Temporary Rates The Conaission has in this proceeding provided adequa:2 nc: ice to the, 8
gi public of an i= mediate rate increase request. A hearing was scheduled and t j8 notice of said hearing was properly published. The adequacy of the notice and , n - I s
,: the awareness of the public concerning the matters before the Commission have been clearly demons: rated by the number cf people who have presented : heir !
I. l., i views both orally and in writing to the Co= mission. Temporary rates have traditionally prctected a utility's righ: :o
'i h a reasonable return during the pendency of a prc:eeding. Consumers are -
- I i
t' protected through the notice and hearing provisions and RSA 37S:20 which I
., allcw for a bond to secure repayment to :he cus:omers cf the utili:y in :he !
i event that temporary rates prove to be higher : hen wha: is alicwed in':he i et permanent rate decision. 4
The Cc =ission in Concord Elec:ric OR 74-1 (1974) allcwed c :e:porary' ;,I increase in rates where it found tha: Concord I"ec:ric was unable :: do cny u
e i t 6 l l l . l
ii i i permanent financing. Similar concerns were e:: pressed in ?ublic Service l i Comoany D-R 6081 (!c74). Therefore, by pas: Ccasfasien preceden: RSA 375:27 . i j is a mechanism whereby a utility can ob:ain an increase in ra:es previded it I t can demonstrate : hat access to the permanen: capi:al markets is being influenced 4
. i l l by the inability of,the utility to earn a reascnable re: urn.
l i .
- i. i
'l B. Enercencv Rates li RSA 378:9, the emergency rate sta:ute, has also been recognized cs ; : j. . a vehicle wheraby a utility after demens:ra:ing a lack of avenues to :he , . l l d permanent financing markets can receive an increase in rates, New Encland !
a i
!! Telephone and Telegraph v. State 95 N.H. 59 (1949) Petition of,public Service tt
- .l ij Company 97 N.H. 549 (1951).
i.
!! In both the New England Tel. decisien and the Blandin cpinion in . I t.*
8 I
, Public Service the inability to finance generally, inability to pay present ] *i .
j b.ank loans and/or issue common stock have been recognized as sufficient i I i 1 . !! grounds by the Supreme Court for the finding of an emergency. The Renison ,
- f I
- j. opinion in Public Service does not differ as to the recognition of what
;I factors result in a rate increase being granted prior to completion of a ,
e i l
..' permanent rate order. Rather, the focus of the Kenison opinion is the ; ;! statutory mechanism. Since that decision, the Supreme Cour: has clearly l*
a I stated that the Commission is not to substi:ute form over subs:ance. L'JCC l l: 1
-{ +
- v. PSNH III N.H. (1979). While the issue of form versus sub- 'i ,
.I ,
ll stance was a question of methodology. in that proceeding, the considera:icns j I.i supporting that decision are equally applicable to the ques:icn of which
' 't hstatuteisappropriate. I i . i ; !! The Commission does not believe that an emergency reques: pursuan: :
- S ,
. ., to RSA 378:9 loses its character as an e=ergency,-si= ply because :he ca::er I
- 8: !
j ! is set for public hearing. Commission policy is to always have a hearing i l';, because this is the only way- the Commission can be assured of balancing the l l - ll . i l - : i, -1 s
} ) . .. l . ~t } , l 1 s ,.
'. 1 interests of the consu ers and the u:ility. l; ;
.; }
Therefore, the Co =ission adop:ed :he positien :hc: :his proceeding .' l'; is pursuant to RSA 378:9 and 373:27 either individually er in c: jun::ica. D U C. o. Burden of ? roof I.
}I. RSA 378:S states that when any utili:7 seeks :he benefi: of an; U I l'I!.
order of the Commission to charge and ratescollec: in excess of :he ra:es ! I
- g presently being charged, the burden of proving the necessi:7 of :he increase 1 I.I is clearly on the utility.
t' Ij
,e In an emergency rate relief situgtion, there is a heavy burden l'
1 upon the utility seeking relief to allege and establish the existence cf 4 il circumstances which would warrent departure from the ner=al rate:aking
'I process.
i Re Potomac Electric Power _Co., 9 PUR 4th 363 (1975).
'a'hile the t.. l i
i. burden of establishing the need for rate relief is always upon :he U ap~plicant in a rate proceeding, that burden bears more heavily upon :he 1 Il y applicant in a request for extraordinary relief. Re Arkansas Power'[ iich: Co., 10 PUR 4th 474 (1975). j' I i Since the Commission does no: have the benefit of a comple:e . l
,)
independent analysis by its staff on the financial posture of the u:ili:y, 1 l
':;; the evidence submitted by an applicant for emergency ra:e relief =us: clearly i ,; l U
and convincingly demonstrate that a s,ituation exists which warrants an { t
.. i .!Ii exercise of the Commission's emergency powers. Re Arthur Mutus: Telechene Co i f
h Case No. 73-562-4 (1973).
+
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'I !
1
III. Commission Analvsis t o
The testimony of Mr. Meyer of Kidder Petbedy is concise cnd :: l ti the point. This Company is foreclosed fro: f permanent financing if addi:icnal ; i revenues are not forthcoming. If permanen: financing is not available, :he e
., i.
e
, , - 5
- l '* - '.' I r 9
- l. l
, ,: .-ommercial bankers have no reasen :o either renew or ex:end shor tar:
l i l 5
.. financial arrangements. If that occurs this cc pany will nc: be abic to ; ,' d n ! 'i meet its bills which would effectively s:cp :he cons:ructien of Seabrcok.
I II
- s. .
g l
} Furthermore, there is at leas: a strong liklihood :ha: Public Service ll l l' Company itself would flcunder on the shoals of insolvency absen: ra:e relief, i Il .
o i j p Staf f Exhibit #6 does show that this Cc=pany is earninc a ra:e i. I '. of return in excess of that allowed by the Co= mission in the las: rate case l !I l
decision DR 77-49. If the financial circu= stances involving this Cc=pany '
lj i had remained the same, Staff Exhibi: 8 would presen: a significent barrier j i 4
, ! to rate relief. However, the circumstance,s. involving :his Ccepany have l . l' i i! changed. First, at the time the Company was last before the Co==ission the l s !i !, prime interest rate was below 10%; now it is at 15k'; . Second, during the i
fi
. il last proceeding the' economy as a whole was on a rela:ive upward swing. !\ ! , ; Today, all of us are in the' throes of a recession. Third, be: ween the last ;; filing by this Company and this emergency rate filing, an incident occurred I !! '
j at the Three Mile Island Station. In the aftermath of this inciden: the i U i il financial markets have reacted somewhat less positively than in the past.
- l !
l
'l While hopefully the events in Caracas this past week will begin to swing l t : ; is . , ,; the pendulum in the opposite direction, certainly the inciden: did add risk I .. i )l. to those utilities constructing nuclear plants. I i
i l 3 l
}l .
Fourth, the stock market has had a steady downward slide. This l, l 4 overall market condition, a symptom of the recession and the high interest ! t 3
.' rates, has had a particularly chilling effect on stocks of c:ilities. Those :
1 -l 1 [ P. p; with major construction prograns or heavy reliance upon oil were hi:
- he
< i 3 y hardest. PSNH is in the unfortunate position of qualifying under bo:h.
l g 1 I 1l
. Fifth, the Company has main:ained and correctly, we believe, that i l
Seabrook is a valuable project. The New England utilities who firs: requested
. a s g ,e i t
g I, f I* t 8 t, I .! .
.. z. .i d i ; portions of Seabroek and then backed off provided an cddi:icnal ris? fa::or -
l j , that neither the Company or this Consission c:uld ccn:::1. Hewever, a risk 8 i e factor to which inves: ors and bankers respend. Cbviously, if :he Company is i i l ..
;f perceived as having to be wary of 1:s fellow bre:hren in :: e indus:ry, :his I i l'.; too causes risk. ,
t u ij Mr. Meyer's indication that he believed Pub *. it Service was the 1
! a - ,i ! O utility with the greatest risk may be true. However, what is clear is the i, l* '. *1 i: correctness of our statement in DR 79-107 where the Cctaission indicated that i
i both the overall rate of return and.the return on ccamen equity is higher than
- i. !
l j!-' our findings in DR 77-49. LUCC witness Williamson, Company witness Meyer and ! s il t j q Harrison all maintained that the cost of common equity for ?SSH was higher i
.I i
than 14%. Certainly the 15.3% at thi. point in ti=e is reasonable. Applying the facts in this proceeding to the tests se: for:h by . the Supreme Court, it is clear that the Company qualifies for emergency , e 0 [lassistance. As in Petition of Public Service, (1951) infra Public Service l! Company is again f aced with an inability to sell co==en s:ock, 95 ::.H. 551. j
, As in 1951, Public Service Company must, assuming the divesture .
I 1 is not completed in 1980, raise extraordinary amounts of addi:ional capital. i ' ti l
,: This factor was another one relied upon by the Supre e Cour: in de:er=ining l l n - . l an emergency existed in 1951. 97 N.H. at page 551. Finally, again as in - !
I l 1951 a loan is coming due that must be renewed or ex: ended :o pcy fer pas: ' il t i construction and to pay for further expansion of services. t i Ane evidence of LUCC witness i'illia son alsc indicates that at
,I t .. leas: some form-of permanent ra:e relief is necessary. i~hile Professor I i
l .' -
.lL Williamson did not address his belief as to the emergency si:ua:ien and ' ;. what relief if any was needed. His reco==endation of a 1.2.7 to o.2% ;
y permanent increase does not differ markedly fro: the acticn the Cc=nission , l takes today.
.i ,
i, i I.
] The testimony of Mr. Harrison toge:her with our own extensive
. I a s inves:igation in:o what is occuring in other jurisdic:icns, lesds us te % conclude tha: ?S::H has made every at:empt to implement :he dives:ure in L, - }themostexpeditiousfashionpossible. If they had no: been held up by l<
j people such as :he Massachusetts interveners there is a s:ren; liklihood it
'l that the action taken today migh: not have been necessary.
Upon a review of all the evidence in this proceeding 1: is clear l I I
' that PSNH has sustained its heavy burden and that our ac: ion conforms to the !
tests set forth by the New Hampshire Supreme Court. Obviously, :nis review cannot address all the concerns raised by each party :o the proceeding. h,However,thefullinvestigationinsituationssuchastheseisleft to the
,i ll hearings on the permanent increase. The $11,970,00 revenue request is approved.
D. Bond. The Commission pursuant to RSA 378:30 will require a bond to be s posted. n 1 IV. Allegatiens Concerning CWIP and RSA 378:30a p
,e Parties to the proceeding have set forth the proposi: ion that the I.
l Company'srequest is nothing more than CWIP by another name. In addition, l': some of these parties contend that RSA 378:30a precludes any mention of any il,
, project under construction. Because these parties have persis:ed wi:h these l 1 !! positions, the Commission finds it necessary to provide the follcwing: l h I If RSA 378:30-a was not in exis:ence, the Company would be entitled i i
i to a rate base nearly double the rate base submitted in this proceeding.
, l' O Assuming the same 14% return on equity al' lowed in DR 77-49 the Ccmpany would h be entitled to approximately S83,706,267 of additional revenue this year. l H : 'a This compares to the approximate 511,970,000 granted by this_opinien ar.d l 1. ,j the approximately $18,500,000 asked in the permanent rate increase request.
is
'l
e . . l
' l. . 9 l
j Clearly neither this Commission nor ?SNH is sidestepping :he effec: cf I i i RSA 378:30-a. I i
' i i
The formula used by the Cct=issien in DR 79-107 will again be ' ll cited as an attempt to explain rate =aking. 11 l' t i! R = E + (V-d ) r li i
., R = Overall revenues required 1 f i
E = Expenses - i i V = Rate Base d = Deprecia:1on ! d' ' r = Overall return .,.
'l :
1 O Under either the CWI? or no CWI? scenario, expenses and depreciation . et can be assumed to be treated in the sa:e fashicn. Consequen:ly, the differences are rate base and return. Obviously, many of the concerns of the 15.3% at this early stage of the proceeding would not be ignored in a similar proceeding! I without RSA 378:30 (a). The differences, if any, on return on equity are the ! I l proper subject for experts. Debt costs and preferred stock costs that have
- E
(( been the subject of hearings by this Cot =ission would not be addressed by a the caliber of witnesses such as Harrison and Williamson, since :here portions of the rate of return are rarely, if ever, in dispute. i
, This leaves a rate base under CW P based ra:es on a New F.anpshire-jurisdictional basis of S648,522,763 as opposed to the recues:ed non-CTI? '
rate base (on a jurisdictional basis) of $325,722,740. l i
;i e , !i
- As to the suggestion that RSA 378:30-a is designed to eleninate I i
'iI consideration of construction from all elenen:s of rate aking, ie.' expenses, li y return, and rate base is untenable.
The bill reads as follows: l l i: l! i 1 I
.s .
.\ . .l 1. Costs of Construe:icn Werk In Proeress I:.:1uded I' From P. ate Ease. Amend RSA 375 by inser:ing af:c sec:1:- 10 l the following new section:
t
- 37S
- 30-a Public t*tility Rate Base: Exclusiens. Public
,; utility rates or charges shall not in any =anner 'o e based en ! the cos: of cons:ruction work in pregress. At no :ime shall 'l' any rates or charges be based upon any cos:s associated w1:h ', construction work if said construction work is no: cc ple:ed. , All costs of cons:ruction work in progress, including, but ! not lini'ted to, any costs associated wi:h constructing, cwning, ), maintaining or financing construe: ion work in progress, shall li not be included in a utility's rate base nor be allowed as an h
l' expense for rate making purposes until, and not before, said construction project is actually providing service to consumers. k:: 2. Effective Date. This act shall :ake effect upon its
- passage. (Emphasis supplied).
< l -
ti ;
.Ii ..
The statute as well as the tic 14 of the statute clearly indicates
, that the legislature was intending to exclude CWIP from rate base.
l l
.e i. , ll V. Commensurate Jurisdiction Returns and Divesture .
i d g The Commission urges the Company to proceed in a reasonably . i; - 1-
, i expeditious manner to seek equality of rates from customers in other i !
jurisdictions serviced by the Company and at the same time to continue ~to
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I strive toward a successful conclusion of the planned divesture. i l 1 l .
- L
; i 4l . !o.i i
il t, e 5
.l' .I j I
I :l. l , s t
'l l1 il :) !- 11 8 l l j .' . I l \
I
l . . .
.. .i p 11 l ,; I 0: Emercencv Measures - PSNH . i I CA? AND LUCC are concerned tha: if censumers are paying higher ;
I, t i. rates because of an emergency resul:ing from lack of cash ficw then 1: is si i. i { only fair and reasonable to require si=ilar sacrifices by the u:ili:y and il i; its s:ockholders. Both ask for a cur: ailment in expenses and CAP has t i particular concerns about a possible dividend increase. i i
'i Both of these parties want the Cc missien :o evalua:e the expenses !
p"
<j of the Company and it is suggested that the Commission impose ei:her a fl.-
i i s Il I percentage reduction to expenses ot in the alternative disallow cer:ain ji expenditures such as the expenditure associated with the Electric Power I Research Ins!'tute. g The questions raised by CAP and LUCC relate to the methods and j 0
'I practices of the utility and its management. These are legit = ate inquires il .
[ that must be considered before reaching a decision in the permanent rate i'
'; request. However, the Supreme Court has clearly indicated : hat "energency
- 1 il. relief does not depend upon the answers to these ques: ions but upon the I -
i l; needs of the company..." New England Telechone and Teleerach _C_o.. v. State i i 95 N.H. 58, 62 (1948). !. t j b'hile there is no statutoryorcaselawwhichrequiresalimitationj l .
![ on expense, the question of increased dividends may well have been addressed I l' !' .' in part by the New Hampshire Supreme Court in the New England Telechene and ;
i 3 t _C_o_.decision. In that decision, the Court found that a proper 9,I Telegraoh l 0 return for common equity was required to be found before es:ablishing i 1 I
. ll .[ permanent rates. The court then stated the following: l i
li. I, "Until.such permanent ra:es can be established, ll< I l 0 stockholders must expec: to share the burden lI Ii i f of abnormal costs without transferring the whole-to the public under the guise of emergency relief." i
. 95 N.H. at p. 63. ! ,b ;j 1
d
+ ii !! i
{.., y However, the Commission agrees with Mr. Harrisca :ha: :he
- i, Commission' lacks the authority to dicta:e the dividend pclicy of this l Company or any other cc pany (Trans:ript t-tS).
, ~he Cc:pany and 1:s , investmen:
t cankers must decide what is necessary fcr :he ecs.en and pre- [ ferred stock of the company to be at:ractive :o investors. y Rate Design . b y il Because of the expedited nature of bo:h temporary and emergency 5 proceedings, rates must be established wi:hout in depth allocaticas of ' 4 ; costs. g The allocations chosen by the Commission in these types of pro- - i
- ceedings do not necessarily control when fixing permanent rates. New Eng-i I .l land Telephone and_ Telegraph Co. v. State 55 N.H. 515 68 A. (1949). 2d lit I
I. I i.
; Consequently, parties to the proceeding-have the right to challenge the \, .! cost allocations made by the Commissi$n tin; hearings toon the be held !j permanent rate request. i A '
q, ; f The Commission,in adopting the increased race level sough: by *
.!theCompanyisfacedwithsubstantialporblemsofincreasin2com-l ,lexity.
i Yesterday's solutions are not always applicable where (1) a l i
- l. unit is being bulit with a cost many times the size of the Company's it i I
'! existing investment. (2) the fuel type of the new plant is = ore desirable >d because of inflationary and national l interest problems associated with the fuel type that ,
y , is presently being ised, and (3) c'enserva:1cn is new a I
,' national policy. ' s ,' !
e
,, s .
The Commission has a::empted to implement a three prenged approach 1 to reducing the oil dependence of utilities within our jurisdic:icn , Firs:,
,ilI the Commission endorse 3 and continues to endorse the cons:1cn rue:of the '
h
; nuclear facility at Seabrook.
i Second, the Ccamission has ini:iated an
-} investigation into the feasibility of ' converting P
oil fired stations to l I 1 % l I i
' l l $c; I !
I L i
+ i e e si coal. Third, the Commission has, through its decisien en ra:es fer sna"1 . . 3 energy producers, attemp:ed to increase substan:ially :he at un: of 'ydro- ,
*i power in the State and possibly cake it more likely that other alternate '
M, e I t I energy forms will also increase. In addition, :he Consission has launched ! i i an investigation into whether or not the Com:issicn should require greater I
, amounts of hydro-power generation on the Connec:1 cut River to be used within l
i, j the State. j Today, the Commission adds a fourth. prong; namely, to make :he rate
.I U
I structure more conservation oriented at leas: until either the other fuel t li h types begin to have a greater percentage of.,PSNH's mix or until :he oil crisis q .. lessens in impact.
't -
ij - At the present time any increased usage by any consumer in this S:a:e i:
'.. will be satisfied by a greater use of. oil fired genera:ing stations. This l' ' will be especially true if the NRC carries through on its order to begin .' closing some of New England's nuclear plants for safety checks and for h
safety related equipment additions. Consequently, the ini:ial rate s:ructure i
" submitted by the Company will not be accepted for purposes of this proceeding.
Instead, the Commission will allow the following increases to the following customer classes and service charges. It should be noted that l Il the full S11,970,591 is being allowed but because of the $1.S2 fuel adjustment ' charge as opposed to the test year average fuel adjus: en: charge of $1.33 d the overall percentage is lower. (4.9S%) . The Commission will spread the n emergency surcharge as shown on the a:: ached rsport of proposed ra:e changes.
'. i-d The proposed' change is to be placed on a per kilowat: hour basis ' each l-The Company will use the at:unt of kilowa:: hours ]customerclassofservice.
o , 4 for each class of service that it used in the calculations it submit:ed :o
- p t il ;! the Commission. The Commission will make two' deviations from this overall ', ,y I l ijrule. The controled water heating subclass for the general service rate G j 12 U- ;
t ' i l
i.~l ; i'.
, y will not have any increase appli2d to 1:s kilowa:: hour usecge. This les:
i Ifrevenueistobereceveredor.aserkilowc:: hour basis fro e:her rc:a C I l- l
,{ customers. The second devia:ica is that no in:: case will be applied :o :he l' l j high-pressure sodium outdoor ligh:s. Agci., this s 'l revenue.lcss is to i i ; be recovered from other !" customers en a per kilowat: hour basis. Our order l
jjwillissueaccordingly, to be affactive as of Dece:ber 28, 1979. i li i. j'i:;r,:: ' r':: 1 4 . !
;; Concurring: 'l I. December 21, 1979 ,
i o si
- i. Francis J. Riordan , Cor;..issioner hMalcolmJ.Stevenson , Coraissioner a
1.: l. l 'I i I 4,! r }. l' 1 5: he * , 11 l I , 1 I t I
~
l_ p) i. I et t l 4 J l
, . In e
l Se
+ , $l s ! I ..I.
Il ll1 1 l
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l
I i
., , , . . . , . * . l 1
- f. ........,....?.
; s. . . ;,, %: ' . . :. . . .=. . : ?. .
C. ... % . .. 6: s............ C:n::rd k
...=~.....-: . ... c: ...: . . _ t. .....-..e. -
("'"II T. t Public Service C::.:a .v of tiev Ma=: shire ,,4 I --_Im Supple.en: :;o . 7
'L*3I3"? UO. 22. _ ;,,, . , IA I 3ased on Actual Sales :o ;ev Hr.=pshire Cus:: ers For.the Tveive Men:hs Peri:d Inding .May 31, 1979 " , 9 ate er Effe: cf Ave.ra. e l Is-i=2 ed A..ual reve..ue - , Class of ! h :ere:i C..a u e h:pesed ne=ber ef) hesen: he; sed t 8 , Serrice C' .a = e
- C.:s te=er d Rat es ** =a es I 1
k cur- ~ 6 Residential Service Increase 238,225
, Race D e $105,171,503 S108,521,160 $3,349,657 3.18 i General Service Increase 30,379 $40,474,739 S41,573,712 S1,098,973 !
Race C 2.71, Pri=ary General Service Increase 1,196
$46*420*020 S49,570,525 Ra te CV*** .
53,150,505 6.78: Trans=is s tori . General $41,298,582 S44,511.484 $3,212,902 7.7 Increase 79
. Service l Race TR**
e _. - . _ i j Outdoor 8 3 Inc rease 13,814tT $6,298,297 t $6,562,001 S263,704 4.18 Race M1. l ' l
'{ l ! Service '
- Charges * 'Inc case S447,425
,I , Ra:es D & C ,
51,3'42,275 5894,350 200.0.:
- i. j TCTI.'dS Increase 270,05L
, $240,110,566 S252,0B0,872 511,970,591 4.95 ]
- D.cv i: creases, decreases and ne cha:ges is ese: ra e ;r.ssifi: site: separs ely,
. c v'ere a;;11:able.
(See reverse side for e other footnotes.) ...., __. ...... e. a ' l.. - , . . . .
a .
" / , PUBLIC SERVICC Cc:!? tiny OT lGDT 1W:PS111RE I '. * ;! . 00..
E L E V E *< T 11 SUPPLEME!!TAL 0RDER t' O . 1 *J ,962
.. Io consideration of -. report issued December 21, 1979, sinich iu 3 *: =ade a part hereof; it is OTu)ERED, that the Public Service Gsapany of New na=pshire be, and - hereby is, allowed emergency rate relief in the amount of Sll,970,59), to becone effective with all billings issued on or af ter Dece ber 2G,1979 and to continue until permanent rates are ordered under this docket; and it is FURTHER ORDERED, that said ravenue be gained by increasing service charges and applying a surcharge to each kilowatt-hour of energy sold, with the er.ceptions noted within the report; and it is
- FUETiis.R OT.DERED, that surcharges for each class be :alculated accordic; to the Iteport of Proposed Race Change attached to the afore=entione.d Ker,c r t; and it is FURTHER OED.= ED. that the resulting rates be docuranted by filing Supplement No. 7 to the Enblic Service Cc:gany of ;;ev Hamps;. ire's tariff 2;F.?UC :;o. 22 - E1cetricity: and it is TURTHER ORDERC, that public ner. ice be given accordini; t.o rarif f Filir.; Rule 27. said notice to su==arice Supplement lio. 7.
By order of the Public Utilities Concission of New Ha=sshire, thf a
' . -- -twenty-sixth day of December, 1979. //-f Vincent J. /'L .:.*-s -.... s Zacopino /'
Executive Dire.ctor and Secretary
o 4 "
. 6(e) I l
STATE "T SEW HAMPSHIRE i e Public Utilities Commission g Public Service Cocpany of New Hampshire )
)
Docket No. DF 79-100-6205 Seabrook Transfer
) ) '
i DISPOSITION OF A MOTION (filed 11/27/79) S_131E S_ E.P,P L E_ M E N T A L 0,R D,E R N 0,. 13,970 On November 27, 1979, the Public Service Company of New Hampshire , / filed a Motion for further orders. To rupport their request the Company relies on testimonj presented at the hearing held on October 18, 1979 and November 13, 1979, where the Company witnesses detailed certain changes in circumstances that have occurred since the Order the Commission issued August 10, 1979. The changed circumstances relate to the March offering of ownership , interest in its Seabrook Project, specifically the reduction in participation l of Passachusetts Municipal Wholesale Electric Company (MMWEC) and the with- l drawal from participation of Central Vernon Public Service Corporation, and Green Mountain Power Corporation. The Company proposes an adjustment of Seabrook'0wnership interests in accordance with the March offering by reducing its ownership interests and increasing the owner ~ ship interests of the following companies.
~
Additionally, the Company reported the affects of its October ; i offering and the acceptance thereof.
- The Company is presently requesting an adjustment in the ownership i
interest of Seabrook by reducing its ownership interests and increasing the
~
l ownership interests of the following Companies in the indicated percentages. 1 i l
j', - Bangor-Hydro-Electric Company
; 1.80142%
l' d Central Maine Power Company 1.0% I;, p Twn of Hudson, Massachusetts Light & Power Department 0.01957% Massachusetts Municipal Wholesale 3 Electric Company 6.00091% i: 1 Montaup Electric Company 1.0%
,i . ; 'New Bedford Gas & Edison Light g Company 2.1739% i ll Taunton, Massachusetts Municipal Lighting Department 0.34445%
lj i, Fitchburg Gas & Electric Light
- ll Company 0.2608% l
'! New Hampshire Electric Co-Operative, i Inc. 2.17391: .
l i; 14.76496" I
!}
The LUCC objects to the Motion alleging (1) it is not in the public [ good, and (2) the need for power must be examined before any order of ' divesture is approved. Additional objections were filed and received I alleging (3) no decision has been made as to who will bear the costs of AFUDC of the transfered interest and (4) without such a decision a transfer cannot be for the public good.
' .[
ii Upon consideration of the Motion and the objection received thereto, the Commission finds that LUCC's objection No. I and 4 are substantially the same and will consider them as one objection. l' The Commission rejects LUCC's objections No. I and 4 and recognizes i
'I ]
h that the financial condition of the Company is such that partial divesture l-of its ownership interest will be in furtherance of the public good. _ j
}
- l. As to Objection No. 2 and 3, need for the power and treatment of tf
'. AFDUC, the Commission's findings in the Report on Motion for Rehearing i' / issued September 10, 1979 is reaffirmed. ;
l
?>
i!-
. .- . l ., j i
Based on the foregoin;, the Motion for Further Orders is granted, I I and our order will issue approving-the reduction in ownership interest of
- Public Service Company of New Hampshire and the increase of ownership interest set forth infra.
By order of the Public Utilities Commission of New Hampshire this ,
~'
thirty-first day of December,1979. i i
,' M '
I Vincent J /Iacopino Executive Director and Secretary l. e I I O s 8 I l 6 e
- s- ,
APPOINTMENT OF AGENT AND SIGNATURE OF APPLICANT The undersigned NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC.
. hereby joins in the filing of this Application and in connec-I tion therewith hereby appoints Public Service Company of New Hampshire as its agent for the purpose of:
(a) signing, executing, acknowledging and filing with the Nuclear Regulatory Commission any and all applications, documents and information (including amendments thereto) which are now or may become , necessary of which Public Service Company of New Hampshire deems necessary or desirable, in con-nection with the construction and/or operation of Seabrook Station (including but not limited to, the construction permits, operating licenses and other licenses required for the Station by the Act); and (b) acting for and on its behalf in any hearing, appeal or other proceeding with respect to said construction permits, operating licenses and other licenses, or the taking of action necessary or incidental thereto or any action deemed necessary or desirable by Public Service Company of New Hampshire in connection with the foregoing; and (c) acting for and on its behalf in connection with the obtaining of any other federal, state or local
*. =
permit, license or approval necessary for or incidental to the construction and/or operation
. of the Station.
NEW HAMPSHIRE ELECTRIC COOPERATIVE, INC. W By chn Pillsbury Its Mananer VERIFICATION State of New Hampshire March 11 , 1980 County of crafton Then personally appeared before me John Pillsbury who being duly sworn did state he is Manager of New Hampshire Electric Cooperative, Inc., one of the Applicants herein, , that he has read the foregoing information relating to such Appli-cant contained in the Application, and that the statements contained therein relating to such Applicant are true to the best of his knowledge and telief, and further that he is duly authorized to appoint Public Service Company of New Hamps e agent a - cribed above. g
. _L ,
Nota W Pu My Commission expires / l l l I I CERTIFICATE OF SERVICE I, John A. Ricsher, one of the attorneys for the applicants herein, hereby certify that on March 19, 1980 I made service of the within Supplement No. 4 to Amendment 40 by mailing copies thereof, postage prepaid, first class, to: Alan S. Rosenthal, Chairman E. Tupper Kinder, Esquire Atomic Safety and Licensing Assistant Attorney General Appeal Board Environmental Protection Division U.S. Nuclear Regulatory Commission Office of the Attorney General Washington, D.C. 20555 208 State House Annex Concord, New Hampshire 03301 Dr. John H. Buck Atomic Safety and Licensing Karin P. Sheldon, Esquire Appeal Board Sheldon, Harmon, Roisman & Weiss
- U.S. Nuclear Regulatory Commission Suite 506 Washington, D.C. 20555 1725 I Street, N.W.
Washington, D.C. 20006 Michael C. Farrar, Esquire Atomic Safety and Licensing Dr. Ernest O. Salo Appeal Board Professor of Fisheries Research U.S. Nuclear Regulatory Commission Institute Washington, D.C. 20555 College of Fisheries University of Washington Ivan W. Smith, Esquire Seattle, Washington 98195 Atomic Safety and Licensing g' Board Panel Dr. Kenneth A. McCollum
- U.S. Nuclear Regulatory Commission 1107 West Knapp Street Washington, D.C. 20555 Stillwater, Oklahoma 74074 Joseph F. Tubridy, Esquire Robert A. Backus, Esquire 4100 Cathedral Avenue, N.W. O'Neill Backus Spielman Washington, D.C. 20016 116 Lowell Street Manchester, New Hampshire 03105 Dr. Marvin M. Mann Office of the Attorney General Atomic Safety and Licensing Board Panel One Ashburton Place U.S. Nuclear Regulatory Commission Boston, Massachusetts 02108 Washington, D.C. 20555 Edwin J. Reece, Esquire Office of the Executive Legal Director U.S. Nuclear Regulatory Commission Washington, D.C. 20555 / John A. Ritsher John A. Ritsher 6}}