ML19318D172

Annual Financial Rept 1979

ML19318D172
Person / Time
Site:	Seabrook
Issue date:	03/28/1980
From:	NEW BEDFORD GAS & EDISON LIGHT CO.
To:
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M h SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 0F THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1979 Commission file number 2-7749 NEW BEDFORD GAS AND EDISON LIGHT COMPANY (Exact name of registrant as specified in its charter)

Massachusetts 04-16590/0 (State or other jurisdiction of (1.R.S. Employer incorporation or organization) Identification No.)

675 Massachusetts Avenue, Cambridge, Massachusetts 02139 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code 617 - 864 - 3100 Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on Title of each class which registered None None Securities registered pursuant to Section 12(g) of the Act:

None (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes X No Shares of common stock outstanding at December 31, 1979 868,972 8007 0 8 0 ()3f}s J

a NEW BEDFORD GAS'AND EDISON LIGHT COMPANY n.

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FORM 10-K- DECEMBER 31, 1979 PART I.

t Item 1. Business General

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y. .The Company is engaged _in the business of generation, transmission,

. distribution:and' sale of electricity at retail in 40 communities located in southeastern Massachusetts, including Cape Cod and the island of Martha's Vineyard, having an approximate year-round-population of 356,000 and in addition, large numbers -of summer residents. The Company is also engaged in the distribution and sale-of natural gas in 11 of these communities.

The' Company, which was organized on April 4, 1850 pursuant to a special act of the-legislature of the Commonwealth of Massachusetts, operates under the jurisdiction of the Massachusetts Department of Public Utilities ("DPU"),

which. regulates reta'il rates, accounting, issuance of securities and other matters. Since its organization, the Company has from time to time acquired the property and franchises of or merged with various other gas or electric companies. Except for a small minority interest (less than 1%), the Company is a wholly-owned subsidiary of New England Gas and Electric Association

-(" Association").

The Company,'by virtue of its' charter which is unlimited in time, distributes electricity'and natural gas without direct competition in kind from any privately or municipally-owned utilities. Alternative sources of energy are available to customers within'the service territory, but competition from these sources has not been a significant factor- affecting the Company.

" Business-Segment Information The Company provides electric and gas service primarily to retail customers in service . territories -located in southeastern Massachusetts. Amounts reported in the'following. table are on an industry segment basis and include intersegment transactions which' consist of purchases and sales of gas at prices approved by the regulatory agency having jurisdiction over these activities.

Operating income of the industry segments includes income from transactions with affiliates and.is~ exclusive of interest expense and income taxes.

Identifiable-assets. include the Company's 2 1/2% investment in a nuclear

. electric power company-(see Note 1).

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NEW BEDFORD GAS AND EDISON-LIGHT COMPANY

-FORM 10-K DECEMBER 31, 1979 Item'I. Business (Continued)

Business Segment Information (Continued) 1979 1978 1977- 1976 1975 (Dollars in Thousands)

Revenues:

Electric.  :$138 484 $119 567 $120 226 $108 280 $100.477 Gas 25 456 22 117 23 960 22 272 19 150 163 940 141 684 144 186 130 552 119 627 Less - Intersegment sales 1 163 -

675- 538 112 Total Revenues $_162 777 $141 684 1143_531 $130 014 1119 515 Operating Income Before Income Taxes:

Electric $ 13 419 $ 14 399 $ 15 591 Gas

$ 15.630 $ 14 050 1 046 461 670 1 077 975 Total Operating Income $ 14 465 $ 14 SnD $_16_261 $_16 707 $_15_025 Identifiable Assets:

Electric $177 846 $168 383 $168 622 $162 084 $163 013 Gas 26 447 24 641 23 620 24 486 23 601 204 293 193 024 192 242 186 570 186 614 Investment in nuclear electric power company 511 512 509 508 506 Total Assets $204 804 $193 536 $122_251 $18LQIH $18L12Q The inc eases and decreases in electric and gas revenues from the prior periods were the result of numerous factors such as changes in sales volume, fuel costs, and product or customer mix. A discussion of the relevant changes in operating'results is included in Management's Discussion and Analysis of the Summary of Operations continued,in Item 2 of this report.

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NEW BEDFORD CAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 1. Business (Continued)

Electric Power Supply The Company owns generating facilities with a total capacity of 75 MW, including 14 MW principally used for emergency and peaking purposes. However, the Company relies primarily on purchased power to meet its electric energy requirements.

Power purchases for the Company and the other electric distribution subsidiary of the Association are arranged on a system basis and power is made available to the subsidiaries in accordance with their requirements. These arrangements include purchases of power from Canal Electric Company (" Canal"),

an affiliated company. The system purchases one-fourth (143 MW) of the capacity of Canal Unit No. 1, and Canal's 292 MW share of capacity of Canal Unit No. 2 under long-term contracts. In addition, the Company has a 74 MW entitlement from a nuclear unit in Plymouth, Massachusetts (Pilgrim No. 1) under a life-of-the unit contract with Boston Edison Company, a 2 1/2% ownership interest in a nuclear unit and a 1.4% joint ownership interest in an oil-fired unit, with entitlements of 4.5 MW and 8.8 MW, respectively.

These existing long-term arrangements, supplemented by purchases frcm neighboring non-af filiated companies under short-term contracts, are expected to provide adequate peak load plus reserve requirements through 1983.

Gas Supply The Company's natural gas is supplied under long-term contracts with Algonquin Gas Transmission Company (" Algonquin"), whose parent is 34.5% owned by the Association. The Company's contract for the purchase of natural gas, which expires November 1, 1989, provides a substantial portion of the Company's total requirements , however, the Company uses supplemental sources of gas to meet its requirements during the heating season.

The Company had been subject to periodic curtailments of its contractual supplies during the 1970's but these curtailments declined during the 1978 heating season and for 1979 there were no curtailments. As a result of the improved gas supply picture, no curtailments are anticipated for the contract year ending October 31, 1980. In response to the earlier curtailments in the supply of natural gas, the Company had arranged for storage of pipeline gas and has entered into contracts for supplemental sources of gas.

The principal storage is available through operation of a liquefied natural gas (LNG) facility by Hopkinton LNG Corp. ("Hopkinton") which is 50%

owned by the Association. Hopkinton has an aggregate storage capacity equivalent to 3,500,000 MCF of natural gas including satellite storage of 500,000 MCF at Acushnet, Massachusetts. Natural gas obtained from Commonwealth Gas Company

(" Commonwealth"), an affiliated company, during the liquefaction season,

s NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 1. Business (Continued)

Gas Supply (Continued)

April 5 to November 15 each year, is liquefied by Hopkinton and transported by truck for storage in Acushnet. When gas is needed in the winter months, the LNG is revaporized and placed in the distribution system of the Company.

Supplemental sources of gas supply currently consist of substitute natural gas (" SNG") purchased from Algonquin under a contract which extends through 1983 and propane available from system-owned facilities which are operated as necessary to satisfy peak-day requirements. Algonquin manufactures SNG at its plant in Freetown, Massachusetts using naphtha as feedstock.

Rates and Regulation During 1979, the Company initiated a general rate hearing before the DPU seeking an increase in retail ele <1ric and gas rates. Information regarding the amounts requested and granted are contained in Note 9 of Notes to Financial Statements. Prior to the amount granted in 1980, Gie most recent iacrease in authorized rates for the Company totaled $9,422,000 and was received during 1975.

The Company has adopted power cost charge clauses which provide for the separate computation and billing to customers of costs of purchased power and fuel used in electric generation. Such clauses require the quarterly computation and submission to the DPU for approval of a power cost charge decimal which is computed based upon forecasts of costs and unit sales. To the extent that recoveries under the clause do not match actual costs, an appropriate adjustment is reflected in the next ensuing neriod's computation.

The Cotgany also recovers on a current basis the total cost of all forms of gas used to supply customers through an overall cost of gas clause.

Effective December 1, 1978, the Company made available Optional Time-of-Use rates to their residential, commercial and industrial customers. This is one of the first in a series of steps ordered by the DPU and directed towards the implementation of peak load pricing and other load management techniques.

Under a peak load pricing system, customers would pay more for power used when the demand for electricity is high and less when it is low. Peak load pricing is intended to make the demands on existing generating equipment more uniform and to reduce or defe* the need to construct new generating facilities to meet future peak demands. A gradual phasing-in of peak load pricing is anticipated with no significant effect on the system's income.

Environmental Matters The Company's electric generating facilities are subject to Federal, State and local environmental quality control regulations. Compliance with

NEW BEDFORD GAS AND EDISON LIGHT COMPAIN FORM 10-K ' DECEMBER 31, 1979 Item 1. Business (Continued)

{:nviro,nmental Matters'(Continued) these regulations has not as yet had a direct material effect on capital expenditures or earnings of the Company, but has required the Company to use more expensive low sulphur fuels in electric generating.facitities. The Company's power' cost tariffs operate to recover the higher fuel costs.

Environmental control regulations also result indirectly in increases to the Company in .the cost of electric power purchased from others, which also are recovered through the power cost charge.

Employees ,

-The Company has approximately 1,094. employees, of whom 75% are represented

' by three separate collective bargaining uni .s. Existing collective bargaining agreements expire November 1, 1981. Employee relations have generally been satis fa cto ry.

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s NEW BEDFORD GAS AND EDISON LIGirl' COMPANY FORM 10-K DECEMBER 31, 1979 Item 2. Summary of Operations For the Years Ended December 31, 1979 1978 1977 1976 1975 (Dollars in Thousands)-

Electric operating revenues $138 484 $119 567 $120 226 $108 280 $100 477 Gas operating revenues 24 293 22 117 23 285 21 734 19 039 Other income (expense) 496 570 357 (120) (249)

Total 163 273 142 254 143 868 129 894 119 267 Costs and expenses:

Electricity purchased for resale and fuel 80 394 63 668 64 844 55 272 52 173 Cost of gas sold 15 287 13 355 14 998 13 655 11 783 Property taxes 7 632 8 808 9 415 9 055 8 250 Interest 4 840 4 837 4 843 5 437 5 973 Depreciation 7 477 7 052 6 684 6 308 5 118

_ Income taxes 3 543 4 453 5 436 5 330 4 197 All other 37 522 33 941 31 309 29 017 27 169 Total 156 695 136 114 137 529 124 074 114 663 Net Income $ 6 578 $__6_140 $ 6 339 $ 5 820 $ 4 604 Cash dividends declared on common stock 99.98% owned by New England Gas and Electric Association (Parent company) $ 5 995 $ 6 344 $ 5 648 $ 5 778 $ 4 335

-Number of ' common shares outstanding 868 972 Management's Discussion and Analysis of the Summary of Operations The following explanation of the reasons for significant changes in

. operating revenues, expenses and net income during the five years ended December 31, 1979 is~ presented to' facilitate an understanding of the summary of operatinnr which appears above. The summary of operations should also be

. read in conjunction with the financial statements and notes included elsewhere in this report.

During the five-year period covered by the summary, the DPU has recognized the necessity of permitting utilities to recover from customers th2 total cost of fuel. used in electric generation, purchased power and the cost of gas sold through operation of power cost charges and cost of gas adjustment clauses contained in the Company's approved tariffs. This permits upward or downward changes in fuel prices to be reflected in revenue without any delay and with no.. impact on income. Because of this procedure and the significance of these

-cost components of revenue, changes in revenue should be considered together with changes in these costs.

o NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 2. Summary of Operations (Continued)

-Electric Revenue, Fuel and Purchased Power Expense Increased fuel and purchased power costs during 1979 have contributed significantly to the 15.8% increase in revenue and changes in these costs has also affected the results of the other years. A 5.2% increase in unit sales

, resulting in part from the addition of 4,900 new customers also. contributed to the increase in revenue. However, fuel expense and electricity purchased for resale are the moat significant operating cost, representing more than half of each dollar of electric revenue, as shown by the table below:

Percent of Electric Revenue 1979 1978 1977 1976 1975 Fuel and purchased power component of revenue 58.1 53.2 53.9 51.1 51.9 Base rate component of revenue 41.9 46.8 46.1 48.9 48.1 Total electric revenue 100.0 100.0 100.0 100.0 100.0

Electric revenues collected through base rates are intended to reimburse the Company for all costs of operation other than fuel and purchased power expense and provide a fair return on the capital invested in the business.

Unit sales of electricity are shown in the tables following.this analysis.

s On a percentage basis, changes in the level of unit sales and the related j- revenues are as follows:

j- Percent Increase (Decrease) Over Prior Year i 1979 1978 1977 1976 1975 j'

Unit Sales 5.2 12.8 3.1 6.2 2.1 Total revenue 15.8 (.5) 11.0 7.8 5.9 y Base rate component of a venue 3.9 .9 4.5 9.7 20.3 Increases in unit sales during the periods are primarily the result of additional customers. However, in 1978 the company sold 209 million KWH at 3 wholesale to two electric companies under short-term contracts.

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-l _ During 1979 purchased power costs were significantly impacted by rising

,j fuel oil prices. Increased generation by the Company, which was similarly

affected by rising fuel prices, contributed to the increased energy costs.

l q~ The decrease in revenue in 1978 is a result of the reduction in purchased

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power costs, attributable to reduced fuel costs incurred by Canal Electric, the primary source of'the Company's purchased power. This reduction was due to changing from a 1% sulphur fuel to a lower priced 2.2% sulphur fuel. In addition,' greater availability of the lower priced nuclear energy also contributed to reduced power costs.

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LNEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM-10-K' DECEMBER 31, 1979 Item 2. Summary' of Operations (Continued)

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Electric Revenue,' Fuel and Purchased Power Expense (Continued)

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=The=following table illustrates these unit costs:

1979 1978 1977 1976 1975 Per KWH Purchased Power $.030 $.024 $.028 $.025 $.025

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Fue1 used in electric production .036 .030 .029 .022 .028 Gas Revenue and Cost of Gas Sold The cost of gas has increased at nearly the same ratt as the cost cf fuel used i~' n electric production. Natural gas constitutes the Company's principal

. source of gas supply, and although its price has been regulated throughout the five-year period, the cost of storage and supplemental gas has added substantially to the overall cost of gas during this period. In recent. years curtailments of natural gas had required that the Company arrange for increasing volumes of supplemental gas supplies in meeting customer demand. However, the amount of curtailments was reduced.in 1978 and there.were no curtailments during 1979. There are no curtailments anticipated for 1980.

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The increase in gas revenues during 1979 is attributable to the increase in cost of gas sold.'. However, cost of gas has been reduced, during the past two yeart, by gas refunds from pipeline suppliers which have been passed along to firm gas customers'. Such refunds reduced the average cost of gas by $.36 and.$.28 per MCF during 1979 and 1978, rsspectively. Cost of gas sold for the five year period is indicated in the following table:

1979 1978 1977 1976 1975 Cost of gas-sold per MCF $2.36 $1.98 $2.42 $2.29 $2.01 The. total' cost of ga. represents more than 60% of each revenue dollar, as shown in the following table:

Percent of Gas Revenue 1979 1978 1977 1976 1975 Cost of gas component of revenue- 62.9 60.4 64.4 62.8 61.9

-Base rate component of; revenue 37.1 39.6 35.6 37.2 38.1 Total Gas Revenue- 1RQ Q' 100.0 100.0 100.0 100.0 Unit sales of natural gas over the years have generally fluctuated in response to weather conditions. In 1979,'despite a 2.0% increase in number of rustocers,' unit sales decreased by 4.3% due, to warmer then' normal weather.

O NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 2. HSummary of Operations (Continued)

Other Expense In general, operating expenses exclusive of fuel and purchased power cost and the cost of gas sold have increased throughout the periods as a result of inflationary pressures en wage rates and material costs, and the expansion of facilities and services to meet the increased demands of customers. The

- magnitude of these increases is shown below:

Percent Increase (Decrease) Over Prior Year 1979 1978 1977 1976 1975 Property taxes (13.4) (6.4) 4.0 9.8 3.9 Interest -

(.1) (10.9) (9.0) 7.4 Depreciation 6.0 5.5 6.0 23.2 11.2 All other 10.6 Ex4 7.9 6.8 16.7 Property tax expense has increased as a result of property additions and the general increase in property tax rates in the Company's service areas.

However, in 1979 and 1978 reductions in assessed valuations and tax reductions in rates for certain cities and towns served by the Company, contributed to lower property tax expense.

Interest on long-term debt has been reduced as a result of redemption of long-term debt through sinking fund purchases. Other interest charges have increased during 1979 as a result of interest accrued on contested Federal income tax deficiencies and during 1979 and 1978 because of interest owed customers on gas refunds. Interest on short-term borrowings increased in 1979 as a result of greater amounts borrowed and an increase in interest rates. An increase in the borrowed funds portion of the allowance for funds used reflects the increased construction activity and a higher rate.

Depreciation expense has increased primarily because of increases in plant in service.

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9 NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K' DECEMBER 31, 1979 Item 2. Sumn.s vy of Operations . (Continued)

Net Income The changes in net income result from changes in revenue ~ sad expenses explained above.

Electric and Gas Statistics Year Ended December 31, 1979 1978 1977 1976 1975 Energy Sales (MWH):

Residential 1 060 064 1 020 248 1 002 166 970 286 912 100 Commercial 584 682 562 763 551 209 545 994 543 311 Industrial 358 437 343 798 334 247 329 708 303 623 Sales for resale and other 475 880 430 035 202 690 180 945 149 254 Total 2 479 063 2 356 844 2 090 312 2 026 933 1 908 288 Customers at End of Period:

Residential-including seasonal (a) 198 755 194 152 187 547 182 413 180 694 Commercial 20 239 19 959 19 438 19 188 18 761 Industrial 344 359 376 369 370 Sales for resale and other 2 964 2 910 2 885 2 659 2 551 Total 222 302 217 380 210 246 204 629 202 376 Gas Sales (MCF - Thousands):

Residential 3 687 3 729 3 571 3 719 3 508 Commercial 1 008 1 074 952 941 807 Industrial 1 381 1 492 1 237 994 1 119 Other 396 467 428 316 424 Total __ 6 472 6 762 6 188 5 970 5 858 Customers at End of Period:

Residential 43 972 43 117 43 261 43 195 43 462 Commercial 3 112 3 045 3 001 3 002 3 004 Industrial 146 -142 147 119 116 Other 220 221 218 217 211 Tot 31 47 450 46 525 46 627 46 533 46 793' (a) Service is considered to be " Seasonal" when the kilowatt hours used in the billing months ending between June 1 and September 30 exceed the kilowatt hours used in the preceding eight months.

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER-31, 1979 Item 3. Properties The principal electric properties of the Company consist of a steam electric generating station with a net capability of 59,000 kilowatts, together with an integrated system of transmission and distribution lines and substations, an office building in the city of New Bedford and other structures such as garages and service buildings. In addition, the Company owns and operates, for standby and emergency purposes only, two diesel plants with a combined 4 capability of 14,000 kilowatts located on Martha's Vineyard.

The principal gas properties consist of distribution mains and facilities for the distribution of gas to the Company's customers and a propane gas plant used for peak-shaving.

y Item 4. Parents and Subsidiaries i

New England Gas and Electric Association at December 31, 1979, owned

! 868,829 shares or 99.98% of the 868,972 outstanding common shares of the Company. The remaining 143 common shares are held by one other shareholder.

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Item 5. Legal Proceedings l

None Item 6. Increases or Decreases in Outstanding Securities and Long-Term Debt None Item 7. Changes in the Rights of the Company's Security Holders and Changes in Assets Securing any of the Company's Registered Securities None Item 8. Defaults by the Company on its Senior Securities l

None Item 9. Number of Equity Security Holders

i. (1) Title of Class l Common Stock, $25 Par Value (2) Number of Record Holders at December 31, 1979 Two Item 10. _Results of Votes of Security Holders Not applicable i

.G NEW BEDFORD GAS AND EDISON LIGHT COMPOiY

. FORM 10-K- DECEMBER 31, '.979 Item 11. Indemnification of Directors and Officers In general, each officer and director of the Company is indemnified against all expenses reasonable incurred by him or imposed on him in connection with any proceeding in which he may be involved because he is an officer or director of the Company.

Item 12. Financial Statements, Exhibits filed, and Reports on Form 8-K (a) 1. Financial statements, as' indicated in the index contained herein, of the registrant together with the Report of Independent Public Accountants, are attached hereto.

, 2. Exhibits:

Filed herewith:

(1) Copy of condensed financial statements of Canal Electric Company for the period ended December 31, 1979.

Filed herein by reference:

(2) Copy of Tenth Amendment, dated October 11, 1979, and Eleventh Amendment, dated January 4,1980, to Agreement for Joint-Ownership, Construction and Operation of New Hampshire Nuclear Units, between New Bedford Gas and Edison Light Company, Public Service Company of New Hampshire and others.

Filed herein by reference:

-(3) Copy of Pension Plan for Employees of New Eng1trid Gas and Electric Association and Subsidiary Companies as Amended as of August 1, 1979, has been filed with the Commission as Exhibit (3) in the Annual Report on Form 10-K of the parent of the registrant, New England Gas and Electric Association (File No. 1-7316).

'(b) No reports on Form 8-K have been filed by the Company during the last quarter of the period covered by this report.

4 INDEX

'NEW BEDFORD GAS AND EDISON LICHT COMPANY

$ INDEX TO FINANCIAL STATENENTS AND SCHEDULES FINANCIAL STATEMENTS Report of Independent Pub 1'ic Accountants

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Balance Sheets at December'31, 1979 and 1978 Statements of Income for the years ended December 31, 1979 and 1978 Statements of Unappropriated Retained Earnings for the years ended December 31, 1979 and 1978 Statements of Sources of Funds Used for Construction for the years ended December 31, 1979.and 1978 Notes to Financial Statements SCHEDULES III Investments XII Reserves ,

SCHEDULES OMITTED All other schedules are not submitted because they are net applicable or not required or because the required information is included in the financial statements or notes thereto.

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i REPORT OF INDEPENDENT PUBLIC ACCOUNTAhTS

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To New Bedford Gas and Edison Light Company:

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We have examined the balance sheets of NEW BEDFORD GAS AND EDISON

LIGHT COMPANY (a Massachusetts corporation and wholly-owned subsidiary of New  :

England Gas and Electric Association) as of December 31, 1979 and 1978, and

) .th- related statements of income, unappropriated retained earnings and sources

! 'of funds used for construction Lfor_ the years then ended, and the supporting '

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-schedules listed in the accompanying index. Our examinations were made in

! -accordance with generally accepted auditing standards and, accordingly, . included =

such tests of the accounting records and such other auditing procedures as we considered necessary.in the circumstances.

In our opinion, the financial statements referred to above present fairly-the financial position'of New Bedford Gas and Edison Light Company as 4 of December 31, 1979 and 1978, and the results of its operations and its sources of funds used for construction for the years then ended, and the supporting schedules present fairly the information required to be set forth therein, all Lin conformity with generally accepted accounting principles applied on a consistent basis.

ARTHUR ANDERSEN.& CO.

Boston,' Massachusetts, February 11, 1980.

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' BALANCE SKEETS NEW EEDFORD GAS AND EDISON LIGHT COMPANY

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BALANCE SKESTS DECEMBER 31, 1979 AND 1978 ASSETS 1979 1978 (Dollars in Thousands).

PROPERTY, PLANT AND EQUIPMENT, at original cost (Note 7):

' Electric $185 S31 $178 261

, Gas 24 625 22 940 L 210 456 201 201 Less - Accumulated depreciation (Note 7) 59 067 53 583 151 389 147 618 Add - Construction work in progress _(Note 6) 21 835. 15 039 173 224 162 657 PLANT CAPACITY UNDER POWER PURCHASE CONTRACT (Note 6) 24 592 24 152 EQUITY IN NUCLEAR ELECTRIC POWER COMPANY (Note 6

) and Schedule III) 511 512 1 CURRENT ASSETS:

Cash 1 977 434 Accounts receivable -

Affiliated companies 277 92 Customers, less reserve of $471,000 in 1979 and

$736,000 in 1978 (Schedule XII) 15 272 10 879 Unbilled revenues 2 442 9 099 Inventor'ies,uat average cost -

, Materials and supplies _ 3 055 2 757 Liquefied natural gas and' propane 1 311 920 Electric production fuel oil 1 535 921 Prepaid property taxes- 3 519 4 144 Other- 567 SS 29 955 29 331 , I i

. DEFERRED' CHARGES AND OTHER ASSETS 1.114 1 036 p.??9 316 $217 688 The accompanying notes are an integral part of .these financial statements. -

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O BALANCE SHEETS (CONTINUED)

NEW BEDFORD GAS AND EDISON LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1979 AND'1978 STOCKHOLDERS' EQUITY AND LIABILITIES 1979 1978 (Dollars in Thousands)

CAPITALIZATION:

Common Equity -

Common Stock $25 par value -

Authorized and outstanding 868,972 shares, 99.98% owned by New England Gas and Electric Association (Parent). $ 21 724 $ 21 724 Amounts paid in excess of par value 32 487 32 487 Retained earnings -

Appropriated - invested in plant 5 225- 5.225

~ Unappropriated (Note 4) 6 660 6 077 66 096 65 513 Long-term debt, including premiums, less current sinking fund requirements (Note 3) 59 162 59 702 125 258 125 215 LONG-TERM POWER' PURCHASE OBLIGATION (Note 6) 24 592 24 152 CURRENT LIABILITIES:

Interim Financing (Note 3) -

Notes payable to_ banks 14 950 -

Notes payable to Parent 7 370 4 950

, 22 320 4 950 Other Current Liabilities -

Current sinking _ fund requirements 902 456 Accounts payable -

Affiliated companies 9 451 5 971 Other 7 652 8 236 Accrued taxes -

Income- 3 169 16 761

-Local property and other 3 963 4 301 Accrued interest 899 879

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Customers deposits and other 2 975 2 288 29 011 38 892 4

51 331 43 842

' DEFERRED CREDITS:

Accumulated deferred income ~ taxes (Note 2) 19 142 17 046

-Unamortized investment tax credits (Note 2) 7 292 6-094 Other' 1 781 1 339 28 215 24 479 COMMITMENTS.(Note 6)-

$229 396 $217 688

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The accompanying notes 'are an integral part of these financial -statements.

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STATEMENTS OF. INCOME NEW BEDFORD GAS AND EDISON LIGHT COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978 i

1979 1978 (Dollars in Thousands)

OPERATING REVENUES:

Electric $138 484 $119 567 Gas 24 293 22 117 162 777 141 684 OPERATING EXPENSES:

Fuel used in electric production, principally oil 5 365 2 419 Electricity purchased for resale (Note 6) 75 029 61 249

. Cost of gas sold 15 287 13 355 Other operation 29 006 26 206 Maintenance 7 165 6 568 Depreciation 7 477 7 052 Taxes -

Local property 7 632 8 808 Income (Note 2) 3 543 4 453 Payroll and other 1 351 1 167 151 855 131 277 OPERATING INCOME 10 922 10 407 OTHER INCOME:

Allowance for other funds used during construction 504 568 Other, net (8) 2 496 570 INCOME BEFORE INTEREST CHARGES 11 418 10 977 INTEREST CHARGES:

Long-term debt 4 699 4 779

'Other interest charges 1 470 725 Allowance for borrowed funds used during construction (1 329) (667) 4 840 4 837 NL1 INCOME $ 6 578 $ 6 140 The accompanying notes are an integral part of these financial statements.

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STATEMENTS OF UNAPPROPRIATED RETAINED EARNINGS 3 I NEW BEDFORD GAS AND EDISON LIGHT COMPANY STATEMENTS OF UNAPPEOPRIATED RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978 1979 1978 (Dollars in Thousands)

Balance at beginning of year $ 6 077 $ 6 281 Add (Deduct):

Net income 6 578 6 140 Cash dividends on common stock (5 995) (6 344)

Balance at end of year (Note 4) $ 6 660 $ 6 077 y,n c,

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f The accompanying notes are an integral part of these financial statements.

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STATEMENTS OF SOURCES OF FUNDS USED FOR CONSTRUCTIO!! -

NEW BEDFORD GAS AND EDISON LIGHT COMPANY STATEMENTS OF SOURCES OF FUNDS USED FOR CONSTRUCTION FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978 1979 1978 (Dollars in Thousands)

SOURCES OF FUNDS -

Internal Sources From Operations -

Net Income $ 6 578 $ 6 140 Items not requiring or (providing) funds:

Depreciation 7 477 7 052 Deferred income taxes 2 114 2 666 Investment tax credits, net 1 199 860 Allowance for other funds used during construction (504) (568) 16 864 16 150 Less -

Payment of dividends 5 995 6 344 Retirement of long-term debt through sinking funds 1 040 1 232 Other (37) 160 6 998 7 736 Change in net current assets (exclusive of interim financing):

Cash (1 543) (370)

Accounts receivable and unbilled revenues 2 079 9 520 Acc. rued income taxes (13 592) 181

<-3. Other 2 551 130 y (10 505) 9 461

,; . Net'available frcm internal sources (639) 17 875 r

3r External Sources Notes payable to banks, net 14 950 (2 360)

Notes payable to Parent, net 2 420 520 Sale of long-term debt 500 -

Net available from external sources 17 870 (1 840) i s'17 231 $ 16 035 {

1 FUNDS USED FOR CONSThUCTION - i Electric: $ 15 915 $ 15 164 l Gas' 1 820 1 439  :

, 17 735 16 603  ;

'Less.- Allowance for other funds used during construction 504 568

$ 17 231 $ 16 035 The accompanying notes are an integral part of these financial statements.

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, NOTES TO FINANCIAL STATEMENTS NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (1) Accounting Policies Transactions with Affiliates The Company is a subsidiary of New England Gas and Electric Association.

The Associrtion is an exempt holding company under the provisions of the Public Utility. Holding Company Act of 1935 and, in addition to its investment in the Company, has interests in other utility companies and other non-

-regulated companies.

Transactions between the Company and other system companies include purchase and sale of electricity and gas and payments for management, accounting and other services. Transactions with other system companies are subject to review by the Massachusetts Department of Public Utilities.

Operating expenses include purchases of electricity from an affiliated company of $74,330,000 in 1979-and-$55,432,000 in 1978 and purchases oi natural gas of $774,000 in 1979 and $659,000 in 1978.

Equity Method of Accounting

]

The equity method of accounting is followed for the 21/2% investment

-in Yankee Atomic Electric Company. This' method recognizes in income the Company's proportionate share of the net earnings of this nuclear power company with a corresponding increase it. the carrying value of the investment.

The investment amount is reduced as cash dividends are received. The Company's equity in earnings of Yankee amounted to $52,000 in 1979 and

'$64,000 in 1978. At December 31, 1979, retained earnings included

_ ,'approximately $128,000 of undistributed earnings of Yankee Atomic Electric Company.

Operating Revenues.

Customers are billed for their use of electricity'and gas on a cycle basis throughout the month. To reflect revenues in the proper-period, the estimated amount of unbilled sales is recorded at the end of each j month.

l The Company is permitted to bil1~ customers for the total costs of -  !

purchased power, fuel used in electric production, and gas. The amount I

of such' costs incurred but- not yet reflected in customers' bills also is recorded in unbilled revenues at th'e end of each month.

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) c (1) Accounting Policies (Continued)

Depreciat'on

Depreciation is provided using the straight-line method at rates intended to coortize the original cost of properties over their estimated-economic lives. The composite depreciation rates, based on average depreciable property in service,.were 3.9% for electric and 2.9% for gas, for 1979 and 1978.

Maintenance

' Expenditures for repairs of property and replacement and renewal of items determined to be less than units of property are. charged to maintenance expense. Additions, replacements and renewals of property considered to be units of property, are charged to the appropriate plant accounts. Upon' retirement, accumulated depreciation is charged with the original cost of property units and the cost of removal less salvage.

Allowance for Funds Used During Construction The Company reflects as an element of the cost of construction of depreciable property an' allowance for funds employed during periods when property is under construction. An amount equal to.the allowance capitalized in the current period is reflected in the statements of income. Under '

applicable rate-making practices, property under construction is not included in. rate. base on which the Company is permitted to earn a return.

Amounts so capitalized, while not currently providing funds, are included in rate base when property is placed in service, and these amounts are-recoverable in revenues over the service life of the constructed property.

.The Company develops rates based upon its current cost of capital and used a~ rate of 12 1/4% in 1979 and 10% in 1978.

(2) Income Taxes For financial reporting purposes, the-Company provides taxes on a separate' return basis. However, 'for Federal income tax purposes, the Company's' taxable income and deductions are included in the consolidated income tax return ofiits Parent and it makes tax payments or receives

refunds on the basis of its tax attributes in the consolidated income tax return;in accordance with applicable Federal income tax regulations.

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(2) Income Taxes (Continued)

The following is a summary of the provision for income taxes for the years ended December 31, 1979 and 1978:

1979 1978 Total Federal State Total Federal State (Dollars in Thousands)

Current $ 230 $ 5 $ 225 $ 927 $ 676 $251 Deferred 2 114' I 839 275 2 666 2 329 337 Investment tax credits 1 492 1 492 -

1 110 1 110 -

3 836 3 336 500 4 703 4 115 588 Less-Amortization of investment tax credits 293 293 -

250 250 -

$3 543 $3 043 $ 500 $4 453 $3 865 11&&

Income taxes are provided for the tax effects of timing differences other than certain construction related costs. Timing differences result from reporting income and expense for tax purposes in periods different from those used for financial reporting purposes. The deferred provision represents principally the tax effects arising from deducting depreciation for income tax purposes that currently exceeds the amounts provided in the accounts. The greater. tax depreciation arises from the use of accelerated depreciation methods and shorter lives permitted by the

Federal and state income tax laws. The tax effects of unbilled revenue

-and other current timing differences are included in the current provisions and accrued income taxes. Investment tax credits are deferred and amortized over the life of the property giving rise to the credits.

The total income tax provision set forth above represents 35% in 1979 and 42% in 1978 of income before such income taxes. The table below reconciles .the statutory Federal income tax rate to these percentages:

1979 19_78 Statutory Federal income tax race 46% 48%

Increase (decrease) from statutory rate:

Allowance for funds used during construction (8) (6)

State tax net of Federal tax' benefit 3 3 Capitalized expenses (2) (2) i Impact of change in Federal income tax rate on '

timing difference reversals (2) -

Other, net (2) (1) 21% $37 a

NEW BEDFORD GAS AND EDISON LIGHT COMPANY ,

NOTES'TO FINANCIAL STATEMENTS (CONTINUED) p (3) Interim Financing and Long-Term Debt i Notes Payable to Parent l

The Company had short-term notes-payable to the parent Association l

totaling $7,370,000 at December 31, 1979. These notes are written for a .l

! term of eleven months and twenty-nine days. Interest is at the prime 4

rate (15 1/4% at December 31, 1979) and is adjusted for changes in the rate during the term of the notes.

[

Notes Payable to Banks The Company and other system companies have banking relationships a under which borrowings are arranged as required for interim financing of construction in progress. These arrangements are not formal lines of credit but provide for unsecured borrowings evidenced by notes payable l which are due within one year.

l

! .Information regarding short-term bank borrowings for 1979 and 1978 l is as follows: l r

1979 1978 (Dollars in Thousands)

Notes outstanding -

Amount at. year-end- $14 950 $

, Monthly ~ average amount 3 896 347 3

! ' Maximum amornt during the year 14 950 2 360

. Weighted Aver.ge Interest Rate -

Year-end 16.5% -

Monthly 15.5% 7.9%

l l

.While informal lines of credit exist with several banks, only one

! such line, totaling $15,000,000 was utilized by the Company as of l December 31, 1979. . The terms of the line require compensating balances l equal.to 8% on the first $10,000,000 of borrowings and 4%~on additional

borrowings or a fee if such balances are not maintained. The interest-I rate for these borrowings is at 108% of the prime rate.

Funds used to satisfy compensating balance requirements are also

j. used as operating funds by the Company and there are no' legal restrictions 3 l

on withdrawal of these funds. -Cash on deposit by the Company at banks '

where system companies had outstanding borrowings totaled $1,920,000 at-l December. 31, 1979, substantially all of which was intended to meet compensating balance requirements.

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(3)' Interim Financing and Long-Term Debt (Continued)-

Lona-Ters Debt

~

Long-term debt outstanding, exclusive of current sinking fund requirements'and.related premius.s, is as follows:

Original Balance December 31, Issue 1979 1978 (Dollars in Thousands)

! 25-Year Notes '

Series C,- 4 1/2%, due 1986 $ 5 000 $ 4 100 $ 4 150 Series D,.5 5/8%, due 1992 10 000 8 693 8 793

, Series E, 8 1/8%,-due 1995 9 000 7 200 7 380 Series F, 8 3/8%, due 1998 20 000 17 200 17 468 i Series G,L10 S/8%, due 2000 15 000 13 500 13 800 30-Year' Notes

, Series A, 4.9%, due 1987 3 500 2 695 2 730 Series B, 6 1/8%, due 1997 6 000 5 217 5 232 5-Year Promissory Notes Small Business Administration,3%,

due'1984. 250 169 -

Disaster Business Loan, 6 5/8%,

due-1984 250 250 -

$59 024 $59 553 The balances of long-term debt outstanding at December 31, 1979 and 1978 are exclusive of $303,000 and $849,000 principal amounts, respectively, purchased tar the Company and deposited with the indenture Trustee in anticipation of' future sinking fund requirements. The Company may continue to purchase its outstanding notes under favorable conditions in the future.

Sinking fund requirements applicable to'long-term debt for the five years subsequent to December 31, 1979, exclusive of amounts purchased by -

- the-Company described above, are as follows:

Sinking Fund ,

, Year Requirements (Dollars in Thousands) e 1980 $ 902 1981 1 187

~

1982 1 199 1983 1 202 1984 '1 152 i

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NEW BEDFORD gab AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(4) Dividend Restriction At December 31, 1979, approximately $489,000 of unappropriated retained earaings was restricted against payment of cash dividends by terms of the Indenture of Trust securing long-tern debt.

(5) Pension and Employee Savings Plans The Company has a noncontributory pension plan covering substantially all regular employees who have attained the age of 25. Pension costs are funded as accrued and include amounts applicable to prior service costs which are being amortized over a period of 30 years. Total pension expense was approximately $2,416,000 in 1979 and $1,530,000 in 1978. The increase in expense is primarily due to changes in the plan which provide improved benefits to employees. At the date of the latest actuarial review, the estimated actuarially computed value of vested benefits exceeded total p nsion fund assets by approximately $6,594,000 and the aggregate unfunded prior service costs were approximately $5,141,000.

The Company has an Employee Savings Plan which provides for Company contributions equal to contributions by eligible employees but not in excess of four percent of each employee's compensation rate. The total Company contribution was approximately $681,000 in 1979 and $589,000 in 1978.

(6) Commitments Power Contracts The Company has long-term contracts for the purchase of electricity from various utilities. Generally, these contracts are for fixed periods and require that the Company pay a demand charge for its entitlement to the generating capacity of each unit and an energy charge to cover the cost of fuel used for electric generation. Total costs under these contracts are included in electricity purchased for resale in the statements of income and are fully recoverable in revenues under the Company's power cost charges.

The Company's long-term obligations under these contracts are detailed in the following table:

Net Company 1979 Capability Entitle- Contract Total Minimum Unit and Owner Kilowatts ment Expires Cost Cost (Dollars in Thousands)

Canal Unit No. 1 - Canal Electric Company 572,000 (Note A) 1996 $20,126 $1,405 Canal Unit No. 2 - Canal Electric Company 584,000 (Note A) 2004 54,204 6-758 Pilgrim Unit No. 1 Boston Edison Company 672,000 11% 2000 9,189 T,498 Yankee Atomic - Yankee Atomic Electric Company 176,000 2.5% 1991 662 14s

9

, NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) g (6) .Commitmentt (Continued)

(Note A) - The Company has a commitment, on a system basis (with an affiliated company), to purchase power from the two Canal Units, with a system entitlement equal to 25% of Unit No 1 and 100% of Canal Electric's share (50% owned) of Unit No. 2. Power purchased by the individual companies varies each year, with fixed costs borne by each of the affiliates based upon the power purchased for the period. Substantially, all of the

. power and the related costs for the Canal units during 1979 were borne'by the Company. Minimum costs, which are included in the total costs above, represent depreciation and a return on investment.

The Company has reflected on its Balance Sheets, as an asset, its share in the net unit investment of Pilgrim Unit No. I which provides more than 5% of the Company's generating capacity. A like amount has been included as a liability representing the present value of the future minimum obligation under this agreement. Included as exhibits to this report are copies of condensed 1979 financial statements of other vendors which provide more than 5% of the Company's capacity.

LNG Strvice Contract The Company has contracted with Hopkinton LNG Corp. (fifty-percent owned by the Parent) for liquefaction and vaporization services over a twenty-five_ year period ending in 1997. The Company is obligated to pay a demand charge throughout the contract period in addition to charges for operating costs. The amount o' the demand charge decreases ratably over

~the term of the contract from approximately $691,000 in 1980 to $257,000.

Construction Program The Company has made substantial commitments in connection with its

( construction program including commitments to participate as a joint-owner in several generating plants planned or under construction by other New England utilities. The Company plans to sell itu interest in such units at cost to Canal Electric Company, an affiliated company, after both companies have obtained required regulatory approvals. Construction expenditures for the five-year period ending in 1984 are estimated at

$228,400,000 including approximately $105,600,000 related to commitments by the Company for jointly-owned projects. The Company has additional commitments of ap9roximately $93,200,000 relating to these jointly-owned projects for years beyond 1984. Construction expenditures for the jointly-owned projects are based upon estimates provided by the lead participant.

NEW BEDFORD CAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED}

-(6) Commitments (Continued)

Construction Program (Continued)

Information relating to these projects is contained in the following table:

Esti- Esti-Company. mated Expendi- mated i Plant Entitle- Scheduled Cost of tures Cost Capacity ment Completion Entitle- through Per Unit (a). '(MW) (MW) Location Date ment 12/31/79 KW (Dollars in Thousands)

Pilgrim No. 2 1150 :18 Plymouth, MA- Late 1930's $ 30 516 $ 5 690 $1 695 '

'Seabrook Nos. 1 & 2 2300 80 (b) Seabrook, NH 1983-1985 97 241 12 951 1 216 Montague Nos. 1&2 2300 80 Montague, MA Not Determined 1 530 -

(a) The lead participants for the jointly-owned nuclear units are: Boston

-Edison Company, Public Servi s Company of New Hsmpshire and Northeast

. Utilities, respectively.

! '(b) The Company has a 1.35% (30 MW) joint-ownership interest in the Seabrook electric generating units and a commitment to purchase an additional 2.17% (50 MW)' interest subject to receipt of necessary regulatory approvals in a' farm satisfactory to the Company.

l These units have experienced delays in both the planning and building r phases of construction which has rescited in significantly increased costs and delays in the scheduled completion dates. The Company is ,

! unable to predict what effect present or future construction difficulties ,

related to these projects will have on its present construction estimates l~ .and the estimated completion dates.

The'Seabrook_ nuclear units have experienced particularly burdensome delays as a result of various legal and regulatory agency intervention.

.As indicated in a recent prospectus issued by the. lead participant, Public Service Company of New liampshire (PSNH), that company's ability to n financeLits present ownership interest in the project is uncertain and it

, is' attempting to sell a portion of its interest to other utilities. They j'

also indicated that regulatory delays and problems of financing construction could require a slowdown in the construction schedule which_may further incresse the-cost of the pro.i.ct. ,

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY NCTES TO FINANCIAL STATEMENTS (CONTINUED)

(6) Commitments (Continued)

Construction Program (Continued)

In March 1980, PSNH announced a significant reduction in construction work at the Seabrook site and a reduction in expenditures during 1980.

PSNN. indicated that high interest rates led.to this decision and that the reduced construction schedule would be in effect for several months.

PSNH indicated that this action is not expected to change the projected I

1983 completion date of Unit No. 1.

s Each of the participating utility companies finances its own. share of the jointly-owned generating units. When these units become operational, the lead participant acts as the operator and bills the participants for-their proportionate share of the expenses of the unit.

(7)' Property and Reserves 1

The major sub-classifications of property, plant and equipment at December 31, 1979 and 1978 were as follows:

Electric Gas 1979 1978- 1979 1978 (Dollars in Thousands)

Land and rights of way; $ 6 523 $ 6 468 $ 358 $ 336

. Structures and lease improvements 9 410 9 147 1 479 1 447 Production equipment 14 651 14 429 203 203 Transmission equipment 34 544 34 081 -

~ Distribution equipment 117 873 111 434 21 963 20 315 General equipment and vehicles 1 972 1 836 294 307 Total plant in service' 184 973 177 395 24 297 22 608 Construction in progress- 21 682- 14 926 153 113

. Non-utility property 20 18 328 331 Property held for future use 838 849 - -

Total. $207 511 $193 183 $24 778 $23 052

NEW BEDFORD GAS AND EDISON LIGHT COMPANY #

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(7) Property and Reserves (Continued)

Neither the total additions to nor reductions in property, plant and equipment during the years 1979 or 1978 amounted to more than 10% of the balance.at the end of the respective years. The changes during the year are summarized as follows:

1979 1978 (Dollars in Thousands)

Balance at beginning of year $216 240 $201 877 Additions, at original cost 17 735 16 603 Total 233 975 218 480 Retirements, at original cost -

Charged to accumulated depreciation 1 684 2 239 Other -

1 1 684 2 240 Balance at end of year $232 291 $216 240

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• NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(7) Property and Reserves (Continued)

Changes in accumulated depreciation of property, plant and equipment during the years 1979 and 1978 are summarized as follows:

Operating Property Motor Total Electric Gas Vehicles I (Dollars in Thousands)

Balance at December 31, 1977 $48 857 $43 623 $5 136 $98 Provisions charged to -

Operating expense 7 052 6 429 623 -

Other income 16 -

16 -

Amortization of leasehold improvements 33 33 - -

55 958 50 085 5 775 98 Deductions -

Retirements 2 239 1 564 618 57 Cost of removal, less salvage 136 385 (243) (6) 2 375 1 949 375 51 Balance at December 31, 1978 53 583 48 136 5 400 47 Provisions charged to -

Operating expense 7 477 6 827 648 2 Other income 23 -

23 -

Amortization of leasehold improvements 35 35 - -

61 118 54 998 6 071 49 Deductions -

Retirements 1 684 1 591 91 2 Cost of removal, less salvage 367 387 (20) -

2 051 1 978 71 2 Balance at December 31, 1979 $59 067 $53 020 $6 000 141 (8) Segment Information The Company provfdes electric and gas service primarily to retail customers in service territories located in uoutheastern Massachusetts.

Amounts reported in the following table are on an industry segment basis and include intersegment transactions which consist of purchases and sales of gas at prices approved by the regulatory agency having jurisdiction over these activities.

NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(8) Segment Information (Continued) .

Operating income of the industry segments includes income from transactions with affiliates and is exclusive of interest expense and income taxes. Identifiable assets include the Company's 2 1/2% investment in a nuclear electric power company (see Note 1).

1979 1978 (Dollars in Thousands)

Revenues:

Electric. $138 484 $119 567 Gas 25 456 22 117 163 940 141 684

.Less - Intersegment sales 1 163 -

I. Total Revenues $162 777 $141 6 '

Operating Income Before Income Taxes:

Electric- $ 13 419 $ 14 399 Gas 1 046 461 Total Operating Income $ 14 465 $ 14 860 Identifiable Assets:

., Electric $177 846 $168 383 Gas 26 447 24 641 l 204 293 193 024 Plant capacity under power purchase contract 24 592 24 152 Investment in nuclear electric power company ___ ,111 512 Total Assets $J!/ 396 $217 688 Depreciation Expense Electric $ 6 829 $ 6 429

. Gas 648 623 Total Depreciation s 7 477 $ 7 052 l Additional segment information relating to property and property

!! additions is shown elsewhere in the financial statements.

.j.

!! (9) Rate Increase

! During 1979, the Company initiated a rate proceeding befora the

l Massachusetts Department of Public Utilities (DPU) requesting an annual i, increase in electric revenues of $11,218,000 and $3,434,000 in gas

f revenues. In Jinuary, 1980, the.DFU authorized increases in retail

.l. electric rates of $5,641,000 and gas rates of $2,488,000 effective February 8, 1980.

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(10) Supplementary Information on Replacement Cost and Effects of Changing Prices (Unaudited)

The following supplementary information is supplied in accordance with recently adopted requirements of the Financial Accounting Standards Board's Statement No. 33 for the purpose of providing certain information about the effects of changing prices. It should be viewed es an estimate of the approximate effect of inflation, rather than as a precise measure.

The new requirements include disclosure of certain financial information in terms of constant dollar amounts and current cost amounts.

Information with respect to current cost must be included with this supplementary information, effective in 1980. The Company has elected to continue, in 1979, disclosure of replacement cost information in its Form 10-K.

Replacement Cost For a number of reasons, the Company believes there are significant limitations in the use of the required replacement cost information in attempting to evaluate the effects of inflation on the Company.

The Company is subject to governmental regulation in the determination of a fair return on investment. Under current rate-making practices, revenue requirements are based upon the original cost of property and capital recovery through depreciation is limited to the historical dollars invested in utility plant. Accordingly, replacement cost in excess of original cost is not recoverable through the rate-making process. On the other hand, during periods of inflation, cost increases are partially offset by economic gains resulting from repayment of long-term debt and other liabilities with dollars which have less purchasing power than that of the money borrowed in earlier years. The required replacement cost information does not give effect to such economic gains nor to possible cost savings resulting from increased operating efficiencies of technologically improved replacement facilities. Further, the required disclosure relates only to certain recorded assets and does not apply to any of the Company's power contracts and gas supply contracts and other contractual arrangements under which the Company has use of the productive capacities.of other companies.

For these reasons, tlis data should not be used to adjust and compare the balance sheets or statements of income of the Company with any other company's financial statements. Many subjective judgements were required in the development of the replacement cost cstimation and it is unlikely that all of the replacements assumed could be accomplished in fact due to fuel availability, environmental considerations and a variety of other factors which might preclude the application of new technology to existing elements of the Company's productive capacity. Neither-does this information purport to represent the current value or reproduction costs of sold.the assets or the amounts which could be realized if the assets were

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NEW BEDFORD GAS AND EDISON LIGHT' COMPANY NOTES TO FINANCI'AL STATEMENTS (CONTINUED)

(10) Supplementary Information on Replacement Cost and Effects of Changing

. Prices (Unaudited) (Continued)-

'Replacec.ent Cost (Continued)

Subject to these limitations and recognizing the imprecise and subjective nature of this data, the computed replacement cost of the Company's productive capacity, depreciated replacement cost and related.

~

depreciation expense together with comparative historical cost data, in conformity with the requirements of the Securities and' Exchange Commission, is as follows:

F Actual Computed Historical Replacement Cost Cost (Dollars in Thousands) 1979 1978 1979 1978

Plant in service --

Electric $178 449 $170 927 $383 713 $340 933 i

, Gas 23 939 22 272 79 489 71 745 ,

Other 8 068 8 002 8 068 8 002 '

210 456 201 201 471 270 420 680 Less - Accumulated depreciation 59 067 53 583 131 568 110 939 Plant in service, net $151 389 $147 618 1339 902 $309 741 l

Depreciation expense $ 7 411 $- 7 052 $ 16 424' $ 15 042 4

Land, non-utility property and property held for future use are included in both the historical and replacement cost data above at their historical cost of $8,068,000 in 1979 and $8,002,000 in 1978.

-In developing the replacement cost estimates, it was assumed-that plant would be replaced substantially in kind and in place with allowances

-for. technological changes and curr'ent environmental requirements.

Replacement cost estimates were developed017 applying to the various categories of plant' a combination of unit costs used by system companies

= -

_for engineering estimates, units costs developed from recent construction cost data.and costs obtained by applying industry and government indices Eto historical cost-data. Ths related accumulated depreciation based on the,. computed replacement cost was' developed by applying the percentage

relationship. that existed between-gross plant and accumulated depreciation

. by functional groups on'a historical. cost basis at the end of each year l

to the current replacement

cost'of the productive capacity._; Depreciation

. expense for. the~ replacement cost of productive capacity was developed by-

! applying:the' actual functional class depreciation rates in use'toLthe

respective functional class average replacement cost ~ figures.

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) .

(10) Supplementary Information on Replacement Cost and Effects of Changing Prices (Unaudited) (Continued)

Constant Dollar The constant dollar amounts (set forth below) represent historical costs statcd in terms of equal purchasing power, as measured by the Consumer Price Index for All Urban Consumers.

Under present ratemaking procedures, only the historical cost of plant is re averable in revenues through depreciation. Because the excess cost of plant stated in terms of constant dollars is not recoverable in rates, a write-down to net recoverable cost is requireu. While the ratemaking process does not recognize the current cost of replacing plant, regulated companies have, historically, been allowed to earn a return on and recover through depreciation the increased cost of its investment when replacement actually occurs.

The current year's provision for depreciation on the constant dollar amounts of property, plant and equipment was determined by applying the Company's depreciation rate to the indexed plant amounts.

Fuel inventories, the cost of fuel used in generation and cost of gas sold have not been restated from their historical cost in nominal dollars. Regulation limits the recovery of fuel and purchased gas costs through the operation of adjustment clauses. Fer this reason fuel inventories are effectively monetary assets. Siace only historical costs are deductible for income tax purposes, the income tax expense in the historical cost financial statements is not adjusted.

During periods of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attributable to the substantial amount of debt which has been used to finance property, plant and equipment. These gains are unrealized and, therefore, do not contribute to cash flow or distributable income. The Company does not have the opportunity to realize a holding gain on debt because it is limited to recovery of the embedded cost of debt capital.

O-NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED)

(10) Supplementary Information on Replacement Cost and Effects of Changing Prices (Unaudited) (Continued)

Statement of Income From Continuing Operations Adjusted for Changing Prices For the Year Ended December 31, 1979 Conventional Constant Dollar IIistorical Cost Average 1979 Dollar (Dollars in Thousands)

Operating Revenues $162 777 $162 777 Fuel, purchased electricity and cost of gas 95 681 95 681 Operation and maintenance 36 171 36 171 Depreciation 7 477 14 474 Income and other taxes 12 526 12 526 Other income and deductions, net 4 344 4 344 156 199 163 196 Income (loss) from continuing operations (excluding write down to net recoverable amount) $ 6 578 $ (419)*

Write down to net recoverable cost $(14 079)

Reduction of purchasing power loss through debt financing 12 031 Net $ (2 048)

• Including the write down to net recoverable cost, the income (loss) from l; continuing operations would have been $(14 498).

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NEW BEDFORD GAS AND EDIh%t LIGHT COMPANY' NOTES TO FINANCIAL STATEMEw?S (CONTINUED)

~(10) Supplementary Information on Replacement Cost and Effects of Changing Prices (Unaudited) (Continued)

Five-Year Summary of Selected Financial Data Adjusted for Effects of Chenging Prices (Stated in Average 1979 Dollars)

Year Ended Decenber 31, 1979 1978 ~

1977 1976 1975 (Dollars in Thousands fxcept Per Share Amounts)

Operating Revenues $162 777 $157 623 $171 883 $165 781 $161 179 Income from continuing operations (excluding write down to net recoverable amount; $ (419)

Reductions of purchasing power loss through debt financing $ 12 031 Net assets at year-end at net recoverable cost $ 62 461 Average consumer price index 217.4 195.4 181.5 170.5 161.2 Note: The Company's stock is 99.98% owned by the Parent Association, therefore per share information is not relevant.

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NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-X DECEMBER 31, 1979 PART II Item 13. Security ownership of Certain Beneficial Owners and Management Amount and Nature of Title of Beneficial  % of Name and Address Class Ownership Class t New England Gas and Electric Association 675 Massachusetts Avenue Cambridge, Massachusetts 02139 Common 868 829 (1) 99.98 All Directors and Officers as a group (22 persons) Common 22 048 (2) .29 (1) Of the Companys 868,972 common shares authorized and outstanding the Parent, New England Gas and Electric Association, owns 868,829 shares.

(2) In accordance with Release No. 7793 under the Securities Exchange Act of 1934, officers and directors beneficial ownership set forth in the above schedule includes, where applicable, shares owned by the wife of any directors or officers. The directors and officers of the Company as a group at December 31, 1979 owned 22,048 shares of the parent company (based on information furnished to the Association by these persons)

, which represents less than one percent of the total number of shares at that date.

Item 14. Directors and Executive Officers Age at December 31, Name of Director (1) Position with Company Business Experience 1979

• Gerald E.. Anderson (2) Chairman of the Board (3) 48 and President

• Earl G. Cheney (4) Financial Vice

• President (3) 43

'* Jeremiah V. Donovan (5) Executive Vice Pres. (3) 44 Electric Operations Norman H. Cook- None Retired Executive 71 Director, Cape Cod Planning and Economic Develop ant Commission

O NEW BEDFORD GAS'AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 14. Directors and Executive Officers (Continued)

Age at December 31, Name of Director (1) Position with Company Business Experience 1979 Fred H. Hubbard None Retired Executive 74 Vice President of the Company Stephen C. Luce None Chairman of the Scard, 89 Martha's Vineyard National Bank A. Malcolm Mager None Retired Executive Vice 72 President of the Company Maurice B. Makepeace None Treasurer and Director 73 A.D. Makepeace Co.,

Inc.

Oliver Prescott, Jr. None Attorney-at-Law 82 Prescott, Bullard &

McLeod Archie-L. Rodgers None Retired Plant Manager, 75 Goodyear Tire and Rubber Co.

Frank Simpson None Retired President - 67 The First National Bank Horace C. Weston None President and Director 70 Plymouth-Home National Bank Prior to their retirement Messrs. Hubbard and Mager served in executive capacities with the Company.

All directors have served in executive capacities either with the Company, an affiliate company or with another company.

(1) The present term of office of all the Directors will expire on January 23, 1981, the date of the annual meeting of_ shareholders.

(2) ; Chairman of the Board of New England Gas and Electric Association (Parent),

-Cambridge Ele,ctric Light Company **, Canal Electric Company **, and Commonwealth Gas. Company **.

NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 14. Directors and Executive Officers (Continued)

(3) Director is also an executive officer of the Company (see Executive Officers).

(4) Director of Cambridge Electric Light Company, Canal Electric Company and Commonwealth Gas Company.

(5) Director of Cambridge Electric Light Company and Canal Electric Company.

• Member of Executive Committee

• • Affiliated companies include: NEGEA Service Corporation, Cambridge Electric Light Company, Canal Electric Company and Commonwealth Gas Company.

Age at December 31, Name of Officer (6) Position and Business Experience 1979 Gerald E. Anderson Chairman of the Board since 1977; 48 President since 1975 Earl G. Cheney Financial Vice President since 42 May 1974 Jeremiah V. Donovan Executive Vice President - Electric 44 Operations since October 1978; Vice President and General Manager, Cambridge Electric Light Company, since April 1976; Assistant Vice President, Cambridge Electric Light Company, November 1975-1976; Engineer NEGEA Service Corporation 1963-1975 William G. Poist Executive Vice President - Gas 46 Operations since October 1978; Vice President and General Manager, Commonwealth Gas Company since November 1976; Vice Fresident and Assistant General Manager, Commonwealth Gas Company March-November 1976; other managerial positions, Commonwealth Gas Company 1972-1976 Andrew S. Griffiths (7) Vice President - Administration 43 since 1978 Ronald F. Mcdonald (8) Vice President - Customer Service 49 since 1978

NEW BEDFORD GAS AND EDISON LIGHT COMPANY

~ FORM 10-K DECEMBER 31, 1979

~

I t em __14. Directors and Executive Officers (Continued)

Age at December 31, Name of Officer (6) Position and Business Experience 1979 William R. Smith (9) .Vice President - Energy Supply 57 since 1978 Richard G. Velte (10) Vice President - Facilities 59 Development since 1978 Robert E. Healey (11) Vice President - Human Relations 42 since 1978

.e John J. Tasillo (12) Vice President - Rates since 37 February 197S

. Robert S. Parker (12) Treasurer since 1971 54

-John A. Whalen (13) Comptroller since September 1978 32 Michael P. Sullivan (14) Clerk since September 1976 31

-(6) The Treasurer'and Clerk of the Company are elected to serve until the next annual shareholders' meeting. All other officers are appointed to serve until the next organization meeting of directors which follows the stockholders' meeting.

(7) Assistant Vice President since 1975 and Assistant Treasurer - New Bedford

. Gas and Edison Light Company.

(8) ' Executive Vice President and General Manage:, New Bedford Gas and Edison Light _ Company.since 1973.

(9) Vice President and General Manager, Canal Electric Company since 1973.

(10): Vice' President, Engineering, NEGEA Service Cerporation since October 1974.

(ll) Assistant Vice President and Assistant General Manager since April 1975 and. Manager of. Erployee and Public Relations since 1972 - New Bedford Gas

, and Edison Light Company.-

(12) Rate Manager, NEGEA Service Corporation since 1973.

I(13) Audit Manager, . NEGEA Service Corporation since 1975.

L(14);Mr. .Sullivan was. employed by NEGEA Service Corporation after graduating from law school in 1975.

NEW BEDFORD GAS AND EDISON LIGHT COMPAhT FORM 10-K DECEMBER 31, 1979 Item 14. Directors and Executive Officers (Continued)

There is no family relationship between any director or executive of ficer of the Company. There were no arrangements or understandings between any officer or director and any other person pursuant to which he was or is to be selected as an officer, director or nominee. There have been no events under any bankruptcy act, no criminal proceeding and no judgements or injunctions material to the evaluation of the ability and integrity of any director or executive officer during the past five years.

Item 15. Management Remuneration and Transactions The aggregate remuneration paid by the Company to its directors and officers for services during 1979 was as follows:

Name of Individual Insurance Benefits Employees' or Capacities or Savings and Number in in which Salaries Reimbursement, TRASOP Plan

Group Served and Fees Personal, Benefits Contributions **

Ronald F. MacDonald Officer $ 55 394 $204 $2 454 William R. Smith Officer 54 184 195 2 334 Richard G. Velte Officer 53 983 199 2 293 14* Officers ,

and Directors $267 031 $942 $9 002

• No remuneration is paid by the Company to Messrs. Anderson, Cheney, Whalen, Tasillo, - Parker or Sullivan. Their compensation is paid by NEGEA Service Corporation, an affiliated service company of which they are officers and employees. For the year 1979, approximately 47% of these officers compensation was charged by the service corporation to thec ompany. Additionally, no remuneration was paid by the Company to Mr. u . ran, during 1979. Hfs compensation, which exceeded $50,000, was paiu b, Cambridge Electric Light Company, an affiliated company, of which he was an officer and employee.

Approximately.52% of Mr. Donovan's salar" was charged to the Company during .

1979. The salary of Mr Poist, which exceeded $50,000, is paid by Commonwealth Gas Company, an affiliated company, of which he was an officer and employee.

Approximately 19% of Mr. Poist's salary is charged to the Company. Approximately 39% of the salaries (above) for Messrs. MacDoeald, Smith and Velte is cS;rged to affiliates of the Company.

• • Column D represents the aggregate contributions by the Company during 1979 on behalf of the above-named individual or group, respectively, to the Employees Savings Plan of New England Gas and Electric Association and Subsidiary Companies and/or the_ Tax Reduction Act of 1975 Employees Stock Ownership Plan of New England Gas and Electric Association and Subsidiary Companies. No Director, as such, receives any benefits under the above Plans.

NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 15. Management Remuneration and Transactions (Continued)

Pension costs are not included in the table because the Pension Plan for Employees of New England Gas and Electric Association and Subsidiary Companies costs are computed on an aggregate actuarial basis without individual allocation.

During t,79, the Association and/or itr. subsidiaries made aggregate contributions to the Plan in the amount of 15.41% of the total base salary of qualified Plan participants in effect on January 1,1979. Remuneration covered under the Plan includes base salary with the limited exception of certain commission sales persons. No Director, as such, receives any benefits under the above Plan.

The following table shows annual pension benefits payable to employees, including Officers, upon retirement at age 65, in various remuneration and years-of-service classifications, assuming the election of a retirement allowance payable as a life annuity:

Highest Annual Consecutive 3-Year Average Basic Salary of Last Annual Benefits for Years of Service 10 Years 10 Years 20 Years 30 Years 40 Years

$ 25 000 $ 3 022 $ o 044 $ 9 068 $11 568 45 000 6 356 12 710 19 068 23 568 65 000 9 689 19 376 29 068 35 568 85 000 13 022 26 042 39 068 47 568 105 000 16 356 32 708 49 068 59 568 125 000 19 689 39 374 59 068 71 568 1

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2e NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K z DECEMBER 31, 1979 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NEW BEDFORD GAS AND EDISON LIGHT COMPANY (Registrant)

By: (Sd.) John A. Whalen Comptroller Date: March 28, 1980 n.

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4 KEW BEDFORD CAS AND EDISON LIGHT COMPANY Investments in, Equity in Earnings of, an? Dividends Received from Affiliates and Other Persons For the Years Ended December 31, 1979 and 1978 (Dollars in Thousands)

Balance at Equity Balance Equity Balance Name of Issuer and December 31, 1977 in Dividends December 31, 1978 in Dividends December 31, 1979 Description of Investegnt Share Amount Earnings Received Amount Earnings Received Amount Common Stock Yankee Atomic Electric Company 1 835 $509 $64 $61 $512 $52 $53 $511 There were no changes in the number of shares held during the years 1979 or 1978,

~

Under terms of the capital funds agreements and power contracts, no st'ock may be sold or transferred except to another stockholder and, as such, no market exists

.for these securities.

en 8_

=

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_ . 'I

b SCHEDULE XII .

NEW BEDFORD GAS AND EDISON LIGHT COMPANY Reserves For the Years Ended December 31, 1979 and 1978

1979 1978 (Dollars in Thousands)

Doubtful Accounts Balance at beginning of year $ 736 $ 777 Add -

Provision charged to operating expense 348 601 Deduct -

Accounts written-off 881 910 Less - Recoveries 268 268 613 642 Balance at end of year s 471 $ 736 4

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