ML19309F881
| ML19309F881 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 03/06/1980 |
| From: | EASTERN UTILITIES ASSOCIATES |
| To: | |
| Shared Package | |
| ML19309F878 | List: |
| References | |
| NUDOCS 8005010533 | |
| Download: ML19309F881 (209) | |
Text
{{#Wiki_filter:Highlights G l
% increase l 1979 1978 (Decrease) l Income, Earnings, Dividends:
Consolidated Net income $ 8,526,000 S 8,656,000 (1.5%) Average Common Shares Outstanding 4,871,667 4,266,921 14.2 % Consolidated Earnings per Average Common Share $1.75 S2.03 (13.8%) Dividends Paid Per Share $1.60 S1.60 Sales and Customers: Total Operating Revenues $185,875,000 S159,195,000 16.8 % Total Electric Sales (KWH) 4,115,000 3,925,000 4.8 % Customers, Year End 222,896 220,090 1.3 % P.operty and Plant: Net Utility Plant $289,559,000 S271,663,000 6.6 % Construction Expenditures $ 30,498,000 $ 25,948,000 17.5 % Table of Contents l Highlights 1 i President's Letter 2 Executive Officers 3 Review of Operations 4 Consolidated Financial Statements 16 Notes to Consolidated Financial Statements 20 Common Share and Dividend Reinvestment Information 25 Supplementary Financial Statement Information 26 Consolidated Operating Statistics 28 Consolidated Summary of Operations 30 Management's Discussion and Analysis i of the Consolidated Summary of Operations 31 Trustees 32 Map Inside Back Cover l l l l l
# Ft'5 010 ) 1
TO Our Shareholders: March 6,1980 Electric utilities continue to operate under power, reasonably-priced, while improving the difficult conditions. The EUA System is no investment quality of our securities. Our exception. EUA earnings for the year 1979 were corporate objective is to continue to provide
$1.75 per average Common Share, compared our customers with a reliable supply of electric to $2.03 for last year on a lesser number of energy at the lowest cost consistent with a average shares outstanding. This decline in fair return to the investor, earnings per share is caused by the continuing in December 1979, your Association sold effects of inflation on all aspects of our 600,000 additional Common Shares to under-business. In particular, we are encountering writers through competitive bidding. Net extraordinarily high, short-term interest rates on proceeds to the Association of $12.139 per bank borrowings. Regulatory lag is especially share, or an aggregate of $7,283,400, were harmful in the present inflationary economy. utilized to reduce System short-term bank loans.
Inadequate rate relief, combined with the Selling additional Common Shares at less than ravaging effects of inflationary pressures, has book value has the effect of lowering the prevented us from achieving the return on book value of all the outstanding existing shares. common equity authorized by appropriate Management of EUA fully recognizes the regulatory agencies. In an effort to reduce regu- increasing seriousness of the situation in which latory lag, System companies are increasing most utility companies today are able to sell the frequency of their filings for rate increases. common shares only at prices substantially We must obtain more equitable rate increases if below their book value. Since 1975, the five sales , we are to raise the return on equity and of EUA Common Shares have caused a increase System earnings to a proper level, reduction in book value of $8.3 million, or a On December 13,1979, Montaup Electric loss of about 8.9% We are concerned about Company, our generation and transmission the inadequate rates of return which subsidiary, petitioned the Federal Energy underlie this situation. The maintenance of Regulatory Commission for permission to appropriate ratios of common equity to other include in rate base a portion of its investment components of the consolidated capitalization of in Construction Work in Progress, also referred the EUA System is necessary in order to to as CWlP. With CWIP, customers would preserve the ability to issue other types of begin to pay now for the fixed charges on securities, selected generating units presently under con- YourTrustees have adopted as a major struction. This is on a " pay-as-you-go" basis, objective the strengthening of the financial rather than payment years later when construc- position of the Association. An important ele-tion is finished and the cost of construction ment in this strengthening process consists ; and financing has compounded. Under the of efforts to reduce our short-term bank loans i
" pay-as-you-go" method, the total cost of the and maintain a proper balance between project is reduced because the cost of funded debt and equity in our capital structure.
money during the construction period is not i included as part of the cost of the new generating Yours very truly, , udts. Since the project cost is less, lower ! total revenues will be required over the thirty-year life of these units. Including CWIP in MgQ ' rate base is essential if the EUA System is to John F. G. Eichorn, Jr. continue to supply customers with reliable President i i k 2
f, i ? +g , Wasa/ uu yd gl[ Tp%' % ,y'a gu. - 4 j! ! ;*
, g~ c;
({y$ ' ., v v.kh)I; r
. v .
l(iY/A T 00/>:r. g,a ,
'7?mdhlSfus f saar f
", 5
.f
&% . /Qs ,a.~ aJna ,e c .
(< T 1 n-w' 9 ., .
- o; >4.)p,.;w%;i9.n
? bym 4 :
.~
o@\! H. ca c.m' y s h-e, ,y ; y @, . , J i,%;y. e . ,e % r w v .3 g , c ,%. ,Is W;a rv . hv 4 ' ' gl Q,:- c
- w. ,
N j h . g g ff, u s ~f Iggy
^
M@ %~.y , eR &~ ' 1 1(- u. '
.j .;inne
~ ~$
n
, in ' .
t ;)p)s%[r g /D, s - s ,5. 3,q *]
.1 '
.L r D p * (,
b h A
'f - . . r #" j 1
,,. y 7 j MWJk, %, ,
\
$n[-Gg~j,f f
+
- :\ '
q 4,
,Y , .?"b "~ '
,b bh ydyS ifi' M[dd,f " .# m dljfh,'l{}\h 4.o[9, k, - A o /
+ w b a. l u a m,A a
n-
); :; /
' vn) ' c,7 yt g g ay, ,
pa.Al f J, Q,. y. oJ&t caf,gh TjQel j s:: ' : ;" p-4r "3 qq l .
.1
-l s e h$h (
3
Review of Operations l l Earnings and Dividends These clauses are not always fully understood by our Consolidated Net income for the year 1979 was customers and, therefore, result in many questions slightly more than $8.5 million, a 1.5% decrease from conecrning their accuracy, validity, and justification. 1978. Earnings per average Common Share outstanding We are increasing our communications efforts in this were $1.75 in 1979, down 28c from the $2.03 earned area of customer concem. in 1978 on fewer average shares. Expenses The quarterly dividend paid during 1979 was main. Fuel and purchased power expense for 1979 was tained at 40c per share, the rate established in the first $104.5 million, up $26.7 million over 1978. This increase quarter of 1977. exactly matches the increase in operating revenues. All dividends received by Common Shareholders The cost of residual oil used by Montaup to in 1979 are reportable as dividend income for Federal generate electricity escalated sharply and dramatically income tax purposes. This information was contained in 1979. From a level of $11.42 per barrel in January, in a notice sent to shareholders on January 31,1980. the price increased almost monthly thereafter to a At present there are more than 20,000 holders of year-end level of just under S19 per barrel. Adding to EUA Common Shares. Over 17,000, or 85%, of our the economic distress associated with higher oil prices is shareholders own fewer than 300 shares apiece, the fact that this nation continues to be reliant on Many EUA shareholders, about 8,400 of them, live foreign oil for too large a portion of its energy needs. in New England, and 75% of these live in Massachusetts Other operation and maintenance expenses were or Rhode Island. The remaining 11,600 are scattered up $1.3 million, an increase of less than 4% over 1978. throughout the United States and many foreign countries. We continue to make everyeffort to control and reduce Revenues and Sales expenses to the lowest possible level without adversely Total primary kwh sales in 1979, as shown on the affecting auality of service. We have computerized the chart below, were up 3% over 1978. Total kwh sales to general ledger system, updated our telephone and radio residential, commercial and industrial customers communication networks, purchased diesel-engine increased 2.4%,4.1 %, and 5.4%, respectively, over vehicles, and inaugurated a diversion control policy 1978. Current projections for 1980 call for kwh sales which is aimed at eliminating the theft of electricity. to these customers to increase 3.2% over 1979, with an The number of full-time System employees con-increase of about 1% in the total number of customers. tinues at substantially the same level reported in last Operatin0 revenues of $185.9 million were up year's Annual Report. While this constitutes a reduction
$20.7 million, or 16.8%, over 1978. A significant portion of approx;mately 300 employees in a six-year period, of the revenue increase is directly attributable to the we do not anticipate further significant reductions.
recovery of higher fuel costs through the operation of The EUA System is subject to the voluntary wage and the purchased power cost adjustment clauses which prico standards of the Federal Council on Wage and are now an integral part of System companies' rates. Price Stability. While the standards have been subject Total Primary Sales (Millions-kwh) 4.000 3.500 3.000 -- 2.500 - t 2.000 1.500 1.cDO 500 4 1969 1970 1971 1972 1973 197,4 1975 1976 1977 1978 1979
m% y k . [g . g l ,* ' \ j p p n hj'h]f l . . j w$(b - M.Q
~
pa w'n y m pr y(
. #. gR._S/e@6 5in y .
V g4, 2 g,,,q SW it.W W )! 'y' Lo" * . s,
* . I '
Jfo i7-W. p,, -s .- 8
.v ,4-~-ttf Q ,w-. ~'). &:,.
- j.
Ui / fl , . , . hNghh
. 1 ..
g . msg ,
! IN
- O a'% 7 : .c D
.s2u% %m g gaw= !! h E QN .%TMWNMi . Aphh5; --
W WYOW;2
&p f di; .n n e.-
s u
-i
-o '
?%)1%M 7
7M.~ f1 u
~N. - m..
-3%% 3a'k. I gsll
)' -
~
, , . \~
, ._ %-YpS
.x
-/k 'J-n[, ;: lm.~.n,nrynugp&
rw.am, ii . m4 3 w--.a .-.a \
' 1 %, sd
,e .n
;. : i .. ywm n-I'- "i e '
x-@n _ F g
- . . . . . ~
6-, c: li
~ M#
3s
*J w .-
,l
;V
,L
.4 i 2
i ' 3 't u j -{ =-
'. j J
%t L d. , ; T~ ,'t ,)
~( ',. m. .4.. -
M. ,
.g
A. #; #fpq- - - /p&_.***y y,,. r_. -- L MVi{ Q L7: ' y-%;>4 -{e- rL1
%,* t ' -.c.
~ ~, ;
q
. . ,V t
& gr- - m q.4 L .. >
*-1 .
~
> ~%g ~
'~
.* *E[,5N. h v% b - '!-1 m 'vm-r:
; d L ,,.m.: dn,%w.a yu . ~ ' #W cagu AbgW -
- p', .y
,L n
-- i -. ,f; r b.
z1 x
- u. n
%,~~
n ::s--M, oM z 4x .g5 ~1:
-t- ; y p ---
-M-' r.:h r - , . ' ~ ' , , ' " _
, g
~- k h ;f.I A '~rO^]4
- Q
_. -T -m-p ,, gpg I. i' [ '$ {M[~[[ {~ i a
~~a.d, r -.-
h<,j % - 2
-m , ,, e r.= z .- e u .~f,
~
~~j. p & MfTU ~:M G '~r r n E.M m
'u. $,
^
iM- . -)Lm___._m a pw. nm m .3 n;
- w. . ..
- u L;]fr r **0 h
~
\
~
'%: y
. _ __ , _ n < i m.
i 3
- g '=;W(
. iffA = 8=p.m ue pg .
~
i2 a;.=. . . -
.< x m ,
e4 ,
.Q g,--
_ ; % 9'.'.2 ~. 5 ,, y - - t~ - - _,1 ____ . ,; w _ _ _ u p b _ f l(l
, J.~L+nt,fM - .- - +- .- .
'Ig,;N~l Qj
+ L .-
r mg . 5; - - . l* l
\
f , L
,pf{'_ --
\
t
,. ; ___._A._, Mr._. r g
, ;.'It 1 4 ,, .' a'l e ?,. M .4 . . J_LM ;j
? ~, f y n g -lll ,r w fly
^ ' ~
{ f MSGTIFFTd,.MG a A .A& L.a 4 v2 . Lpm o m y ikac k 3d %r~!s.pu # i m s l
'y'----- - - - _M_24 r - y $
. g , y g' e,/.b W- m(,
gw; p'y m' < , j, s y <p, 8h JN I' ' , 's i n t J. - - Y ) hy't
" A w}Q-Q)}y w g& a;m $,g$ L' Lii n W, .
k N ' &m.$ L f,y WiumOd[..
.O x W0N!k'3 m
& u , 'Om.i & ~ . =... _._ _ D %.
y-- _- ~3
~
9 m$$<
.m
,..,ec,s N " ~
_..wn - .. 0 ~,_ --w"y1 -- -= - 2'
.w c o, . m
- to revision and reconsideration by the Council, we We continue to gather data from several different believe that we have fully complied with appropriate, types of local research and development projects. One applicable guidelines for both wages and prices, test involves the installation of six storage units in Intarost charges on long term and short-term debt individual homes. The units are basically large volume increased $4.0 million in 1979 to a total of $20.2 million. hot water storage tanks in which the water is heated and The increase was due to an extraordinarily high prime - stored during off-peak periods.Thehot water may then interest rato combined with an increase in short-term be utilized during on-peak periods as well as off-peak.
borrowings. Another project involves two residential customers The Yearin Review who have recently installed 1500-watt wind generators Work continued during 1979 on the installation of a designed to provide a portion of their total electric
$5.5 million SCADA system. SCADA - the acronym for energy requirements. We are metering the output of Supervisory Control and Data Acquisition -will offect these generators in order to measure the overall effec-r' the centralized, computerized monitoring of our genera- tiveness of this type of alternative energy source. Thus tion, transmission, and distribution facilities. The SCADA far, the results have been disappointing, as very small system is expected to become operational in late 1980, quantities of electricity have been generated.
The shipping channel and turning basins in the The installation of a solar water-heating research ' Taunton River adjacent to Montaup Electric's generating project which we sponsored at the Lincoln campus of station in Somerset, Massachusetts were dredged by the Rhode Island Junior College has been completed j the U.S. Army Corps of Engineers to restore a depth of and ownership of the equipment has been formally i 35 feet below low water. Since deeper draft tankers transferred to the college. In successful operation for and barges can now deliver fuel to our wharf, the more than a year now, the project conserves electric efficiency of the delivery process has been improved. onergy by supplying supplementary hot water require-Two of our smaller, older, less efficient generating ments, and also acts as a teaching station for the units at Montaup's Somerset Station have been placed college's engineering department. We will continue to in reserve status at the end of 1979. This was possible monitor data from this solar energy project.
- because Somerset Unit No. 5 was retumed to service in The feasibility of reactivating a small, obsolete early December, after a one-year scheduled outage hydroelectric generating facility owned by our Rhode
, for intensive maintenance, overhaul, ana replacement of Island subsidiary is currently being investigated. The the turbine generator. The now, $5.5 million turbine has 400-kilowatt plant was deactivated in 1971 when a higher capacity rating and a more efficient heat rate, the operating and maintenance expenses exceeded the J The table below lists the System's interest in existing cost of replacement power. Today's oil costs, combined major generating sources. with an undesirable dependence on foreign oil, have EUA Generating Units in Service EUA System Interest
- Not Capability system Share l
In (thousands of (thousands of { Unit Type Owner Servico kilowatts) % kilowatts)
; Somerset Nos. 5. 6 Oil Montaup Electric Company 1951-1959 199 100.0 199 Somerset Nos. Jf, J2 Gas Turbino Montaup Electric Company . 1970 1971 48 100.0 48 Yankeo nowe Nuclear Yankee Atomic Electric Co. 1961 176 4.5 8 i Connecticut Yankoo Nuclear - Conn. Yankee Atomic Power Co. 1968 '575 4.5 26 -l Canal No.1 Oil Canal Electric Co. 1968 572 25.0 143 CanalNo.2 Oil Canal Electric Co. & Montaup 1976 584 50.0 292 Vermont Yankee - Nuclear Vt. Yankee Nuclear Power Corp. 1972 528 2.5 9 !
Malno Yankee Nuclear Maine Yankee Atomic Power Co. 1972 830 4.0 26 Pilgrim No.1 Nuclear Doston Edison Co. - 1972 670 11.0 70 1' Cleary No. 9 Oil City of Taunton. Mass. 1975 110 69.1 -76 New Drunswick Oil Now Drunswick Electric Power 1976 400 6.41 26 - Nos.1, 2, 3 Commission Wyman No. 4 Oil Central Maino Power Co. - 1979 615 1.96 12
)
- Interest can be in any of the following forms: ownership, joint ownership, stock ownership, variable purchaso contract, or " life of unit
purchase contract. 6-
r_ _ caused us to reassess the merits and economics of this Company our retail subsidiary. The one-day fair had small hydro-generation. The City of Woonsocket, Rhode more than fifty exhibits and information booths offering Island is proposing to develop another hydro-generation the latest conservation and alternative energy devices. project on the Blackstone River. The project would be The dissemination of conservation information and funded by general obligation bonds issued by the City. the conducting of energy audits on customers' premises We are negotiating with the City for the purchase of the continue to represent a major component of our electric energy generated by the proposed hydro project. customer contact program. This type of activity is now Thirty dwelling units utilizing solar energy have been in its fourth year in our System and has been well completed and occupied in a proposed 160-unit con- received by our customers. The Residential Conserva-dominium townhouse complex served by Eastern Edison tion Services Program - a part of the National Energy Company, our Massachusetts retail subsidiary. The Conservation Policy Act of 1978- directs state govern-privately-financed complex received a solar demonstra- mental agencies to provide comprehensive services to tion grant from the Federal Department of Housing and residential customers in the form of conservation inform-Urban Development and will utilize so'ar energy for ation and energy audits. Both Massachusetts and Rhode space-heating, as well as for water-heating require- Island are interested in evaluating the feasibility of ments. Electric appliances have been selected for having services like these provided by an independent cooking and other domestic uses. Electricity has also contractor. Accordingly, our retail subsidiary companies been selected for complete back-up systems for space- are participating in the funding of pilot programs which heating and water-heating in the event of the unavail- are aimed at determining the best means of implement-ability of solar energy or a malfunction of the solar ing. in both states, the Fedcral mandates under the energy equipment. Residential Conservation Services Program. Teachers wanting to introduce the subject of energy Our customers' bills now contain an Energy Con-to their elementary or high school pupils, to explore servation Report- also known as " Report Card" billing. altemate energy sources or to enlarge on the socio- A message on each monthly bill compares the custo-economic aspects of these subjects, have found our mers' current month's kilowatt-hour usage with the expanded educational services program valuable. previous year's kilowatt-hours for the same month. This The program covers a broad range of subjects: energy innovative program has been supported by newspaper conservation, electric safety, environmental issues, advertising and monthly bill inserts which urge our nuclear power, economics, and others. Resources customers to try harder to "get a better grade" next include films, multi-media kits, speakers, special month in the important subject of energy conservation. demonstrations, literature and slide presentations. A reader survey card was included with the 1978 Last summer, the University of Rhode Island pro- Annual Report of Eastern Utilities Associates. Comments posed the establishment of an Office of Energy Educa- made by survey respondents enabled us to identify tion, the first of its kind in New England. We are several specific areas of shareholder interest. These contributing to the initial funding of this Office, which is areas were discussd in a " Response to Annual Report aimed at a balanced approach to the education of pre- Survey" which we mailed to all shareholders with the college teachers in all aspects of the energy problem. November 15,1979 dividend checks. URl's program will be utilized by teachers from Massa- A Customer Satisfaction Survey was initiated in chusetts as well as Rhode Island. Fully-informed, knowl- late 1978. This is an on-going survey designed to edgeable teachers should greatly enhance the level of determir.e whether or not our customer contact energy awareness in their students, who are tomorrow's employees are perceived as being prompt, courteous, customers. knowledgeable and helpful by the customers who have Thousands of energy-conscious citizens attended occasion to call on us for information or service. We a Northern Rhode Island Energy Fair which was co- receive high marks on our quality of service from those sponsored by the Govemor's Energy Office, the local customers who have direct contact with us. gas utility company, and Blackstone Valley Electric 7
Construction in energy sales to residential, commercial and industrial Construction expenditures for utility plant were $30.5 customers reflects the construction of industrial parks, million in 1979, up $4.6 million from the previous year. hospitals and schools, the revitalization of downtown Transmission, distribution and other non-generation ex- urban centers, and other building activity. The 3% penditures were $11.1 million, up $1.7 million from 1978. growth rate also reflects the effect of continuing con-Nearly $16.9 million was spent during the year on servation efforts by all customer classes. our share of large generating units which are designated Generation-related expenditures for the Seabrook as pool-planned under the New England Power Pool units shown in the table on page 10 are based on a 5% Agreement. NEPOOL is a regional association of utilities level of ownership. This participation represents an which controls and operates the generation and trans- increase from the present 1,9% and is subject to various mission network throughout New Englani regulatory approvals. The increased participation in Construction requirements for 1980 are currently Seabrook is particularly timely in view of the cancellation estimated at $75.2 million. This includes $17.6 million of the two nuclear generating units to have been built for all non-generation expenditures, and $57.6 million by New England Power Company (NEFCO) in which the for generation. The generation estimate includes $56.6 EUA System was to have a 4.35% interest. million for the jointly-owned generating units now Final costs associated with the cancelled NEPCO either under construction or in various stages of en- project have not yet been fully established. We will gineering and design. The table on page 10 lists apply for appropriate Federal regulatory approval to Montaup's ownership interest in the only major generat- recover our portion of the total costs of the cancelled ing units presently scheduled to be operational in New project, over a five-year period commencing with the England by 1990. effective date of our next wholesale rate filing. Construction requirements for the five-year period We are conducting a preliminary feasibility study of 1980-1984 are estimated at $302.9 million. Transmission, a coal-fired generating unit. We would not expect to be distribution, and other non-generation expenditures will the lead participant in such a project, which would not total approximately $86.5 million. Expenditures for be operational until the 1990's, based on current jointly-owned generating units are expected to require estimates of capacity requirements. S216.4 million during this same period. The EUA System has sufficient capability available Present estimates of kilowatt-hour energy sales (see table on page 6) to provide sufficient capacity to reflect an annualload growth of approximately 3% for meet our estimated load and reserve requirements the period 1980-1989, with a slightly lower growth rate through 1982. Any significant delays in construction, or for the System's peak demand. The projected growth failure to obtain regulaton approval for our proposed Electric Construction Expenditures (Millions of Dollars) m System a Retail Cos. 36 - 32 28 ~ 24 20 ~ 16 12 8 4 "- 8 - 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979
g / 1 [l\ . )g
'i
;Y UJ !NI'U A i i p, ! M
,/
s
!MkdjG'.
\j~'.'q.4.Vy'kY,c ,t
.L * { ;{ \,e, \ l 7' .J
.' d \ l$ n f)
. .p. .
J.=a,m. . x.
,n f -*--4 y
,,-.-1, y . 4' -.4.h ' yy y e f .w . , . - .
'./[N_!b- bw.,.%, [.J_Na k' ,n w-L ~f1 y +*,
- 3 h-j
[ m . _b d ! M
- 4. . m, OiM, 1, ,a o i.}r f ~
u c ;_i . 7
./
,d '
1 ;._*T#,it .L%.;m,.4
- i r
h 1 4 o
- Pdo. .L+;r- a. - a 3\
52 . y WMQ b.i'En . . t h- TT a - 4W .
,2 ,.
l ? $m . E Q . M, s.s iw te 9+0 n iMLL { {M:~ik fTo$1:erlt -\+% E,
,v y k.
i , k ! b iH, { k 'l f d, , t 3,k I
- h. '~;
ha, hir
.&w # 4 j:
H m;ig 1, , s t
'"i ! f i g M j j o h,d
- N - k + $a i by r j
u5 % bMA% yt'f'l
) i .., .1m !,lc t
a iT y *k -WM~, ;wa ; i'
; y $p d(h (
s =3_ J V ek.&.7 !
)W lq h2.:lg fr" l
;j y
~-
g@; rQw_+Em,c@r m
- ur e.,a y y & &
k.:_ g._ h, -- :M 2._. d r,* - _ _.s - m E--_1r e. b. 1
# g gw.,, y;j Nc yg ry g,3 ypf p.
gg
, rM,tgV 0AY r
W- r Jo +, ~ :njif1W M
\
k i
,pvtt p
w 9,,,,p
'" y' g'$'4%
Ef.0.R,14&u l
... M $;n (N e u j
# e % t/; .
- 01) 4 : 3 u b i ,
! H4id
% i' g #
[. r,atW,..,s(p - : sy, W %i.d. a
~ ,
d,- .4 a T, E v .0, %wa a
. ~
~~i
[ g g'$ p i i Ik, 1 4 p ., s.q g J.i.. EC'M;w ee w a . ,@ r f53. f w'".}[ gn G g-A a L 1
%' an sfwk" n p ,r %n . f s..
g p g:.iy E 1 { ' - uR! y~j w%1, Sib 5 M_wk 3 ~ wr W *L % p/#Q
- l
{!\
%% $q ~,,gc h MX g N Pe k r t a
M; a ;" _ _ -
- Q; 5N;
_ bR$5 s-pg A0&CA}f-p-l._ hhots
~
_}9 4 }f'3f ~ Y S'h [
; eda v .CcY
I i l increase to 5% participation in the Seabrook units, will other things, it recommended that the NRC be re-have an adverse impact on our ability to meet System organized and it proposed procedures, including review estimated load and reserve requirements beyond 1982 of safety factors, of personnel training, and of state and with low-cost nuclear capability and may force us to local emergency plans, which should be followed by the resort to various short-term, more expensive options. NRC or its successor on a case-by-case basis before Nuclear Power issuing a new construction permit or operating license. Events beginning March 28,1979,at the Three Mile The TMI incident has also generated a multiplicity of Island Nuclear Unit No. 2 in Pennsylvania (TMI) resulted legislative proposals in Congress and various state in damage to that unit and release of a small amount of legislatures, radioactivity into the surrounding environment. While Modifications at substantial cost are likely to be there was no documented evidence of injury to the required in nuclear units now in operation. With respect public the incident nevertheless caused widespread to the units under construction at Seabrook, it is believed, concern about the safety of nuclear generating plants. based upon a preliminary engineering review, that the We cannot predict what effect the events at 'IMI, new requirements already promulgated by the NRC will which have precipitated increased opposition to nuclear result in design changes which will add several million power, may ultimately have upon the completion or dollars to the total cost of the Seabrook project. This cost of completion of the planned nuclear units or those represents less than two-tenths of one percent in under construction or upon the continued operation of additional cost, and indicates the high standards of the existing nuclear generating plants in New England. safety and construction which were already an integral
- The various New England plants utilize nuclear steam part of the project design.
supply systems which are substantially different in design The EUA System reaffirms its commitment to nuclear from that utilized at TMI and are furnished by vendors power as a safe, environmentally clean, economical other than the one which supplied TMI. The TMI incident source of energy that can substantially reduce our has prompted a rigorous re-examination of safety-related dependence on the increasingly costly and insecure equipment and operating procedures in all nuclear supply of imported fuel oil. With the lessons learned fac;lities. The plants in which Montaup has an interest from Three Mile Island, nuclear power will become even are being reviewed by their owner-operators, and those safer. Toward this end we have joined in the funding plants and all other nucicar facilities are being re. of the electric utility industry's Nuclear Safety Analysis examined by the Nuclear Regulatory Commission (NRC). Center and will join in support of other industry efforts A Presidential Commission,after investigating the cause of a similar nature. of the TMI incident, made a report in which, among EUA Generating Units Scheduled Through 1989 EUA System Interest
- Expenditures to Cost 12/31/79 Estimated Thousands (millions (millions Operating Unit Namo Location Type % of Kilowatts of $) of $) Date Seabrook No. I Seabrook, NH Nuclear 5.0 57.5(1) 76.7 9.4 1983 Seabrook No. 2 Seabrook, NH Nuclear 5.0 57.5(1) 75.4 9.4 1985 Millstone No. 3 Waterford. CT Nuclear 4.01 46 112.1 29.2 1986 Filgrim No. 2 Plymouth,- MA Nuclear 2.15 25 55.0 7.5 1987 TOTAL 186 319.2 55.5
- Estimated as of 12/31/79 (1) Assumes effectiveness of agreed upon increase in participation from present 1.9% which is subject to regulatory approvals.
'^
. e ., "1 .t'-
s .
.l' 10
^ _ _ - - -
/. NF @s , ..
( ,,./ y .l' ^, l .y+
%' : s s pn - '
nwev - sy %~c'. "^ Wh"E %+,. , k g6f>F j;
\
s = d" p p#
, il9> k* @!b.~{% A (p. , ,, p l;p
% . < .x%, v $r ,'\ o\
%n%,Wman
- g. ; m.pWE*
e n e wAs;ew &
- 4- - Ih N
%y ' "a. a y .. : L-tw .
e..
} - r _
*::r g ,..m ; n . n- .. ,.
y[. 3
. h g . wp s <;,' 7 ..,
$l]y
' w6'
'"* Z A7
]~ M 7jy d ; 'q'fj.,.3. ' j ' Ih-b%
~ '
- p 4 + ; tl P - M ,}r.4,%3-m- <
h4d
, y.. ~
x ,,{4(
,5 Q:]
y .. p,gt; \. . l'
- '<2:#.-
' yL -
- . .))
f *i'U i h$ g , h_kQ ( t ;< i , - ' 4g. -g g q.,g7_ d ut
. l f*3'?f N
x\ m = w g/ i ," A ym, pA._sp;.
+
;)dN
( e. , 1 E
.I_ ( 1 /
Se
, gJ O # _ y y p 'w + 1 4 nu ' ~
' e ~a -e m ./ 4 -"
,,e
)/. /
- t (P' ,
m , , . . - ~ v,- . f, \ j 9
< '. i
' -1 7# c a h
- p
= , uW Lf
.s;p y.se a E1 I ..
't.
- - e~G. H '4~~h
+ :
S.L I ;. g-- y i ,- y
> 5, .
3 [dfd 3 t \
<v k'. g#u[qa .
=l t.tho .k ?,
s 2rc g 5u: _,.- a 4 g[e; 4. Qp} 4 'd' { .' 11 1 ; s *j _~~. y .. L, -N;'.~.h t .;. 4 % >n h @> o !g g ,. ;'g . a n p.
~
u t p.* , wt-dbae .rs .
,.t .i;; :- . i 73 ?..} fa^lsk i N- --
#qe,- p. ;:rS u
---h. y, p -
2 __4, f, ".. . g; a!
\, m . g..m. - ; y o
-p k
T~b b e 4y n - i Q. (m\ \x. L , j% . d
,a. , !
& ig2r .b,g
. 10 Y p!.58'r' ) L
,, s . i Q. - . , 10 ;
f %,w, \ [0 ?b J d l m?W . g5U}i ~
"' k,Y? o\
NfEf i h J
.'ggbi.y mmw -_
ww WH 4N n-g4be p %~ b9cA_d.O$ Ah; ^' N_ ' ' _ . r.
- c. .6 , , e NM M..;.,& '
4' r, M% g:, h d d % W
. .s w
ma [ j.i- $} _IP yw # p.i. a .
'Ti
~
E ,,,, ++ <~#T, ~$ w 3 ,-.
-4 . .,-. a' .,
-- u w .. ~e
- 1. .-
s,
< dh.4%"1-wCE,,;,
b,sv u...;. ,>g l_ .** n-
~. 4 f., .-
.m
~_-
- - - - ~ ~ ~ ~ . ._
g ,
+
+-)
' ~ - W m, jj gg ,
, d y,
tg * .** , , . ._w..
. *EE.. ;L 4 O \\
1 p
. , p ',
1
'- lur .
# , # w w >=) b
.g w - A .,, - _) ; . ~ '
pp wM~ g,jn.a ~ P-g
}
i - p'-- m * * * ' '
. g.-- nw;
~~
4
% Y'
l l Today oil, coal, nuclear, and hydro power are the Present plans call for Eastem Edison Company to technologies that enable the electric utility industry to issue $15 mil l ion in long-term debt and $10 million in best serve the public efficiently, economically, and with preferred stock in late 1980. In addition, the Association the amounts of electricity people need. A multitude of presently plans to sell additional Common Shares, i alternative energy resources are in various stages of probably in the fourth quarter of 1980. The feasibility l research and development. When these altemative of this proposed 1980 financing program will be energy resources meet appropriate criteria for efficiency, dependent upon a number of factors, including the economy, environmental impact and quantities sufficient ability to obtain adequate and timely rate increases, to meet customer needs, the electric utility industry will conditions in the securities markets, a more favorable employ them to serve its customers. market appraisal of Association companies' securities, Financing economic conditions, and the level of kilowatt-hour In January 1979 our Massachusetts retail company sales. finalized the arrangements for $20 million in term loans The primo rate on short-term bank borrowings rose with a final maturity of December 1,1985. $19 million to unprecedented levels during 1979. The rate fluctuated represented existing debt which was due in 1979. The in a narrow range of 11 % % to 12% % for the first eight remaining $1 million was used to reduce short-term debt. months of the year. A 1% increase in September was A private placement of $22.5 million of 10% % followed by a 2% increase in October, with the prime Senior Notes due in 1999 was completed in May by the rate peaking at 15%% in mid-November before falling Association. S20 million was immt. iiately utilized to back to the year-end level of 15% %. The effect of discharge a like amount of higher-cost Serial Notes high interest rates on bank borrowings had an obvious , which had a final maturity in 1982. The remaining $2.5 adverse impact on the earnings of the Association. l million was received on November 30 and was used to Permission was received from the Securities and pay off at maturity the $2.437 million balance of the Exchange Commission to implement a revised Dividend Association's 3%% Collateral Trust Bonds. Reinvestment and Common Share Purchase Plan. The In December, the Association sold 600,000 revised Plan was made available to shareholders prior 1 additional Common Shares to underwriters through to the February 15,1980 dividend payment date. Share-competitive bidding. The pnce to the public was S12.625 holders may now reinvest dividends to acquire newly-per share, from which the Association received $12.139 issued Common Shares at a 5% discount from an aver-per share, or almost S7.3 million. The net proceeds, after age market price. In addition newly-issued shares may expenses, were applied to reduce System short-term also be purchased, by cash payment, on a monthly bank borrowings. basis, at market price but with no service charge. Since 1979 Energy (kwh) Primary Sales Source of Energy Use of Energy Other. 12.7 % v
< industrial
= 24.5% "
(Nuclear? - e 21.9% ' Fossil (Purchased) 23.5 % T 12
u VM[ W > f lYA
/
! r fi
,/ i :(,
{'
.A * [j g Q'. .
, . l1
?'
s.~. ,/ bL ) 21,1 _ . gs,'h, l, 4, .a g j/ eO
,ffl
., (! q L l7
; [',' w5 t
g" e i, .f' ..t
,'j e ;) ~
j [N N qc p
~
_' 3 3
\, o,, } W.(v+<
y c u pt. l Q,
??mfEW, s .
's;L-w+
1.a n , h,y {' / \
\ m .,th,[rf ,w(l l,. fgf~Hl.,
yfylQ ,yp g, y (f'm M'Q1h/bsfaQyme%< m _m Aw lk , 771wqn7 % %%~ ._ 1
; a
\
l; , g t y gg g 1 1 4 ; ;} - L - Ty9 %(jrTu ,1 siE : sp ;
<ew [f - -ky@o Ishm w;lI 1 hy;;
hMY w un*L - q 3 d,L 'c t ,.
- 1. u o q
N',U; ;;. , .l i O = h <[;'\>
,,m
,.ss ..4.'yL., J n
il' ],& j(*-~ i 4,0 R{f--*C'.) af '
\
A A
' }_,( ,
j JP.m 4T 'Tili$ im. g M. 51+
- s. g. .a es %. k a m
A' .:~W}=:&ce .32== ,s,. eg% Q't
,.).,-_.
,T D:v K r _ , = , y' p{L;;q y qLiy
.t f f@np
; . _Qf M -
r
, W. _. ), , i , l, (yf i o e,ay x
=, ,w -
e f( g m.
.; 7 .a
- n. j f s c., .
$, q3 a u j
.1 - t. , -
w ,1,g .,g.5- g: g g g g g, ygg
$:e I ~~: ! M h O d kd b h M I$ b u d b b b 5 w h}u,et- anen g
j=5L m & . g w'$h$m e 3 h. yer
%g;;ia Q,ysailmEr tea m n w gsay 00GBBD son m
E r a ,2 n.awn= ~voy.,,-
= y 4n.,. m m + ~y cgm 9 14*
m/q 3
.M 'l a; 7_14! w,p. ijij,p; M;i.y< ij qw.
- n. m,. 9 7 , i.p y... 3c xn - x,. m , m
- e. q j ;,, .se a :
J. qv g .,j . I,g%~y .y
.. i ,
a b ,.,. ,,
. :. g L V i ,5 ww 1.
t 4- t -~ 3 -- i b_1, 3 e s % V ]"? \ i!L{EA L L.-L SMLN; hA ! g: J .
# 2 " 3 b W _ S_ G I R d R .
DOxM
l newly-issued shares are utilized to service the revised 1978 by our Massachusetts retail subsidiary. The Plan, the Association is provided with additional equity DPU disallowed any increase in rates. The decision funds to meet its on-going construction program. The was appealed to the Massachusetts Supreme Judicial revised Plan is also available to System employees. For Court on the basis that the DPU allowed an inadequate information regarding the Plan see page25. return on common equity and, in addition, made certain Rates errors in its treatment of income tax-interest deduction A settlement was reached with intervenors in the allocations. On January 31,1980, the Court denied our rate case involving Montaup Electric Company's whole- appeal, but ordered the DPU to re-examine the calcula-sale-for-resale rate M-4. On June 15,1979 the Federal tion of the interest deduction allocation. We petitioned Energy Regulatory Commission ordered the Company to the Court for a rehearing in this proceeding but our refund a portion of the monies collected during a seven- petition was denied by the Court on February 29,1980. month period under the rates as originally filed. The The revised purchased power cost adjustment refunds to our Massachusetts customers have been clauses which have been in effect in our retail subsidiary completed. The refunds to our Rhode Island customers companies since 1978 have brought about a more are scheduled to be processed in April 1980 as a result equitable and timely matching of revenues with changes of different refund procedures of the Rhode Island in the cost of purchased power. The computation of each regulatory agency. cost adjustment billing factor and the periodic reconcilia-On January 5,1979, the Rhode Island Public Utilities tion of purchased power revenues and expenses are Commission had remanded to it by the Rhode Island reviewed and approved by the appropriate state , i Supreme Court a 1976 rate decision in which the PUC regulatory commission. In addition, in each state the ' had ordered a " freeze" on the revenues derived from Attomey-General's office is an active participant in each the first 300 kilowatt-hours of monthly consumption by review session. residential customers. Local Chambers of Commerce had in 1978, Congress enacted the Public Utility felt that this treatment constituted customer discrimina- Regulatory Policies Act. PURPA is a complex piece of tion. As a result of the Supreme Court remand order, the - legislation which is designed to bring about sweeping PUC held hearings in February and March,1979 and changes in rate structures, pricing, and cost method-approved revised rate tariffs which reflected the ology. Extensive information-reporting requirements - elimination of the " freeze" and a resultant revenue shift must be complied with on a specific time schedule. The of $0.9 million from other customer classes to the thrust of PURPA is that Federal intervention in rate-residential customer class. related matters will result if the state regulatory agencies Our Rhode Island company filed _an application do not implement or give good reasons for. not imple-with the PUC on August 15,1979 for additional annual menting the various provisions of PURPA. It is too soon revenues of $4 million. Hearings commenced on January to predict the effects that this legislation will have on the 7,1980. Statutes require that an order be issued regard- broad spectrum of this nation's utility rates and pricing. ing this application no later than May 15,1980. Optional time-of-use rates have been made avail - ; On June 28,1979, the Massachusetts Department able to customers of our Massachusetts retail subsidiary of Public Utilities issued its decision in response to the company.The rates are based on peak demand and
$2.1 million rate increase application filed in December time differential pricing and are intended to determine whether or not customers are willing to change their patterns of energy consumption. Customer interest in these optional rates has been disappointing, largely due to the lack of a substantial price diffeience between !
l 1 i
-1 4
)
h
.14 =
V . f
on-peak and off-peak rates. Massachusetts law requires Rhode Island. Newport's board of directors has agreed that the purchased power cost adjustment clause be to consider and respond to any proposals EUA may applied uniformly to all kilowatt-hours regardless of the make after its investigation. Should acquisition appear time of usage. Unfortunately, this tends to virtually desirable, the approval of shareholders, various state eliminate the base rate differential between on-peak and Federal agencies, and other interested parties would and off-peak energy. Remedial action must be taken be required. by the Massachusetts legislature if meaningful time After an eighteen-day work stoppage - the first in differential pricing is to be implemented throughout its history- the then-Fall River Electric Light Company the state. completed negotiations for a two-year labor contract in late 1977 the Massachusetts DPU promulgated which will expire in June 1981. The union local involved regulations which will require electric utilities to adopt represents approximately 11% of the EUA System em-mandatory rate structures based on peak load and time ployees. Montaup Electric has a labor contract which differential pricing. We have developed a plan for will expire in mid-July 1980. Montaup's union local implementing the regulations and have filed that plan represents approximately 9% of the total System em-with the DPU. The implementation period is expected to ployees. The remaining 80% of our employees are not be of considerable duration. represented by any bargaining unit. A two-year " time-of-day" rate experiment spon- " Spectrum", the newsletter-magazine which is sored by the Rhode Island Public Utilities Commission published monthly for our employees and retirees, re-and the Federal Department of Energy involved the ceived a first-place award from the Public Utilities Com-cooperation and participation of our Rhode Island municators Association in the 1979 national "Better subsidiary. The experiment has been completed, and we - Communications Competition." One of " Spectrum's" continue to gather metering data under our on-going objectives is to provide employees with up-to-date load rescarch program. The Department of Energy's factual information on developments which affect their project manager, a private consultant, has not yet issued jobs, their company, and their industry, a report on the results of the experiment. The research Donald G. Pardus became Vice President and program will provide important information tuhich will Treasurer of the Association in June 1979. Mr. Pardus's be used in cost-of-service studies, rate design, cost experience in the electric utility industry includes more allocation studies, and load forecasting, than twenty years of employment by another public
@rganization utility holding company.
A further step in our corporate reorganization and Francis I. Patterson retired as Senior Vice President simplification was completed on July 31,1979 with the of the Association in September 1979, after a 45 year merger of Fall River Electric Light Company into Brock- period of service to the utility industry. ton Edison Company. On August 1, Brockton Edison's name was changed to Eastern Edison Company. Eastern Edison Company owns 100% of Montaup Electric Com-pany, our generation and transmission subsidiary. A preliminary analysis is under way concerning the possibility of acquiring Newport Electric Corporation. Newport Electric is an investor-owned retail electric dis-
. tribution company which provides electricity to approxi-mately 25,000 customers in the City of Newport and the '
Towns of Jamestown, Middletown, and Portsmouth, i I l t 15
Eastern Utilities Associatos and Subsidiary Companies Censolidited incsme St:t: ment Years Ended December 31, (In Thousands Except Numbers of Shares and Per Share Amounts) 1979 1978
~
Operating Revenues (A) $ 185,875 $ 159,195 Operating Expenses: Operation - Fuel 82,133 56,295
- Purchased Power - Net (I) 22,403 21,577
- Other _
28,6_6_2_ 27,330, 133,198 105,202 Maintenance 5,153 5,210 Depreciation (A) 9,729 9,377 Amortization of Investment Credit (Credit) (A) (446) (414) Taxes - Other Than Federal Income 12,724 13,286
- Federal Income (Credit) (B) (48) 4,804
- Deferred (Credit) (A) (B) 2,515 (122)
Total Operating Expenses 182,825 137,343 Operating income 23,050 21,852 Equity in Earnings of Nuclear Generating Companies 807 679 Allowance for Other Funds Used During Construction (A) 1,608 982 Other income - Net 23_8 _ __. _ _7._3 Incomo Before Interest Charges 25,703 23,586 interest Charges: Interest on Long-Term Debt 11:401 10,385 Amortization of Debt Expense and Pretnium 123 210 Other Interest Expense 8,680 5,639 Allowance for Borrowed Funds Used During Construction (Credit) (A) (4,660) (2,937) Not interest Charges 15,544 13,297 income After Interest Charges 10,159 10,289 Prefered Dividends of Subsidiaries 1,633 1,633 Consolidated Net income $ 8,526 $ 8,656
=== ,
Average Common Shares Outstanding 4,871,667 4,266,921 ' Consolidated Earnings Per Average Common Share $1.75 $A03 Dividends Paid Per Ccmmon Share _
$1.60 _$1.60 Consolidated Retained Earnings Statement Years Ended December 31, l (In Thousands) 1979 1978 Consolidated Retained Earnings - Beginning of Year $22,998 $21,116 l Consolidated Net income 8,526 8,656 l Total 31,524 29,772 Dividends Paid - EUA Common Shares 7,738 0,774 Consolidated Retained Earnings - End of Year (E) ,$_23,786' $22,9_98 l
16 The accompanying notes are an integral part of the financial staternents.
Eastern Utilities Associates and Subsidiary Companies C n= lid ted St:t:m:nt cf Ch nges in Fin:ncial P:citi:n Years Ended December 31, (In Thousands) 1979 1978 SOURCE OF FUNDS: From Operations: lacome After Interest Charges $10,159 $10,289 Principal Non-Cash Charges (Credits) to income: Depreciation (A) 9,992 9,592 Amortization of Debt Expense and Premium 123 210 Deferred Federalincome Tax (A) 2,360 1,378 investment Tax Credits, Less Amortization (A) 514 2,751 Equity in Undistributed Earnings of Nuclear Generating Companies (169) Allowance for Funds Used During Construction (A) (6,268) (3,920) Total Funds from Operations 16,711 20,300 External Sources: Increase (Decrease)in Short-Term Notes Payable to Banks 12,850 (1,400) Proceeds from Sale of Common Shares 7,331 9,001 Proceeds from Sale of Term Notes 20,000 Proceeds from Sale of Senior Notes 22,500 Other - Net 921 Total Funds from Extemal Sources 62,681 8,522 Total Source of Funds $79,392 S28,822 APPLICATION OF FUNDS: Construction Expenditures $30,498 $25,948 Less: Allowance for Funds Used During Construction (6,268) (3,920) Net Construction Expenditures 24,230 22,028 Subsidiary Preferred Dividends 1,633 1,633 EUA Common Dividends 7,738 6,774 Ret.rement of Long-Term Debt 37,637 3,880 Increase (Decrease) in Working Capital 7,142 (5,875) O'.her AppliccMon - Net 1,012 382 Total Application of Funds $79,392 $28,822 CHANGES IN COMPONENTS OF WORKING CAPITAL j (Excluding Short-Term Debt): l Increase (Decrease) in Current Assets: Cash and Temporary investments $ (3,580) $ 1,938 Accounts Receivable 5,332 (822) Materials and Supplies 7,802 (2,496) O her Current Assets 223 (229) 9,777 (1,609) increase (Decrease) in Current Liabilities: Accounts Payab!e 4,557 817 Accrued and Deferred Taxes (1,452) 1,177 Other Current and Accrued Liabilities (470) 2,272 2,635 4,266 increase (Decrease) in Working Capital $ 7,142 $ (5,875) l The accompanying notes are an irtegral part of the financial statements. 17
Eastern Utilities Associates and Subsidiary Companies Consolid:ted B lance Sheet December 31, (In Thousands) 1979 1978 Assets Utility Plant and Other investments: Utility Piant (at cost) (H): In Service $322,684 $312,601 Less Accumulated Provision for Depreciation (A) 94,61_8, 87,728 Net Utility Plant in Service 228,066 224,873 Construction Work in Progress 61,493 46,790 Net Utility Plant 289,559 271,663 Nonutility Property -- Net 1,630 992 Investments in Nuclear Generating Companies (at equity) 7,401 7,232 Other Investments (at cost) 67 _ 67 Total Utility Plant and Other Investments 298,657 279.954 Current Assets: Cash and Temporary investments (G) 2,187 5,767 Accounts Receivable (A): Custcmers, Less Allowance for Doubtful Accounts of $200,000 and 5423,000, Respective;y 25,288 20,507 Others 879 328 Materials and Supplies (at average cost): Fuel 10,702 3,329 Plant Materials, Operating Supplies and Other 4,646 4,217 Other Current Assets 559 337 Total Current Assets 44,261 34,485, Deferred Debits: Unamortized Debt Expense 739 699 Extraordinary Property Loss (H) 2,065 Other Deferred Debits 3,875 3,562 Total Deferred Debits 6,679 4,261 Total Assets $318,700 g49,597 _ Liabilities and Capitallration Capitalization: Common Equity $ 94,260 $ 86,299 Non-Redeemable Preferred Stock of Subsidiaries 15,079 15,079 Redeemable Preferred Stock of Subsidiaries 5,607 5,921 Long-Term Debt 123,485 97,870 Total Capitalization 238,431 205,169 Current LiabilHies: Long-Torm Debt Due Within One Year 20,770 Notes Payable - Banks (G) 63,300 50,450 Accounts Payable 13,336 8,780 Redeemable Preferred Stock Sinking Fund Requirement 314 Customer Deposits 1,270 1,143 Taxes Accrued (B) 2,550 4,051 Deferred Taxes (A) (B) 1,573 1,522 Interest Accrued 2,752 1,926 Other Current Liabilities 533 1,957 Total Current Liabilities 85,628 90,599 Deferred Credits: Unamortized Investment Credit (A) 10,186 9,673 Other Deferred Credits 69 336 Total Deferred Credits 10,255 10,009 Accumulated Deferred Taxes (A) (B) 15,283 12,923 Total Liabilities and Capitalization _$_3,49 597 $318,700 18 Tho accompanytng notes are an integral part of the financial statements.
Eastern Utilities Associates and Subsidiary Companies , Consolidated Statement cf C: pit:liz: tion December 31, 1979 1978 1979 1978 (In Thousands) (Capitalization Ratios) Eastern Utilities Associates: Common Shares
$5 par value, authorized 7,000,000 shares, outstanding 5,438,969 shares (1978, ,
4,835,598 shares) (C) $ 27,195 $ 24,178 Other Paid.Ir, Capital (C) 44,382 40,066 Common Shares Expense (1,103) (945) Retained Earnings (E) 23,786 22,998 Total Common Equity 94,260 86,299 39.5 % 42.1 % Preferred Stock of Sut,sidiaries: Non Redeemable Preferred (C): Blackstone Valley Electric Company: 4 25%, $100 par value 35,000 sharest 3,500 3,500 5 60% $100 par value 25,000 sharest 2,500 2,500 Premium 129 129 Eastern Edison Company: 4 64%, $100 par value 60,000 sharest 6,000 6,000 8.32%, $100 par value 30,000 sharest 3,000 3,000 Premium 48 48 Expense (98) (98) 15,079 15,079 6.3 7.3 Redeemable Preferred (D): Eastern Edison Company: 13 60%, $100 par value 60,000 sharest 6,000 6,000 Premium 8 8 Expense (87) (87) Sinking Fund Requirement (314) ___ 5,607 5,921_ _ 2.4 2.9 Long-Term Debt (F): Eastern Utikties Associates: Collateral Trust Bonds,3%% due 1979 2,437 Serial Notes duc 1982 20,000 Senior Notes 10% % due 1999 22,500 Eastern Edison Company: First Mortgage and Co: lateral Trust Bonds: 3%% due 1983 6,800 6,800 7%% duc 1983 (second series) 5,000 5,000 4%% duc 1983 (third series) 2.106 2,196 3%% due 1985 6,%0 6,000 12% due 1985 (second series) 19,800 20,000 4%% due 1987 3,000 3.000 4va% duc 1988 3,000 3,000 4 % % due 1993 5,000 5,000 6%% due 1997 7,000 7,000 8%% due 1999 5,000 5,000 7%% duo 2002 8,000 8,000 8%% due 2003 10,000 10,000 Note Payable due 1979 15,000 Note Payable due 1984 (Prime x 104.8%) 5,000 Note Payable due 1985 (Prime X 109%) 15,000 Unamortized Premium 189 207 123,485 118,640 Less Portion Due Within One Year 20,770 Total 123,485 97,870 51.8 ,47,7 Total Capitalization $238,431 $205,169 100.0 % 1000% ( Autnotized and outstanding The accornpenying notes are an integral part of the finMcial statements. 19
Erst:rn Utiliti:s Associ:t:s and Subsidiary Comp:ni:s Notes TO Consolidated Financial Statements December 31,1979 and 1978 (A) Summary of Significant Accounting Policies: Operating Revenues: Revenues are based on General: Eastern Utilities Associates (EUA) and billing rates authorized by applicable Federal and EUA Service Corporation (Service) are subject state regulatory commissions. The retail subsidiaries to the jurisdiction of the Securities and Exchange follow the policy of accruing the estimated amount Commission under the Public Utility Holding of unbilled revenues for electricity provided at the Company Act of 1935 and Service's accounts are end of the month to more closely match costs and maintained under the system of accounts prescribed revenues. The amount of estimated unbilled by that Act. The accounting policies and practices revenues included in accounts receivable at of the retail subsidiaries, Blackstone Valley Electric December 31,1979 and 1978 amounted to Company (Blackstone) and Eastern Edison Company S3,106.254 and $2,930,000, respectively. (Eastern Edison), and of Montaup Electric Company As of April 1,1979 Montaup began classifying (Montaup) are subject to regulation b/the Federal sales of electricity to the New England Power Pool Energy Regulatory Commission (FERC) and two as interchange power and these amounts are state regulatory commissions with respect to their reflected as credits to purchased power expense. rates and accounting. The retail subsidiaries and Amounts reported for periods prior to April 1,1979 Montaup conform with generally accepted have been reclaasified to conform with classifica-accounting principles, as applied in the case of tions used since that date. regulated public utilities, and conform with the Federal income Taxes: The general policy of accounting requirements and rate-making practices EUA and its subsidiaries with respect to accounting of the regulatory authority having jurisdiction. for Federal income taxes is to reflect in income the Effective July 31,1979 Fall River Electric Light estimated amount of taxes currently payable and to Company (Fall River) was merged into Brockton provide for deferred taxes on certain items subject Edison Company (Brockton) and on August 1,1979 to timing differences. The significant items which Brockton's name was changed 10 Eastern Edison. are subject to provision for defenad Federal incomo A description of the significant accounting policies taxes are as follows: follows 1. Additional depreciation resulting from Principles of Consolidation: The consolidated the use of accelerated methods for tax financial statements include the accounts of purposes. Eastern Utilities Associates and its subsidiaries 2. Accrued unbilled service revenues and (Blackstone, Eastern Edison. Montaup and Service). fuel adjustment costs recoverable in subsequent All material intercompany balances and trans- periods. actions have been eliminated in consolidation. 3. Abandonment Loss on New England Utility Plant: Utility plant is stated at original Power Company Unit Nos.1 and 2. (See cost. The cost of additions to utility plant includes Note H) contracted work, direct labor and material, alloc- As permitted by the regulatory commissions it able overhead, allowance for funds used during is the policy of the subsidiaries to defer the annual const<uction and indirect charges for engineering investment tax credits and to amortize these credits and suoervision. Replacement of minor items of over the productive lives of the related assets. property and the cost of repairs is charged to Allowance for Funds Used During Construc-maintenance expenses. At the time depreciable lion: Allowance for funds used during construction properties are retired or otherwise disposed of, the (AFUDC) is defined in the applicable regulatory original cost, together with removal cost, less system of accounts as "the net cost during the salvage, is charged to accumulated provision for period of construction of borrowed funds used for depreciation and the cost of related replacements cor.struction purposes and a reasonable rato upon is added to utility plant. other funds when so used." Depreciation of Utility Plant: For financial The combined rate used in calculating AFUDC statement purposes, depreciation is computed on was 11.50% in 1979 and ranged from 8.50% to the straight-line method based on estimated useful 10.50% in 1978. lives of the various classes of property. The AFUDC amounted to 73.5% and 45.3% of Provisions for depreciation, on a consolidated consolidated net income for the years 1979 and basis, were equivalent to a composite rate of 3.2% 1978, respectively. in 1979 and 1978 based on the average depreciable property balances at the beginning and end of each year. 20
(B) Federallncome Taxes: n 'he event of involuntary liquidation the non-Federal income tax expense for the years 1979 redeemable preferred stock of Blackstone and and 1978 were less than the amounts computed by Eastern Edison is entitled to $100 per share. In the applying Federal income tax statutory rates to book event of voluntary liquidation, or if redeemed at the income subject to tax for the following reasons: option of those companies, the non-redeemable (In Thousands) 1979 ig preferred stock is entitled to: Blackstone's 4.25% issue, $104.40; Blackstone's 5.60% issue, $103.82; Current Federal income Taxes Per Dooks: Eastern Edison's 4.64% issue, $102.98; Eastern charged to ther neome Edison's 8.32% issue, S107.70 prior to 10-1-83; Total 4,875 $105.62 prior to 10-1-88; $103.54 prior to 101-93 (40) Delerred Federal income Tax 2,411 68 and $102.30 per share thereafter. Total Federal income Tax Expense 2,371 4,943 Under the terms and provisions of the issues Net income Per Books 10,159 10,289 of preferred stock of Blackstone and Eastern income Before Federal income Tax Edison, certain restrictions are placed upon the Expense $12,530 $15.232 payment of dividends on common stock by each mputed at Natb'" nd $ 5,745 $ 7,298 company, but at December 31,1979 and 1978 the (Decrease) in Federal income Tax on respective capitalization ratios were in excess of account of items Capitalized - the minimum which would make these restrictions Allowance for Funds Used During effective. Construction (2,883) (1,881) Overheads (377) (372) (D) Redeemable Preferred Stock: other (114) (102) Eastern Edison's 13.60% Preferred Stock is entitled Federal incomo Tax Expense $_2,371_ $ 4,943 to a mandatory sinking fuid sufficient to redeem Effechve Federal income Tax Rate.% 18.92 32.45 3,000 shares during each 12 month period, com-The provision for deferred income taxes mencing October 1,1980, at a redemption price resulting from timing differences is comprised of equal to the initial public offering price plus accrued the following: dividendo. Eastem Edison has the non-cumulative option to redeem an additional 3,000 shares 1979 1978 during each period at such price. Excess Tax Depreciation $ 1,264 $1,394 Sinking fund redemption requirements for each computer conversion costs (135) (48) of the five years through 1984 are approximately Eshmated Unbilled Revenue 703 (1.288) Abandonment Loss
$314,000 Eer Year' 602 Effect of Stato and Local Taxes 103 (190) (E) Retained Earnings:
Other - Not (22) 10 Under the provisions of the Note Agreements Total s 2,515
$ (122) dated May 23,197P relating to EUA's Senior Notes, Retained Eamings in the amount of $15,787,430 as At December 31,1979 unused investment tax of December 31,1979 was unrestricted as to the credits of approximately $4,900,000 are available to payment of cash dividends on EUA Common Shares.
reduce future Federal income tax liability. (F) Long-Term Debt: (C) Capital Stock: Under terms of the Indenture securing the First The changes in the number of common shares Mortgage and Collateral Trust Bonds, Eastern outstanding and the increases in other paid-in Edison is required to deposit annually with the capital during the year ended December 31,1979 Indenture Trustee, cash in an amount equal to 1 % end 1978 were es follows: of the greatest aggregate principal amount of bonds Number of Common Shares Issued previously authenticated and delivered. Epiove. Incesse Where permitted, Eastern Edison has satisfied olnT$,p Pubhc ad sinking fund requirements for 1979 and 1978 Plan Sales Total Capital Year g gg g 1979 3,371 600,000, 603,371 $4,313,750 by depositing cash or by certifying to the Indenture 1978 2,736 600.000- 602,736 5.987,408 Trustee "available property additions" and Eastern Edison expects to continue such practice during There were no changes in the number of shares the year 1980. of non-redeemable preferred stock during the years ended December 31,1979 and 1978. 21
The First Mortgage and Collateral Trust Bonds Substantially all of the physical property of of Eastem Edison and Eastern's Note Payable Blackstone is pledged to secure a $25,000,000 due 1985 are collaterialized by securities of short-term note to a bank. Montaup in the principal amount of $139,975,000. In (H) Jointly-Owned Facilities: addition the First Mortgage and Collateral Trust At December 31,1979 and 1978 Montaup owned the Bonds of Eastern Edison are collateralized by following interests in jointly-owned electric substantially all of its utility plant. facilities (dollars in thousands): The Note Agreements relating to EUA's 10% % o.e. , si, im Senior Notes due March 1,1999 require, for the ,,,,,,, , , , , , , y,,,,,g py;', coa $,t'gt'oa issuance of additionallong-term debt by EUA, that un,i o.n.o s nnc. o.or.c tion s.nnc. Proar.is at the time of such issuance and immediately there- Canal No. 2 50.0 % $63X70 $8,823 $54,847 $ after (i) long term debt of EUA shall not exceed 30% wyman of EUA's total capitalization, (ii) consolidated No. 4 W 3.871 116 3,755 fong-term debt of EUA and its subsidiaries shall SYo$sI not exceed 65% of consolidated total capitalization, and 2 1.90 40 40 18.792 (iii) the sum of consolidated long-term debt, Pilgrim No.2 2.15 7,520 preferred stock of subsidiaries and any minority N*o'. [ 4.01 29,221 interests in subsidiaries shall not exceed 70% Montague of consolidated total capitalization, and (iv) consoll- N s1
,n 2 2.00 937
- dated net income available for fixed charges for 12 consecutive calendar months within the on.mber St.1978 preceding 15 calendar months shall have been at ,,,,,,, , , , , , , y,,,,,,,,g py;t, coa 5&uctjoa least twice the sum of consolidated interest charges unit own.o some. o.orecianon s.nnc. Progress _
on long-term debt and dividend requirements on CanalNo.2 50.0 % $63,415 $6,574 $56.841 $ 64 preferred stock of subsidiaries. WY,y,f4 1.96 3,568 9 3,559 The aggregate amount of cash s,nking i fund seabrook requirements and maturities for each of the five No.'s 1 4 years following 1979 are: none in 1980,1981 and PHg0 No.2 1982, $13,996,000 in 1983 and $11,125,000 in 1984. Millstone (G) Notes Payable to Banks: No.3 4.01 22,365 During 1979 and 1978 the EUA System followed Montague g the practice of borrowing from banks for construc- and 2 2.00 830 tion and other working capitat requirements on a short term basis at the prevailing prime rate of The foregoing amounts represent Montaup's in'erest with compensating balances of up to 20% of interest in each facility. Financing for all such amounts borrowed or at an equivalent or lower interest is provided by Montaup. Montaup's share effective rate. At December 31,1979 and 1978 the of related operating and maintenance expenses is lowest prevailing prime rates were 15.00% and included in its corresponding operating expenses. 11.75% and the average effective rates were Montaup has a 4.35% ownership interest 15.47% and 13.36%, respectively. A summary of in two nuclear generating units designated as short-term unsecured bank borrowing information NEP 1 and 2 (lead participant, New England for the years 1979 and 1978 is as follows: Power Company-NEFCO) proposed to be built at a site in Charlestown, Rhode Island. On December Maulmum Month Weighted Unused Un.s 4,1979 an order was issued by the United States oi""*I"'o',ni $E'nN int.I.'slifi. 8.'c.'m"s'r's's District Court for the District of Columbia which (M Thoo. ands) upheld a previous decision by the U.S. General 1979 11-30 844,300 $32,019 - 14.3e% - $se,500 Services Administration barring transfer of the site 1978 11-30 $33,550 $27,350 ' 10.16 % $15.275 property to NEPCO. As a result of the adverse court decision, the Board of Directors of NEPCO, on Except for daily working funds and like items, December 17,1979, approved the cancellation of substantially all of the funds included in cash the units and NEPCO has concluded that all capital represent compensating balances maintained in costs relative to NEP 1 and 2 should be written off respect of bank borrowings, as being valueless. As of December 31,1979 Montaup had incurred approximately $2,065,000 of costs (including allowance for funds used during 22
f construction) in connection with the project. oM Tsia,. et t si. mated Additional costs (which are not expected to be om, SQ4 g,8','N ,4 %, material) relating to cancellation charges, or salvage, gg;;g if any, are undeterminable at this time. Montaup Taunton Municipat Ck3 has reported the costs of the abandoned project as g,w 8run w ck 1986 41 3 an extraordinary property loss and has requested Yankee Atomic Power Co. 1991 4.50 828 permission from the Federal Energy Regulatory Conn. Yankee Atomic Commission (FERC) for approval to amortize these Power Co. 1998 4.50 2.004 ca cct c Co. costs, net of the related tax savings to be realized 9 1998 25.00 4.072 in the EUA System's 1979 Federal income tax return, Pilgrim Unit No.1 2000 11.00 7.800 over a period of five years and will request approval Maine Yankee Atomic P co 2002 4.00 1,968 fron, FERC for recovery of such costs commencing y, with the effective date of its next rate fihng. Power co. 2002 __2.50 1.116 (l) Commitments: $21.928 At December 31,1979 and 1978, the System com-panies had leases covering certain facilities and The EUA System's construction program is equipment. Total rental expense for these leases for estimated at $75,200,000 for the year 1980 and the years 1979 and 1978 amounted to approximately $302,900,000 for the years 1980 through 1984
$993,000 and $876,000, respectively. (including allowance for funds used during All of the System companies' leases are treated construction).
as operating leases for rate making purposes and (J) Contingencies: have been accounted for as such; however, certain Montaup currently has a 1.90% ownership interest lease agreements meet the criteria requiring cap- in each of the two 1,150 megawatt nuclear generat-italization as set forth in the Statement of Financial ing units being constructed in Seabrook, New Accounting Standards No.13. If such leases were Hampshire. In addition, approval has been requested capitalized, the amounts thereof would not have a from the Massachusetts Department of Public material effect on assets, liabilities, or related Utilities to purchase an additional 3.10% interest expenses. from three other participants. All of the necessary Future minimum rental payments at December state and federal regulatory ap rovals for the con-31,1979 for such leases are estimated to aggregate struction of the units have been obtained, and S867,000 in 1980, S837,000 in 1981, $704,000 in construction is in progress; a petition for a Nuclear 1982,5609,000 in 1983, $325,000 in 1984 and Regulatory Commission (NRC) review of the seismic S3,285,000 for years after 1984. design issue, as to which one member of the NRC The entire cost of the Employees' Retirement Appeal Board dissented, is pending before the NRC. Plan of Eastern Utilities Associates and its Subsidiary The approvals have been consistently opposed by a Companies is assumed by the respective companies. number of intervening groups, resulting in significant it is the policy of the companies to fund the pension delays and greatly increased cost. Various court costs accrued, including amortization of past service appeals from federal regulatory approvals have been costs on a 20-year basis. As of January 1,1979, the decided in favor of the lead participant in the project, latest valuation date, plan assets exceeded the but one appeal, in which intervenors are challenging actuarially computed value of vested benefits by the refusal of the NRC in 1976 to suspend the con-approximately $481,000. As of the same date, total struction permits, is still pending in the United unfunded past service liability was S4,149,300. States Court of Appeals for the First Circuit. Further Persion expense charged to operating court appeals are possible and there is pending expenses and to construction and other accounts before the NRC staff a request of an intervenor for was $1,948,967 and $193,720, respectively, in 1979 issuance of show cause orders as to why the con-and $2,005,449 and $162,489, respectively, in 1978, struction permits should not be suspended or The EUA System is committed under purchased revoked on grounds concerning the NRC's failure power contracts to pay demand charges whether or to require development of evacuation plans and not energy is received. The following table sum- related matters. An operating license must be marizes information concerning such contracts at sought and obtained from the NRC before the units December 31,1979. can be put into operation. The lead participant in the Seabrook project, Public Service Company of New Hampshire (PSNH), which presently owns an undivided 50% ownership interest in the units, has stated that it is experiencing serious difficultes in 23
financing its construction program because of state (L) Replacement Cost Information (Unaudited): regulatory changes denying the inclusion of con- The impact of the rate of inflation experienced in struction work in progress in its rate base. Among recent years has resulted in replacement costs of other steps to reduce its construction expenditures, productive capacity that are significantly greater PSNH decided in March,197'1 to reduce its owner- than the historical costs of such assets reported in ship interest in the Seabrook plant to 28% by the System's financial statements. In compliance offenng ownership interests to other utilities. with reporting requirements, quantitative replace-Through October 31,1979, subject to receipt of ment cost information will be disclosed in the requested rego.utory approvals, other utilities System's 1979 Annual Report to the Secunties and (includin0 Montaup) have committed to acquiro Exchange Commission on Form 10-K. only approximately 15% of the additional plant being offered. As of December 31,1979 Montaup's invest-nwnt in the project amounted to approximately
$18,800,000. Montaup is unable to predict what Auditors' Report to the Trustees of effect further administrative and court actions or Eastern Utilit.ies Assoc.iates financing problems may have on the Seabrook project or its cost. We have examined the consolidated balance sheets Montaup also has a 2.00% ownership interest in and statements of capitalization of Eastern Utilities a planned nuclear project, Montague Unit Nos.1 Associates and subsidiary companies as of December 31,1979 and 1978 and the related con-and 2 (lead participant, subsidiary of Northeast Utihties). Expenditures on this project have been solidated statements of income, retained earnings reduced to a minimum and the project schedule and and changes in financial position for the years then related projected capital expenditures are uncertain ended. Our examinations were made in accordance at this time. As of December 31,1979 Montaup with generally accepted auditing standards, and had spent approximately $937,000 in connection accordingly included such tests of the accounting with its interest in the Montague project. Final costs records and such other auditing procedures as we associated with cancellation of the project,if considered necessary in the circumstances.
ultimately necessary, cannot now be ascertained. In our opinion, the financial statements referred in the event of such cancellation, Montaup would I above present fairly the consolidated financial apply for appropriate regulatory approval to recover Position of Eastern Utilities Associates and sub-its total costs over an appropriate future period. sidiary companies at December 31,1979 and 1978 The extent to which rate relief, if any, would permit nd the consolidated results of their operations recovery of the project costs cannot be determined nd changes in their financial position for the years at this time, then ended, in conformity with generally accepted (K) Quarterly Financial Data (Unaudited): accounhng principles applied on a consistent basis.
"""?".Z 7$ 5 '07 " ALEXANDER GRANT & COMPANY Ouager inded "L7 3"f,",f "fdr'- T,7 Boston, Massachusetts Operating Revenues 014 43.138 4 006 5 17 Operating income 6.057 5.513 5.735 5.746 Consohdated Net income 2,972 2.379 2,574 2.234 Earnings Apphcable to EUA Common Shares 2.564 1,971 2,166 1,826 Earnings Per Averago Common Sharo S 0.53 $ 0.41 $ 0.45 $ 0.36 Ouarter rnded 578 978 98 7 Operating Revenues 44.482 36.855 38.042 39,816 Operating income 6,952 4.608 5,191 5,101 Conschdated Net income 4,109 1,766 2.482 1,931 Earnings Apphcable to EUA Common Shares 3,701 1,358 2.074 1,523 Earnings Per Average g Common Share $ 0 87 $ 0.32 $ 0.49 $ 0.35
f
- Common Shara Information The common shares of Eastern Utilities Associates are listed on the New York Stock Exchange and the ticker symbol is "EUA" The annual market price range of common shares is shown in the Consolidated Operating Statistics on page 29. The high and low sales prices and dividends paid for the past two years by quarters are shown below:
Quarterly Dividend Year High Low Per Share __ 1979 First Quarter 15 % 14 % $0.40 Second Quarter 14 % 13 % $0.40 Third Quarter 15 13 % $0.40 Fourth Otarter 14 % 11 % $0.40 1978 First Quarter 17 16 $0.40 Second Quarter 16 % 15 % S0.40 Third Quarter 16 % 15 S0.40 Fourth Quarter 16 % 14 % S0.40 Dividend Reinvestment and Stock Purchase Plan A Dividend Reinvestment and Common Share Purchase Plan is available to all registered shareholders , and System company employees. I Participants in the Plan are given a 5% discount on shares purchased with reinvested dividends. Participants may also send in additional cash payments as frequently as once a month to purchase additional shares with no discount. Optional cash payments are limited to a maximum of $5,000 per calendar quarter and must be received not later than the 5th day preceding the investment Date. The investment Date for all shares purchased under the Plan is the dividend payment date for the months in which dividends are payable. For each month in which a dividend is not payable the Investment Date is the 15th of such month. The price of shares purchased is based on the average closing prices of EUA shares for the five trading days preceding each investment date. Complete details regarding the Plan may be obtained by wnting: The First National Bank of Boston EUA Automatic Dividend Reinvestment Plan P.O. Box 1681 Boston, Mass. 02105 i Transfer Agent Trustee and Registrar l The First National Bank of Boston State Street Bank and Trust Company P.O. Box 644 225 Franklin Street Boston, Mass. 02102 Boston, Mass. 02110 (Common and Preferred Shares) (Bonds of all series) l 25
Eastern Utilities Associates and Subsidiary Companies Supplementary information To Disclose The Effects of Changing Prices The following supplementary information is supplied in accordance with the requirements of the Statement of Financial Accounting Standards No. 33 for the purpose of providing certain information about the effects of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than a precise measure, since a number of subjective judgments and estimating techniques were used in developing this information. Constant dollar amounts represent histoncal costs stated in terms of dollars of equal purchasing power, as measured by the Consumers Price Index for all Urban Consumers. The current year's provision for depreciation on a constant dollar basis was computed by applying the average composite depreciation rate to the average depreciable balance of property, plant and equipment af ter adjusting such accounts for inflation. Fuel inventories, the cost of fuel used in generation, and purchased power for resale have not been restated from their historical cost. Re0ulation limits the recovery of fuel and purchased power costs through the operation of adjustment clauses. For this reason fuel inventories are offectively monetary assets. Consolidated Statement of income From Continuing Operations Adjusted For Changing Prices For the year ended December 31,1979 Adjusted for General inflation As Reported (Constant Dollar) Historical Average Cost 1979 Dollars (Thousands of Dollars) Operating Revenues $185,875 $185,875 Fuel and Purchased Power Expense 104,536 104,536 Other Operating and Maintenance Expenses 33,815 33,815 Depreciation Expense 9,729 18,537 Taxes Other than Federal Incomo 12,724 12,724 Federal Income Taxes 2,021 2,021 Interest Charges - not 15,544 15,544 Other (income) and Deductions - net (2,6_53_) _(2,653) 175,716 184,524 Income From Continuing Operations (excluding reduction to net recoverable cost) S 10,159 S 1,351' Reduction to Not Recoverable Cost S (26,350) Gain From Decline in Purchasing Power of Not Amounts Owed 21.082 NET S (5,269)
- Including the reduction to net recoverable cost. the loss from continuing operations on a constant dollar basis would have been $(24.999).
26
r As presenbed in Financial Accounting Standard No. 33, income taxes were not adjusted. Under the rate-making prescribed by the regulatory commissions to which the System companies are subject, only the historical cost of plant is recoverable in revenues as depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars that exceeds the historical cost of plant is not presently recoverable in rates as depreciation, and is reflected as a reduction to net recoverable cost. To properly reflect the economics of rate regulation in the Statement of income from Continuing Operations, the reduction to net recoverable cost of net property, plant, and equipment should be offset by the gain from the decline in purchasing power of net amounts owed. During a period 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. Since the depreciation on this plant is limited to the recovery of historical costs, the System companies do not have the opportunity to realize a holding gain on debt and are limited to recovery only of the embedded cost of debt capital. Five Year Summary of Selected Financial Data Adjusted for the Effects of Changing Prices Years Ended December 31, 1979 1978 1977 1976 1975 (in Thousands of Average 1979 Dollars) Operating Revenues $185,875 $177,118 S188,893 S194,040 S176,961 Income From Continuing Operations (excluding reduction to net recoverable cost) 1,351 Gain From Decline in Purchasing Power of Amounts Owed 21,082 Per Common Share: Earnings (Loss) From Continuing Operations (after preferred dividend re uirements) (0.06) Cash Dividends Declared 1.60 1.78 1.92 1.91 2.02 Year-end Data: Net Assets at Net Recoverab!e Cost 108,696 Market Price Per sharo 11.75 15.26 19.42 22.76 18.95 Average Consumer Price Index 217.4 195.4 181.5 170.5 161.2 l l 27
s Eastern Utilities Associates and Subsidiary Companies Con::clidnt:d Operating Statistics 1979 1978 1977 1976 1975 1974 1969 Energy Generated and Purchased (mdhons kwh): Generated - by EUA System 792 660 667 774 1,164 1,643 1,931
-by Equity-Owned Nucicar Units 479 530 490 523 480 420 215 l -by Jointly Owned Units 1,795 1.865 1,599 1,512 153 1 Interchange witn NEPOOL (600) (620) (284) (187) 200 151 78 i
Purchased Power -- Unit vower 1,649 1,490 1,381 1,419 1,482 1.240 652 Total Generated and Purchased 4,115 3,925 3.853 4,041_ 3,454 2,876 3.4_79 Operating Revenues (thousands): Residential 5 63,468 $ 56.613 $ 56,302 $ 53.036 $ c0,535 $ 47,803 $ 20,405 Commercir' 53,012 46.976 45,159 41,104 36.478 33,163 10,619 Industrial 38,192 32,440 30,203 28,246 26,021 28,380 11,472
, Other Electric Utilities 12,435 10.220 11,418 11.315 10,151 10,197 2.274 Other 7,502 7,505 7,657 7,154 5,912 5,159 1,650 Total Primary Sales Revenues 174,609 153,754 150,739 140.855 129,097 124,702 46,420 Unit Contracts 11,266 5,441 6.961 11.325 2,118 1,541 1,001 Total Operating Revenues $185,875 $159,195 $157,700 $152,180 $131,215 $126.243 -$ 47,421
..= : = -
- - - . . . = == =
Energy Sales (millions kwh): Residential 1,150 1,123 1,119 1,098 1,073 1,052 784 Commercial 1,052 1,011 998 950 848 792 463 industrial 859 815 788 776 726 830 801 Other Electric Utilities 398 403 399 434 396 399 356 Other 44 49 48 47 45 45 35 Total Primary Sales 3,503 3.401 3,352 3,305 3,088 3,118 2,439 Losses and Company Use 226 290 246 276 248 215 231 Total System Requirements 3,729 3.691 3,598 3,581 3.336 3.333 2.670 Unit Contracts 386 234 255 460 143 121 206 Total Energy Sales 4,115 _ 3,925 3,853 4,041 _ 3,479 3,454 2g6 Number of Customers at December 31: Residential 201,435 198.910 199,063 196,760 195.207 193,110 180,758 Commercial 20,073 19,781 21,501 21,066 20.813 20,311 18,362 industrial 1,222 1,213 1,513 1,54' 1,594 1,655 1,773 , Other Electric Utihties 16 15 16 16 14 12 12 l Other 150 171 222 229 234 241 200 Total Customers 222,896 220,090 222,315 219.613 215,329 21_7.862 2_01.105 I Average Revenue per Residential Customer ($) 315 285 283 270 259 249 114 Average Use por Residential Customer (kwh) 5,708 5.646 5.621 5,582 5.497 5.448 4,337 Average Revenue por KWH: Residential 5,52c 5.04c 5 03c 4.83c 4.71c 4.54c 2.60c Commercial 5,04c 4 65c 4.53c 4.33c 4.30c 4.19c 2.29c industrial 4.44c 3.98c 3.83c 3.64c 3 58c 3.42c 1.43c l 28
Eastem Utilities Associates and Subsidiary Companies Consolidated Opsrating Statistics-Gansral l i 1979 1978 1977 1976 1975 1974 1969 Capitahzation: (thousands) . Mortgage Bonds (Net) $ 80,985 $ 81.203 $ 83.658 $ 87,860 $ 88.321 $ 68,697 $ 54,409 ) Other Long-Term Debt 42,500 16.667 35.000 35.000 Total Long Term Debt 123,485 97.870 118.658 122.860 88,321 68.697 54.409 Preferred Stock 20,686 21.000 21.000 21,000 21,000 15.078 12,175 Common Equity 94,260 86.299 75.417 64.917 55,783 50.097 43.822 Total Capitalization $238,431 $205_,169 $215_075 . $208.77_7 $16h104 .$1_33.872 $110,406 Common Shares Data: Earnings Per Share ($) 1.75 2.03 1.50 2.07 1.96 1.56 1.52 Dmdends Per Share ($) 1.60 1.60 1.60 1.50 1.50 1.50 1.40 Payout (%) 91.4 78 8 106.7 72.5 76.5 96.2 92.1 Average Ccmmon Shares Outstanding 4,671,667 4.266.921 3.970,459 3.389.560 2.939.945 2.784,945 2,510.718 Book Vafue Per Share ($) 17.33 17.85 17.82 18 03 18 02 17.99 17.05 Percent Earned On Average Comm~1 Equity 9.4% 10.7 % 85% 11.6 % 10.8 % 8.7% 9.0% Mariiet Price ($) High 15 % 17 19?'s 18 % 16 17 30 % f Low 11 % 14 % 16Ye 14 % 8% 0 18 % l ( Miscellaneous. System Capabihty - MW 908 969 939 940 781 822 577 , System Peak Demand - MW 677 666 668 687 614 590 506 l Reserve Margin (%) 34.1 44.2 40.6 36.9 27.1 39.3 14.1 I ] System Load Factor (%) 62.8 62.7 61.5 59.5 6 ; 64.5 60.3 Sources of Energy (%): Nuclear 21.9 22 0 18.7 19 5 22.0 la 4 8.1 Fossil 78.1 78 0 81.3 80.5 78.0 81.6 91.9 Cost of Fuel (Mills Per KWH): Fossil (Oil and Coal) 25.1 18.1 21.5 17.8 19.5 20.2 3.0 Nuclear 3.5 3.0 2.4 2.6 3.0 2.4 3.1 All Fuels Combined 19.6 14.3 17.5 15.0 16.0 16.8 3.1 29
3 Eastern Utiliti:s Associates and Subsidiary Companies Consolidated Summary of Eperctions (Thousands of Dottars Except Number of Shares and Per Share Amounts) 1979 1978 1977 1976 1975 1974 1969 Operat ng Revenues $185,875 $159,195 $157,700 $152,180 $131,215 $126,242 $ 47,421 Operating Expenses Operation and maintenance 138,351 110,412 119,441 105,883 97,642 93,319 27,048 Depreciation 9,729 9.377 9,131 8.873 6.368 5,755 3,636 Taxes other than Federal income taxes 12,724 13,286 12,493 11,776 10,606 10.060 6,076 Federal income taxes 2,021 4,268 706 5,454 621 773 3.315 Total operating expenses 162,825 137,343 141,771 131,986 115,237 109,90' 40,075 Operating income 23,050 21,852 15,929 20,194 15,978 16,335 7,346 Other Income and Deductions
- 2,653 1,734 1,006 1,763 5.423 3,875 626 income Before Interest Charges 25,703 23,586 16,935 21,957 21,401 20,210 7,972 Interest Charges
- 15,544 13,297 11,894 13,312 14,626 15,055 _ 3.498 Income After Interest Charges 10,159 10,289 5,041 8.645 6,775 5,155 4,474 Preferred Dividends of Subsidianes 1,633 1,633 1,633 1,633 1,021 817 567 income Before Cumulative Effect of Change in Method of Recording Revenue 8,526 8,656 3,408 7,012 5,754 4,338 3,907 Cumulative Effect on Years Prior to 1977 of Accruing Estimated Unbilled Revenue After Deduction of Related Taxes of $2,630,600 2.526 Consolidated Net income $ 8,526 .$ . 8,656 .$_ 5 934 $ 70 2 _$__5,754
$ 4,338 $ 3,90_7 EUA Common Shares Outstanding (Weighted Average) 4,871,667 4.266,921 3,970,459 3,389,o60 2,939,945 2,784,945 2.570.718 Consolidated Earnings Per Average Common Share Outstanding:
Before Cumulative Effect of Change in Method of Recording Revenue $1,75 $2.03 $0.86 $2.07 $1.96 $1.56 $1.52 Cumulative Effect of Years Prior to 1977 of Accruing Estimated Unbilled Revenue 0.64 Total $1,75 $2.03 $1.50 $2.07 $1.96 $1.56 $1.52 Pro Fo.,oa Amounts Assuming Change in Method of Recording Revenues was Apphed Retroacti rely: Consolidated Net income 53,409 $7,226 $5,990 $5,034 $3,963 Consolidated Earnings Per Average Common Share Outstanding $086 $2.13 $2.04 $1.81 $1.54 Dividends Paid Per Common Share $1,60 $160 $1.60 $1.50 $1.50 $1,50 $1.40
- 1979,1978 and 1977 Interest Charges have been reduced by the borrowed funds component of allowance for funds used during construction, in prior years the total allowance for funds was included in Other income and Deductions.
30 i
f Management's Discussion and Analysis of the Consolidated Summary of Cperations Operating Revenues: 1979 operating revenues over 1978 is primarily the result of decreases in increased 16.8% over 1978 primarily due to a state franchise taxes due to lower taxable income. significant increase in the recovery of higher fuel The increase in taxes, other than Federal income costs.1978 operating revenues increased only 1% in 1978 over 1977 of 6% is primarily the result of over 1977, reflecting the net effect of an increase in increases in property tax rates assessed on the kwh sales of 1.87% and wholesale and retail rate System's increased utility plant in service. increases granted during 1978 of $6.1 million, Allowance for Funds Used During Construction: partially offset by reduced fuel clause revenues The accounting practice of capitalizing as part of resulting from the use of lower cost fuel in 1978 construction costs an allowance for funds used and a decrease ,n i unbilled revenues. during construction (AFUDC) is in accordance with Operating Expenses Other Than Taxes: Operat. ion the uniform system of accounts prescribed by regu-and maintenance expenses increased 25.3% in latory authorities and results in the inclusion in 1979 over 1978. Virtually all of the increase was due income (and in construction work in progress, for the to the escalation in the cost of fuel during 1979. The urpose of establishing rates for utility charges to price per barrel of oil increased from a level of customers) of amounts considered by regulatory
$11.42 per barrel in January to almost $19.00 por authorities as an appropriate cost of funds used barrel at year-end The decrease in operation and
, during construction but which do not represent maintenance expenses of 8.2% in 1978 as cash income. The AFUDC increased by 59.9% in compared to 1977 is due primarily to a substantial decrease in the cost of fuel, as a result of the use of 1979 over 1978 and 97.7% in 1978 over 1977 primarily due to increases in the AFUDC rate and higher sulphur residual oil to generate electricity.
construction expenditures. See Note A of Notes to This decrease was partially offset by an increase in maintenance and other operating expenses. The Consolidated Financial Statements. increase in maintenance expenses in 1978 over 1977 Interest Charges: The increases of 24.5% in 1979 is due to the continuation of the acceleration of over 1978 and 11.8% in 1978 are primarily due to previously deferred maintenance programs which increases in both short-term borrowings and in the began in 1976 and unusual storm related mainte. prime borrowing rate. See Note A of Notes to Con-nance expenses caused by the 1978 blizzard. solidated Financial Statements. Taxes: For an explanation of changes in Federal Net income: The changes in net income for the two income taxes, see Note B of Notes to Consolidated year period result from the changes in revenues and Financial Statements. The decrease of 4% in 1979 expenses as explained above. 31
Trustees Trustee Since Oliver F. Ames (C) 1973 Director, Fiduciary Trust Company, and private trustee, Boston. Samuel C. Brown (F) 1967 Executive Director, Massachusetts Health and Educational Facilities Authority, Boston. Robert 1. Dexter (A,P) 1978 President Abington Mutual Fire insurance Company, Abington. Massachusetts. John F.G. Eichorn, Jr. 1971 President and Chief Executive Officer of the Association. Peter B. Freeman (F) 1979 Business and Financial Consultant Providence, Rhode Island Nathan H. Garrick, Jr. (A,C) 1963 Independent Consultant to The Boston Company Inc., Boston. Robert E. Maguire 1976 Executive Vice President of the Association. Wesley W. Marple, Jr. (A,F) 1976 Professor of Finance, Northeastern University, Boston. Thomas A. Rodgers, Jr. (C,P) 1975 President, Globo Manufacturing Co , Fall River, Massachusetts. Margaret M. Stapleton (F) 1977 Second Vice President, John Hancock Mutual Life Insurance Company, Boston. D. Reid Weedon, Jr. (P) 1972 Senior Vice President, Arthur D. Little, Inc., Cambridge, Massachusetts. A-Indicates member of Audit Committeo C-Indicates member of Compensation and Nominating Committee l F -Indicates member of Finance Committeo l P-Indicates member of Pension Trust Committee l l l 32 o
Le9end ASSACHOSETTS suas Existing 345KVLinesof EUASystem Existing 115 KVLines emme Existing 345 KV Lines of Other Systems p C InterconnectionswithOtherSystems A MajorSubstations k'T.wRh O GeneratingStationsof EUASystem
- t ' f M S Generating Stations of Other Systems
# ,; 3 n TerritoryServedatRetail ed g D TerntoryServedatWholesale
[,h . / ~
, ?]
kW +,,:q . k ,
^ '
) .
. % 9
.$- :y
/
~ -a= > = ' =
L PROVIDENCE $ CK [:7 t
'ij.
fg 1f
- q &[ [[^ .QwD .
O RHO E is o k3 9g3. E
,' 'h ER oN W
f ', O AMER hfkN C3 w Lin* y'Agg '
~
g 47 331 ' . Q
~ s 'm Q!Mjj [s%? r
^ ~
g 1 '.' h n'f A/ ( /. , t%) . , P [ih he m Y > fnfchf% ~ lyf, hb ,
,9 ,
EASTERN UTILITIES ASSOCIATES ANNUAL REPORT 1979 gr'm 7- g L.JJL1 l 1 v~ + - _ ___-__,,--_________a ---
-, m -- --- -- - - -, - wr--- -
-==wm
' ' -- ----'-- - ~ -' -
-----u --- m ----y__-v-v
4: n.;.. u3 .. 4
. [ $ 59 =:L.;
Sh.} SECURITIES AND EXCII ANGE COMMISSION
]q,] . WASIIINGTON, D.C. 20549
, ea gL .s bl'} F Form 10-K
~; ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
, s TIIE SECURITIES EXCIIANGE ACT OF 1934
~
For the fiscal year ended December 31,1979 Commission file number 1-5360 o
?
Eastern Utilities Associates (Exact name of registrant as specifed in its charter) MASSACIIUSETTS 04 1271872 (State or other jurisdiction of incorporation or organization) (l.Il.S. Employer Identifcation No) 99 IIigh Street, Boston, Massachusetts 02110 (Address of principal executive of5ces) (Zip Code) Registrant's telephone number, including area code: (617) 357 9590
=-
4 Securities registered pursuant to Section 12(b) of the Act: Title of each Class Name of each exchange on schich regi:tered
' ? New York Common Shares, par value $5 per share 1
, Securities registered pursuant to Section 12(g) of the Act:
, (Title of Class)
{ None
.,' 1
-L ~
. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by jj Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for jp..
{ such shorter period that the registrant was required to file such reports), and (2) has been subject to 2 i ,- such filing requirements for the past 90 days. Yes / No _g Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of
. . the close of the period covered by this report.
, ; ~f S, - } Common Shares Outstanding at December 31,1979 5,438,969 am ,3 ,
n?1
'J M .4 ,
9*D g i h
~. .,
l y;v:3 l ; ;;;N
*cj ;
t w} , .
I PART 1 Item 1. Business (a) The Registrant, Eastern Utilities Associates (EUA) is a blassachusetts voluntary association organi7ed and existing under a Declaration of Trust dated April 2,1928, as amended, and is a reg-istered holding company imder the Public Utility Holding Company Act of 1935. EUA owns directly all of the shares of common stock of two operating electric utility companies (the Retail Subsidiaries), namely, Blackstone Valley Electric Company (Blackstone) and Eastern Edison Company (Eastern Edison). Eastern Edison in turn owns all of the permanent securities of hiontaup Electric Company (hiontaup), a generation and transmiuion company, which supplies electricity to it, to Blackstone. and to several municipal and other unafBliated utilities for resale. EUA also owns directly all of the shares of common stock of a service company, EUA Service Corporation (Service). The holding company system of EUA, the Retail Subsidiaries, hiontaup and Service is referred to as the EUA System. The EUA System covers a service territory of about 539 square miles in portions of south-eastern hiassachusetts and northern Rhode Island with a population of approsimately 62MXW). During 1979 approximately 677c of its revenue was derived from hiassachusetts and 337c from Rhode Island. On December 31, 1979 the EUA System furnished retail electric service to 222,S96 oustomers in 29 cities and towns, and wholesale service to 7 other utility companies. (b) For the five years 1975 to 1979, electric operations accounted for 100% of total operating res enues. (c) hiontaup and the Retail Subsidiaries are members of the New England Power Pool (NEpOOI ), which is open to all investor-owned, municipal and cooperative electric utilities in New England, under an agreement which provides for coordinated planning of future facilities and opera-tion of approsimately 9W of existing generating capacity in New England and of related trans-minion facilities. The NEPOOL Agreement imposes obligations concerning generating capacity rewrve und the right to me major transmission lines, and provides for central dispatch of the generat-ing capacity of the pool's members with the objective of achieving economical use of the reciuds facilities. Pursuant to the NEPOOL agreement, interchange sales to NEPOOL are made at a price approsimately e< pial to the fuel cost for generation without contribution to the support of fised charnes. Ih canw of its participation in NEPOOL, the EUA System's operating revenues and costs are affected to some estent by the operations of other members. The availability and emt of fuel oil to hiontaup and to other owners of oil.hurning units in which N1ontaup has an interest (1mld he advenely aIIected by policies of oil producing nations. Other f actors allecting world supplies, and domestic governmental action. Substantially all of the residual fuel used is imported It is im]mulble to predict the impact on hiontaup's operations of possible action of Con-grew or the President with respect to import fees, duties or quotas on oil. hiontaup has an agreement with a supplier for the purchase of 50% of its oil requirements for its Somerset Station. The agreement continues from year to year imless terminated by either party on July 31. Klontaup is presently negotiating with other suppliers to provide its remaining respiirements. It is espected that an agreement will be consummated in the near future. During 1979, hiontaup had an average inventory of 266,600 barrels of fuel oil for its steam generating units at the Somerwt station, the equivalent of 65i days' supply under present load conditions. hiontaup's weighted average price per barrel of oil for the years 1975 through 1979 was $11.78, $11.40, $13.25, $11.48 and $15M respectively Since February 22,1978, hiontaup has been permitted to burn oil with a sulphur content of up to 2.2%, which is higher than the 19 allowed by current regulations. hiontaup has no arrange-ments for the purchase of coal. Canal Electric Company on behalf of itself and hiontaup has a contract with a single suppher for the fuel-oil requirements of Canal Unit Nos. I and 2 for the period ending November 15, 1950. The contract permits limited purchases from other suppliers. 1 A
m l 1 The owners (or lead participants) of the nuclear units in which the System has an interest, as set forth in the table below, have made, or expect to make, various arrangements for the acquisition of concentrate, the conversion, enrichment, fabrication and utilization of nuclear fuel and the reprocessing of that fuel after use. EUA is aware that various electric utilities have been unable to obtain contracts l for adequate nuclear fuel supplies and that additional difBculties have been encountered because there are no domestic reprocessing facihties. EUA cannot predict the extent to which such problems will affect fuel costs for r uclear um's in wloch the EUA System is participatmg The following table sets forth the EUA System's interest in planned jointly-owned units as of December 31,1970. System Interest La pe oJ,. Cast twes to e (n.ilhans 12/31/79 Estimated Tnousmods of 6 3 (rndlmns Operating locarma % cikuomens ( t )(2) of 3 : Irene 1%: Neva. 1_vpe_ Seabeu d No I Seabroni. NII Nuclear 5.00(3) 57.5(3) 76.7 9.4 19M(4) Seabiula Na 2 Seabru4, Nil Nuclear 5.00(3) 57.5(3) 75.4 94 19SM4) Malatone No 3 Waterford, C1 Nuclear 4.01 46.0 112.1 29.2 19 % Pdsttra No 2 Plymouth, M A Nuclear 2.15 25.0 55 0 y 1987 TOTALS 186.0 319.2 55 5 (1) Based upon information furnished by the lead participant responsible for construction of each unit. Complete cost projectmns are continually being reviewed and these estimates are subject to further escalaimn (2) Ir.cludmg allowarre for funds used during construction and estimated nuclear fuel costs. (3) Assumes eficctiveness of agreed upon increase in participation from the current 1.97c, which is subject to regulatory approvals. Ilased on a 1.97o participation, EUA's net capabihty would be 22 htW from each unit and its total estimated construction costs would be $31,03S,000 and $29,5S0,000, respectively. (4) The lead participant Pubhc Service Company of New llampshire (PSNil), announced on hf arch 20,1950 its decision. in view of the unsettled state of the capital markets and the very high cost of external funds, to reduce the level of construction expenditures substantially. If the reduction were to continue for more than a few months, the estimated operating dates would be deferred. Such deferral would substantially increase the total cost of the units. In addition, on h1 arch 25,1979 PSNil announced a 15.37c increase in the estimated Snal cost of these units primarily as a result of rising interest rates. See Notes 11 and J of Notes to Consolidated Financial Statements for additional information regarding jointly-owned electric facilities. hiontaup's costs of fossil and nuclear fuels for the years 1975 through 1979, together with the weighted average cost of all fuels, are set forth below: Mills per kwh 1975 1976 1977(1) 197S(1) 197C l) Fossil (oil and coal) 10.5 17.8 21.5 18.1 25.1 Nuclear (2) 3.0 2.6 2.4 3.0 3.5 All fuels . 16.0 15.0 17.5 14.3 19.6 (1) Based on use by hiontaup's customers. Prior years include unit power sales and sales to NEPOOL (2) Nuclear fuel costs for the indicated periods include credits for the estimated salvage value of residual fuel and charges for estimated reprocessing costs, as deterrained from time to time by the varying practices of the lead participants of the nuclear generating units in which the EUA System is a participant. It is believed that such estimated credits less such charges are not material to the indicated ret ci ell fuel 2 s
The rate schedules of the Retail Subsidiaries are designed to pass on to customers the increases and decreases in fuel costs and the cost of purchased power subject to review and approval by appropriate regulatory authorities. The compsnies within the EUA System hold valid franchises, permits and other rights adequate for conducting the business in the territories which they serve, and such franchises, permits and other rights mntain no unduly burdensome restrictions. The EUA System's electric sales are seasonal to some extent. There has been a winter peak due primarily to increased usage for heating and lighting and a summer peak due to air conditioning usage. The EUA System is not dependent on a single customer or a few customers for its electric sales. All of the transmission facilities within the EUA System are interconnected with the New England tratnmmion grid. There is no competition from other electric utilities within the retail territories sened by the Retail Subsidiaries. Eastern Edison and hiontaup are subject to regulation by the hiassachusetts Department of Public Utilities with respect to the issuance of securities, the form of accotmts, rates to be charged (in the case of Eastern Edison) senice to be provided and other matters. Blackstone is subject to regulation in numerous respects by the Rhode Island Public Utilities Commission, and by the Division of Public
' Utilities and Carriers, Department of Business Regulation of the State of Rhode Island, including matters pertaining to financing, sales and transfers of utility properties, accounting, rates and service.
lu addition, by reason of its ownership of fractional interests in certain facilities located in other states, l h!ontaup is or may be subject to regulation of activities in those states. The companies in the EUA System are subject to the jurisdiction of the Securities and Exchange Commiulon under the Public Utility lloiding Company Act of 1935 by virtue of which such Commis-sion has wrtain powers of regulation, including jurisdiction over the issuance of securities, change in the terms of outstanding securities, acquisition or sale of securities or utility assets or other interests in any hminess intercompany loans and other intercompany transactions, payments of dividends under certain circumstances, and related matters. Eastern Edison, insofar as it may be deemed to be a holding company under such Act by reason of its ownership of securities of hiontaup, has been esempted from registering under such Act as a holding company by complying with the applicable rules thereunder. The Retail Subsidiaries and hiontaup are also subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) under Parts 11 and til of the Federal Power Act. That jurisdiction includes among other things, rates for sales for resale, interconnection of certain facilities, accounts, senice, and property records. Nuclear generatmg facilities, including those in which hiontaup has an ownership interest, are subject to extensive regulation by the Nuclear Regulatory Commission (the NRC), which has assumed the licensing and related regulatory functions formerly performed by the Atomic Energy Commission. The NBC is empowered to authorize the siting. construction and operation of nuclear reactors after consideration of public health, safety, environmental and antitrust matters. The Retail Subsidiaries and hiontaup and the other companies owning generating units from which hiontaup obtains power are subject, like other electric utilities, to developing standards admin-istered by Federal, state and local authorities with respect to the siting of facilities and emironmental
) factors. The Environ.,, ental Protection Agency (the EPA) has jurisdiction over discharges into both water and air and has broad authority in connection therewith including the ability to require installa-tion of pollution control and mitigation devices.
The Federal Water Pollution Control Act establishes a national objective of complete elimination of discharges of pollutants (including heat) into the nation's waters and creates a rigorous permit program designed to schieve these effluent limitations. All water discharge permits for plants in hlassachusetts including those for the Somerset and Canal plants, are issued by the state Department 5
l ..~__o =~ ' - -- - - W" of Environmental Quahty Engineering, subject to review by the EPA. Certain rigorous water pollu-tion control regulations issued by the EPA which would have substantially limited discharges from electric generating plants were challenged by industry groups and in 1976 and 1977 were remand by a United States Court of Appeals to the EPA for reconsideration. Certain substitute regulations have since been proposed by the EPA. The Federal Clean Air Act empowers the EPA to estabhsh . clean air standards which are implemented and enforced by state agencies. Both Federal and hfassachusetts legislation require consideration of reports evaluating emiron-mental impact as a prerequisite to the granting of various permits and licenses, with a view to mimmi)
)
ing environmental damage. Af assachusetts air quality regulations also require that plans (inclu procedures for operation and maintenance) for construction or modification of fossil fuel generating facihties be approved by the Department of Environmental Quality Engineering. In addition, in h1assachusetts, certain electric generation and transmission facilities on which construction commences * ' after Apnl 1976 will be permitted to be built only if they are consistent with a long. range forecast filed by the utihty concerned aad approved by the Energy Facihties Sitmg Council.
'Ibe Retail Subsidiaries and hiontaup and the companies and municipalities with which hiontaup has power supply arrangements are also subject, like other electric utihties, to regulation w to zoning, land use and similar controls by various state and local authorities. Under recently e Federal law the Secretary of Energy has authority with respect to existing electric power plants to prohibit the burning of oil, but only after 6nding that a plant has the capabihtv to use coal w substantial physical modification and that the use of coal is financially feasible. Exemptions relating to environmental requirements and other factors are provided. The Department of Energy has issue complex rules under this legislation. In 1977, the Federal Energy Administration (the agency th exercising similar authority) concluded, after reviewing data concerning costs and other factors, an order forbiddmg the burning of oil in the largest unit at hiontaup's Somerset generating station should not be issued. EUA understands that the Department of Energy is investigating the feasibility of requiring Canal Unit No. I to convert to coal. EUA is unable to predict the results of this investi gation or any other eflects which this legislatinn ~.ay have on the EUA System. Conversio allation of air quality control equipment, may generating unit from oil to coal, with attendo require heavv capital expenditures and may li.ww operating costs. The same legislation for the use of od as a primary fuelin new power plants, subject to similar exemptions. l f
l't. der their continuing jurisdiction, the NRC (with respect to nuclear facihties) and one or more of the EPA and the state and local authorities may, after appropriate proceedings, require modification of generating facihties for which construction permits or operating licenses have already b m impose new conditions on such permits or licenses, and may require that the operation of cease or that its level of operation be temporarily or permanently reduced. I Other activities of the EUA System from time to time are subject to the jurisdiction of various other state and Federal regulatory agencies. Some of the generating facii ties in which the EUA System has an interest, and is required to a share of the costs, have encountered and may in the future encounter problems under gover segulations, particularly those relating to nuclear facilities or to protection of the emiro problems may result in increases in capital costs and operating costs which may be su delays or cancellation of construction of planned facilities, or in modification or terminati tions of existing facilities. Through December 31, 1979 compliance with applica' ole emironmental including regulations approximately re additional capital expenditures by hlontaup of approximately $14,050,000
$11,568,000 for hiontaup's ownership in the following units: Canal No. 2 $10,230,000; Wyma
$516,000, hfillstone No. 3 $231,000, Pilgrim No. 2 $49,000 and Seabrook Nos. 1 & 2 $538,0 on mformation supplied by the lead participant or operator in each case. hiontaup expects ra increasing expenditures, not now determinable, to meet environmental requirements for the exi and proposed units in which it is participating 4
hiost of the generating units from which hfontaup obtains power operate under permits which hmit their effluent discharges into water and which require monitoring and in some instances biological studies of the impact of the discharges. Such permits are issued for a period of not more than five years, at the expiration of which renewal must be sought. All domestic fossil fuel plants from which hiontaup obtains power operate under permits which limit their discharges into the air and require monitoring of the discharges. Air quality requirements adopted by state authorities in hfassachusetts pursuant to the Clean Air Act impose limitations with respect to pollutants such as sulfur oxides, oxides of nitrogen and particulate matter. These limitations could not be complied with if hfontaup were to burn coal with the present equipment in its Somerset plant and therefore the use of coal would require suspension of these air quality requirements or the installation of control devices. The Somerset plant and the Canal plant have been granted approvals by the hf assachusetts Department of Environmental Quality Engineering to burn fuel oil with a sulfur content not in excess of 1.21 pounds per million B.T.U. heat release potential (approximatelv 2.27c sollnr content fuel oil). The approvals are subject to conditions including a proviso that fuel oil havmg not in excess of 1G sulfur content be used during air pollution emergencies. The EPA had initially approved the use of the higher sulfur content fuel oil to July 1,1979 and subsequently approved the Department of Environmental Quality Engineering request for a permanent extension of the permit subject to a review every three years. As of December 31,1979, the EUA System had 943 full time employees. Item 2. Summary of Operations See item 12. Financial Statements, Exhibits Filed and Reports on Form SK. Item 3. Properties hlontaup owns all of the EUA System's generating facilities and also has arrangements for pur-a h.ising power from sources outside the System. Afontaup also operates all of the transmission facihties of the Sptem. The rights of the Retail Subsidiaries under the contract which governs their purchases of power from N1ontaup, together (as to Eastern Edison) with the securities of hiontaup owned by them. are phniged to secure outstanding bonds or other indebtedness. The following table sets forth the EUA System's net generating capability,includmg jointly owned units, at Devend>er 31,1979: Net System Systern In Capability share Type Ownes In crest Service MW _MW _t'np Somerset, Nos. 5 & 6 Od hiontaup 100To 1951-1959 199(6) 199(6) Somerut. Cas Afontaup 1007c 1970-1971 45 45
.Nos. jl & J2 Turbine Nuclear Yankee Atomic 4.57c(1) 1961 176 8 Yankee Rowe Electric Company Nuclear Connecticut Yankee 4.57e(1) 1968 575 26 Connecticut Yankee Atomic Power Company Oil Canal Electric 257c(2) 1968 572 143 Canal No.1 Company Canal Electric 1976 584 292 l Canal No. 2 . . Oil 50G(4) l Company and l Montaup l 5
l
Net System System In Capahuity Share Umst Type Owner Interest Service MW MW Vermont Yankee Nuclear Vermont Yankee 2.5fo(1) 1972 528 9(7)(8) Nuclear Power Corporation hiaine Yankee Nuclear Maine Yankee 47c(1) 1972 830 26(7)(8) Atomic Power Company Boston Edison 117e(2) 1972 670 70(7) Pilgrim No.1 Nuclear Company Cleary No. 9 Oil City of Taunton 69.Irc(3) 1975 110 76(3) New Brunswick Nos.1,2
&3 Oil New Brunswick 6.419c(5) 1976 400(5) 26(5)
Electric Power Commission Oil Central Maine 1.967c(4) 1979 615 12 Wyman No. 4 Power Company (1) Stock ownership. (2) " Life of unit" purchase contracts (earliest normal expiration year 2000). f (3) Variable purchase contract. Amount under " System Share" represents estimated entitlement I through October 31,1950. Montaup's share is expected to decline each year thereafter until it ceases. now estimated to occur m 1992. (4) joint ownership (5) Share of contract of several New England utilities for 10-year purchase of 400 MW (except in 10th year reduces to 200 MW). System Share MW is before giving effect to a resale to another utihty in the amount of 2.5 MW. (6) Active capability as of December 1,1979, reflecting deactivation of Unit Nos. 3 and 4 (66 MW) and increase of capability of Unit No. 5 by 12 MW to 74 MW as the result of the replacement of the steam turbine making it capable of cycling duty. Unit Nos. I and 2 (82 MW) have been de-activated since May 1,1976. (7) After giving effect to life-of. unit resales to Newport Electric Corporation aggregating 10 MW for Vermont Yankee, Maine Y.nkee and Pilgrim No.1. (8) After gidng effect to reduction in capacity available to EUA System as a result of agreement with certain municipal and cooperative utihties. (9) The aggregate estimated annual cost, for the EUA System, of commitments under all pur-chased power contracts at December 31,1979 was approximately $21,928,000. The EUA System owns approximately 3,450 miles of transmission and distribution lines and approximately 120 substations located adjacent to the cities and towns served. See Note 1 of Notes to Consolidated Financial Statements regarding the System's rental and lease commitments. In addition to the ibove, the Retail Subsidiaries also own six buildings which house distribution, maintenance or general ollice personnel. 6 i b __ A.
,mummunemmg r - I Jtem 4. Parent and Subsidiaries Percent Voting State of Orgenization and Seciaitice Owned Name of Date Tleerec,f _ by Sptem Companies Compeng Eastern Utilities Associates None (Voluntary Association) Declaration of Trust Filed in hiassachusetts April 2,1928 The subsidianes of the Registrant as of December 31,1979, are as followo 1007c owned by EUA Service Corporation Afassachusetts January 1,1971 EUA Rhode Island 100% owned by Blackstone Valley Electric Company April 23,1912 EUA Rhode Island 100% owned by Pawtucket Electne Company (1) hf ay 6,1896 Blackstone Woonsocket Electric hiachine and 1007c owned by Power Company (1) Rhode Island June 1, ISS2 (2) c Blackstone hiassachusetts 1000 owned by Eastern Edson Company (3) July 31,1979 EUA h!assachusetts 100% owned by hiontaup Electric Company April 29,1923 Easte n (1) Both companies have liquidated and are inactive, having disposed of their properties and business to Blackstone in 1912. (2) Organized under name of hianufacturers' Foundry, hiachine and Power Company, the name being changed to Woonsocket Electric hiachine and Power Company on April 12, IM1 (3) On July 31,1979 Fall River Electric Light Company was merged :nto Brockton Edison Com-pany and on August 1,1979 Brockton's name was changed to Eastern Edison Company.
'the above companies are included in the consolidated financial statements.
Item 5. Legal Proceedings.
- 1. Blackstone Valley Electric Company filed an application on August 15,1979 with the Rhode Island Public Utilities Commission seeking additional retail revenues aggregating $4,030.000 on an annual basis. Certain rate structure issues in other proceedings have been consolidated for considera-tion with the rate application. IIcarings have been completed. Rhode Island statutes require that an l
order be issued on the rate appl
- cation by Atay 15,1980.
i l
- 2. On June 28,1979, the hlassachusetts Department of Public Utilities (hlDPU). In a decision )
in response to an application filed in December 1978 by Eastern Edison (then named Brockton on an annual basis, disallowed l Edison Company) seeking a rate increase of approximately $2,100,000 I any increase in rates. Eastern Edison appealed the decision to the hiassachusetts Supreme Court. The Court, by decision dated January 31,19S0, affirmed the 51DPU's decision subject to its directive to the hlDPU to re-examine its calculation of the interest deduction for tax purposes used in the decision, it appears that such recalculation will increase Eastern Edison's allowed revenues l'. approximately $375,000 annually. Eastern Edison petitioned the Supreme Judicial Court for rehe of the appeal, but that petition was denied on February 27,1980. 7
q :-
- 3. On December 13, 1979, hfontaup filed an application with the FERC for permission to include in rate base, for deriving its rates to its afIlliated and non affiliated wholesale customers, a portion of its investment in construction work in progress associated with ownership of various jointly-owned generating units presently under construction. hfontaup asked FERC to establish an expedited procedural schedule which will permit a final order to be issued by January 1,1981. Protests and petitions to intervene have been filed by one of hfontaup's non. affiliated wholesale customers and by the Attorney General of Rhode Island and the Rhode Island Division of Public Utilities and Carriers.
- 4. Afontaup, together with numerous other electric utilities, is participating in proceedings con-cerning implementation by the EPA of the Federal Clean Water Act. Involved in this matter are proceedings before EPA and other governmental entities and courts regarding various Federal and state regulations, including certain regulations remanded to EPA in 1976 by the United States Court of Appeals for the Fourth Circuit. In addition, members of the same group of utilities have sought judicial review of certain EPA variance regulations and of EPA regulations which revise the National Pollutar.t Discharge Elimination System (NPDES) permit program. hiembers of the group have also intervened in a case which raises the question whether NPDES permits are needed for discharges from dams.
- 5. hiontaup is participating. to the extent of a 1.90% interest as a tenant in common. in two nuclear generating units, of 1,150 megawatts capability each, being constructed at Seabrook. New llampshire by Public Service Company of New llampshire as the lead participant. Afontaup is a party to consolidated proceedings before the h1DPU in which hiontaup and other utilities owning interests in the units seek appmval br their acquisition of additional interests, namely,in the case of 51ontaup, an additional ID1% now owned by The Connecticut Light and Power Company, an additional 1.00G now owned by Public Service Company of New llampshire, and an additional 1.067c now owned l
by The United Illuminating Company, all subject to certain additional regulatory approvals. The J Attorney General of 51assachusetts and certain individuals have intervened in opposition to the requests for such approval. If hfontaup's proposed acquisitions of additional interests are consum-mated, hiontaup will own a 5.00re ownership share in the Seabrook units. The following description of certain other proceedings affecting the Seabrook units is based on information received from the lead participant. In the proceeding before the NRC on the application for construction permits, an Atomic Safety and Licensing Board on June 29, 1976 issued its Initial Decision approving the issuance of such permits. The NRC issued the permits on July 7,1976, and construction commenced. The l I Initial Decision was affirmed 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 pending before the NRC. There is presently pendmg 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 invohing Seabrook which set aside the NRC's rule with respect to the environmutal effects of reprocessing spent fuel and disposing of nuclear waste. (Natural Resources Defene Council, Inc. v. NRC. D.C. Cir. Nos. 741385 and 74-1586, which was reversed and remanded by the United States Supreme Court on April 3,1978 in Vernmnt Yankee Nucicar Powcr Corporation v. Natural Resources Dcferuc Council, Inc. No. 76-419). Effective September 4,1979, the NRC (one member dissenting) has promulgated its final rule (which supersedes an interim rule in place since htarch 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 8
for the District of Columbia Circuit (State of New York v. NRC, D.C. Cir. Nos. 79-2110 and 79-2131). The lead participant believes that the environmental effects of the fuel cycle, deter-mined in accordance with the new rule, are too small to affect the environmental cost benefit evaluation of the project. Further appeals from various regulatory approvals granted for the project are possible.
- 6. hiontaup is participating, to the extent of a 2.15% interest as a tenant in common, in the proposed nuclear generating unit of 1,150 megawatts capability known as Pilgrim Unit No. 2, to be constructed at Plymouth, h!assachusetts by Boston Edison Company as the lead participant. hiontaup also has a long term (life-of.the-unit) contract for the purchase of 11% of the capacity and output of Pilgrim Unit No.1, an existing unit of 670 megawatts capability owned by Boston Edison Company and located at the same site, and is required to pay the same percentage of all of the costs of that unit including fixed costs (whether or not the unit is operating), operating costs, and costs associated with condemnation, shutdown or retirement of the unit. The following description of proceedings affecting the Pilgrim units is based on information received from Boston Edison Company.
Based on Boston Edison Company's demonstration concerning the combined discharges of Pilgrim Unit Nos. I and 2, the EPA and the hfassachusetts Division of Water Pollution Control (the h!DWPC) (which may jointly issue a single permit) issued permits on Alarch 11, 1977 authorizing once-through cooling for Unit Nos. I and 2 and granting exemptions from the EPA's thennal effluent guidelines. Appeals of the permits for Unit Nos. I and 2 were taken by parties who sought adjudicatory hearings before EPA and AfDWPC. These hearings were completed in November 1977. Final decisions upholding the permit issuance have been received from the EPA Administrator and the h!DWPC. Further review of the EPA decision was not sought; however, judicial review of the blDWPC decision has been sought in the hiassachusetts Superior Court, which review is presently pending. The Pilgrim Unit No. 2 permit does not expire until 1982. The Pilgrim Unit No. I permit expired by its terms during 1979, however, timely renewal of the permit was sought prior to expiration, and under applicable federal and state law the validity of the pre-existing permit continues. The SIDPU is conducting a proceeding to inquire into the capacity needs of Boston Edison Company and the construction program required to meet such needs. Pilgrim Unit No. 2 may be affected by this inquiry. llearings have been completed and briefs have been filed. In December 1973. the NHC accepted for filing the application of Boston Edison Company and the other joint owners for authorization to construct and operate Unit No. 2 at Pilgrim Station. llearings before an Atomic Safety and Licensing Board of the NRC concerning various radi-ological, health, safety, environmental and financial matters commenced in October 1975. The Attorney General of hiassachusetts and certain other parties have been permitted to intervene in opposition to the application. In 1977, the Applicant's request for a limited work authorization to permit site preparation work in advance of the receipt of a construction permit was rejected by the Atomic Safety and Licensing Board which held that the NRC's staff review of alternative sites was inadequate under the National Environmental Policy Act of 1969. Ilearings on this and other issues were held during 1979. Further hearings relating principally to the issue of emergency planning and possibly relating to other issues arising out of the hiarch 1979 accident at the Three 51ile Island nuclear plant in Pennsylvania (see paragraph 10 below) are continuing. In April 1979, an action was commenced in the hfassachusetts state courts on behalf of the Plymouth County Nuclear Information Committee Inc. and several individuals seeking injunctive relief against the continued operation of Pilgrim Unit No. I as well as unspecified monetary relief for alleged damages resulting from its operation. The plaintiffs
- initial application for a preliminary injunction was denied. The action was subsequently removed to the United States District Court for the District of hiassachusetts, where it remains pending, including the plaintiffs' request for a permanent injunction.
9
- 7. hfontaup is participating, to the extent of a 4.019e interest as a tenant in common, in the nucleai generating unit of 1,150 megawatts capability known as hiillstone Unit No. 3, being con-structed at Waterford, Connecticut by subsidiaries of Northeast Utihties as lead participants. The following description of proceedings affecting this unit is based on information received from the lead participants On September 26,1979 the United States District Court for the Eastern District of Virginia approved an agreement in settlement of an action originally brought in the United States District Court for the District of Connecticut by the lead participants on behalf of all of the owners of hblistone Umt No. 3 against Westinghouse Electric Corporation seeking damages for the repudia-tion by Westinghouse of its contract to supply uranium for the first core and three refuehngs of the unit. Under the agreement Westinghouse has paid the owners $2,000,000 in cash, will provide equipment and services for the unit dming the next ten years at no charge or with a rebate agaimt the purchase price, will provide rebates against the purchase price on certain uranium conversion senices and fuel fabrication senices for the unit, will provide at formula prices cur-rently approumating or slightly below estimated productio a costs 1.5 million pounds of uranium for the unit to be dehvered during the period 1955 to 109, and has waived any right for price adi mtment for uranium already delivered and to be dehvered under a court ordered allocation plan at the original contract pnce.
- 8. 51ontaup n participatmg, to the extent of a 4.357o interest as tenant in common,in two nuclear generating units, of 1,150 megawatts capabihty each, referred to as NEP Unit Nos. I and 2, which were proposed to be bmit at a site at Charlestown, Rhode Island by New England Power Company as lead partiopant.
Following an adverse decision of the United States District Court for the District of Rhode bland on December 4.1979 in htigation relating to the use of the propmed site of the NEP units, hiontaup received notification from the lead participant that the units had been cancelled. As of December 31, 1979 hiontaup had incurred approximately $2,065,000 of costs (includmg allowance for funds used during construction) in connection with the project; additional costs (which are not expected to be matenal) are undeterminable at this time. hiontaup has requested permissmn from the FERC for approval to amortize these costs, net of related tax savings, over a penod of fwe years and wdl request approval from FERC for recovery of such costs commencing wnh the cifectne date of its next rate filmg. 9 hfontaup is participating, to the extent of a 1.967o interest as a t'enant in common, in an od-fired generating umt of 615 megawatts capability known as Wilham F. Wyman Unit No. 4 which has commenced operation and is located at Yarmouth, hiaine. The following description of proceedings affecting that umt is based on information received from the lead participant, Central h1aine Power Company. On February 13, 1979, the Maine Board of Environmental Protection (BEP) held a pubhc hearing to investigate the causes of excessive noise emanating from Wyman Unit No. 4 durmg operation. To minimize the effect on the surrounding area, the BEP ordered that the unit be operated only on weekdays between the hours of 6 Ah! and 11 Ph!, except in the case of emer-gencies The lead participant has completed the installation of new sound-attenuating mufHers which are expected to make possible full commercial operation. In 1973 the BEP initiated a suit against the lead participant seeking payment of a civil penalty and alleging that the excessive noise constituted a violation of the siting permit for Wyman Unit No. 4. The lead participant does i not believe that substantial civil penalties will be imposed as a result of the suit.
- 10. IJeensmg and other proceedings with respect to nuclear generating plants in which htontaup has an interest may be affected by events at the Three htile Island Nuclear Unit No. 2 in Pennsylvania ,
i (TMI) beginning March 28, 1979, which resulted in damage to that unit and release of a small amount of radioactivity into the surrounding environment and caused widespread concern about the j
)
10 u - j
safety of miclear puerating plants. The registrant cannot predict uhat eficet the events at TMI. which have precipitated creawd opposition to nuclear power, may ultimately have upon the unnpletion or cost of completion of the planned nuclear units or those under comtruction or upon the continued operation of the esisting neelcar generating plants in New Encland. The TMI incident has prompted a rigorom reesamination of safety related equipment and operatin t procedures in all nuclear facihties The plants in which Montanp has an interest are being reviewed by their owner operators. and thme plants and all other nuclear facilities are being reexamined by the NitC. A Presidential Com-minion. after imestigating the came of the TMI incident, made a report in which. anuing other things, it recommended that the NitC he reorganized and it pro;wd pmn dures inebuling review of safety f actors, of permnnel training. and of state and hical emergency plam, which should be folhmed by the NitC or its succewor on a case hy-case basis before louing a new nmstruction permit or operating liceme. The TMI incident has ahn generated a umitipheity of legislatise propmals in Congrew and sarium state legislatures While the ultimate effect of thew reesaminatiom and pro-posals cannot he specifically predicted, they onild interefere with or prevent liceming of and ma: cair.e delays in o>mtruction and ontly mmlificatiom ef both the operating and planned nuclear plants in which Montaup has an interest. Atiy web modiheatiom may respiire that operation of a particular unit he smpended or its lesel of operation redneed. Item fi. Increases and Decreases in Outstanding Securities and Indebtedness (1) Common Shares 65 par value
- 12) See (4 ) f or date of tramactiom (3 Amount outstamling at December 31. 1979 5.415.969 sliari s Amoimt ontstanding at 1)ecember 31. 1978 -1.835.595 shares lucrease during the year 603.371 shares
.sl. ares t41 Italance of Connnon Shares 1/1/79 4.835.59$
Add - Shares luned upon - 1 Dividend ren vestments ninler Employee Stod Ownership plan. 2/25/79 751 J h6% 6/5/79 5/23/79 h45 11/15/79 907 Sold to underwriter 12/11/79 . _ 6(Kl.(KM) l 1 lialance of Connnon Shaies 12/31/79 5. .43._5.,.969 Item 7. Changes in Securities and Changes in Security for liegistered Securities Not applicable item 8. Delcults Upon Senior Securities l Not applicable. l Item 9. Approximate Number of Equity Security lloiders The apprmimate number of holders of record of each claw of ITA > equity sceurities at l'chro-ary 1.1950 was as f olloww Numhet of itecaril Title of Clew . Isole m Common Shares. $5 par Value 20.lm 11
Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Executiec Oficers of the llegistrant The names, ages and positions of all of the executive officers of EUA as of December 31,1979 are hsted below along with their business experience during the past five years. Officers are elected annually by the Trustees at the meeting of Trustees next following the annual meeting of shareholders. There are no family relationships among these oEcers, nor any arrangement or understanding between any officer and any other person pursuant to which the o$cer was selected. Name, Age and Position Bush.ess Experience During Past 5 Ye, ars John F. G. Eichorn, Jr.,55 President and Chief Executive Officer since 1972; responsible President (1) primarily for the operations of the EUA System. Robert E. Slaguire,51 Executive Vice President since April 1975. assists the Presi-Executive Vice President (2) dent in the overall operation of the EUA System. Prior to i that time, he was Vice President of New England Electric System since 1972. William R. Biuon,55 Vice President since 1974. Currently he serves as Vice Presi- l Vice President (3) dent of Blackstone and has held said position since 1969, responsible primarily for the EUA System's power enginect-ing operations, including generation, transmission and distri- : bution facilities of the EUA System. l Dona!d G. Pardus,39 Vice President and Treasurer since June,1979; Chief Financial i Vice President and Treasurer (4) Offiar responsible primarily for the financial plann'ng and j management of the EUA System. Prior to that time he was l Assistant Treasurer of Northeast Utilities frcm 1971 to 1979. l l William F. O'Connor,40 Secretary since 1971: responsible for corporate affairs, person- l Secretary (5) nel and labor relations of the EUA System. l Hichard ht. Burns,42 Comptroller since 1976 and Assistant Secretary since 1978. Comptroller (6) Prior to that time, he was Assistant Treasurer since 1974. Chief Accounting Officer of EUA. (1) President of Senice and hiontaup and Chairman of Blackstone and Eastern Edison. (2) Eweutive Vice l' resident of Senice and Afontaup and Vice Chairman of Blackstone and Eastern Edison. (3) Vice President of Service, Blackstone, Eastern Edison and hiontaup. (4) Vice President Treasurer, and Assistant Secretary / Assistant Clerk of Service, Vice President, Asustant Treasurer, Assistant Secretary / Assistant Clerk of Blackstone, Eastern Edison and hiontaup. ' (5) Vice President, Secretary and Clerk of Senice, Clerk of Eastern Edison, Assistant Secretary ! of Blackstone and Assistant Clerk of hiontaup. (6) Comptroller of Senice, Treasurer of Eastern Edison and Assistant Treasurer of Blackstone and hiontaup. 12
unamic E Item Il< indemnification of Directors and Oficers Article 32 of EUA's Declaration of Trust provides for indemnification under certain circumstances of its " Trustees" and " officers", which terms are defined in Article 32 to include persons who serve at the request of EUA as directors, officers or trustees of another organization in which EUA has an ) interest, and thus include directors and officers of EUA's direct and indirect subsidiaries. Article 32 Indemnifies Trustees and officers against liabilities and expenses, including counsel fees, imposed or reasonably incurred in connection with litigation or threatened litigation in which a Trustee or office may be invalved by reason of his position. Indemnification would be withheld as to any matter as to which the Trustee or officer is adjudicated "not to have acted in good faith in the reasonable belief that his action was in the best interests of the association". This limitation conforms to the statutory standard which a business corporation organized under the laws of hlass2chusetts is permitted to ; establish for indemnification of its directors and officers, and the provisions are consistent with the l Alassachmetts law on this subject. With respect to litigation or threatened litigation which is resolved l by a comprmnite agreement, indemnification can be provided only if the compromise is approf in the best interests of EUA, after notice that it involves such indemnification, (i) by a disinterested majority of the Trmtces of EUA, or (ii) by a majority of the disinterested EUA Trustees, provided that an opinion in writing of independent legal counsel has been obtained to the effect that the perso involved appears to h:ve acted in good faith in the reasonable belief that his action was in the best interests of EUA, or (iii) by vote of the holders of a majority of the EUA shares outstanding and entitled to vote, not emmting shares owned by any interested Trustee or officer. Article 32 aho provides that Trustees and officers will be pmtected in relying in good faith on corporate books of account, reports and similar material; provides that no Trustee or officer s liable for any act, omission, step or conduct taken or had in good faith, which is required, authoriz or approved by any order or orders issued pursuant to the Public Utility Holding Company Ac 1935, the Federal Power Act, or any other Federal statute or any state statute regulating EUA or any of its subsidiaries by reason of their being public utility companies or public utility holding com-panics: provider, that EUA may pay expenses incurred by a Trustee or officer in advance of disposition of litigation upon receipt of an undertaking by him to repay the amount advanced it is ultimately determined that he is entitled to indemnification; and provides that EUA may provid imurance against the rights of indemnification provided in Article 32 and, to the extent permitted to a hlassachusetts bminess corporation, may provide insurance against other liabilities which may he incurred by Trustees and officers in any such capacity. EUA in conjunction with its subsidiaries has purchased insurance coverage under a policy insur-ing Trmtces, diredors and officers of EUA and its subsidiaries against certain liabilities which may incur in their capacity as such. l Item 12. Financial Statements, Exhibits Filed and Reports on Form SK (a)(1) Financial Statements l The following financial statements, schedules and information are included in the Company's 1 , Annual Heport to Shareholders which is attached hereto and are filed as part of this annual reI on Form 10-K. Except for the information set forth below, the Company's 1979 Annual Report to Sh holders is not deemed filed as part of this report: ' Comolidated Income Statement for the two ye rs ended December 31,1979 (page 16). Consolidated Retained Earnings Statement for the two years ended December 31,1979 (page 16 31,1979 Consolidated Statement of Changes in Financial Position for the two years ended December (page 17). 13
Consohdated Balance Sheet at December 31,1979 and 1976 (page IS). Consolidated Statement of Capitalization at December 31,1979 and 1978 (page 19). Notes to Consolidated Financial Statements at December 31,1979 and 1978 (pages 20 to 24). The Auditors
- Report of Alexander Grant & Company dated hfarch 4,19SO (page 24).
Supplemental Information to Disclose the Effects of Changing Prices at December 31,1979 (pages 26 and 27). Consohdated Summary of Operations for the six years ended December 31,1979 (page 30).
.\tanagemer.t's Dnenuion and Analysis of the Consolidated Summary of Operations (page 31).
'Ihe following addinonal fmancial data should be considered in conjunction with the financial statements in the Company's 1979 Annual Report to Shareholders:
- 1. Supplementary Note to Consohdated Financial Statements (pages 17 and 18).
- 2. Financial Str ements of Eastern Utilities Associates (Parent): Balance Sheet et December 31,1979 and 1976 page 19); income Statemer.t for the two years ended December 31, 1979 (page 20); Betained Earnings Statement for the two years ended December 31,1979 (page 20);
Statement of Changes in Financial Position for the two years ended December 31,1979 (page 21).
- 3. Fmancial Schedulet Schedtde 111 -Investments in, Equity in Earnings of, and Dividends Received from, Affiliates and other Persons for the two years ended December 31, 1979.
Consolidated (page 22) Registrant Separately (page 24) Schedule V -Property, Plant and Equipment for the two years ended December 31,1979- Consolidated (page 25) Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the two years ended December 31,1979-Consolidated (page 26) Sched ite IX -Honds, htortgages and Similar Debt as of December 31, 1979 - Registrant and Consolidated (page 27) Schedule X11 -Valuation and Quahfymg Accounts and Reserves for the two years ended December 31,1979 - Consolidated (page 28) Schedule X111 -Capital Shares as of December 31,1979-Registrant and Consoli-dated (page 29) Schedule XVI -Supplementary Income Statement Information for the two years ended December 31,1979-Registrant and Consolidated (page 30) All other schedules have been omitted since the required information is not present or not suffi-ciently material to require submission of the schedule, or because the information required is included in the 6nancial statements or the notes thereto.
- 4. Report of Alexander Grant & Company independe it CertiBed Public Accountants (page 51).
14
i I i l 1 Item 12.(a)(2) Exhibits (Filed herewith)
- 1. Amendments dated as of August 15,1978, January 31,1980 and February 1,19S0, respectively, to the New England Power Pool Agreement dated as of September 1,1971, as amended.
- 2. Tenth and Eleventh Amendments made as of October 11, 1979 and December 15.1979, re-spectivelv, to the Agreement for Joint Ownership, Construction and Operation of New llampshire Nuclear Units made as of hiay 1,1973 among Public Service Company of New Hampshire and other utilities including hiontaup, as amended, l l
- 3. Sixth and Seventh Extension Agreements made as of November 12, 1979 and January 31, 19so, respectively, to the Agreement to Transfer Ownership Shares dated as of July 1,1976, hv and between the Connecticut Light and Power Company, The liartford Electric Light Company Western hlassachusetts Electric Company and Nfontaup, as amended.
- 4. Amendment No. 3 dated as of December 31, 1978, to the Agreement for joint Ownership, r' .,struction and Operation of William F. Wyman Unit No. 4 dated November 1,1974, among Central
.sf aine Power Company and other utilities including hiontaup, as amended.
- 5. 1979 Annual lleport to Shareholders.
Item 12(b). Reports on Form 8 K (1) Date: August 13.1979 Financial Statements: None Items Reported: Item 5. Other hiaterially important Events. i l l 4 15 ( _..a. .
PART H Items 13 to 15, Inclusive. EUA has filed with the Commission pursuant to Regulation 14A definitive copies of its Proxy Statement dated Mareb 27.1%0. Therefore, Items 13 to IS, inclusive, have been omitted. SIGNATURES 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 authori7ed. EASHRN UTH.mES AssocuTrs (Registrant) ; l RICHABn M. BURNS By l l Richard bl. Burns Comptroller Date. March 28.1950 16
SUPPLEhfENTARY NOTE TO CONSOLIDATED FINANCIAL STATE 5fENTS Note AA. Replacement Cost Information (Unaudited): The estimated replacement cost of the EUA System's productive capacity is presented below in compliance with the disclosure requirements of the Securities and Exchange Commission. This information does not purport to represent the current value of the existing plant in service; it is only an estimate of the cost that would be incurred if such assets were replaced at: December 31,1979 December 31,1978 Estimated Estimated Replacement llistorical Replacenent Ilistorical Cost Cost Co<t __ Cost Utility Plant: Subject to replacement cost disclosure $625,425 $317,531 $545,MS $305,076 Included at historical cost 66,M6 66,M6 54.315 54,315 Total 692.071 384,177 599,663 359,391 1 Less accumulated provision for deprecia-tion 187,628 94,618 163.6M 37.728 Net utility plant $5M,443 $2S9,559 $436,199 S271.663 Depreciation expense $ 18,736 $ 9,729 $ 16.759 $ 9.377 The estimated replacement cost for production, transmission, distribution and general plant facilities has been calculated by (1) using unit cost estimates, (2) trending original costs using Stone
& Webster Appraisal Corporation cost indexes which reflect construction labor costs in the Boston area, and (3) testing the trended cost results by various unit cost comparisons and adjusting, as necessary, to an estimated replacement cost. These indices translate original costs recorded in the property records to current costs based on historical inflation and are reasonably adjusted for changes in technology Land, land rights, property held for future use and constmetion work in process have not been restated in terms of replacement cost as they are not part of the current productive capacity.
lleplacement cost information relating to inventories, including fuel, has not been included in the replaecment cost analysis. Changes in the cost of fuel are reflected in billings under the fuel adjust-ment clauses in the utility subsidiaries
- rate schedules. Inventories of material and supplies have also been acluded from the replacement cost amounts since such amounts are not material.
The accumulated depreciation based on the replacement cost was developed by applying the same percentage relationship that existed between depreciable plant and accumulated depreciation on a historical cost basis at December 31,1979 and 1978 and applying such ratios to the current replace-ment cost of the productive capacity. Depreciation expense related to replacement cost has been computed by applying the appropriate composite depreciation rate (See Note A of Notes to Consolidated Financial Statements) for the years ended December 31,1979 and 1978 to the average replacement cost for the year. The EUA System cautions that the above information represents only a compu.aon of data on a piecemeal basis to indicate a possible effect of inflation on the results of operations. Replacement of the various components of property, plant and equipment will take place over many years and the actual replacement costs will be affected by, among other factors, changes in technological develop-ments, the rate of inflation, environmer.tal requirements and national energy policy. Additionally, replacement of existing plant could result in changes in operating and maintenance expenses. Because of these factors, as well as others which cannot presently be foreseen, the System is unable to estimate 17
1 l SUPPLEMENTARY NOTE TO CONSOLIDATED FINANCIAL STATE.51ENTS - (Continued) the effect that the cost of replacing existing property, plant and equipment will have upon its future operating results. The difference between historical and estimated replacement cost of the net utility plant in senice does not represent an unrecorded increment in Shareholders' Equity; rather it represents a theoretical additional capital investment which would be required if the utility plant in service were seplaced in its entirety at December 31,1979 and 1978. The System also cautions readers of these fmancial statements of the imprecise nature of this data and of the many subjective judgments entering into the determination of the replacement cost informa-tion. In addition, the System cautions that replacement cost is not the current value of existing plant. but only an estimate of the cost of replacing such assets at December 31,1979 and 1978. Accordingiv. this replacement cost information should not be interpreted to indicate that the System has plans to replace such assets or that the actual replacement would take place in the form and manner assumed in developing these estimates. 1 The Securities and Exchange Commissicn has cautioned investors and analysts against the sim- ! plistic use of replacement cost data. It also decided not to require, at this time, the disclosure of the eficct of replacement cost dat2 on net income, because there are still substantial theoretical problems in determining an income effect. The actual cost of replacing the System's assets will be incurred over I a period of years and not at one time. ! The utility subsidiaries are subject to Federal and state regulations in the determination of a fair rate of return on their investments. Under current rate-making policy (which does not allow the ) utility subsidiaries to recover the excess of replacement cost over historical cost), it is not possible to l predict the effects of either the additional revenues that would be realized from the recovery of the increased replacement cost or the possible savings resulting from the operating eHiciencies of technically improved replacement facilities. l l l 18
Parent Company Financial Statements EASTERN UTILITIES ASSOCIATES BALANCE SHEET December 31, (In husands) ASSETS 1979 1978 Utility Plant and Other Investments: Investment in Subsidiaries - Schedule III $116,732 $10S,566 Encess of Carrying Values of Investments in Subsidianes 17 17 Total 1*tility Plant and Other Investments 116,749 108.581 Current Assets: Cash and Temporary Investments 289 121 Ammnts Recchable- Associated Companies 126 102 Other 2 Total Current Assets 417 223 Deferred Debits: l'namortired Debt Expense 232 109 Other Deferred Debits 212 191 Total Deferred Debits 444 300 Total Assets $117.610 $109.106 LIABILITIES Capitali7ation: Common Shares - Schedule X111 . $ 27,195 $ 24,178 Other Paid In Capital 44,382 40,068 Issue Espenw on Common Shares (1,064) (910) Hetained Earnings 23,786 22 998 94,299 86,334 teme Term Debt (less entrent maturitws)-Schedule IX 22.500 16.66S Total Capitalization 116,799 103,002 Current Liabihtics: Lone Term Debt Dnc within One Yea: 5,770 Awounts Payable - Trade 41 34 Amumes Pavable - Awriated Companies . 52 15 Interest Accrued . 705 275 Total Current Liabihties 798 6,094 Defened Credits . . 13 10 Total Liabilities and Capitalization $117,810 $109.106 19 i
r-Parent Company Financial Statements - (Continued) EASTERN UTILITIES ASSOCIATES INCO5fE STATEhfENT For the Years Ended December 31, (In Thousands) 1979 1976 Operatmg Revenues s 8 336 283 Total Operating Expenses Operating Income (336) _ 283) ( Other Income and Deductiom 245 203 Interest and Divalend Income 11,172 11,245 Equity in Earnings of Subsuhanes 25 31 hhseellaneous Nonoperating Inco ne 11.442 11.479 Total Other Income and Deductions income Before Interest Charges 11,106 11.196 Interest Charges: Interest on Long Term Debt 2,561 2.498 Amortization of Debt Expense and Premium 19 42 Total Interest Charges 2 580 2 540
& 8,526 5 8.656 Net lucome RETAINED EARNINGS STATE % TENT For the Years Ended December 31, 1 (In Thor, ands) l 1979 1975
$22,998 $21,116 lietained Earnings at Beginning of Year 8.526 8.656 Net inc ome 31,524 29,772 Total Dedudions.
7,738 6.774 Disidends Paid-Common Stod
$23.786 . 822,998 Retained Earnings at End of Perial l
Parent Company Financial Statements - (Continued) EASTERN UTILITIES ASSOCIATES STATEMENT OF CilANCES IN FINANCIAL POSITION For the licars Ended December 31, (in Thousands) SOURCE OF FUNDS 1979 1974 From Operations: Net income S 8.526 & 8.656 Amortintion of Debt Espense and Premium (Net) 19 42 Equity in Undistributed Earnings of Subsidiaries (1,183) (2.092) Total Funds from Operations 7.3fl2 6.606 Esternal Sources: Proceeds from Sale of Common Shares 7,331 9.001 Proceeds from Sale of Senior Notes 22.500 Proceeds from the Redemption of EUA Servin Corporation Notes 150 150 Other - Net 3 Total Funds from Esternal Sources 24 934 9 t 51 Total Source of Funds $37 346 515.757 APPL.lCATION OF FUNDS Purchaw of Eastern Edison Common Stock $ 7,133 5 9.275 EUA Common Dnidends 7,73S 6,774 Retirement of lens-term debt 22.417 (Detteaw) in Working Capital (280) (37)) Other Application (Net) 318 4] Total App!kation of Funds ---.
$37.3 4 6- -515.757--
CilANGES IN CONIPONENTS OF WORKING CAPITAL increaw (Decreaw) in Current Assets; Cash aml 'lemporary insestments $ 168 4 (152) Hercisables and Othe Current Assets . 20 (945) 194 (l.097) Inocaw (!hueaw) in Current Liabihties Accounts Pa>able 43 (843) Amued Liabihties 431 85 474 (758) (thucaw) in Working Capital 5 (280) 6 (339) 21
SCIIEDULE III - Consolidated EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES INVESThfENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVF.D FftOM AFFII,IATES AND OTIIER PERSONS (In thomands, empt number of shares) Colmnn D Column E Column F Column R Column C Column A Balance at end Balance at becinning of period of period Additions Deductions (1) (2) (1) (2) (1) (2) (I) (2) Dividends received Equity during the taken up Distribution period from in earnints of earnings Number of Number of by persons shares or investments shares or (Imses) of in which umts. not units, affiliates Prmeipal accounted and other earnings Principal amount of for by the amount of persons (Im m ) Amount equity were bonds and Description hands and Amount for the taken up Other notes in dollars method of Investment notes in dollars penod other Name of Issuer
$ For the year ended December 31, 1979:
Eastern Edison Company: 436,000 $ 72,484 564,000 $ 63,209 $8,589 $ 7,200(a) $6,514 $
*Montaup EIcetric Common Stock 15,000 1,500 15,000 1,500
'Montaup Electric Preferred Stock $ 74,875 74,875 Debenture Borvis s 74,875 74.875
'Montaup Electric 6,514 148,859 139,584 8,589 7,200 Montaup Electric Co : 97 0,9G3 924 Capital Stock 6,9n3 932 89 Yankee Atomic Electiic Co. 266 20,000 2,740 Capital Stock 20 tWW1 2,740 266 Maine Yankee Atomic Power Co. 126 15,750 2,283 15,750 2,102 307 Conn. Yankee Atomic Power Co. Capita! Stock j 10,001 1,454 Vermont Yankee Nuclear Power 10,001 1,458 145 149 Co. Capital Stoc ' 7,401 7,232 807 (G8 7,152 156,260 146,816 9,396 7,200 Grand Total 0,514 148,859 139,588 8,589 7,200 Eliminated in Comolidatinu ,
$ (G8 $ $ 7,401 Total
$ 7,232
.. r --
$ 807 $ ,-~=0 - =-. --. .:_ ...
M:lil:Dt'I.1: !!! - Comolidated - ( Continued)
= -- .. .-- -- - - . - - - - - - - -
= -.- - - - = . _ . . . - - - . - -
Column C Cohmen D Column E Column F Column A Column Il - Ratance at end Balance as hccinnine ni penaf ni perimi Additiems Deductiems (It (29 til (2t (1) (2) til (2) Dividends Equity reccised taken up IWtrihntion during the in carnincs ni carnmes Number of penal from Number of insest ments shares or (Imses I of by pennus shares or in which smin, not units. alfiliates scenieted Principal an.1 no her carmnes Principal persons (l.mcs) ammme ni far by the amount of Ammmt equity Desniption hemds and Ammmt for the =cre twmdsand of Investment notes in itollars perimi Other taken up Other notes in dallars method Name of Issucr .. For the year ended Decemlw 31, 1978: Eastern Edison Company-9 WI,000 $ (13,209 561,000 $ nl.035 47.122 9 46.11sH g *Montaup Electric Common Stock 15,000 1,500 15,000 1,500
*Montaup Electne PrcIerved Stock 9.275(a l 1 74,875 74,875
*Montaup Elcetric Debenture llonds S 65.600 Mftio 130,135 7,122 _6,9 88 139,588
_ 9.275 _, hfontaup Electric Co.: Capital Stock 6,901 916 126 I10 6,903 932 Yankee Atomic Electric Co. 20,000 2,740 268 268 20,000 2,740 5faine Yankee Atomic Power Co. Capital Stock 15,750 2,0'N3 138 126 15,750 2,102 Conn. Yankee Atomic Power Co. Capital Stock Vermont Yankee Nuclerr Pmscr 175 10,00I 1,459 Co. Capital Stock 10.001 1.186 147
~ 212 679 679 7,232 137,367 7,801 9.275 7.627 186,816 Grand Total l'W1,135 7.122 9.275 6.988 139.581 Eliminated in Consolidation Total 9 7.2.12 $ 679 1 -4 6 S 679 1 $ 7,232. - -
= _ = = :--.- _ . . .
- Eliminated in Consolidation.
(a) Purchases at cost.
SCIIEDUIE III- Registrant Separately EASTERN UTILITIES ASSOCIATES INVESTMENTS IN, EQUTTT IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM AFFillATES AND OTIIER PERSONS (In thousands, except number of shares) Column A Column B Column C Column D Column E Column F Ratance at hczinnmg Balance at end of permd Additmns Deductmos of period (1) (2) (Il (2) (1) (2) (I) (2) Dividends Eqtufy received taken up Distribution durine the Number of in carmnes of carnings Number of period frown shares or s losses) of hv persons shares or investments smits. aflitiates in which units. not Principal and allier earnings Principal accounted amoemt c' persons (losses) ammmt of for hvthe Dewription Imndsand Amount for the were Imndsand Ammmt equity Name of Issuer of Investment notes in do!!ars period Other taken up other notes in dollars method g For the year ended December 31, 1979: Eastern Utihties Associates: EUA Service Corporatmn . Common Stock 100 $ 1 $ $ $ $ 100 $ 1 EUA Service Corporatmn _ Promissory Notes duc 1991 $1.630 1.fl10 150(h) $ 1,480 1,480 186,062 16,622 277 7GI 184,062 16,135 Blackstone Valley Electric Co. Common stock 2,606,021 90.313 10.895 7,133(a ) 9.225 2,891,357 99,116 Eastern Edison Company Common Stock
$1n8 566 S11.172 S 7.133 $9 989 $ 150 $116,732
~ ~
~ ~
~
For the year ended December 3' 1978: Eastern Utihties Associates: EUA Service Corporation . Common Stock 100 $ 1 $ $ $ $ 100 $ 1 EUA Service Corporation . Promanorv Notes 1,630 1,630 duc Ifr)I $1,780 1,780 150(b) $ 184,062 16,199 1,159 736 184,062 16/122 BI ekstone Valley Electric Co. Common Stock Lastern Edison Company 2,235,021 79 370 10 085 9.275(a ) 8 417 2fdWI,021 90.313 Common Stock
$ 97,350 S I 1.244 39.05 m t.4 $ 150 $108,566 (a) Purchases at cost.
(b) Iledemption of Notes.
SCIIEDULE V CONSOLIDATED EASTERN UTILITIES ASSOCIATES & SUBIDIARY COMPANIES PROPERTY PLANT AND EQUIPMENT (In Thousands) Column A Columo B Column C Column D Column E Column F Other Charges - Balance at Add Balance at Beginning Additions ( Deduct )- End of ClassiScation of Period at Cost Retirements Dewribe Period For the Year Ended December 31, 1979 l'tihty Plant Produebon - Steam 5118.512 % 5.I21 $1.128 % $122,501 Production - Other 3.6S9 3,689 T:ansmission and Dutnbution 183.718 8,499 IJi87 190,526 l General Plant 5.317 159 170 5,33G . Electric Propert> licld for Future l'se 1.339 (711)(c ) 628 ; Construction Work in Progress 4fi.790 22.961 (8,258 )f h) fil,493 l Total t'tihty Plant 5W1391 Wi.7 80 52.9 % 5388,177 4 (8.969) Nonutihty Property s 1.nl s 93 s s 711 (c) 5 2,156 I For the Year Ended December 31,1978 l'tihty Plant: Production - Steam $114.316 5 4.304 S 128 6 $118,512 Produetion - Othe 3,636 M 3,fm Transmission and Distribution 177,996 7,318 1,596 (4)(a) 183,714 Cencral Plant 4,712 1.21S 587 4 ta) 5,347 E!cetric Property lleld for Future l'se 1,339 1,334 Construction Work in Progress l 33.740 17.58; ( 4,535 )l b) 48,790 Total Utility Plant . $335,759 530,478 $2.311 6 (4.535) M59.391 Nonutihty Propert) $ 1,306 $ 49 % 3 $ 1,354 (a) Transfer between classifications. (b) Transfer to Utility Plant and Other Account. (c) Transfer between Utility Plani and Nonntility Property, 25
SCIIEDULE VI EASTERN UTILITIES ASSOCIATES & SUBSIDIARY COMPANIES -CONSOLIDATED ACCUhtULATED DEPRECIATION, DEPLETION AND A%f0RTIZATION OF PROPERTY, PLANT AND EQUIPhlENT (In Thousands) Columa E Column C Column D Column E Column F Column A Other Additions Charges - Balance at Char ged to Add Balance at Beginning Costs and (Deduct )- End of Description of Period Espenses Retirements Describe Period For the Year Er.ded Decemler 31.1979 Accumulated Depreciaticn, Depletion and
,$_87,728 $ 9.888 $ $ 94.618 Amortuation $_2.998 _
362 $ 166 $ $ $ 528 Nonutshty Property $ For the Year Ended Decemler 31.1978 Accumulated Depreciation. Depletion and
$ 80,597 8 9,447 $2.316 $ $ 67,728 Amortuation 220 $ 145 $ 3 $ $ 362 Nonutihty Property $
- 1 l
1 l 26 a
_m - 4
@ @& c o o b c & & & @ @ 4' Gt644k4
# x f "-
I c c o c cccccccccgc e ecccccccc. ccE.CC cc Cccccc *"D r 3 - e aB g 5 % Z ZZZZZZZZZZZZZZ ZZZZZZZZ c { c!g g e* , A
. i;E ~*] am -
.-2e ------r er
.c i k6 I o
h IIIIIcIIcIIIIh ec ec: eec: c i h 5'c'a ld N d [t 1
- ,, "E f f p ; f en;;j
< s - -s Z .-r: ZZZZZZZZZZZZZ..Z -a = .,.,: .f. -
G g
,_ y i
- e .
- w. . * <.
1 : Le g 1 I l C. :
.U g l -
& in 17ug $ &.. k=. k 6kk'E).).).)).
E. =. =. . . . ,. c . oco g*[I C k k k k k "z k 's
^w .":E g =. =. =. c- =o =. =. = . =.
C 4 iZ /. ZZZZZZZZZZZZZ.e/- Z Z.Z Z Z Z Z /. _.= l[' 3= M i I O.c ~ l! , 50 N .f. I 5.c.b *0 -
-C "E" k L U
E.kx.k = k k=I C g kCa* _ g, ck 8_ c_ c'g- =k-. kkkk
= = = , k= ,k=.k k
.A T-6 =. *E. - ----- - F .-
, . - ' .E E 2- Z / ZZZZZZZZZZZZZZ ZZZZZZZ/ 3 lli
- /, .A < c "E * :.E ,E.g ' - e W< w -
.1 $
ll: a. I m ., Ei : p .5 Um 3.' h.,, -).gl#f,,.a
...w ~
x
- xxxxxx-..- - s xxxxx
-, =s xxp- x%-xxrr- i . i.- ., . ::. . i 7.5.9 5.2.5.g ~. 5.5.5.5.5.5.5 t.
',2 f. 5
~
M w c M $; ~ 4.i e4.e M 3'd 5.,,a c x.,; q 6 gE J g ] I6g
.. r Y.-~ 3. a 2 ea es c ic ea c e e e e t. ne ac o nc ie s *
- . '- i e m e e r -eaeic ei. .s. - i.
e- - ei =.
>. = E - e -
- - r -=
K c e tcc s'E.E.!! . ' e : Q iEE m j +=
<k l*
"9 ; < .I ~ =a i 2~
-k -
Z* , . x y xMxxxz xxypxxz g . , = - 8 I
.g 3 e_a3 g . hl- M
'E -r, f.5.0.5.2,5.g. x5. x5 x x x x x 4.G.en. 0, M 2, 5.esg ; L. 3 D3 m- a 6
x .: -
- m. 1. .;.
es e,a
- c e ca c- e e e e iie5.sc 5.5. o ne ne 5.5 e se c e ac ea e :
- ea I .
.g .
i x - m 7e .:g.s, /. .c 4,,c,. - e- :s .. y yee
.,,,, "e i e,,
-- E= . *c = ;., .
<Z. a -9L =c E.
(a.a
. , < " i
. l .E
<,,,2,,
.e6.=. _? !!!. , 2 h
=.
k
=.
=
kkkk'k)k"=kk)k-=. =. =. =. = = =.
=. ...
k*='hhkkk
=. =.
=
=.=.=. _.=.=.=. ?.
=. =. =.
.= :
b .W e A. B =. C - Z Z Z Z /.Z /.Z.Z Z Z Z Z Z Z Z ZZZZZZZZ =
< w< E pc - . . - =
w =
. ,=.
z b- U == s y sessssssssssss sa m asse -- E-(e;
. we e
g E t j .".g 7 5 I. .,,. C - ei ca 2.5.:.52.5.5.55.455,5.5 C e ci c :-e e ne t- se ac -c- in e s.G.ca % R 2. 5.'i. e e n e x es -m- c-e b. g
- 5:
.c .=
.;.g
- . < ec.nIa ., p ..
.# .f.
- 7. G, mu s : :
pE
-I >
! 6;i i- :
.m :=
,,,: 7g . . . . . .- a .
h a $.3 6:c : s2 kF [[{{ F-] h([gg g ',' N E g... u y .=.~x g g @ 6. pgx. g g-. i-cse
~ . E x x.x.=.x
~ - . ~ x. x. x. x. 4. ,:
E
,,,a = ei . . - - .i . t
.: a;: -
W.. e4 c ic e c Ce4e nie t-e aC O- e s.a ne c e ac ea c
./. .,. = c ..ea ea ,-
= '
c : = W _'= H
- r.
i i
' ! = Ed
*;c : :.
< .: ,. = 0.
W * ' E. .=_
=
=. s3
- 2. . - - -
= .- t
(~ .5
.: E A ; .-
c c - : v. 't. F . }, '* g .=E 'r
- 5
.w :
_ - .3 E - a e E '= c v. Z4-:-
., } 5 t .m .E -
- c s -
3 a "C . . .
'E
^
- v. 6 E ;E
.c D t.t :
-=
W' t =; 3." jg' E"k 5= r.d m e eg r t-ace k .eaec a .= .E .2 a
= 5l $
k 6, Z W qrh, TTTir$)%-hsM ~ cs, 7 .C. E: T, [: i r, = 3,E"500L:.L- L"4MMgk g ,,, g.67 j
- 2. .b ae p L . kk. k. k. k k. k. k. I k k. k.mi
/.Cgt7tTiTTT"TT73A GL ,-98ex -r c?a E x t .E
=<E xcw
-d$
o
-8 gg w E rK-= v-
.;: c ;r-
.c e g . .C. .Ek.e ( 6 .e ..0. .t. . . . .c.a g
.c xx b s.
ue . 6 -5e4e4MM g e =, =$e - c h,l* a Nhhhhh hhehhhEE $$5I-5II5 b. .I E , hd I 5: ' E
.$EW;eeee ct ,i h'e e tes w :e s .i,s eeeeeeeems e- u m,e ,a ,s r- s = Z a.v.cneIe*:ee
= x c s e r e ee,J ne,caea--
C Ex 3$c .n u l. ' a c 3 D 'E' - g -a:2 "c s 3= c c w w w e F- <F = U
l - _ _ _ ___ _ _ _ i SCllEDULE X11 Consolidated EASTERN UTILITIES ASSOCIATES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In Thousands) Column A Column B Column C Column D Column E Additions (1) (2) Balann at Charged to Charged Lalance at Beamning Costs and to Other Deductions - End of Description of Period Expenses Accounts Describe Period For the year ended Decemler 31. 1979. Allowance for Doubtful Accmmts $ 423 $ 883 $ 100(a) $ 1,Il6(b) $ 290 For the year ended Decemler 31,1978: Allowance for Doubtful Accounts $ 208 $ 820 $ 46(a) $ 651(b) $ 423 (a) Recoveries of accounts previously written off. (b) Accounts Receivable written off. 28
SCITEDULE XUI - Registrant and Consolidated EALTERN IPITLITIES ASSOCIATES AND SUBSIDIARY COMPANIES CAPITAL SIIARES(s) Decemfer 31,1979 Column A Column B Column C Column D Column E Column F Column C Shares inued or outstanding as Number of shown on or included shares held by Number of sharee in related balance afEliates for reserved for options, Number of shares included sheet under caption which statements warrants, conversions in Column C whiah are *' capital shares' are Sted herewith and other rights Number (il (2) (Il (2) (11 (2) (I) (2) of shares Itchi by Not held Number imwd or for by or for Amount Persons Directors, Name of of shares arul not armunt account at included in ofLvrs imer and authorised retired or of imer of imer which ansolidated and title of issue by charter camviled thereof thereof Number shown statements Others employees Others (In Thousands) Eastern Utilities Associates: Common Sharcs- $5 Par 7JNM).000 5,438,969 %nw 5.438.909 5.4385NH $ 27,195 None None None None EUA Service Corporation: Common Semk - $10 Par 5, 3 10 100 None 100 It W) I 100 None None None ] Blackstone ' Valley Common + Sim Electric
- $50Company:
Par .. 233,000 IMJi62 Note IM.062 IM.062 9,203 184.002 None None None Non-Redeemable Preferred Stock - 3,500 None 4.25%, $lto Par (h) 35JWM) 35JMM) Wne Emo 35JWN1 None None None 5.fiO%, 2100 Pari b) 25,310 25,mm %ue 25.m o 25JWH 2,500 Nme None None None Eastern Edison Company: 2.89 t X>7 2.891,357 None 2.891,357 2.891,35. . 2,7M 2,891,357 None None None , Canmon Stm k - S25 Par . . Non-Redeemahic Preferred Strwk- None None 4 687, SHU Par 60.000 60.000 None fa.000 00JN10 (1/X10 None None 8.327, $100 Par 30.tNo 30,000 None 30.W M) 30JN4 3.3 10 None None None None Re leemable Preferred Stmk. 13 607, $100 Par 60,000 60JN10 wne 60JMM 60.000 f1JXXI None None None None hfontaup Electne Company: C3,000 None None Common Stmk - 3100 Par . fG6JKn (G6JNM %ne fdfl.04 (MGJMMI 636.000 None 15JHU 15.tWO Nur 15,1N C 15 tMN) I,500 15JWO None None None Preferred Stock - SIOO Par Total Capital Shares . . . . . .... .
~ i95.283 less: Intermmpany IIctdings Eliminated in consolidation ,
'87,088 Redeemahic Preferred Stmk sink- '
ing Fund requirenwnt 318 Total per Consolklated Halame Sheet: ,
$27,I9 3 EllA Cornmon Shares .
i Perferred Stuck of 5.shshbry Com-panics 20,68fi $ 17,881 i (a) There were no significant changes since the date nf the relateil balance sheet (b) The Charter prmisions of the Cornpany hmit the preferreel stewk inued and ontstanding at any tirnt to 7,7'E of the total capital <fock
5 SCIIEDULE XVI - Registrant and Consolidated EASTERN UTILITIES ASSOCIATES AND SURSIDIARY COAfPANIES SUPPI.EMENTARY INCOME STATEMENT INFORMATION Column A Celumn B Column B For the Year Ended December 31, 1979 1978 Charmed to Costs Charged to Costs
@ and Expenses and Expenses (In Thousands)
Amounts of maintenance and repairs and depreciation expense were as shown in the income state-ment and notes thereto. Taxes-Other Than Federal Income (a) EtJA Service Corporation S 257 5 248 Blachtone Valley Electstc Company 4,221 4,0*2 Eastnn Edison Company 6,157 6,820 Montaup Electric Company 2,400 2.641 13.035 13,711 Ehminations 257 24 5 Censolidated $12,778 513,463 l Amounts of rents, advertising costs and research and development costs did not exceed IC7r of gross reve nues. Notes. (a) 1.ocal State State State Fayroll Penperty Corpwation Seles and Franchise Tames leses Tat Use Tas T as For the Year Ended l December 31,1979 i El'A Semre 5 257 8 $ $ $ I Blarisinne 229 1,559 2A33 Easterni Edi.on 398 5,406 353 hionta.4 208 2,179 2 2 9 Elimmations 257 l To*Al $ 835 89,144 $2A35 5 2 6 362 1 For the Year Ended December 31,1978 EUA Sersice 6 248 8 6 $ $ Biscistone 222 1,6 61 2,176 Easteer. Edisen 409 5,693 8 710 M,sraup 192 2,392 2 3 52 Ehmir.atior.s 248 79e* $ 823 $9,6fs9 $2,178 $ 11 $ Te2 30 u
Q l l l l AUD11DRS* REPORT Truders EasTmx UTn.mr.s Assoc Am Under date of March 4.19SO, we reported m. the consolidated balance sheets and stateinents ni capitalization of Eastern Utilities Associates and subsidiaries as of December 31,1979 and 1978 and the related consolidated statements of income, retained earnings, and changes in financial position for l the years then ended, as contained in pages 16 through 24 in the annual report to shareholders for l the year 1979. These consolidated financial statements and our report thereon are incorporated by reference in this Annual Report on Form 10-K required to be filed by Eastern Utilities Associates j under the Securities Exchange Act of 1934. We have esamined the balance sheets of Eastern Utilities Associates (Parent) as of December 31. 1979 and 1978 and the related statements of income, retained earnings and changes in financial position for the years then ended. Our examinations were made in accordance with generally accepted auditing ] standards and, accordingly, included such tests of the accounting records and such other auditing procedure.s as we considered necessary in the circumstances. In our uninion. the financial statements referred to above present fairly the financial position ni Eastern Utilities Amiciates (Parent) at December 31,1979 and 197S and the results of its operations and changes in its financial position for the years then ended,in conformity with generally accepted ac-counting principles applied nn a consistent basis. In connection with our esaminations of the financial statements referred to above, we also cum-ined the schedules as listed in the accompanying indes. In our opinion, such schedules present faidy l the infonnation required to be set forth therein. As.r.XANDr.n GnAxT & CostrAxy 1 Iloston. M awachusetts March 4,1950
]
1 l l l l l 31
- 1. : y
]? ~3
- pj 13 SECURITIES AND E X CII AN G E COMMISSION w g a WASIIINGTON, D.C. 20549
- ,, . s 4
!; ' il Form 10-K 3:4*
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF 4{ 7}ii i)V - TIIL SECURITIES EXCIIANGE ACT OF 1934 For the fiscal year ended December 31,1979 Commission file number 0 S450 i r : Ei Eastern Edison Company
} , .i (Esact name of reg &trant as specified in its charter)
~
j ' MASSACIIUSETTS 04 1123095 (i.R.S. Employer Identification No.) (State or other furkdktion of) incorporation or organi:ation 3G Main Street, Brockton, Mass. 02403
~. ,
(Zip code)
'; (Address of principal executive ofices)
. Registrant's telephone number, including area code (617) 5S01213 Securities registered pursuant to Section 12(b) of the Act:
'. a. . , . Title of each class Name schkhofregistere each exchanbe on 2 .
None b Securities registered pursuant to Section12(g) of the Act: h 4.64% Non-Redeemable Preferred Stock, $100 Par Value a+d
,W l ' 1 .
(Title of class) 8.32ro Non Redeemable Preferred Stock, $100 Par Value f,' y ,. "' - 4 (Title of class) 13.607o Redeemable Preferred Stock, $100 Par Value lb;%I'f . ', (Title of class) A,7 '. D Yt s M *. ?
?>
? .i, V .', ( Indicate by check mark whether the registrant (1) has filed all reports required to be filed by IU 7) Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for j I :ly,+'d such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes V No M.}
h.' [N Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of
- the close of the period covered by this report.
%)
Common Stock Outstanding at December 31,1979 h.. $!:}' w*
,1 }b 2,891,357 Shares
, ; .s ,
ef.)
'M ?)
.' S (*
, ;'=
PART I Item 1. Euriness (a) Eastern Edison Company (the Company, or Eastern Edison) is a retail cicetric utility com-pany organized under the laws of the State of Slawaelmsetts. The Company is a wholly-owned sub-sidiary of Eastern Utilities Amiciates (EUA) a hlawaelmsetts voluntarv amiciation organized and esisting under a Declaration of Trmt dated April 2,1928, as amended. and EU A is a registered hohhng company under the Public Utility lloiding Cinnpany Act of 1935. EUA ow m directly all of the shares of common stock of two operating electric utility companies (the lletail Subsidiaries). namelv. Eastern Edison and Blackstone Valley Electric Company (Hlac kstone). Eastern Edison owm all of the perma-nent securities of hiontaup Electric Company Olontaup), a generation and transmiwinn company, which supplies electricity to it. to lilackstone, and to several municipal and other unaffiliated utilitic' for resale. EUA aho owm directly all of the shares of common stock of a service compam. EUA Service Corporation (Service). The holding company system of EUA. the Betail Sulnidiaries. Ntontaup and Service is referred to as the El'A System. Effective Juiy 31, 1979 Fall River Electric I.ight Com-pany was merged into llrockton Edison Company and on August 1,1979 llrockton's name was changed to Eastern Fdison Company. Eastern Edison and its subsidiary (Ntontaup) cover a service territory of about 390 upiare miles in portiom of southeastern Slawachmetts with a population of apprmimately .120.(WKb On Decemhe: 31,1979 the Company furnished retail electric service to approsimately 16,300 cmtomers in 22 cities and towm. and w holesale sersice to 7 other utility companies. (b) For the fise years 1975 to 1979, ch etrie operatiom accounted for 100'J of total operating res enues. (c) Eastern Edison and Afontaup are members of the New England Power Pool (NEPOOI.). l l which is open to all investor-owned. municipal and cooperative electrie utilities in New England. under an agreement u hich provides for coordinated planning of f uture facilities and operation l of approsignately 9W of existing cencrating capacity in New England and of related trammiuinn facihties. The NEPOOI. Agreement imposes obligatium conecrning generating capacity rescrse and the right to me major trammiwion lines. and provides for central dispatch of the generat-ing capacity of the pool's members wis the objective of achieving economical me of the regioni facilities. Pursuant to the NEPOOI. Greement. interchange sales to NEPOOI. are made at a priec apprmimate!j equal to the f uel emt for generation without contribution to the support of fised charges. Ilecame of its participation in NEPOOL the Company and N!ontaup's operating revenues and costs are affected to some extent by the operations of other members. The Company relies totally on purchased power to meet its electric energy requirements. Power purchases for Eastern Edison, as well as Blackstone are arranged on a system basis, by NIontanp. l nnder w hich power is made available to the El'A System and allocated to the Retail Subsidiaries in accordance with their peal requirements. The availability and tot of fuel oil to N1ontaup and to other owners of oil burning units in which l Ntontaup has an intciest could he adscrsely allected by policies of oil producing natiom, other f attors aficcting world supplies, and domestic governmental actioa Substantially all of the residual fuel med is imported. It is impossible to predict the impact m hjontaup's operations of powihte action of Congrew or the President with respect to import fees, duties or quotas on oil. Afontaup has an agreement with a supplier for the purchase of 50% of its oil reipiirements for its Somerset Station. The agreement continues from year to year unless terminated by either pany on July 31. Afontaup is presently negotiating with other suppliers to provide its remaining requirements. It is espected that an agreement will be comummated in the near future, During 1979, hiontaup had an average inventory of 266.f>00 barrels of fuel oil for its steam generating units at the Somerset station. the equivalent of 65 days' supply under present load conditions hiontaup's weighted average price per barrel of oil for the years 1975 through 1979 e,as $11.78, $11 AO, $13.25, $11 AS and 515.9fi respec-I l
, r a tively. Smee February 22,1978, hiontaup has been permitted to burn oil with a sulphur content of up to 2.2%, which is higher than the 1% allowed by current regulations. Afontaup has no arrangements for the purchase of coal. Canal Electric Company on behalf of itself and hiontaup has a contract with a single supplier fer the fuel-oil requirements of Canal Unit Nos. I and 2 for the period ending November 15,19S0. The contract permits limited purchaws from other suppliers. The owners (or lead participants) of the nuclear units in which Afontaup has an interest, as set forth in the table below, have made, or expect to make, various arrangements for the acquisition of concentrate, the conversion, enrichment, fabrication and utilization of nuclear fuel and the reprocessmg of that fuel after use. The Company is aware that various electric utihties have been unabic to obtain contracts for adequate nuclear fuel supplies and that additional difBeulties have been encountered because there are no domestic reprocessing facilities. M intaup cannot predict the extent to wluch such problems will aflect fuel costs for nuclear units in which Montaup is participatmg The following table sets forth hiontaup's interest in planned jointly-owned units as of Decem-ber 31.19~9. hfontaup Imerest Espende Cost turesto ( milhons 12/'ll/79 Esnmated Thousands of 5 ) (milhom Opersiins
% of kilowatts (l H 21 of 6 : Date 1* nit Name lecenan Tp_e, 5.00(3) 57.5(3) 763 9.4 19M( 4 )
bbm>L No. I Seabrook, Nil Nur trav Seabrook, Nil Nuclar 5.00(3) 575(3) 75 4 9.4 19M(4 ) l Mbr<mL No 2 19S6 Nucles: 4.01 46.0 112.1 29 2 hhStor e No 3 Waterford. CT 2.15 25 0 MO 75 1967 Pilgurn Na 2 Plymouth, ht A Nuclear 166 0 319 2 55.5 TO"I ALS l t 1) Based upon information f urnished by the lead participant responsible for construction of each unit. Complete cost protections are continually being reviewed and these estimates are subject to further escalation (2) Includmg allowance for funds used during construction and estimated nuclear fuel costs. (3) Assumes eflectiveness of agreed upon increase in particiption from the current 1.9% which a subject to regulatory approvals. Ilased on a 1.9% participation, EUA's net capability would be 22 MW from cath umt and its total construction costs would be $31.035.000 and $29.550,000, respectnely j (4) The Icad participant. Public Service Company of New llampshire (PSNil), announced on March l l 20,1950 its decismn, m view of the unsettled state of the capital markets and the very high cost of external funds, to reduce the level of construction expenditures substantially. If the rednetion l were to continue for more than a few months, the estimated operating dates would be deferred. Such deferral would substantially increase the total cost of the units. In addition, on March 25. 1991 PSNil announced a 15.3% increase in the estimated final cost of t!,oc .imts primanly as a result of rising interest rates. See Notes 11 and J of Notes to Consolidated Financial Statenents for additional information re-garding jointly-owned electric facihties. Montaup's costs of fossil and nuclear fuels for the yars 1975 through 1979. together with the weighted average co*t of all fueh. are set forth below hiill iper kuh 1975 1476 1977(1) 1975t!) 1979.li 19.5 17.8 21.5 IS 1 25.1 l'om! (od and coal) 30 2.6 24 30 3.5 Nucicar(2) 16.0 15 0 17.5 14.3 19.6 All fuels (1) Based on use by Montaup's custorr'ers. Prior years inchide unit power sales to NEPOOl.. 2
~ ~ -
I ' J -- __. _ _ _ _ _ _
-, j i
(2) Nuclear fuel costs for the indicated periods include crechts for the estimated salvage value of I residual fuel and charges for estimated reprocessing costs, as detennined from time to time by the ' varying practices of the owners of the nuclear generating units in which Montaup is a participant. It is believed that such estimated credits less such charges are not material to the indicated mst of all fuels. Eastern Edison and Alontaup hold valid franchises, permits and other rights adequate for con. ducting their business in the terntories which they serve, and such franchises, permits and other rights ' contain no unduly burdensome restrictions. l The Companies' electric sales are seasonal to some extent. There has been a wmter peak due primarily toincreased usage for heating and lighting and a summer peak due to air conditmning usage. The Company is not dependent on a single customer or a few customers for its electne sales All of the transnuuion facihties within the EUA System are interconnected with the New England transtmsuon grid. There is no competition from other electne utihtfes within the retail territories , served by the Betad Subudianes. l Eastern Edison and Montaup are subject to regulatioas by the Massachusetts Department of Pub-he Utilities with respect to tbc issuar re of securities, the form of accounts, rates to be charged. service to be prouded and other matters, in addition, by reason of its ownership of fractional interests in certain facilities located in other states, Montaup is or may be subject to regulations of activities in those states. The companies m the EUA 3mem are subject to the junsdiction of the Securities and Eschance Commission under the Public Utihty llolding Company Act of 1935 by virtue of which such Commis-sinn has certain powers of regulatmn. including jurisdiction over the issuance of securities, chance in the terms of outstandmg securities, acquisition or sale of securities or utihty assets or other interests in any business, intercompany loans and other intercompany transactions, payments of dividends under certain circumstances, and related matters. Eastern Edison, insofar as it may be deemed to be a holdmg company under such Act by reason of its ownership of securities of Montaup, has been exempted from registering under such Act as a hohling company by complying with the applicable rules thereunder Eastern Edison and Montaup are also subject to the jurisdiction of the Federal Energy Regulatory Commission (FERC) under Parts 11 and Ill of the Federal Power Act. That jurisdiction includes. among other things, rates for sales for resale, interconnection of certain facilities, accounts, senice, and property records. Nuclear generating facilities, including those in which Montaup has an ownership interest, aie subject to extensive regulation by the Nuclear Regulatory Commission, (the NRC) which has assumed l the licensing and related regulatory functions formerly performed by the Atomic Energy Commission. ( The NRC is empowered to authorize the siting, construction and operation of nuclear reactors after consideration of public health, safety, environmental and antitrust matters. The Company and Montaup and the other companies owni ng generating units from which Montaup obtains power are subject, like other electric utilities, to developing standards administered l by Federal, state and hical authorities with respect to the siting of facilities and environmental factors. The Emironmental Protection Agency (the EPA) has jurisdiction over discharges into both water and air and has broad authority in connection therewith including the ability to require installation of pollution control and mitigation devices. The Federal Water Pollution Control Act establishes a national objective of complete elimination l of discharges of nollutants (including heat) into the nation's waters and creates a rigorous permit program designed to achieve these effluent limitatiors. All water discharge permits for plants in Massachusetts,includmg those for the Somerset and Canal plants, are issued by the state Department of Environmental Quality Engineering, subject to review by the EPA. Certain rigorous water pollution l 2
a
, m e
control regulations issued by the EPA which would have substantially limited discharges from electne generatmg plants were challenged by industry groups and in 1976 and 1977 were remanded by a Umted States Court of Appeals to the EPA for reconsideration. Certain substitute regulations have since been proposed by the EPA. The Federal Clean Air Act empowers the EPA to estabhsh clean au standards which are implemented and enforced by state agencies. Both Federal and hiassachusetts legislation require consideration of reports evaluating environ. mental impact as a prerequisite to the grantmg of various permits and licenses, with a view to mini. mizmg environmental damage. hlassachusetts air quality regutations also require that plans (includmg pmcedures for operation and maintenance) for construction or modification of fossil fuel generatmg fanhtws he appmved by the Department of Environmental Quality Engineering. In addition, in Manachmetts. certain electric generation and transmission f acilities on which construction commences af ter Apnl 1976 udl be permitted to be budt only if they are consistent with a long. range forecast f led by the utihty concerned and appmved by the Energy Facihties Sitmg Counot The Company and 51ontaup and the companies and municipalities with whwh Montaup has power supply arrangements are aho subject, hLe other electne utihties, to regulation with regard to inmne, land me and smular controls by various state and hwal authorities. Under recently enacted Federal law the Secretary of Energy will have authority with respect to existing electric power plants to prohibit the burman of oil, but only after finding that a plant has the capability to use coal without substantial physical mothficatmn and that the use of coal is financially feasible. Exemptions relatmg to emnonmental requirements and other factors are provided. The FERC has recently propmed comples rules under tlas legniation. In 1977, the Federal Energy Administration (the agency then escrening sinalai authonty) concluded, af ter reviewing data concerning costs and other factors. that an order forbulding the burning of oil in the largest unit at hiontaup's Somerset generating statmn should not be iuned. EUA understands that the Department of Energy is investigating the feasibility of re piiring Canal Unit No. I to comert to coal. EUA is unable to predict the results of this investiga-tmn or acy other ellects which this legislation may have on the EUA System. Comersion of a generat-ing unit from oil to cral, with attendant installation of air quality control equipment, may require heavy capital espenditures and may increase operating costs. The same legislation forbids the use of oil as a primary fuel in new power plants. subject to similar exemptions. Uruler their omtmuing jurisdiction, the NRC (with respect to nuclear facdities) and one or more of the EPA and the state and local authorities may, after appmpriate proceedmgs, require nuxlifications of generatmg f anhties for which construction permits or operating licenses have already been issued. or impow new conditiom on such penuits or licemes, and may require that the operation of a unit l ceaw or that its level of operatmn be temporarily or permanently reduced Othrs artnitu s of tlie Company and Alontaup from tune to time are subject to the lunsdiction of s arious other state and Federal regulatory agencies. S.nne of the generating f acihties in which hiontaup has als initerest, aiul b rnliaired to liay a i share of the emts, base encountered and may in the future encounter pmblems under governmenta' regulationis, partmidarly those relating to nuclear facilities or to protection of IIw einirotutient. Sueti problem may result in increases in capital costs and operating costs which may be substantial. to ( delays or catwellation of comtruction of planned facihties, or in mmlification or termination of l operations of existing f acihties. l l l Through Decemlwr 31, 1979, compliance with applicable environmental regulations required l I additional capital expenditures by hiontaup of approximately $14,050,00() inchiding approximately ! $11,5M,fXX) for 51ontanp's ownership in the following units: Canal No. 2 $10,230,000, Wyman No. 4 I $516,(XM), h!illstone No. 3 5231,(XX), Pilgrim No. 2 $49,00() and Seabmok No.1 & No. 2 5538,000, based on information supplied by the lead participant or operator in each case. Stontaup expects rapidly increasing expenditures, not now determinable, to meet environmental requirements for the existing and proposed units in which it is participating. l 4 1 I
htmt of the generatmg units from which Montaup obtains power operate under permits which hmit their efiluent discharges into water and which require monitoring and in some instances biological studies of the impact of the discharges. Such permits are issued for a period of not more than five years, at the expiration of which renewal must be sought. All domestic fossil fuel plants from which hfontaup obtains power operate under permits which limit their discharges into the air and require monitoring of the discharges. Air quality requirements adopted by state authorities in Alassachusetts pursuant to the Clean Air Act impose limitations with respect to pollutants such as sulfur oxides, oxides of nitrogen and particulate matter. These limitations could not be complied with if Montaup were to burn coal with the present equipment in its Somerset plant and therefore the use of coal would require smpension of these air quahty requirements or the installation of control devices. The Somerset plant and the Canal plant have been granted approvals by the Massachusetts Department of Environmental Quality Engineering to horn fuel oil with a sulfur content not in excess of 1.21 pounds per million B.T.U. heat release potential (apprmimately 2.2'? sulf ur content fuel oil). The approvals are subject to conditions including a proviso that f uel oil havmc not in excess of IG sulfur content be used during air pollution emergencies. Th.e EPA had initiallv apprmed the use of the higher sulfur content c,f fuel oil to July 1,1979 and subserpiently apprmed the Department of Environmental Quality Engineering request for a permanent extension of the permit subject to a review every three years. As of December 31,1979, Eastern Edison had 506 full time employees. Item 2. Summary of Operations EASTEltN EDISON COMPANY AND SUBSIDIAllY CON 501.lDATED SUhl%IARY OF OPERATIONS Years Ended th-wmher 31, 1979 1979 1477 197h 1975 (In Thousands) Operating Resenues (Notes I arul 21 S168,127 5141,712 5144.791 $138.9 46 5117.4 % Operating Espenses, Other lhan the Fo'lowme 138.832 111,044 120,651 107.658 96.903 Tases-Other Than Federal inomm 8,504 9.284 8.657 S351 7.297
-Federal Innnne (Crnht) 638 4.016 (895) 4.0iM all
-Defened (nnht) 1,576 (254) I 657 1,373 4%
Total Operstme Espenses 149.550 124.090 130.100 121.391 105.12t3 Operatme Income 16.577 17,622 14.691 17.555 12,329 Allowann for Other Funds Used During Construction 1,589 969 4 13 1.M 3 4.914 Nonoperatmg Income - Net 1.070 779 517 450 558 Income Reinre Interest Charges and htmoney Interest 21.236 19,370 15,MI 19.N 8 17,811 Net Interest Charers 8.997 7,941 7.814 9.015 9.4% Income before hiinority Interest 12.239 11.429 7,827 10.633 8.345 hiinority Interest in Net Larnmes of Subudiary _ 1,167 1.192 Inmme After Interest Charers 12.239 11.429 7.h27 9,466 7.151 Dnidend Requirements on Preferred Sinck 1.344 1,344 1,344 1,344 732 Income Before Cumulatise F.Hect of Change in hiethod of Recordma Resenue 10,895 10.085 6.483 8.122 6.421 l Cumulative Eficct on Years Pnor to 19"7 of Acoume Esh. mated Unbdled Revenue After Deduction of Related Taxes of $1,400,526 (Note 1) 1.80n Consolidated Net Income (Note 2) $ 10.895 $ 10.085 3 8.283 $ S.122 $ 6.421 5 l 1 l
V ,. Years I:nded Decer her 31, 1979 1974 1977 197f> 1975 Average Number of Common Shares Outstandma 2.629.799 2.265.938 2,098,021 1,571,776 1,245,653 Consohdated Earnmgs Per Asciage Common Sharc Out-standmg: Before Cumulative Effect of Change in Meth<nl of Re. cordma Revenue $4.14 6045 $3.09 $5.17 $5.15 Cumulatise Eficct on Years Pnor to 1977 of Accrums Est mated t*nt.illed Ecsenin .M Total $414 4445 %1 94 $5.17 $515 Pro Forma Amounts Assim.mc Changes m Mcttiiwi of Re. cordmg Ecsenues was Apphed Hennactncly tNote I) Consohdated Net inaunc $ 6 4ri s $ h.228 % 6 649
-- - ~ - ~
Conmbdated Earnmas Pcs Asermec Common bhaic Outstandma $109 $5 23 $5.34 EASTEltN EDISON AND SUBSIDIARY CONfPANY NOTES TO CONSOLIDATED
SUMMARY
OF OPERATIONS Note 1, llevenues are based on hdhng rates authonzed by applicable Federal and state regulatory com-missions. Prior to 1977, Eastern Edimn followed the policy of not recording revenues relating to serv- i ices rendered but not billed at the end of the accounting period, Effective January 1,1977 Eastern Edi-son changed to a method of accounting to accrue the estimated amount of unbilled revenues for electricity provided at the end of the month to more closely match costs and revenues. This change had the effect of increasing conmlidated net income and earnings per commen share in 1977 by
$207,447 and 50.10, respectively, before the emnulative effect for periods prior to 1977. The cumula-tive effect of the change for > cars prior to 1977 after deducting applicable taxes ha<, been reflected in the Sununary of Operations for 1977 The pro forma amounts reflect net income and earnings per common share auumine the change in method of recording revenues wa applied retroactively.
As of April 1,1979 hfontaup began classifying sales of electricity to the New England Power Pool as interchange power and these amounts are reflected as credits to purchased power expense. Amounts reported f or periods prior to April 1,1979 have been reclawified to conform with classifications used i smee that date. l Note 2. Ellective July 31. 1979 Fall Hiver Eleetne IJght Company was merged into Hrockton Edison Company and on August 1.1979 Hrockton's name was changed to Eastern Edison Company, , 1 Operating Herennes and conmlidated net income for the two Companies for the five years ended December 31,1979 are as follows: Denmher 31, 1979 197% 1977 1976 1975 Operating Resenues: Hn= Ltont A) $158,990 $131,535 $136,259 $129,773 $108.477 Fall Hner . 30,088 27.100 26,701 25,039 23,774 Elimination ( H) (20.951) (16,923) (18,169) (15,865) (14,7931 Camsohdated 168.127 141,712 144,791 138,947 117,454 Consolidated Net Innunc: Bnx kton( A ) $ 9,799 $ 8,372 $ 6,668 $ 6,362 $ 4,807 Fall Riser 1.096 1,713 1,415 1,760 1,614 Consolulated 10,895 10.085 8,283 8,122 6.421 ( A) As previously reported for years ended December 31,1975 through 1978, after giving eficet to reclassification of NEPOOI, sales (see Note I), (B) Eliminations relating to intercompany revenues. 6
A
.a %gp ec vp
'b-n\,$ $1l[[.
e.,
'I' '
84 O 9q
:]'
N%*\ff g)pf s4 <e, f}f g /g,g Y(+,,,9 NV IMAGE EVALUATION
'%,,,,,N N
TEST TARGET (MT-3) 1.0 lf EM EM ld ?ll t% l.l [[E HM \' 1.8 l.25 1.4 1.6 4 4 6" y MICROCOPY RESOLUTION TEST CHART b w&y> % AN +r
. + +a/s // p '
ru%c gy///U/ O y
<>b4;s@
.3 6;'8 '
,jp 3
.j
~
3 i
' ' ._ j '
q MANAGEN1ENTS DISCUSSION AND ANAL.YS15 OF Tile SUhtNIAltY OF OPEllATIONS Operating fletsenues: 1979 operating revenues increased 15.67o over 1978 primarily due to a significant inercase in the recovery of higher fuel costs.1978 operating revenues decreased approxi-mately 2.1"*c mer 1977, reflecting the uct ellect of reduced fuel clause revenues resultmg from the use of lower cost fuel in 1978 and a decrease in unbilled revenues, partially offset by wholesale and retad rate increases granted dunng 197h. Operarma Expemes; Operatmn and N1aintenance expenses increased 26.5% in 1979 over 1976. Ortually all of the increase was due to the escalation in the cost of fuel during 1979. The price per barrel of oil increased from a level of $11.42 per barrel in January to almost $19.00 per barrel at
> car end. The decrease in operation and maintenance expenses of 9.57c in 1976 as compared to 1977 n due primarily to a substantial decrease in the cost of fuel. as a result of the use of higher sulphur ecsi.lual od to generate eh etncity Thn decrease was partially offset by a <,hght increase in other operatmg expemes.
I nnes for an esplanation of chances in Federal income taxe,. see Note 11 of Notes to the Con-sohdated i mancial Staten ents The mereases m tases other than Federal income, during the penod 1977 through 1979 a primanly the result of increases in property tas rates asseswd on the Companies' mcreawd utihty plant m wnice. Allon enn e for Fumis U3 cal During Comtruction: The accounting practice of capitahzing as part of emntruction costs an allowance for funds med during comtruction ( AFI'DC) is in accordance with the uniform system of accounts presenhed by regulatory authorities and results in the inchmon in menme (and in comtnietion work in progress, for the purpme of establishing rates for utility charges to emtomers) of amounts considered by regulatory authorities as an appropriate cost of funds med during comtruttmn but which do not represent casl "come. The allowance for funds med during con. struction increased by 61.7G in 1979 over 1978 anti by 97.07c in 1978 over 1977 primarily due to increaws in comtruction espenditures and the AFL'DC rate. Net Interest Clearges- The increases of 13.3G in 1979 over 1978 and 1.67 in 1978 mer 1977 are primarily due to increaws in both short term borrowings and in the prime borrowing rate. Net income The changes in net income for the two year period 1977 through 1979 result f rom the chances in re enues and espenses as espiamed above. leem 3. Properties N1ontaup owm all of the El'A Systemi generating facdities and also has arrangements for pur-chasing power inun suurecs outiide the System. 51ontaup also operates all of the trammission facil-ities of the System. The rights of the lietail Subsidiaries under the contract which gmerm their pur. t h ses of power (nun Stontaup, together (as to Eastern Edison) with the securities of 51ontaup emned by them. are phxiged to secure outstand;ag bonds or other indebtednew
, The followine tabh sets forth N1ontaupi net generating capahdity mehnhng piintly-owned unit .
at December 31.1979 3,, Capa. Sinneaup htontaup Service biho M.are t* nit l ype Ownet Interest In MW Mu homenet Nm. 5 6 fi Oil hiontaup 1(Xn 1951-1959 19'h6) 199tf u har .trwt Nos J16J2 Gas Turbme hiontaup 10(r c 1970-1971 as 4s L ukee liowe Nuclear Yankee Atomit 4.57c(1 ) 1 9(11 176 A Electric Company Connectunt Yankee Nuclear Connecticut Yankee 4.57(1) 1968 575 2(i Atormo Power Compan)
B
)
1 l Net Capa- Monimup Montaup Service bility Share Tmc W nce Interest In MW MW _ Unit Canal No.1 Oil Canal Electrie 257c(2) 196S 572 143 Company Canal No. 2 Oil Canal Electric 50Te(4) 1976 554 292 Company and hiontaup Vermont Yankee Nuclear Vermont Yankee 2.5cc(1) 1972 52S 9(7)(S) Nuclear Power Corporation hiaine Yankee Nuclear hiaine Yankee 4Q(1) 1972 S30 26t?)(8) Atomic Power Company Pilgnm No.1 Nuclear Boston Edison lle'c(2) 1972 670 70(7) Company Cleary No. 9 Od City of Taunton 69.1%(3) 1975 110 76(3) New Brunswick Nos.1,2 & 3 Od New Brunswick 6.41%(5) 1976 400 26(5) Electric Power Comission Wyman No. 4 Od Central hiaine 1.96%(4 ) 1979 615 1; Power Co. (1) Stock ownership. (2) " Life of unit" purchase contracts (earliest normal espiration year 2000). (3) Variable purchase contract. Amotmt under " System Share" represents estimated entitlement through October 31,1950. 51ontaup's share is expected to decline each year thereafter until it ceases. now estimated to occur in 1992. (4) joint ownership. (5) Share of contract of several New England utilities for 10-year purchase of 4(Ki 51W (escept in 10th year reduces to 200 N1W). System Share h1W is before giving effect to a resale to another utility in the amount of 2.5 \1W. (6) Active capability as of December 1,1979, reflecting deactivation of Unit Nos. 3 and 4 (66 51W) and increase of capability of Unit No. 5 by 12 51W to 74 h1W as the result of the replace-ment of the steam turbine making it capable of cycling duty. Unit Nos. I and 2 (82 51W) have been deactivated since Ntay 1.1976. (7) After givmg effect to life-of unit resales to Newport Electric Corporation aggregatmg 10 N1W for Vermont Yankee, hiaine Yankee and Pilgrim No.1. (8) After giving effect to reduction in capacity available to EUA System as a result of agreement with certain municipal and cooperative utilities. (9) The aggregate estimated annual cost, for the EUA System, of commitments under all pur-chased power contracts at December 31,1979 was approximately 521,928.000 Eastern Edison and hiontaup own approximately 2.470 miles of transmission and distribution lines and 64 substations located adjacent to the cities and towns served. See Note 1 of Notes to Consolidated Financial Statements regarding the Company's rental and lease commitments, in addition to the above, Eastern Edison and hiontaup also own 3 buildings which house distrihu-tion, maintenance or general office personnel. 8 i
w. Item 4. Parent and Subsidiaries The Parent and subsidiaries of the Registrant as of December 31,1979, are as follows: Percent Voting State of Sewrines owned Name of Orcaniinnon and h, Sysicm Company C.mnpames _Daic Thescol Eastern Utilities Associates (Voluntary Association) Declaration of Trust None Filed in hiassachusetts Aprd 2,192S Eastern Edison Company hiassachusetts 1(XG owned by July 31,1979 EUA Afontaup Electne Company hiassac husetts 100% owned by Apnl 28,1923 Eastein Ednon item 5. Legal Proceedings
- 1. On June 2S 1979, the 51assachusetts Department of Pubbe Utihties (NIDPU). in a deemon m response to an application filed in December 197S by Eastern Edison (then named Brockton Edi-son Company) seeking a rate increase of approximately 52,100.000 on an annual basis, dnallowad any increase in rates. Eastern Edison appealed the decision to the 51assachusetts Supreme Judicial Court. The Court, by decision dated January 31, 1950, afhrmed the S!DPU's decision subject to its directive to the N1DPU to re-esamine its calculation of the interest deduction for tas purposes used in the decision. It appears that such recalculation wiD increase Eastern Edison's allowed revenues by approximately 5375.000 annually Eastern Edison petitioned the Supreme Judicial Court for rehean ing of the appeal, but that petition was denied on February 27.19so
- 2. On December 13.1979, \1ontaup filed an application with the FERC for permission to melude in rate base, for deriving its rates to its affiliated and non-affiliated wholesale customers, a portion of its imestment in construction work in progress asscelated with ownership of various jointly-owned generating units presently planned or under construction. 51ontaup asked FERC to establish an expedited procedural schedule which will permit a final order to be issued by January 1,19Sl. Pro-tests and petitiom to intervene have been filed by one of hiontaup's non-affiliated wholesale customers and by the Attorney General of Rhode Island and the Rhode Island Division of Public Utilities and Carriers.
- 3. .\1ontanp together with numerous other electric utilities, is participating in proceedings I concerning implementation by the EPA of the Federal Clean Water Act. Involved in this matter are pnweedings before EPA and other governmental entities and courts reganhng various Federal and state regulations, including certain regulations remanded to EPA in 1976 by the United States Court )
of Appeals for the Fourth Circuit. In addition, members of the same group of utilities base sought judicial review of certain EPA variance regulations and of EPA regulations which revise the National Pollutant Discharge Elimination System (NPDES) permit program. hiembers of the group have alm intervene) in a case which raises the spiestion whether NPDES permits are needed for diwharges imm dams.
- 4. .\lontaup is participating, to the estent of a 1.90% interest as a tenant in common, in two nnelear generating units, of 1,150 megawatts capability each, being r 3tructed at Seabrook New llampshire by Public Service Company of New llampshire as the m.d participant. Alontaup is a party to ceolidated proceedings before the h!DPU in which hiontaup and other utilities ownine interests in the units seek approval for their acquisition of additional interests, namely, in the case of $1ontaup, an additional 1.04% now owned by The Connecticut Light and Power Company, an additional 1.00% now owned by Public Service Company of New llampshire, and an additional 1.0f4 now owned by the United Illuminating Company, all subject to certain additional regulatory approvals. The Attorney General of hlassachusetts and certain individuals have intervened in opposi-9
tmn to the requests for such approval. If hiontaup's proposed acquisitions of additional interests are consummated, hiontaup will own a 5.00% ownership share in the Seabrook units. The following description of certain other proceedings affecting the Seabrook units is based on information received from the lead participant. In the proceeding before the NRC on the application for construction permits, an Atomic Safety and Licensing Paard on June 29,1976 issued its initial Decision approving the issuance of such permits. The NRC issued the permits on July 7,1976, and construction commenced. The Initial Decision was afErmed by an NRC Atomic Safety and Licensing Appeal Board (the Appeal Board) with one member dissenting and by the NRC. The Nenting 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 pending before the NRC. There is presently pending before the United States Court of Appeals for the First Ciremt an appeal by interrenors from a decision of the NRC challenging the NRC's refusal in 1976 to sus-pend the Seabrook construction permits despite a court decision in litigation not involving Seabrook which set aside the NRC's rule with respect to the environmental effects of reprocessinc spent fuel and disposing of nuclear waste. (Natural Resources Defense Council, Inc. v. NRC, D.C. Cir. Nos. 7413S5 and 74-1556, which was reversed and remanded by the United States Supreme Court on April 3,1978 in Vermont Yankcc Nuclear Poncer Corporation v. Natural Resources Defeme Connril, Inc., No. 76-419). Effective September 4,1979, the NRC (one member dissent-ing) has promulgated its final rule (which supersedes an interim rule in place since Starch 1977) emering 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 Appe,ls for the District of Columbia Circuit (State of Ncic York v. NRC, D.C. Cir. Nos. 79-2110 and 79-2131). The lead participant believes that the environmental effects of the fuel cycle, determined in accordance with the new rule, are too small to affect the environmental cost-benefit evaluation of the project. Further appeals from various regulatory approvals granted for the project are possible.
- 5. 51ontaup is participating. to the extent of a 2.15G interest as a tenant in common. in the proposed nuclear generating unit of 1,150 megawatts capability known as Pilgrim Umt No. 2. to be comtructed at Plymouth, hlassachusetts by Boston Edison Company as the lead participant. 51ontaup l aho has a long-term (life-of the unit) contract for the purchase of 11% of the capacity and output of Pilgrim Unit No.1, an existing unit of 670 megawatts capability owned by Boston Edison Company l and located at the same site, and is required to pay the same percentage of all of the costs of that unit f including fised costs (whether or not the unit is operating), operating costs, and costs associated with l condenmation, shutdown or retirement of the unit. The following description of proceedings affecting the Pilgrim units is based on information received from Boston Edison Company.
Based on Boston Edison Company's demonstration concerning the combined discharges of Pilgrim Unit Nos. I and 2, the EPA and the hiassachusetts Division of Water Pollution Control (the h1DWPC) (which may jointly issue a single permit) issued permits on Starch 11, 1977 authorizing once-through cooling for Unit Nos. I and 2 and granting exemptions from the EPA's thermal effluent guidelines. Appeals of the permits for Unit Nos. I and 2 were taken by parties ( who sought adjudicatory hearings before EPA and h!DWPC. These hearings were completed in November 1977. Final decisions upholding the permit issuance have been received from the EPA Administrator and the h1DWPC, Further review of the EPA decision was not sought; however.
' judicial review of the h1DWPC decision has been sought in the hiassachusetts Superior Court, which review is presently pending. The Pilgrim Unit No. 2 permit does not expire until 19S2. The Pilgrim Unit No. I permit expired by its terms during 1979; however, timely renewal of the permit was sought prior to expiration, and under applicable Federal and state law the validity of the pre-existing permit continues.
10
- 1 l
l The h!DPU is conducting a proceeding to inquire into the capacity needs of Boston Edison Company and the construction program required to meet such needs. Pilgrim Unit No. 2 may be affected by this inquiry. Hearings have been completed and briefs have been filed. In December 1973, the NRC accepted for filing the applicaticn of Boston' Edison Company and the other joint owners for authorization to construct and operate Unit No. 2 at Pilgrim Sta- l tion. Hearings before an Atomic Safety and Licensing P,oard of the NRC concerning various j radiological, health, safety, environmental and financial matters commenced in October 1975. The l Attorney General of hiassachusetts and certain other parties have been permitted to intervene in opposition to the application. In 1977, the Applicant's request for a limited work authorization to permit site preparation work in advance of the receipt of a construction permit was rejected by the Atomic Safety and Licensing Board which held that the NRC's staff review of alternative sites was inadequate under the National Environmental Policy Act of 1969. llearings on this and other , issues were held during 1979. Further hearings relating principally to the issue of emergency planning and possibly relating to other issues arising out of the h! arch 1979 accident at the Three hiile Island nuclear plant in Pennsylvania (see paragraph 9 below) are continuing. In April 1979, an action was conunenced in the hlassachusetts state courts on behalf of the Plymouth County Nuclear Information Committee, Inc. and several individuals seeking injunctive relief against the continued operation of Pilgrim Unit No. I as well as unspecified monetary relief for alleged damages resulting from its operation. Tte plaintiffs' initial application for a pre-liminary injunction was denied. The action was subsequently removed to the United States District Court for the District of hlassachusetts, where it remains pending including the plaintiffs' request for a permanent ininnetion.
- 6. hiontaup is participating. to the extent of a 4.01% interest as a tenant m common. m the nnelear generating unit of 1,150 megawatts capability known as htillstone Unit No. 3, being con-structed at Waterford. Connectient by subsidiaries of Northeast Utilities as lead participants. The following description of proceedings affecting this unit is based on information received from the lead participants.
On September 26,1979 the United States District Court for the Eastern District of Virginia approved an agreement m settlement of an action originally brought in the United States District Court for the District of Connecticut by the lead participants on behalf of all of the owners of hiill-stocie Unit No. 3 against Westinghouse Electric Corporation seeking damages for the repudiation by Westinghouse of its contract to supply uracium for the first core and three refuelings of the unit. Under the agreement Westinghouse has paid the owners $2,000M)0 in cash. will provide e(ptipment and services for the unit during the next ten years at no charge or with a rebate against the purchase price, will provide rebates against the purchase price on certain uranium conversion services and f uel f abrication services for the unit, will provide at formula prices currently approxi-mating or shghtly below estimated production costs 1.5 million pounds of uranium for the unit to be delivered during the period 1955 to 1959, and has waived any right for price adpistment for uranium already dehrered and to be delivered under a court ordered alhication plan at the original contract price. 4 4
- 7. Alontaup is participating, to the extent of a 4.35G interest as tenant in common. in two
, nuclear generating units, of 1,150 megawatts capabihty each, referred to as NEP Unit Nos. I and 2,
; which were proposed to be built at a site at Charlestown, Rhode Island by New England Power Company as lead participant.
Following an adverse decision of the United States District Court for the District of Rhode i Island on December 4,1979 in litigation relating to the use of the proposed site of the NEP units. hiontaup received notification from the lead participant that the units had been cancelled. As of December 31,1979 hiontaup had incurred approximately 52/X15,000 of costs (including allowance for funds used during construction) in connection with me project; additional costs (which are j not expected to be material) are undeterminable at this time. hiontaup has requested permission j 11 5 l l
~~~~~"'N,-
o. Irom the FERC for apnroval to amortize these costs, net of related tax savmgs, over a period of five years and wdl rrquest approval from FERC for recovery of such costs commencing with the effective date of i.s next rate 6hng.
- 6. Montamp is participating, to the extent of a 1.967o interest as a tenant in common, in an oil-fired generating umt of 615 megawatts capabihty known as William F. Wyman Unit No. 4 which has commenced operation and is located at Yarmouth, Maine. The following description of proceedings affecting that umt is based on information received from the lead participant, Central Maine Power Company.
On February 13, 1979, the Maine Board of Environmental Protection (BEP) held a pubhc hearing to mvestigate the causes of excessive noise emanating from Wyman Unit No. 4 during operation. To minmuze the eflect on the surrounding area, the BEP ordered that the unit be operated only on weekdays between the hours of 6 AM and 11 PM, except m the case of emer-gencies. The lead participant has completed the installation of new sound attenuatmg mufflers which are expected to make possible full commercial operation. In 1979 the BEP tmtiated a suit against the lead participant seeking payment of a civd penalty and allegmg that the excessive noise constituted a violatmn of the siting permit for Wyman Umt No. 4. The lead participant does not beheve that substanaal civil penalties will be imposed as a result of the smt
- 9. 1.icensing and other proceedings with respect to nuclear generating plants in which Montaup has an interest may be aflected by events at the Three Mile Island Nuclear Unit No. 2 in Pennsylvania (TMI) beginning March 2S,1979, which resulted in damage to that unit and release of a small amount of radioactivity into the surrounding environment and caused widespread concern about the safety of nuclear generating plants. The registrant cannot predict what effect the events at TM1, which have precipitated increased opposition to nuclear power, may ultimately have upon the completion or cost of completmn of the planned nuclear units or those under construction or upon the continued operation of the existing nuelcar generatmg plants in New England. The TM1 incident has prompted a rigorous reesannnation of safety-related equipment and operating procedures in all nuclear facilities. The plants in which Montaup has an interest are being reviewed by their owner-operators, and those plants and all other nuclear facilities are being reexamined by the NRC. A Presidential Commission, after imestigatmg the cause of the TMI incident, made a report in which, among other things, it recom-mended that the NRC be reorganized and it proposed procedures, including review of safety factors, of personnel training, and of state and local emergency plans, which should be followed by the I
NRC or its successor on a case-by-case basis before issuing a new construction permit or operating liceme. The TMl incident has also generated a multiplicity of legislative proposals in Congress and various state legislatures. While the ultimate effect of these reexaminations and proposals cannot be , specifically predicted, they could interfere with or prevent licensing of and may cause delays in con- i struction and costly modifications of both the operating and planned nuclear plants in which Montaup ; has an interest. Any such modifications may require that operation of a particular unit be suspended or its level of operatmn reduced. Item 6. Inc reuses and Decreases in Gutstanding Securities and indebtedness
~W res (l) Conmnon Sto(k. 525 par value (2) See (4) for date of transaetmus l (3) Amount outstanding at December 31, 1979 2.891,357 )
Amount outstanding at December 31,1978 ( A) 2f06.021 ) Increase durmg the year 255 336 I (4) Balance of Common S'ock 1/1/79 2.606 021 Add -Shares sold to EUA (Parent) 12/ .2/79 285.336 Balance of Common Stock 12/31.'79 2A91,357 ( A ) includes 244,021 common shares issued July 31,1979 in conjunction with merger l' l , l
. _. 7 -
ltem 7. Changes in Securities and Chamges in Security lor llenistered Securities Not applicable. Item 8. Defaults Upon Senior Securities Not applicable. Item 9. Approximate Number of Equity Security lloiders The approximate number of holders of record of each class of the Company's equity secunties at December 31,1979 was as follows: Number of Record Tige of Claw lloiders Common Stock, $25 par value 1 13.6Wi lledeemable Preferred Stock, $100 par vahic 525 8.32ci Non.lledeemable Preferred Stock, $100 par value 84 4.61ci Non-lledeemable Preferred Stock,5100 par value 71 ltem 10. Submission of Matters to a Yote of Security lloiders Not applicable. item 11. Indemnifcation of Directors and Oficers Article 32 of EUNs Declaration of Trust provides for indemnification under certain circumstances of its " Trustees" and "oilicers", which tenns are defined in Article 32 to include persons who serve at the request of EUA as directors, officers or trustees of another organization in which EUA has an interest thus include the Company's directors and ollieers. Article 32 indemnifies Trustees and ofEcers against liabilities and expemes, including counsel fees, imposed or reasonably incurred in connection with liti-gation or threatened litigation in which a Trustee or officer may be involved by reason of his position, indenmification would be withheld as to any matter as to which the Trustee or officer is adjudicated "not to have acted in good faith in the reasonable belief that his action was in the best interests of the association". This limitation conforms to the statutory standard which a business corporation organized under the laws of Massachusetts is permitted to establish for indemnification of its directors and officers, and the prmisions are consistent with the Massachusetts law on this subject. With respect to litigation or ?hreatened litigation which is resolved by a compromise agreement, indemnification can be provided only il the compromise is approved as in the best interests of EUA, after notice that it involves such indemnification, (i) by a disinterested majority of the Trustees of EUA, or (ii) by a majority of the chsinterested EUA Trustees, provided that an opinion in writing of independent legal counsel has been obtained to the effect that the person involved appears to have acted in good faith in the reasonable behef that his action was in the best interests of EUA, or (iii) by vote of the holders of a majority of the EUA shares outstanding and entitled to vote, not counting shares owned by any interested Trustee l or offim
- Article 32 also provides that Trustees and officers will be protected in relying in good faith on corporate books of account, reports and similar materiah provides that no Trustee or officer shall be liable for any act, omission, step or conduct taken or had in good faith, which is required, authorized 13 l
5
-s or approved by any order or orders issued pursuant to the Public Utility lloiding Company Act of 1935, the Federal Power Act, or any other Federal statute or any state statute regulating EUA or any of its subsidianes by reason of their being public utility companies or public utility holding companies; provides that EUA may pay expenses incurred by a Trustee or officer in advance of the final disposi-tion of litigation upon receipt of an undertaking by him to repay the amount advanced unless it is ultimately determined that he is entitled to indemnification; and prmides that EUA may provide insur-ance against the rights of indemnification provided in Article 32 and, to the extent permitted to a Niau sachusetts business corporation, may provide insurance against other liabilities which may he incurred by Trustees and officers in any such capacity. EUA in conjunction with the Company and its other subsidiaries bas purchased insurance cover-age under a policy insuring Trustees, directors and officers of EUA and its subsidiaries against ecrtain habilities which they may incur m their capacity as such. I Item 12. Financial Statements, Exhibits Filed and Reports on Form 8-K (a)(1) Financial Statements The Financial Statements and supporting schedules, listed in the index, follow the report of independent certified public accountants and are referred to in such report. (a)(2) Eshibits
- 1. Amendments dated as of August 15,1978. January 31,19S0 and February 1,19SO, respectively, to the New England Power Pool Agreement dated as of September 1,1971, as amended. (Exhibit 1, Form 10-K of EUA for 1979, File No.1-5366)
- 2. Tenth and Eleventh Amendments made as of October 11, 1979 and December 15,1979, re-spectively, to the Agreement for Joint Ownership, Construction and Operation of New flampshire Nuclear Units made as of 51ay 1,1973 among Public Ser ice Company of New Ilampshire and other utilities including hiontaup, as amended. (Exhibit 2, Form 10-K of EUA for 1979, File No.15366) i'
- 3. Sixth and Seventh Extension Agreements made as of November 12,1979 and January 31,19S0, respectively, to the Agreement to Transfer Ownership Shares dated as of July 1,1976. by and between the Connecticut Light and Power Company, The liartford Electric Light Company, Western hiassa-chusetts Electric Company and hiontaup, as amended. (Exhibit 3, Form 10-K of EUA for 1979, File No.1 5366 )
- 4. Amendment No. 3 dated as of December 31, 1978, to the Agreement for Joint Ownership.
Construction and Operation of William F, Wyman Unit lio. 4 dated November 1,1974, among Central hiaine Power Company and other utilities including hiontaup, as amended. (Exhibit 4. Form 10-K of EUA for 1979, File No.1-5366) (b) Heport on Form 8 K (1) Date August 13,1979 (2) Financial Statements: None (3) Items Reported: Item 5. Other hiaterially Important Events 14 l l
, C i
i PART 11 Item 13. Security Osenership of Certain Beneficial Oneners and Management (a) and (b) All of the 2,891,357 shares of common stock of the Company, which is the only voting security of the Company,is owned by Eastern Utilities Associates,99 II:gh Street, Boston, h!assachusetts. The directors and executive oEcers of the Company as a group, at January 31,19S0 owned bene-ficially 6,091 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 outstanding at that date. The directors and executive oEcers of the Company as a group at January 31,1980 owned bene-Scially 200 shares of the Company's 13.600o Preferred Stock (based on information fumished to the Association by these persons) which represents less than one percent of the total number of shares outr.tanding at that date. (c) The Company knows of no contractual arrangements wluch may at a subsequent date result in a change in control of the Company.
, Item 14. Directors and Executive Oficers I
; (a) and (b)
' The names, ages and positions of all of the Directors and executive omeers of the Company as of h1 arch 31,19S0 are listed below with their business experience during the past five years. The Direc-j tors, Treasurer and Secretary of the Company are each elected to serve until the next annual stock-i holders' meeting which is scheduled to be held h! arch 3,19SI. All other oEcers are elected to serve
' until the next meeting of Directors following the annual stockholders
- meeting. There is no family i relationship between any of the Directors or officers of the Company.
I Bminess Experience i Name. Age
! and Pminnn During Past 5 Years William R. Bisson,55 .. .
Vice President since 1974. Currently he serves as Vice Presi. Director and Vice President (1) dent of parent and has held said position since 1974 and Vice President of Blackstone which position has been held since 1970; responsible primarily for the power engineering operations, including generation, transmission and distribu-tion facihties of the EUA Syster. . Richard hl. Burns. 42 Treasurer since 1974. Currently he serves as Comptroller of Treasurer (2) parent and has held said position since 1976; responsible primarily for the financial affairs of the Company. Robert I. Dexter, 61 President of Abington hfutual Fire Insurance Company and Director has held that position for more than five years. John F. G. Eichorn, Jr., 56 Chairman of the Board since 1973: President and Chief Execu-Director and Chairman of the tive OEcer of parent since 1972; responsible primarily for Board (3) the operations of the EUA System. Allan K. Ilamer, 54 . . President since 1969; responsible primarily for the manage-Director and President ment and operation of the Company. Robert E. hiaguire,52 ... Vice Chairman of the Board since 1976. Executive Vice Presi-Director and Vice Chairman of dent of parent since 1975; assists the Chairman in the overall the Board (4) operation of the EUA System. William F. O'Connor, 40 Clerk since 1974. Currently he serves as Secretary of parent Clerk (5) and has held said position since 1971; responsible primarily for the corporate affairs of the Company. 15 i.
1 1 Name,Ane Business Experience
, and Pounon During Past 5 Years Donald C. Pardus,39 ... ..... Vice President since August.1979. Currently he serves as Vice Director and Vice President (6) President, Treasurer and Chief Financial OEcer of parent, positions held since lune,1979. Prior to that time he was Assistant Treasurer of Northeast Utilities from 1971 to 1979.
Margaret hf. Stapleton,43 Second Vice President. Jolm liancock hfutual Life Insurance Director Company (" John Hancock") since Februarv,1979. Prior to that time, she was Investment OEcer from 1974 to 1977 and Senior Investment OEcer from 1977 to 1979 of John Han-cock. James T. Waldron,66 Partner in law firm of Clarkin. Waldron & Tucker and has held Director that position for more than five years. (1) Vice President of EUA, Service, Blackstone and hfontaup (2) Comptroller and Assistant Secretary of EUA, Comptroller of Service and Assistant Treasurer of Blackstone and hiontaup. (3) President and Chief Executive OEcer of EUA. President of Service and h1ontaup and Chair-l man of Blackstone. (4) Executive Vice President of EUA, Service and hiontaup and Vice Chairman of Blackstone. (5) Secretary of EUA, Vice President, Secretary and Clerk of Service, Assistant Secretary of Blackstone and Assistant Clerk of hiontaup. (6) Vice President, Treasurer and Chief Financial OEcer of EUA, Vice President Treasurer and Assistant Secretary / Assistant Clerk of Service and Vice President, Assistant Treasurer and Assistant i Secretary / Assistant Clerk of Blackstone and alontaup. l j (c) There have been no events under any bankruptcy act, no criminal proceedings and no judge-ments or injunctions material to the evaluation of the ability and integrity of any director or executive oEcer during the past ten years. Item 15. Remuneration of Directors and Oficers Information is set out below (a) as to remuneration paid by the Company during the year 1979 to each Director and each of the five highest paid executive oEcers of the Company whose aggregate remuneratior for the year exceeded $50,000, (b) as to the amounts centributed on behalf of the o$cers of the Company under the Employees' Retirement Plan of Eastern Utilities Associates and its Subsidiary Companies and (c) as to the aggregate remuneration paid by the Company during the year to all Directors and o$cers of the Company as a group. Amount Con. Salaries u.'.suted to Name of Individual and Personal Retirement or Persons in Group Capacities in which Served Directors
- Fees Bene 6ts Plan
- Allan K. Ilamer President and Director $ 51,279 $1,116 $ 8,890 All Directors and oEcers as a group (7 persons) $125,G11 $1,425 $19,900
- Estimated normal annual benefits to be paid under the Retirement Plan assuming continuance in the employ of the Company at present salary levels until normal retirement date for Mr. Hamer and for all Directors and oEcers as a group, respectively, are $24.469 and $59.675.
18 l L. A
SIGNATL1tES 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. EASTERN Entsos COhlPANY (Registrant) RIGIARn M. BURNS By. Rhard M Burns leeeseer Date: March 28,1950 17 i
7
* ~
l \' i l i l l EASTERN EDISON COMPANY AND SUBSIDIARY CONSOLIDATED FINANCIAL STATE.\fENTS AND SCIIEDULES IB
AUDITORS
- REPORT To the Shareholder EAsERN EnisoN COMPANY We have examined the consolidated balance sheets of Eastern Edison Company (a Massachu-
,setts corporation and wholly-owned subsidiary of Eastern Utilities Associates) and subsidiary as of December 31,1979 and 1978 and the related consolidated statements of income, retained earnings, and changes in Snancial position for the years then ended. We have also examined the balance sheets of Eastern Edison Company (parent) as of December 31,1979 and 1978 and the related state-ments of income, retained earnings and changes in Snancial position for the years then ended which are presented in Note L of Notes to Consolidated Financial Statements. 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 cir-cumstances.
In our opinion. the financial statements referred to above present fairly the financial positions of Eastern Edison Company and subsidiary and of Eastern Edison Company (parent) at December 31,1979 and 197S and the results of their operations and changes in their financial positions for the years then ended in conformity with generally accepted accounting principles applied on a consistent basis. In connection with our examinations of the financial statements referred to above, we have also exaniined the schedules listed in the attached index. In our opinion, these schedules present fairly the information required to be set forth therein. ALnx4xntn Gn4xT & Cosm4w lioston. Massachusetts March 4,19S0 I l l 19 i
m-EASTEllN EDISON COh!PANY AND SUBSIDIARY INDEX TO CONSOLIDATED FINANCIAL STATEh!ENTS AND SCIIEDULES Pgsg Auditors
- Report 19 Consolidated Balance Sheet at December 31,1979 and 1978 21 Consolidated Income Statement for the two years ended December 31,1979 22 Consohdated Retained Earnings Statement for the Two Years Ended December 31,1979 23 Consohdated Statement of Changes in Financial Position for the Two Years Ended Decem-her 31,1979 24 Notes to Consolidated Fmancial Statements 25 Financial Statements of Eastern Edison Company (Parent) 33 Supplementary Information to Disclose the Effects of Changing Prices 37 Schedules:
Ill-Investments in, Equity in Earnings of, and Dividends Received from, AfIiliates and other Persons for the two years ended December 31,1979 38 V- Property, Plant and Equipment for the two years ended December 31,1979 40 VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the two years ended December 31,1979 42 LX- Bonds, Afortgages and Similar Debt at December 31, 1979 44 Xil - Valuation and Qualifying Accounts and Reserves for the two years ended Decem-her 31,1979 45 Xill- Capital Shares at December 31,1979 46 XVI- Supplementary Income Statement Information for the two years ended Decem-ber 31,1979 47 All other schedules are omitted because they are not applicable or the required information it shown in the Consohdated Financial Statements or the Notes thereto 20
EASTERN EDISON COMPANY AND SUBSIDIARY CONSOIJDATED BALANCE SHEET December 31, (In Thousanas) ASSETS 1979 1976 Utility Plant Utility and(atOther Plant cost) Investmentsble (Sched V and Note A) . . .. .... ... .... $317.543 $295.146 Less Accumulated Prmision for Depreciation (Schedule VI and Note A) 77.874 71,890 Net Utility Plant . .................. 239.669 223.256 Net (Schedule V) ... ...... .......... .. 643 132 Nonutility In estments Property in Nuc lear Generating Companies (at equity) (Schedule Ill and Note A) ...... 7.401 7.232 Other Irivestments (at cost).. .... 50 50 Total Utility Plant and Other Investments 247. % 1 230.6 9 Current Assets; Cash and Temporary Investments (Note C) . . . 1.569 3.665 Accounts Receivable (Schedule XII and Note A); Customers Less Allowance for Doubtful Accounts of $213 and $173 respectivel> 17.034 13.785 Others ...... . . 731 294 Associated Companies . . . . . ........ 3.553 2.950 Plant Afaterials. Operating Supplies and Other 3 805 3.412 Fuel (at average cost) . . . . . . 10 702 3.329 Prepayments and Other Assets 401 292 Total Cunent Assets . 37 825 27.747 Deferred Debits: Unamortized Debt Expense . . . . . . ... 485 516 Extranrt! mary Property Loss (Note 11) 2.065 Other Deferred Debits . . 2.520 1.767 Total Defened Debits 5.070 2.283 Total . . . 5290.855 5'200.I00 LIABILITIES Capitahzatin Common Stock (Schedule XI!! and Note C) $ 72.284 $ 65.151 Common Stock Expense (39) (35) Other Paid in Capital . . 5.824 5.824 Appropriated Retained Earnings 821 821 Retained Earnings . ... . . .. .... ... 20.187 18.517 Non.Hedeemable Preferred Stock (Schedule NIII and Note C)......... 8.950 8.950 Redeemable Preferred Stock (Schedn'e XIII and Note D) 5.607 5.921 Long-Term Debt (Schedule IN and Note F) 100.985 81.202 Total Capitalization 214.619 186.351 Current Liabilities: Long. Term Debt Due Within One Year . 15.000 Notes Payable - Banks (Note G) 37,500 25,450 Accounts Payable: Publie ...... ...
. .. . .. .... . .. . . 13.071 8.188 Associated Companies . . . . . . . . . . . . . . . ............... . .. 724 645 Hedeemable Preferred Stock Sinking Fund Requirement (Note D) 314 Customer Deposits . . . . . . .. . . . . .. 820 755 Taxes Accrued (Note B) . . . . . . . . . . . 240 1.599 Deferred Taxes (Notes A and B) . . . .. ... . 815 775 Interest Accrued ... . .. . .. . 861 820 Other Current Liabilities ...
. . ... .. . .. 463 1.897 Total Current Liabihties . . ..... .. 54.808 55.329 -
Deferred Credits: Unamortized Investment Credit (Note A) .. .. 8.760 7.879 i Other Deferred Credits . .... . . . . .. . 33 36 ~ l Total Deferred Credits ... . ..... .. .. 8.793 7.915 ) Accumulated Deferred Taxes (Notes A and B) 12.638 11.105 1 Total . . . . .. ... . . . . . . . s290.858 $260.700 l The accompanying notes are an integral part of this statement. 21 1 I
I
. r l
l EASTERN EDISON COMPANY AND SUBSIDIARY CONSOllDATED INCOhfE STATEMENT Years Ended December 31, (In Thousands Except Numbers of Shares and Per Share Amounts) 1979 1978
$ 168.127 $ 141,712 Operating lievenues (Note A)
Operating Expenses: 99,911 127,455 Operation 3,911 3,887 htaintenance 7,565 7,855 Depreciation (Note A) (365) (343) Amortization of Investment Credit (Credit) (Note A) 9,288 8,504 Taxes-Other Than Federal Income 4,016 638
-Federal Income (Note B) 1,576 (254)
-Deferred (credit) (Notes A and B) 149.550 124.090 Total Operating Expenses 18,577 17,622 Operating Income 807 680 Equity in Earnings of Nnclear Generating Companies (Schedule III and Note A) 1,589 969 Allowance for Other Funds Used During Construction (Note A) 2G3 99 Other Inecme and (Deductions) - Net .
21.236 19.370 Income Before Interest Charges Interest Charges: 8,840 7,8S7 Interest on Long-Term Debt Amortization of Debt Expense and Premium 40 111 4.723 2,805 Other Interest Expense Allowance for Borrowed Funds Used During Construction (Credit) (Note A) (4.606) (2.862) 8.997 7,941 Net Interest Charges 12.239 11,429 Income after Interest Charges 1,344 1.344 Preferred Dividends Requirement
$ 10.895 $ 10.085 Consolidated Net income Eastern Edison Common Shares Outstanding (Weighted Average) 2.629.799 2.265.93S Consolidated Earnings Per Average Common Share Outstanding $4.14 $4.45 l
l l l l I l The accompanying notes are an integral part of this statement. l n i I l l l I
t EASTERN EDISON COhfPANY AND SUBSIDIARY CONSOLIDATED RETAINED EARNINGS STATEMENT Years Ended December 31, (In Thousands) 1979 1978 Retained Earnings-Beginning of Year at Predously Reported $14,032 $12.429 Adjustment to RcHect the Retained Earnings of Fall River (Note A) 4.485 4,420 Retained Earnings- As Adjusted 18,517 16,849 Income after Interest Charges 12,239 11.429 Total 30,756 28,278 Dividends Paid. Preferred 1,344 1,344 Common . 9.225 8,417 Retained Earnings - End of Year (Note E) s20.187 $18 517 The accompanying notes are an integral part of this statement.
. N 1
I
?-
EASTERN EDISON COMPANY AND SUBSIDLARY CONSOLIDATED STATEMENT OF CifANGES IN FINAhCIAL POSITION Years Ended December 31, (In Thousands) 1979 1978 SOURCE OF FUNDS: From Operations: Income after Interest Charges $12.239 $11,429 Principal Non-Cash Charges (Credits) to income: Depreciation (Note A) 7,942 7,650 Amorttration of Debt Expense and Prerruum 41 Ill Deferred Federal Income Taxes (Note A) 1,534 1,090 Investment Tax Credits, Less Amortization (Note A) 881 2.267 Equity in Undistributed Earnings of Nuclear Generating Companies (Note A) (169) Allowance for Funds Used During Construction (Note A) (8,195) _ _( 3,R30) Total Funds From Operations 16.273 18,717 External Sources: Increase (Decrease) in Short Term Notes Payable to Banks 12.050 (1,400) Proceeds from the sale of Term Notes 20,000 Proceeds From Sale of Common Stock 7,133 9,275 other - Net 234 Total Funds From External Sources 39.183 8.109 Total Source of Funds $55.456 $28,R26 APPLICATION OF FUNDS: Construction Expenditures . $27,131 $22,592 Less: Allowance for Funds Used During Construction _ (6,195) (3,830) Net Construction Expenditures 20,936 18,762 Dividends Paid; Preferred Stock 1,344 1,344 Common Stock , , 9,225 8,417 Increase (Decease) in Working Capital 7,965 (5,848) Retirement of Long-Term Debt 15,200 3,8S0 Other Application-Net 766 271 Total Application of Funds $55,456 $26,826 CilANGES IN COhfPONENTS OF WORKING CAPITAL (Excluding Short-Term Debt): Increase (Decrease) in Current Assets: Cash and Temporary Investments $(2,117) $ 947 Accounts Rewivable 4,320 (1,6S5 ) Afaterfah and Supplies 7,766 (2,474) Prepaid Expenses and Other Current Assets . 110 26 10,079 (3,186) Increase (Decrease) in Current Liabilities: Accounts Payable 8 4,783
. . . $ 294 Accrued and Deferred Taxes (1,319) 496 Accrued Liabilities (1,330) 1,872 2,114 2.662 Increase (Decease) in Working Capital 8 7,965 $(5,848)
The accompanying notes are an integral part of this statement. 24 i
7 EASTERN EDISON COh!PANY AND SUBSIDIARY NOTES TO TIIE CONSOLIDATED FINANCIAL STATEMENTS December 31,1979 and 1978 (A) Summary of Significant Accounting Policies: General: The accounting policies and practices of Eastern Edison Company (Eastern Edison), and of hiontaup Electric Company (hlontaup) are subject to regulation by the Federal Energy Regulatory Commission (FERC) and hiassachusetts Department of Public Utilities (DPU) with respect to their rates and accounting. Eastern Edison and hiontaup conform with generally accept:d accounting principles, as applied in the case of regulated public utilities, and conform with the accounting requirements and rate-making practices of the regulatory authority having jurisdiction. Effective July 31,1979 Fall River Electric Light Company (Fall River) was merged into Brockton Edison Com-pany (Brockton) and on August 1,1979 Brockton's name was changed to Eastern Edison. The financial statements for the period ended December 31,1978 have been adjusted to give effect to the merger. The effect of the hierger on Operating Revenues and Consolidated Net Income is as follows: December 31. 1979 1978 Operating Resenues:
$158,000 $131,535' Brot Lton 30.088 27,100 Fall River .. (l(1,923)
Elimination of intercompany revenue (20,951)
$16S,127 $141,712 Total Consolidated Net Income:
BrntLton $ 9,709 $ S,372' Fall River 1,096 1.713 Total $ 10.895 8 10.085
- As p5viously reported, after giving effect to reclassification of NEPOOL sales (see operating revenues below).
A description of the significant acconnting policies follows. Principles of C<m$olidation: The consolidated financial statements include the accounts of East-ern Edison and its subsidiary hiontaup. All material intercompany balances and transactions have been eliminated in consohdation. Uncomolidated Subsidiaries: At December 31,1979 and 1978 investments in nuclear generating emnpanies represent four investments ranging in percentage of ownership from 2.50 to 4.50 percent. Underlying equity in net assets is equal to the investment at equity. Tramactiorn trith Affiliater The Company is a wholly. owned subsidiary of Eastern Utilities Awociates (EUA). In addition to its investment in the Company, EUA has interests in another utility company and a senice corporation. Transactions hetveen the Company and its subsidiary and other afBliated companies includes the following; sales of electricity of approximately $42,185,000 in 1979 and $34,585,(XX) in 1978; accounting. engineering and other senices rendered by the senice company of approximately $4,SS9,(XX) and 54.209,(XXIin 1979 and 1978 respectively; operating expenses from the rental of transmission facilities from afBliated companies of approximately $2,134,000 in 1979 and $2,178,000 in 1978. Transactions with other system companies are subject to review by applicable regulatory commissions. Utility Plant: Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work, direct labor and material, allocable overhead, allowance for funds used during etmstruction and indirect charges for engineering and supervision. Replacement of minor items of property and the cost of repairs is charged to maintenance expenses. At the time depreciable proper. 25
1 I l EASTERN EDISON COMPANY AND SUBSIDIARY NOTES TO Tile CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31,1979 and 1978 ( A) Summary of Significant Accounting Policies:-(Continued) ties are retired or otherwise disposed of, the original cost, together with removal cost, less salvage, is charged to accumulated provision for depreciation and the cost of related replacements is added to utility plant. Depreciation of Utility Plant: For financial statement purposes, depreciation is computed on
, the straight line method based on estimated usefullives of the various classes of property.
Provisions for depreciation, on a consolidated basis, were equivalent to a composite rate, of 3.2Cc in 1979 and 1978 based on the average depreciable property balances at the beginning and end of each year. Operafing Recennes: Revenues are based on billing rates authorized by applicable Federal and state regulatory commissions. The Company follows the policy of accruing the estimated amount of unbilled revenues for electricity provided at the end of the month to more closely match costs and l revenues. The amount of estimated unbilled revenues included in accounts receivable at December 31,1979 and 1978 amounted to $1,590,300 and $1.504,100, respectively. As of April 1,1979 Montaup began classifying sales of electricity to the New England Power Pool (NEFOOI.) as interchange power and these amounts are reflected as credits to purchased power e.xpense. Amounts reported for periods prior to April 1,1979 have been reclassified to conform with classifications used since that date. Federal Income Taxes: The general policy of the Company and its subsidiary with respect to i I accounting for Federal income taxes is to reflect in income the estimated amount of taxes currently payable and to provide for deferred taxes on certain items subject to timing differences. The signifi- ) cant items which are subject to provision for deferred Federal income taxes are as follows:
- 1. Additional depreciation resulting from the use of accelerated methods for tax purposes.
- 2. Accrued unbilled service revenues and fuel adjustment costs recoverable in subsequent periods
- 3. Abandonment Loss on New England Power Company Unit Nos.1 and 2. (See Note II)
As permitted by the regulatory commissions it is the policy of the subsidiaries to defer the annual investment tax credits and to amortize these credits over the productive lives of the related assets. Allotrance for Funds Used During Construction: Allowance for funds used during construction ( AFUDC) is defined in the applicable regulatory system of accounts as "the net cost during the period of construction of borrowed funds used for construction purposes and a reasonable rate upon other funds when so used" The combined rate used in calculating AFUDC was 11.507c in 1979 and ranged from 8.507c to 9.757o in 1978. AFUDC amounted to 56.97o and 3S.07o of consc%ted net income for the years 1979 and 1978, respectively. (B) Federal Income Taxes: Federal income tax expense for the years 1979 and 1978 were less than the amounts computed by applying Federal income tax statutory rates to book income subject to tax for the following reasons: 1970 19_7s Current Feder.1 Income Taxes Per Books; (In Thousands) l Charged to Operations 4 (G8 8 4,016 Charged to Other Income 8 72 l Total . . . . .... 646 4,088 Deferred Federal Income Tax 1,541 (74) l l i i
s EASTERN EDISON COMPANY AND SUBSIDIARY EOTES TO TIIE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31,1979 and 1978 (B) Federal Income Taxes: - (Continued) 1979 1976 (In Thousands) Total Federal Income Tax Expense . 2,187 4,014 Net income Per Books 12.239 11.429 Income Before Federal Income Tax Expense $ 14.426 $15.443 Federal Income Tax Computed at Statutory Rates . .. $ 6,617 $ 7,400 (Decrease) in Federal Income Tax on amumt of Items Cap-itahred - Allowance foi Funds I' sed Dunng Construction (2.849) (1.836) Osciheads (302) (315) Con ohdated Tax Sasings (1,131) (1,018) Other (148) (215 ) Federal Income Tax Expense $ 2,187 S 4.014 The provision for deferred income taxes resulting from timing differences is comprised of the fallowin",: 1979 197f, (In Thousands) Execss Tas Depreciatinn 5 990 $ 1,1f13 G nputer Comerunn Cmts (68) (68) Estimated Unhdled Resenue 35 (1,176) Abandonment Loss ...... 602 Effect of State and Local Taxes 35 (180) Other - Net (18) 7 Total $ 1.576 $ (251) At December 31, 1979 unused investment tax credits of approximately $4,200.000 are available to reduce future Federal income tax liability. (C) Capital Stock: The changes in the number of common shares outstanding, resulting from sales to parent, during the y ears ended December 31,1979 and 1978 were as follows: Year Shares issued Total 1979 285.336 $7,133.400 1978 371,000 9.275.000 There were no changes in the number of shares of non-redeemable preferred stock during the years ended December 31,1979 and 1978. In the event of involuntary liquidation the non-redeemable preferred stock of Eastern Edison is entitled to $1(x) per share. In the event of voluntary liquidation, or if redeemed at the option of the Company, the non redeemable preferred stock is entitled to: Eastern Edison's 4.649b issue, $102.9S; 8.329'c issue, $107.70 prior to 10-1-83; $105.62 prior to 10-1-SS: $103.54 prior to 10-1-93 and $102.30 per share thereafter. Under the terms and provisions of the issues of preferred stock of Eastern Edison, certain restric-tions are placed upon the payment of dividends on common stock by the Company, but at December 31,1979 and 1978 the respective capitalization ratios were in excess of the minimum which would make these restrictions effective. 27 L
EASTERN EDISON COMPANY AND SUBSIDIARY NOTES TO Tile CONSOlJDATED FINANCIAL STATEMENTS-(Continued) Det .mber 31,1979 and 1978 (D) Redeemable Preferred Stock: Eastern Edison's 13.607c Preferred Stock is entitled to a mandatory sinking fund sufBeient to redeem 3,000 shares during each 12 month period, commencing October 1,19S0, at a redemption price equal to the initial public offering price plus accrued dividends. Eastern Edison has the non-cumulative option to redeem an additional 3,000 shares during each period at such price. Sinking fund redemption requirements for each of the five years through 1934 are approximately
$314,000 per year.
(E) Retained Earnings: Under the provisions of the Company's Indenture securmg the First h1ortgage and Collateral Trust Bonds, Retamed Earmngs in the amount of $11,846,241 and $12.245.818 as of December 31, 1979 and December 31,1978, respectively, was unrestricted as to the payment of cash dividends on Common Stock. (F) Long Term Debt: Under terms of the Indenture securing the First hfortgage and Collateral Trust Bonds, Eastern Edison is required to deposit annually with the Indenture Trustee, cash in an amount equal to IQ of the greatest aggregate principal amount of bonds previously authenticated and delivered. Where permitted, Eastern Edison has satisfied sinking fund requirements for 1979 and 1978 under , alternate provisions of the indenture either by depositing cash or by certifying to the Indenture Trustee "available property additions" and Eastern Edison expects to continue such practice during the year 1950. The First htortgage and Collateral Trust 1 onds of Eastern Edison and Eastern's Note Payable due 19S5 are collateralized by securities of hiontaup in the principal amount of $139,975,000. In addition the First Alortgage and Collateral Trust Bonds of Eastern Edison are collateralized by i substantially all of its utility plant. j The aggregate amount of cash sinking fund. requirements and maturities for each of the five l years following 1979 are: none in 1980,1981 and 1952. $13,996,000 in 19S3 and $11,125,000 in 19S4. (C) Notes Payable to Banks: During 1979 and 1978 Eastern Edison and Subsidiary followed the practice of borrowing from j banks for construction and other working capital requirements on a short-term basis at the pre-vailing prime rate of interest with compensating balances of up to 20c of amounts borrowed or at an equivalent or lower effective rate. At December 31,1979 and 1978 the lowest prevailing prime rates were 15.007e and 11.757o and the average effective rates were 15.517o and 13.369, respectively. A summary of short-term unsecured bank borrowing information for the years 1979 and 1978 is as follows: Maximum Month Weighted Unused Lines End Balance Average Average of Credit at Date Amount Balance Interest Rate December 31
~
(In Thousands) 1979 11 1 $43.060 31,353 14.41 % $35,500 i 1975 II 1 $33.550 27,183 10.15% $15,175 Except for daily working funds and like items, substantially all of the funds included in cash i represent compensating balances maintained in respect of bank borrowings. 28 t f
=
l EASTERN EDISON COh1PANY AND SUBSIDIARY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31,1979 and 1978 (II) jointly-Owned Facilities: 1 At December 31,1979 and 1978 hiontaup owned the following interests in jointly. owned electric facilities (dollars in thousands): p, ,,w,,23,3g79 N Construction Percent Plant In Accumulated Plant In Work In Owned Service Depreciation Se m cc Progress ' Umt 58,823 $54,847 $ I Canal 2 50 0% $63,670 m man N,, 4 1.96 3,871 116 3,755 , 40 40 18,792 I 5 al,ennk Nm I and 2 1.90 7,520 blenm No 2 2.15 29,221 Mdbtone No. .i 4 01 Mor, sac..e Nm I anel 2 2 00 937 Canal No 2 50.04 563,415 $6.574 556,841 5 M W3 man No 4 1.96 3.568 9 3,559 Scahinot Nm 1 and 2 1 90 40 40 11.317 higimi No. 2 2.15 5,918 22,365 Mdheone No 1 4 01 Montagne Nm I ai.d 2 2.00 830 The foregoing amotmts represent 51ontaup's interest in each facility. Financing for all such interest is innvided by hiontaup. Niontaup's share of related operating and maintenance expenses is melnded in its corresponding operating expenses. N!ontaup has a 4.35% ownership interest in two nuclear generating units designated as NEP 1 and 2 (lead participant, New England Power Company-NEPCO) proposed to be built at a site in Charlestown, Rhode Island. On December 4,1979 an order was issued by the United States District Court for the District of Columbia which upheld a previous decision by the U.S. General Services Administratmn barring transfer of the site property to NEPCO. As a result of the adverse court decision, the Hoard of Directors of NEPCO, on December 17,1979, approved the cancellation of the units and NEPCO has concluded that all capital costs relative to NEP 1 and 2 should be written off as being valueless. As of December 31, 1979 hiontaup had incurred approximately $2,065,000 of emts tincluding allowance for funds used during construction) in connection with the project. Addi-tional costs (which are not expected to be material) relating to cancellation charges, or salvage, if any, are undeterminable at this time. hiontaup has reported the costs of the abandoned project as an estraordinari property loss and has requested permission from the Federal Energy Hegulatory Commioion (FERC) for approval to amortize these costs, net of the related tax savings to be realized in the El'A System's 1979 Federal income tax return, over a period of five years and will request approval from FERC for recovery of such costs commencing with the effective date of its next rate filme. (I) Commitments: At December 31,1979 and 1978 Eastern Edison and Subsidiary company had leases covering certain facilities and equipment Total rental expense for these leases for the years 1979 and 197S I amounted at apprmimately $177,000 and $275,000, respectively, These leases are treated as operating leases for rate making purposes and have been accounted for as such, however, certain lease agreements meet the criteria requiring capitalization as set forth in the Statement of Financial Accounting Standards No.13. If such leases wue capitalized, the amounts thereof would not have a material effect on assets, liabilities, or related expenses. I Future minimum rental payments at December 31,1979 for such leases are estimated to aggregate
$150,000 in 1980 and 19S1, $160,000 in 1982, $119,000 in 1983, $45,000 in 1984 and $5,900 for years af ter 1964.
29
1 EASTERN EDISON COh!PANY AND SUBSIDIARY NOTES TO TIIE CONSOLIDATED FINANCIAL STATEh!ENTS-(Continued) December 31,1979 and 1978 l (I) Commitments: - (Continued) The entire cost of the Employees' Retirement Plan of Eastern Utilities Associates and its Sub- l sidiary Companies is assumed by the respective companies. It is the policy of the companies to fund ! the pension costs accrued, including amortization of past service costs on a 20-year basis. As of January , l 1,1979, the latest valuation date, plan assets exceeded the actuarially computed value of vested bene-fits by approximately $481,000. As of the same date, total unfunded past service liability was $4,149,300. j Pension expense charged to operating expenses and to canstruction and other accounts was approximately $1,327,000 and $119.000, respectively,in 1979 and $1,391,000 and $101.000 respectively. 1 l in 1975 hientaup is committed under purchased power contracts to pay demand charges whether or not energy is received. The following table summarizes information concerning such contracts at Decem-ber 31,1979. Date of % share of Einmated Contract Output Being Annual Unit Empiration Purchased Lost (Doni omitted) Taunton hfunicipal Cleary :9 1984 Variam 5 2.700 New Brunswick 1986 R41 1.3h0 Yankee Atomic Power Co. 1991 4.50 828 Conn Yankee Atonne Power Co. 199S 4.50 2.001 Cana! Electric Co. L'mt No 1 1998 25.00 4.nT2 Pilgrim l'mt No.1 . 2000 11.00 7.800 Af aine Yankee Atomic Power Co 2002 4 00 lJ4 Vermont Yankee Atomic Power Co 2002 2.50 1.116 y28 Eastern Edison's construction program is estimated at approximately $70,000,000 for the year 1950 and $274,200,000 for the years 19S0 through 19S4 (including allowance for funds used during construction). 1 (J ) Contingencies l N!ontaup currently has a 1.909 ownership interest in each of the two 1,150 megawatt nudear l generating units being constructed in Seabrook, New Hampshire. In addition, approval has been re- l quested from the Afassachusetts Department of Public Utilities to purchase an additional 3.10Q l interest from three other participants. All of the necessary state and federal regulatory approvals l for the construction of the units have been obtained, and construction is in progress; a petition for a i Nuclear Regulatory Commission (NRC) review of the seismic design issue, as to which one member of the NRC Appeal Board dissented,is pending before the NBC. The approvals have been consistently opposed by a number of intervening groups, resulting in significant delays and greatly increased cost. Various court appeals from federal regulatory approvals have been decided in favor of the lead partici. pant in the project, but one appeal, in which intervenors are challenging the refusal of the NRC in 1976 to suspend the construction permits, is still pending in the United States Court of Appeals for the First Circuit. Further court appeals are possible and there is pending before the NRC staff a request of an intervenor for issuance of show cause orders as to why the construction permits should not be suspended or revoked on grounds concerning the NRC's failure to require development of evacuation plans and related matters. An operating license must be sought and obtained from the NRC before the units can be put into operation. The lead participant in the Seabrook project, Public j Service Company of New Hampshire (PSNII), which presently owns an undivided 50Tc ownership I interest in the units, has stated that it is experiencing serious difEculties in financing its construction program because of state regulatory changes denying the inclusion of construction work in progress in 30 1 1 t i i
EASTERN EDISON COh1PANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -(Coctinued) December 31,1979 and 1978 (J ) Contingencies: - (Continued ) its rate base. Among other steps to reduce its construction expenditures, PSNil decided in Alarch,1979 to reduce its ownership interest in the Seabrook plant to 289'c by offering ownership interests to other utilities, Through October 31,1979, subject to receipt of requested regulatory approvals, other utilities (including hiontaup) have committed to acquire only approximately 15?b of the additional plant being offered. As of December 31, 1979 Afontaup's investment in the project amounted to approxi-mately $lh,MX).fXM). hiontaup is unable to predict what effect further administrative and court actions or financinq problems may have on the Seabrook project or its cost, hiontaup a5o has a 2.00'Te ownership interest in a planned nuclear project, hiontague Unit Nos. I and 2 (lead participant, subsidiary of Northeast Utilities), Expenditures on this project hr.e been reduced to a minimum and the project schedule and related projected capital expenditures are uncer-tain at this time. As of December 31,1979 hiontaup had spent approximately $937,000 in connection with its interest in the 51ontague project. Final costs associated with cancellation of the project, if ultimately necessary, cannot now be ascertained. In the event of such cancellation, hlontaup would apply for appropriate regulatory approval to recover its total Ws over an appropriate future period. The estent to which rate relief,if any, would permit recovery ot trie project costs cannot be determined at this time. (K) Heplacement Cost Information: (Unaudited) The estimated replacement cost of the Companies' productive capacity is presented below in compliance wi;h the disclosure requirements of the Securities and Exchange Commis< ion. This infor- : mation does not purport to represent the current value of the existing plant in service; it is only an estimate of the cost that would be incurred if such assets were replaced: _ December 31,1979 December 31,1978 j Estimated Estimated Replacement llistorical Replacement llistorical Cost Cost Cost Cost (In Thousands) I'tih:3 Plant-
.subirti to replawment cost disclosurr $489,151 $253.809 $429,511 $244,452 Int huled at historical cost 63.734 63.734 50.694 50.694 To+41 552,885 317,543 480,205 295,146 Ins strumulated prmision for depreciation 151,637 77,874 128,853 71,850 1 Net utihty plant $401.248 $239.669 $351,352 $223.290 l Depreciation espense $ 14,694 $ 7,855 S 13.186 $ 7.5M The estimated replacement cost fcr production, transmission, distribution and general plant facili-t:es has been calculated by (1) using unit cost estimates, (2) trending original costs using Stone &
Webster Appraisal Corporation cost indexes which reflect constmetion labor costs in the Boston area, and (3) testing the trended cost results by various unit cost comparisons and adjusting, as necessary, to an estimated replacement cost, These indexes translate original costs recorded in the property records to current costs based on historical inflation and are reasonably adjusted for changes in technology Land, land rights, property held for future use and construction work in process have l not been restated in terms of replacement cost as they are not part of the current productive capacity. Replacement cost information relating to inventories, including fuel, has not been included in the l j replacement cost analysis. Changes in the costs of fuel are reflected in billings under the fuel adjust-31
y EASTERN EDISON COMPANY AND SUBSIDIARY NOTES TO TIIE CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31,1979 and 1978 (K) Replaecment Cost Information (Unaudited): - (Continued) ment clauses in the Company's rate schedule. Inventories of material and supplies have also been excluded from the replacement cost amounts since such amounts are not material. The accumulated depreciation based on the replacement cost was developed by applying the same percentage relationship that existed between depreciable plant and accumulated depreciation on a historical cost basis at December 31,1979 and 1978 and applying such ratios to the current replace-ment cost of the productive capacity. Depreciatmn expense related to replacement cost has been computed by applymg the appropriate composite depreciation rate (See Note A) for the years ended December 31,1979 and 1978 to the aserage replacement cost for the year. The Companies caution that the above information represents only a compilation of data on a piecemeal basis to indicate a possible effect of inflation on the restdts of operations. Replacement of the sarious components of property, plant and equipment will take place over many years and the attual replacement costs will be affected by, among other factors, changes in technological develop-ments, the rate of inflation, environmental requirements and national energy policy. Additionally, replacement of existmg plant could result in changes in operating and maintenance expenses. Because of these f actors, as well as others which cannot presently be foreseen, the System is unable to estimate the eficet that the cost of replacing existing property, plant and equipment will have upon its future operatmg results The diflerence between historical and estimated replacement cost of the net utility plant in service does not represent an unrecorded increment in Shareholders' Equity; rather it represents a theoretical additional capital mvestment which would be required if the utility plant in service were replaced in its entirety at December 31,1979 and 1978. The Company alm cautions readers of these financial statements of the imprecise nature of this dat., and of the many subjectise judgments entering into the determination of the replacement cost infor- i I marion. In addition. the Company cautions that replacement cost is not the current value of existing plant, but only an estnnate of the cost of replacing such assets at December 31,1979 and 1978. Ac-cordingly, this replacement cost information should not be interpreted to indicate that the Company has plans to reldace such assets or that the actual replacement would take place in the form and mamier assumed in developing these estimates. The Securities and Exchange Commission has cautioned investors and analysts against the simplistic use of replacement cost data. It also decided not to require, at this time, the disclosure of the effect of replacement cost data on net income, because there are still substantial theoretical problems l m determining an income effect. The actual cost of replacing the Companies assets will be incurred over l a period of years and not at one time. The Companies are subject to Federal and state regulations in the determination of a fair rate of return on their investments. Under current rate-making policy (which does not allow the utihty subsidiaries to recover the excess of replacement cost over historical cost), it is not possible to predict the effects of either the additional revenues that would be realize from the recovery of the increased replacement cost or the possible savings resulting from the oy_ rating efficiencies of tech-l rucally improsed replacement facdities. l 32 l
EASTERN EDISON COMPANY AND SUBSIDIARY NOTES TO Tile CONSOLIDATED FINANCIAL STATEMENTS-(Continued) December 31,1979 and 1978 (L) Parent Company Financial Staternents: EASTERN EDISON COMPANY BALANCE SHEET December 31, (in Thousands) ASSETS 1979 1975
' ribr> Plant and Other Imestments. 5 99.355 5 91,154 L'tihty Plant f at cost) (Schedule Y) . .
Less Accumulated Provision for Depreciation (Schedule VI) 24.189 21.799 Net Utihty Flant .. 75,166 72,355 Net . .... .. . ... . 821 110 Nonutihty 139,584 investmentProperty In Subsi diar; Companies (at equity) (Schedule !!!)..... 148,859 51 51 Other Imestments (at co>i) Total Utiht> Plant and Other Investments 224.897 , 212.100 Current Assets: Cash and Temporary Imestments 135 2,145 Anounts Heccisable: Cmtomers Less Allowance for Doubtful Accounts of $213,124 and $173.111. respectisely (Schedule XII) 10,153 9,832 Others ..... 283 Ill Associated Companies . ... . IT lh Plant %1ateriah, Operating Supplies and Other 2,175 1,825 Prepayments and othes Aswts 223 118 Total Current Assets 12,956 14.052 Deferred Debits. L'namortued Debt Expense 445 477 Other Deferred Debits 1.2Ni 1.472 Total Deferred Debits 1.705 1.949 lotal Awets 5239.591 5226.101 LIABILITIES t *; spit.sIstatson. Common SintL (Schedule XIII) 5 72.284 5 65,151 ^ Connoon 5tmL Expense (391 (35) Other Paid in Capita! . 5,824 5,824 Appropriated Retained Earnings 821 821 Metained Earnings . . . ....... ... .... 20,187 16.517 Non.itedeemable Preferred Stak (Sthedule XI!!) 8,950 8.950 Hedeemable Preferred Stock (Schedule X111) 5,607 5.921 tong. Term Debt (Nhedule IX) 100.9S5 81.202 Total Capitalizatmn 214,619 186,351 Cur:ent Liahdities: 15,000 Long-Term Debt Due Within One Year , 7,400 Ltes Payable - Banks .. . . . 8.950 Anuunts Pay able - Pubhc . .
.67 654
- Awociated Companies . 2.845 2,03h Hedeemable Preferred Stock Sinking Fund Requirement.. . 314 Customer Deposits . . . 820 754 3,572 2.861 Taxes Accrued . . . ..
815 775 Deferred Taxes . . 789 Interest Actrued . . . . 757 3 1,860 Other Current Liabilities 17.293 33,701 Total Current Liabilities . Deferred Credits: 2,082 2.621 Unamortized Investment Credit . . 27 30 Other Deferred Credits . . 2.109 2.651 Total Deferred Credits . . 5.570 5.395 Amimulated Deferred Taxes Tot.J Liabihties and Capitalization $239.591 $228.101 33
+
i EASTERN EDISON COMPANY AND SUBSIDIARY NOTES TO Tile CONSOLIDATED FINANCIAL STATEhfENTS-(Continued) December 31,1979 and 1978 (L) Parent Company Financial Statements: - (Continued) EASTERN EDISON COMPANY INCOME STATEMENT Years Ended December 31, (In Thousands)
;979 1975 Operatmg Revenues $100,%3 $M4.765 Operating Expenses.
Operation 61,877 66.r,4; ; hiaintenance 1.936 2.123 Depreciation 3.083 2,816 Amortization of Investment Credit (Credit) (123) (117) Taxes-Other Than Federal Income 6,157 6,766
- Federal Income 1,095 3,514
- Deferred (Credit! 215 (1.127)
Total Operating Expenses 91.240 82.919 Operating Income 6,323 6.819 Interest from Subsidiary Company 7,102 6.221 Equity in Earnings of Subsidiary (Schedule Ill) 8.589 7.122 Other Income and (Deductions) - Net (16) (61 Income Before Interest Charges 21.995 20.lR7 Interest Charges: Interest on Long Term Debt 8.M0 7,897 Amortization of Debt Erpense and Premium 39 ItN Other Interest Expense 1,013 792 Allowance for Borrowed Funds Used During Construction (Credit) (131) (30) Net Interest Charges 9.759 6.75@ Income After Interest Charges 12.239 11.429 Preferred Dividends Requirement 1.344 1.344 Net income $ 10.895 $10.083 RETAINED EARNINGS STATEMENT Years Ended December 31, (In Thousands) 1979 13 Retained Earnings- Beginning of Year as Previously Reported $14.032 512.429 Adjustment to Reflect the Retained Earnings of Fall Riser (Note A) 4,485 4.420 Retained Earnings - As Adiusted 18,517 16,849 Income After Interest Charges 12.239 __I_1.429 Total 30.756 28.274 Dividends Paid-Preferred 1,344 1,344
- Common 9.225 8.417 Retained Earnings-End of Year $20.187 $18.517 3d
B EASTERN EDISON COMPANY PIO SUBSIDIARY NOTES TO Tile CONSOLIDATED FINANCIAL STATEMENTS-(Continued! December 31,1979 and 1978 (L) Parent Company Financial Statements: - (Continued) EASTERN EDISON COMPANY STATEMENT OF CIIANCES IN FINANCIAL POSITION Years Ended December 31, (In Thousands) 1979 197% sot *RCE OF FUNDS: From Operations: Income After Interest Charges $ 12.2 P r 51 ) . l.N Prmeipal Non-Cash Charges (Credits) to income: 3.170 2.W 1 Depreciation Amortization of Debt Expense and Premium 39 Ito 172 21h l Deferred Federal Income Taxes Ins estment Tax Credits, less Amortization . . (319) fil l l Equity in Undistributed Earr.ings of Subsidiaries (2.071) (1711 l Allowance for Funds Used During Construction (lill I .w t j Total Funds Fror, Operations 12.A71 lyyn External Sources: j (Decrease) Increase in Short. Term Notes Payable to Banks t1.510) 2.17 5 , l Proceeds From Sale of Notes 20.tMio Proceeds From Sale of Common Stock 7.111 9.271 Other - Net ___ 21 1 , 2:1 Total Funds From External Sources _23.79" 11.9s i Total Source of Funds 5%.go 52 .0 __" _3_] _ APPL.lCATION OF FUNDS Construction Expenditures .- 6 6.092 s 3.1 th Less: Allowance for Funds Used During Construction i1111 e 10 ) i Net Construction Expenditures . 6.559 5.116 Purchase of Montaup Common Stock 7.200 Purchase of Montaup Bonds 9.273 Daidends Paid- Preferred StocL 1.341 1.111
- Common Stock 9.225 6.417 Hetirement of Long. Term Debt 15.2t ui 1.wi (Decreaw) in Working Capital t h91) ( % 1) i Other Application- Net li 1 l Total Application of Funds 6.18 fi7o 527.ou l l
CilANGES IN COMPJNENTS OF WORKING CAPITAL (Excluding Short-term Debt): , (threase) Increase in Current Assets: Cash . 5(2.0111 8 1.21; i Receivables . 492 i1.979 Inventories .. ... 331 (102) Prepaid Expenses and Other Current Assets loi ip ( l .of a ; _ i swil (Decrease) Increase in Current Liabilities: Accounts Payable .. 920 t L62is Accrued and Deferred Taxes . 752 1.761 Aenued Liabilities (l.h41) 1.9 I I (172) A,4 (Decrease) Increase in Working Capital $ (893) 5 (!)ill 35 D]*lDN arlw
*'D'3'Y f
l EASTERN EDISON COhlPANY AND SUBSIDIARY St*PPLEhlENTARY INFORhtATION TO DISCLOSE Tile EFFECIS OF CllANCING PR The following supplementary information is supplied in socordance with the requirements of the Statement of Financial Accounting Standards No. 33 for the purpose of providing certain informatinn about the eficets of changing prices. It should be viewed as an estimate of the approximate cile inflation, rather than a precise measure, since a number of subjective judgments and estimating techniques were used in developing this information. CONSOLIDATED STATEhtENT OF INCO\tE FROh! CONTINLflNG OPERATIONS ADJt'STED FOR CIIANGING PRICES For the year-ended December 31,1979 Adnnted ins Gerieral Infiadon A Repe.ned (Constant Dulle i llistorical A arnet Cost 19753_Ibflur_( IThousands of Dollars) i
$165.127 $1GS.127 Operatmg itevenues 131.126 101.126 Fuel and Purchased Power Expense . . 27,216 27,216 Other Operating and M.sintenance Expenses 7,655 15,150 Depreciation Expeme . . .. 8.501 8,501 Tases Other than Federal Income 1,S49 1.849 Federal Income Tases 9,517 9,517 Interest Charges - net . (3.179) (3,179)
Other (income) and Deductions-net 155,8 % 163,153 income From Continuing Operations (excluding reduction to 5 4.94_4* i
$ 12.239 net recoverable cost) _._ _
5(21,691) Reduction to Net Recoverable Cost 15.235 Gain From Dechne in Purchasing Power of Net Amounts Owed _5 (6_ 4%) NET
'lucluding the reduction to net recoverable cost, the loss from continuing operations on a constant I ibillar basis would have been $(16.747). !
FIVE ) EAR SL'Al%tARY OF SELECTED FINANCIAL DATA ADL'STED FOR TIIE EFFECTS OF CllANGING PRICES Years Ended December 'll, 1977 1976 19 5 l 1979 1978 (In Thousands of Average 1819 7allars)
$16S,127 $157,667 $173,430 6177,166 sl%.4th Operating itevenues lucinne Fnnn Continuing Operations (escludmg reduction to net recover- 4,981 f
able omt) l Cain From Decline in Purchasing Power of Amounts Owed 1553 Pei Common Share: Earnings (less) From Continu-l mg Operations dividend (after p) referred requirements 1.37 5.39 3.59 4.10 4.07 3.19 Cash Dividends Declared Year end Data. l Net Assets at Net Recoverable 107,455 l Cost l 181.5 17 0.5 1612 l 217.4 195.4 l Average Consumer Price Index l l l J
L__ _ _ _ ._ O y EASTERN EDISON COMPANY AND SUBSIDIARY Comtant dollar amounts represent historical costs stated in terms of dollars of equal purchasing pim cr, as measured by the Consumers Price Index for all Urban Consumers. The current year's provision for depreciation on a comtant dollar basis was computed by applying the average compmite depreciation rate to the average depreciable balance of property, plant and equipment after adjmting such accounts for inflation. Fuelinventories, the cost of fuel used in generation, and purchased power for resale have not been restated from their historical cost. Regulation limits the recovery of fuel and purchased power emts through the operation of adjustment clauses. For this reason fuel inventories are effectively monetar anets. As prescribed in Fmancial Accoimtmg Standard No.33, income taxes were not adjusted. L'nder the rate-maling prescribed by the regulatory commissions to which the Companies are subject. only the historical cost of plant is recoverable in revenues as depreciation. Therefore. the esc of the emt of plant stated in terms of constant dollars that exceeds the historical cost of plant is not presently recoverable in rates as depreciation, and is reflected as a reduction to net recoverable c properly reflect the economics of rate regulation in the Statement of Income from Continuing Oper tiom, the reduction to net recoverable cost of net property, plant, and equipment should be offset by the gain from the dechne in purchasing power of net amounts owed. During a period of inflation holders of monetary assets suller a loss of general purchasing power while holders of monetary liabihties esperience 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, p and equipment. Since the depreciation on this phnt is limited to the recovery of historical costs. the System companies do not.have the opportunity to realize a holding gain on debt and are limited to reemcry only of the embedded cost of debt capital. 37
SCHEDULE IH Parent and Consolidated EASTERN EDISON COMPANY AND SUBSIDIARY j INVEST 4fENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FBOM AFFILIA'IT.S AND OTIIER PERSONS f (In thousands, except number of shares) i Column D C-lumn E Column F Column A Column B Column C Balance at heginninz Ratance at end Additions Deductions of period of perind (21 - (11 f2) (I) (2) (1) 12) (Il Dividends received Equity during the taken up Distribution in carnings of earnings Number of period from Number of by persons shares or investments shares or (loeses) of g units. affiliates in mhich earnings units. Principal not accounted Principal and other for by the persons (losses , amoimt el amount of hands and Amount equity Description honds and Amount for the were Other taken up Other notes in dollars method of Investment notes in dollars period Name of Issuer _ __ For tl.e > car ended December 11, 1979: Eastern Edison Company: G1tl.000 1 72,448
'hfontaup Electric Crnnmon Stock 5(il,tWwl t in,2trl $8,589 4 7.2tNyal VI.5ft 9 1,500 I.5txt 10.000
'hfontaup Electric Preferred Simk 15fxN % 74,875 74.875
'htontaup Electric Delw nture H<mds 7 8.H75 74.875 139,588 8 W7 7.21WI fi.514 148.859 hiontau. Slectric Co.. 97 fi.1Nn 928 Capital Stml fl.<Mn 1:12 89 Yankee Atomic Electric Co. 2twi 20.tN W1 2.740 hfaine Yankee Atomic Power Co. Capital SemL 20.txus 2.7 10 2twi' 15,7.7) 2241 15,7.91 2,1172 . p r. I2fs Conn. Yankee Atomic Power Co. Capital Sem-L Vermont Yankee Nuclear Power i19 10.001 1,454 Capital Stex L 10.INil 1,158 lli Co. 7,401 7.2 12 807 til8 7,2tml 15ti,2fio l iti.8 t fi 9 rms 7.152 Grand Total 148,859 139,588 8.589 7,200 6.514 Elimmatal m Conudidati n. 5 (M8 9 $ 7,801 Tntal $ 7 312 $ 807 S n-
o a l SCHEDULE III Farent and Consolidated - (Continued)
- . _ _ . . - . . - -.- . . . - _ _ . _ . _ . . . =...-.- .- _ -...___. -
Column D Co umn E Column F Column A Column R Column C Balance at end [ Ratance at twzinning of period of period Additions Deductions (26 (I) (2) Dividends , (1) (2) (I) (2) til received Equity during the taken up Iktribution period t' rom in car.iinc. of earninzs Number of Number of by person, shares or investments I shares or (Insws) of units. not units. affiliates in which accounted l' earninzs Principal ' Principal and other amount of for by the amount of persons (losses) equity for the were hands and Amount Description bonds and Amount taken up Other notes in dollars method of Investment notes in dollars period Other Name of Issiwr _ _ . _ . _ _ _ .. - _ _ ._ For the year ended Decemler 31. 1978: u Eastnn Edison Company: sn.9 84 Vl4.000 $ fi3.200 Common Stock Sc>fjKNI $ 61.035 $7,122 1
'O *Montaup Electric 15JWW1 1.500 Preferred Sfmk 153NN) 1.5(N) 74.875
*Montaup Electric fi5.fiOO 9,275(a) S 74.875
*Montaup Electric Dehenture Ilonds $ 65.0(W) 139.531 i 130.135 7.122 9.275 fi.9 34 Montaup Electric Co.: 110 6.903 932 Capital Stock fi.901 9 f fi 12(1 2.740 Yankee Atomic Electric Co. 2fW 2fW 20.000 Capital Stark 20JNNI 2.780 2.102 Maine Yankee Atomic Power Co. 2,0'NI 138 120 15.750 Conn. Yankee Atomic Power Co. Capital Stm k 15.750 Vermont Yankee Nuclear Power 175 10.001 1,458 Co. Capital Stock 10,001 I.48ti 117 679 679 7.232 7.232
. 627 14fi.816 137.367 7.80I 9.2. a Crand Total 130.135 7.122 9.275 6.9 88 139.584 Elimmated m Conelidation 9 fit 9 1:----
7.232 Total $ 7.232 $ ~=679 % :0- .= . = . .
.=--
- Eliminated in consolidation.
(e) Purchase at cost. I, I i
e
- SCIIEDL.'LE V CONSOLIDATED EASTERN EDISON COMPANT PROPERTY PLANT AND EQUIPMENT (In Thousands)
Column C Column D Column E Column F Column A Column B Other Charges - Add balance Belanw at at End Beginning of Additions ( Deduct) - at Cost Retirements Describe of Period ClassiScation Period For the Year Ended Denmber 31,1979. Utility Plant; 5 5,121 5 1,128 5 S122,505 Production - Steam 5118.512 3.689 3A89 Otha 121,184 6.162 802 126.544 Transmisi.fi.n and Distribunon 126 52 4.507 Ceneral Plant 4.433 (711)(c) 62h Electric Property lirld for Future Use 1.339 Construction Work m Piogiess 45.989 21.939 (8.258) _59A70 533.348 5 1.982 5 (8.969) 5317.543 Total Utihty Plant 5295.146 . _ - - 5 132 5 5 5 Til (c) 5 Ri1 Nonutihty Property __ For the Year Ended December 31,1976. Utiht> Plant; 5114,336 5 4.304 5 128 5 5116.512 Prndachon - Steam 3.636 53 3.fm Othe: 117,595 4,489 896 (4)(a) 121.184 Teansmnuon and Distnhunon 3Nu 1.115 MI 4 (a) 4.4 13 Cencral Plant . 1,339 1,339 Electne Property lleld for Future Use Consnuction Work in Progres, 33.383 17.141 ( 4.5:15)( b) 45.We 5274,154 527,102 4 1.575 5 (4.535) 5295.146 Total Utihty Plant 5 132 5 5 5 5 112 Nooutihty Property (a) Transfer between classifications. (b) Transfer to Utility Plant. (c) Transfer between Utility Plant and Nnn-Utility Property. 40 , . . . ~
o ' SCllEDULE V PARENT EASTERN EDISON COMPANY PROPERTY PLANT AND EQUIPMENT (In Thousands) Cohima A Column B Column C Column D Column E Column F Other Char ges - Balance at Add Balance Besmning of Additions (Deduct 1 - atEnd Clastihcotion Period et Cost Retirements Desmhe of Perind For the Year Ended December 31,1979. . Utahty Plant: Transinmion and Distributiy $89,370 $ 5,096 $ 773 5 591.693 3,550 118 45 3,62.1 General l'lant Electric Property lield for Future Use 7]] (711)(a) 1,516 2.nyl Construction Work in hogress 523
$94,154 $ 6,730 $ 818 5 (Til) $99.355 Total l'tiht3 Plant Nonutihty hoperty S 110 $ $ 5 711 ta) 5_ 821 For the Year Ended Decembre 31,1976 L'tihty I'lant.
Transmission and Distribution 565,871 $ 4,372 S 873 5 569.370 General Plant 3,044 1.054 548 3.550 Electric hopetr> lleid for f uture Use 711 Til Con <truction Work in hogress M14 (291) 521 590.440 5 5.135 5 1,421 $ SW.151 lotal l'aiht> Plant Nonntih:3 hoperts S 110 $ $ $ _ 5 110 (a) Tramfer Iwtween Utility Plant to Non Utility Property. 41
. s SCllEDL1E VI CONSOLIDATED EASTERN EDISON COMPANY ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY PLANT AND EQUIPMENT (In Thousands)
-- - - - - =
Column A Column B Column C Column D Column E Column F Other Additions Charaes - Balance at Charged to Add Balann at beginning Costs and ( Deduti l - End of Description of Period Espenses Retirements Describe Period Fen ilie irar Entled Decemler 31,1979 Total Atrumulated Depreciation, Deple-tion and Amortization $71,R90 $7,954 $1.970 $ 5]7ATI
} or the Year Er. des! Denmber 31,1978 Intal Accumulated Depreciation Deple.
tmn and Amortuation 565 MO $7,fiS1 $1 fiOI 4 571Nxl j l 1 l
)
1 I l l t l i l l l
~
h
* .- a e
SCilEDUI.E VI PARENT EASTERN EDISON COMPAhT ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY PLANT AND EQUIPMENT (InThousands) Colomo C Column D Column F Column F Column A Column B Oni,cr Additions Charges - Charged to Add Balance Balance at at Erid of Beamning of Costs and ( Dedia e t - Espenses Retirements Descrds Period Description Period For the Year Ended Denmber 31, 1979-Total Acemnulated Derweeintion, Depletion ar.d Amortuation $2I299 $3.170 $ 780 5 52_1.l .. .'a For the Year Ended Decemhe 31, lim Total Accumulated Depreciation. 5 521.7W Depletion and Amortizatum $20.327 $2.904 31.432 43 1
P4tlENT AND CONSOUDATF.D 4 EASTEllN EDISON COMPANY AND SUllSIDIAlW IM)NDS. MORTGAGES AND SIMilAR I)ERT I)ccember 31.1979 I In Thousands I Column R Column C Column I) Column E Column F Coleman C Column H Column A Amount
'f, Amount held ley
, "ed amliates foe under which statements Amount included in Column C which is '[' j", g,A
]" are Gled herewith II) (2) mortgages and (I) (2)
IIrld by Not held and sim- other Amount Per, Amount nrfor by or for ilar debt'* special pledged incluw' Amount issued and account account in related funds of by conson Name of issuer 'sted issuer and authorized not reH.c.I - ei i....a of issuer balance issuer
- o. .sanlled thereof thereof sheet thereof thereof staaement Others title of each issue by indenture Eastern Edison Company:
First Mortgage ami Collateral Trust Bonds- None None None
$fl,800fa) $ (1.800 Nonc $ fl.8tX) $ 6.800 None 3%"e Series due 19M3 . . . .. None hone None None 7%% Series due 1983 (Secor+d Series) 5.tM Mit a l 5JMMI None 5,tFWs 3.tMM) 2,ItHi None 2,194 2,190 None None None hone 4%% Series duc 1983 (Third Series) 4.mm(a) 6t00 None None None None 3%% Series due 1985 fijMM(a) fi.0im None 6,tW M)
None None 19,800 None 20JMMit a) 19.NIO Nonc 19.NMI None 12'5 Series due 1985 (Semnd Series) None None None None 4%% Series due 1987 3JMm(a) 33MO None 3JM MI 3JMU 3JMio None 3JMMI 3JM10 None None None None I 4%% Series duc 1988 3JMm(a) 5.000( a ) 5JMMI None SJMm 5JMMI None None hone None 4%% Series due 1993 None None None None fi%"r Series duc 1997 7JMM1(a ) 7JM4 None 7.t M MI 7JMM) None 5JMO 5,000 None None None None 8%% Series due 1999 53MM)(a) 5.tW M) 8.000 None MJMO 8JMM) None None None None 7%% Series duc 2002 83MM)(a) None None 10JM10(a) 10JMMI Nonc 10JMM IUJMM) None None 8%% Series duc 2003 . None None None None Note payable due 1988 . 5,tM M) 5.tWM) None 5JMMS 5.tW10 15JMMI Nonc 15JME 153MU None None None None Note payable due 1985 15JMM) 189 Unamortized Premium l(M),985 Montaup Electric Company: Debenture Ikmds - 5,400 None Nenc $ 5.400 None 3%% duc 1982 11.tM10 5.400 None 5.400 5,7tm 5.7to N...:- 5.700 5.700 None None 5,700 None 5% duc 1987 . 3,250 None None 3,250 None 4%". due 1988 . 3.250 3,2*>0 None 3.23) 3,950 None 3.930 3.950 None None 3,930 None 5% due 1989 3.950 None 8% duc 2000 . , 8,500 8.S M) No w 8.5(Mt 8.5(U None None 8.500 I2.m H Nonc 12.8tMI 12.MM) N mc None 12.800 None 8%% due 2fM)3 12.800 26JMMI 2fi.t M M) None 2GJXM) 2HJMM) None None 2fi3MM) None 14% due 200."i None 4 275 None 9.275 9.275 None 9.275 9 275 None 10'% due 2004 74.H75 7 4.M.5 ilTViTI ITiM n ' 74,8ts Total Bonds. Mortrancs and similar Debt f ii1MI 7 8.8~5 7 Isss Intercompany lloldings Ehminated un Comnh.latuw. ._1875
* &_'?.
Total per Comolulateil llalanw slurt
- lim 931 (a) linnds ni esisting Senn in acIslitune to those alreaalv nuu d anel ihnHIs nl am either Scrin mas lu* tsmeel In cas h Cennpam ushiert to rmtnctions tuntairw d m the Indentons. .n uegeplemes.tnl wohnn lunil in amenmt mttpl .o m.n in funitril by law an.1 f>> the ImfenInra I
o .*
- s SCIIEDi'LE Xil Parent and Consolidated EASTERN EDISON CO.\fPANY AND SUBSIDIARY VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (In Thousands)
Column A Column B Column C Column D Column E Additions (1) (2) Balance at Charged to Charred Balance at Beginning Costs and to Other Deductions - End of Description of Period Expenses Accounts Describe Period For the Year Ended Denmber 31,1979: Allowatice for Doubtful Awounts 5 173 8 419 $ 89(a) $ 46 Sib) 5 213 For the Year Ended December 31,1978: Allowance for Doubtful Accounts $ 159 $ 470 S 31(a) $ _486(b) 5,_173 tal Recosenes of accounts presiously written oil. (b) Accounts Receisable written off i I l l 1 45
O l \ . SCITEDULE XIII l PARENT AND CONSOLIDATED l ! EASTERN EDISON COMPANY AND SUBSIDIARY CAPITAL SIIARESIa) December 31,1979 Column D Column E Column F Colume G Colume A Cainsne B Column C Shares imeed or Number of
.mtstamtmg as shares held by Number of shares show n on or included affiliates for reserved for options, l Number of shares included warrants, m..;. h in Column C which are m related halance =fuch statements i
sheet under caption are filed herewith an I other rights S umher t2) ni shares tI) Ifel.1 hs Not I.cid * *P ' *I_'I'*"'- I eI) (2) fI) Directors, (2) er for by or f ar (I) (21 Persons Number essued incimled in officers Name of of shares amt sent account account Amount of iss..cr of issuer at which consalutated and issuer and anal.orwed retired or statements Others employees Others by charter cancelled therent thereal Number show n title of issue (In Thousandsi Eastern Edison Companv: 2,891 M7 None None None 2,891,357 2.891,357 None 2.891.357 2.891,357 $ 72.7FLI Common Stock-$25 Par a Non-Redeemable Preferred
- Stock: fl.000 None None None None 4.64%, $100 Par fio.000 no.000 None 00.000 si.000
%ne 30.000 30.000 3.0 10 None None None None 8.J2%, $100 Par 30.000 .10.000 18 Preminm Expense (98) 8.950 Redeemable Preferred Stock: None 00.000 None H0.000 f 0.000 fl.000 None None None 13.00%, $100 Par 60.000 8
Premium Expense (87) Sinking Fimd.... (311) 5.607 hfontaup Electric Company: None None (136.000 None 630.000 G10.000 63/W10 fi30.0ix) None Common Stock-$100 Par 636.000 None None None None 15.000 15.000 1.'W M) 15.GMI Preferred Stock-$100 Par 15fMN) 15.IMMI Total Capital Shares 152.411 Less: Intercoropany ifoldings Ehminated m Consolidation 65.100 Total per Consolidated Bal-ance Sheet: Common Stock . . 972.781 Resleemahle Preferred Stex-k . . 8.0'un Non-Hedeemable Pre-ferreil Stock _ 5.007 $ 87.311 (e) Therc5cre no uculicant changes simr tin .lat. of ilw related I. alan.v shee t 8h) The Charter prmiu.wis of ilw f *.unpan, In not tin twe l.ee.41 v. L ew,*I .iral nuest.indme as ans tum so 75, of th. e,.tal c:ip val senrk e
i o.*o e SCIICnt'LE XVI PARENT AND CONSOLIDATED EASTERN EDISON COMPANY AND SUBSIDIARY SUPPL.EMENTARY INCOME STATEMENT INFORMATION Colunno A Column B Column R For the Year Ended Ikcemhe 31, 1979 l'87 4 Charged ta Charged io Cost and Co,e ar.d item Jpeme Espeme _O n Thousan.h ) Amounts of maintenance and repairs and depreciation expense were as shown in the income state-ment and notes thereto. Taxes - Other Than Federal Income. (a) Eastern Edison Company $G,150 ER19 hiontaup Electric Company 2.400 2.6 11 Consohdated 58,556 59.4fdt Amoimts of rents, advertising costs and research and development costs did not esceed l'r of gross res enues. Notes: (a) local State State st.te Propert) Corporation bales and Frarwhi,e P.)Tull Taxes Tames Tax l'se 1 as Tas For the Year Ended Decenite 31, 1979. Eastern Edison $398 $5,406 5 5 5353 Montaup 208 2,179 2 2 %
'I ot.) 3600 $7.585 $2 52 516I Fue tir Year Ended Decemix: 31,1978 Eastern Edison 6409 $5,693 4 56 57 &s Montaup 191 2.391 2 3 52 Total 6600 88,086 $2 $11 571il i
i 1 47 ) I l l l l
'^
g - -- -- -- - - - - - - - - - - - - - - - - -
/Tl A CH/VT%
~
- ~ [I l
l
. . m_._, . _ _ . . _ _ _ _ _ . _ _ _ . _._ . . _ - - _ _ _ m ,_. - . _ _ _-_ -_ -
NEW BEDFORD CAS AND EDISON LIGHT COMPAhT - SEABROOK LNITS 1 & 2 Pro-forma Sources of Funds for System Wide Construction Expenditures , and Capital Structure During Period of Construction of subject Nuclear Power , Plant-Assuming Transfer of New Bedford Ownership to Canal Electric Company - January, 1981 (Millions of Dollars) 1980 1981 1982 1983 1984 1985 External Financing Common Stock -$ -
$ - $ - $ 10.0 $ - $ -
[ Long-tern Debt - - - 20.0 - Notes Payable, net 20.2 (20.0) 5.8 (25.0) 10.0 5.0 2
' Total External Funds 20.2 (20.0) 5.8 5.0 10.0 5.0 Internally Generated Cash
-Net Income 9.5 8.2 7.4 8.3 9.1 9.6 Less:
Common Dividends 9.5 8.2 7.4 8.3 9.1 9.6 Retained Earnings - - - - - - Deferred Taxes 2.0 1.2 1.1 1.2 1.3 1.4 Investment Tax Credit, net 1.6 .9 1.0 1.5 1.3 1.5 Depreciation and Amortization 7.8 7.5 8.1 8.6 9.3 9.8 Change in Working Capital .1 (.3) (.5) .6 ~(1.0) .5 Receipt from Canal Electric for Sale of , Joint Owned facilities - 29.8 - - - - Less: AFUDC (1.1) (.3) (.1) (.1) (.1) (.3) ; Total Internal Funds 10.4 38.8 9.6 11.8 10.8 12.9 Total Funds - ..1QJ JJ _ lid 16 R JM W Construction Expenditures Nuclear Power Plants 8.4 - - - - - Other 21.0 17.7 14.3 15.7 19.3 16.4
- Total Construction Expenditures y _.1.L2 __,.lM E _1M _._L(t d J
Subject Nuclear Plant (Included Above) J - - - - Other Capital Requirements Acquisition of Bonds for Sinking Funds 1.2 1.1 1.1 1.1 1.5 _ _,l . 5 ! Total Capital Requirements W $, ,DJ $JJ W . gJM $,1 Q Capital Structure Long-tern Debt $ 57.9. 47% $ 56.8 46% $ 55.7 46% $ 74.6 50% $ 73.1 49% $ 71.6 48% Common Equity 66.1 53 66.1 54 66.1 54 76.1 53 76.1 51 76.1 52
- . Total $124 0 100% [1_2229 1QQ1 jlli m&_ 100% [15Q 7 10Q% 1]49.2 100% g,1{7.7 100%
t , , - - rc ,---, - , , - - - - - - - -e , e- -
NEW BEDFORD GAS AND EDISON LIGHT COMPANY Sources of Funds Assumptions (a) Return on Average Common Equity - 13% for 1980-1982,13 1/2% for 1983-1985 (b) Preferred Stock Dividend Rate - Not Applicable (c) Long-Term Interest Rate - 11% Short-Term Interest Rate - 13% (d) Common Stock Sold at Book Value (e) Common Stock Dividend Payout Ratio - 100% (f) 50/50 Long-Term Debt, Common Stock (g) Coverage Indenture Basis SEC Basis 1980 5.70 2.88 1981 5.15 4.02 1982 4.41 3.48 1983 5.04 3.'46 1984 5.70 3.36 1985 4.91 3.34 (h) Annual Growt h Rate in KWH Sales - 4% Annual Increase in Price per KWH - 7%
, . _ - . . _ . . . . . . - . - . . ~ - . - . - . . . _ - . _ . _ - . . _ - - . ~ . ..- _ -. . . . . . . ~ . - . - , _ ..~
i CAhAL ELECTRIC COMPAhT Pro-forma Sources of Funds for System Wide Construction Expenditures j and Capital Structure During Feriod of Construction of Subject Nuclear Power
! Plant-Assuming Transfer of New Bedferd Ownership to Canal Electric Company - January,1981 1980 1981 1982 1983 1984 1985 -1 External Financing
. Common Stock- $ - $ 15.0 $ - $ - $ -- $ -
Long-ters Debt - 20.0 - - 15.0 - 2 Notes Payable, net - 5.0 15.0 - (19.0) (2.3) { Total External Funds ~ - 40.0 15.0 - (4.0) (2.3) Internally Generated Cash Net income 5.3 8.9 11.5 10.1 14.1 17.0 Less: Common Dividends 5.3 6_ 2 8.1 7.1 9.9 11.9 Retained Earnings - 2.7 3.4 3.0 4.2 5.1 Deferred Taxes 1.0 1.6 2.3 4.0 3.2 4.8 Investment Tax credit, net .3 4.1 2.3 .9 .4 .1 Depreciation and Amortization 4.6 4.6 4.6 6.4 6.9 8.6 t Change in Working Capital (3.1) 7.9 (.4) .4 .1 (12.1)
;Less:
AFUDC (.5) (2.8) (4.6) (3.2) (3.0) (1.5) . Total Internal Funds 2.3 18.1 7.6 11.5 11.8 5.0 Total Funds ... A 3 JBA J_Q A __Z,1 -JJ i Construction Expenditures , Nuclear Power Plants - 57.9 24.0 12.9 9.1 1.7 > Other 1.7 .4 .4 .5- .5 - 1 Total Construction Expenditure.a dl . . iBJ ,,.J4 4 11.4 _21 J Subject Nuclear Plant (Included Above) JM 21.8 _lQJ _LD_ _,.}
- Other Capital Requirements t 4
. Acquisition of Bonds for Sinking Funds .6 .8 .8 .8 .8 1.0 ,
f . Total Capital Requirements $W UM $J2 g $JM $, J,1 W j Capital Structure Long-term Debt "
$ 49.1 48% $ 69.1. 49% $ 68.3 48% $ 67.5 46% $ 81.7 50% $ 80.7 48%
Common Equity 53.7 52 71.4 51 74.8 52 77.8 54 82.0 50 87.1 52
- - Total $102.8 100% 1140.5 100% 1143.1 100% 1111.1 100% 1163.7 _109% $161.8 109%
I i
CANnL ELECTRIC COMPANY Sources of Punds Assumptions (a Return on Average Common Equity - 13 1/2% (b) Preferred Stock Dividend Rate - Not Applicable (c) Long-Term Interest Rate - 11% Short-Term Interest Rate - 13% (d) Common Stock Sold at Book Value (e) Common Stock Dividend Payout Ratio - 70% (f) 50/50 Long-Term Debt, Common Stocks (g) Interest Coverage Indenture Basis SEC Basis 1980 3.93 3.52 1981 6.12 2.34 1982 3.72 2.33 1983 4.18 2.10 1984 3.20 2.92 1985 3.40 3.14 (h) Annual Growth Rate in KWH Sales - 5% Annual Increase in Price per KWH - 10%
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 04-1659070 (State or other jurisdiction of (I.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 l (Titic 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 l for the past 90 days. i Yes X No l l Shares of common stock outstanding at December 31, 1979 868,972
f NEW BEDFORD GAS AND EDISON LIGHT COMPANY i r FORM 10-K ~ DECEMBER-31, 1979 PART I. 1 Item 1. Business General j 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 j distribution and sale of natural gas in 11 of these communities. i 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 retail 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 Cas and Electric Association 1 (" Association"). i 1 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 4 with affiliates and is exclusive of interest expense and income taxes. , Identifiable assets include the Company's 2 1/2% investment in a nuclear i electric power company (see Note 1). I
NEW BEDF6RD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 1. 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 $143 511 $130 014 $119 515 Operating Income Before Income Taxes: Electric $ 13 419 Gas d 14 399 $ 15 591 $ 15 630 $ 14 050 1 046 461 670 1 077 975 Total Operating Income $ 14 465 $ 14 860 $ 16 261 S 16 707 S 15 02.5 Identifiable Assets: Electric $177 846 Gas
$168 383 $168 622 $162 084 $163 013 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 $20_4_804 $m_53(i $JS2 751 $187 078 $187 120 The increases 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.
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 from neighboring non-affiliated 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,
NEW BEDFORD CAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 1. Business (Continued)
- Gas Supply (Continued) l 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.
I Supplemer.tal sources of gas supply currently consist of substitute natural i 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 electric and gas rates. Information regarding l the amounts requested and granted are contained in Note 9 of Notes to Financial Statements. Prior to the amount granted in 1980, the most recent increase in l' 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 un't sales. To the extent that recoveries under the clause do not match actual costs, an appropriate adjustment is reflected in the next ensuing period's computation. i The Company 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. 1 Effective December 1, 1978, the Company made available Optional Time-of-Use rates to their residential, commercial and industrial customers. .This is one 2 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 l the demand for electricity is high and less when it is low. Peak load pricing i
is intended to make the demands on existing generating equipment more uniform-and to reduce or defer the need to construct new generating facilitias 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, l State and local environmental quality control regulations. Compliance with- [ I s
NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 _1 tem 1. Business (Continued) Environmental 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 regul.ations 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 units. Existing collective bargaining agreements expire November 1,1981. Employee relations have generally been satisfactory. i l i l l l
NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 i l 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 operations 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 cuttomers the 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 ot downward changes in fuel prices *.o 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. i
NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 ftem 2. Summary of Operations (Continued) Electric Revenue, Fuel and Purchased Power Expense 1 2 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 af fected 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 most significant operating cost, representing more than half of cach 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 100J _100.0 10020 100 0 100J 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. On a percentage basis, changes in the level of unit sales and the related revenues are as follows: Percent Increase (Decrease) Over Prior Year 1979 1978 1977 1976 1975 Unit Sales 5.2 12.8 3.1 6.2 Total revenue 2.1 Base rate component of revenue 15.8 (.5) 11.0 7.8 5.9 3.9 .9 4.5 9.7
. 20.3 Increases in unit sales during the periods are primarily the result of 4 additional customers. However, in 1978 the company sold 209 million KWH at wholesale to two electric companies under short-term contracts.
During 1979 purchased power costs were significantly impacted by rising fuel oil prices. Increased generation by the Company, which was similarly affected by rising fuel prices, contributed to the increased energy costs. The decrease in revenue in 1978 is a result of the redtetion in purchased' 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. i we ' F #
NEW BEDFORD GAS AND EDISON LIGIIT COMPANY FORM 10-K DECEMBER 31, 1979 Item 2. Summary of Operations (Continued) Electric Revenue, Fuel and Purchased Power Expense (Continued) The following table illustrates these unit costs: 1979 1978 1977 1976 1975 Per KWH Purchased Power $.030 $.024 $.028 $.025 $.025 Fuel 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 rate as the cost of fuel used in 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 curtai?ments of natural gas had required that the Company arrange for increasing volurks 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. The increase in gas revenues during 1979 is attributable to the increase in cet. of gas sold. However, cost of gas has been reduced, during the past two ye,rs, by gas refunds from pipeline suppliers which have been passed along to ficz g
,as customers. Such refunds reduced the average cost of gas by $.36 and $.28 per MCF during 1979 and 1978, respectively. 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 gas 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 Base rate component of revenue 62.8 61.9 37.1 39.6 _35.6 37.2 38.1 Total Gas Revenue _100.0 100.0 100.0 100.0 100.0 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 customers, unit sales decreased by 4.3% due, to warmer than normal weather.
t NEW BEDFORD GAS AND EDISON LIGHT COMPANY ] FORM 10-N DECEMBER 31, 1979 Item 2. Summary of Operations (Continued) 4 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 on 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 i
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 JQ16 ats . 7.9 _618 Intl i 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 i 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. Othe- interest charges have increased during 1979 as a result of interest accrued on conteste4 Federal income tax deficiencies and during 1979 and 1978 becauce 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, I
l 7 i l " l 1.
NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 2. Summary of Operations (Continued) Net Income The changes in net income result from changes in revenues and 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 222 302 217 380 210 246 204 622 202 376 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 Total 47 450 46 525 46 622 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. l
.w l
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 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. Item 4. Parents and Subsidiaries 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. Item 5. Legal Proceedings None Item 6. Increases or Decreases in 0.g .anding 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 None Item 9. Number of Equity Security Holders (1) Title of Class j Common Stock, $25 Par Value l (2) Number of Record Holders at December 31, 1979 Two l Item 10. Results of Votes of Security Holders Not applicable
NEW BEDFORD GAS AND EDISON LIGilT COMPANY FORM 10-K DECEMBER 31, 1979 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 Campany. 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 England 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. l l I l i l
INDEX NEW BEDFORD GAS AND EDISON LIGHT COMPANY INDEX TO FINANCIAL STATEMENTS AND SCHEDULES FINANCIAL STATEMENTS Report of Independent Public Accountants 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 not applicable or not required or because the required information is included in the financial statements or notes thereto. L 1
4 l
. I REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To New Bedford Gas and Edison Light Company:
We have examined the balance sheets of NEW BMDFORD 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 the related statements of income, unappropriated retained earnings and sources of funds used for construction for the years then ended, and the supporting 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 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 in conformity with generally accepted accounting principles applied on a consistent basis. ARTHUR ANDERSEN & CO. Boston, Massachusetts, February 11, 1980. 1 1
i l I
l
4 BALANCE SHEETS . NEW BEDFORD GAS AND EDISON LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1979 AND 1978 ASSETS 1979 1978 (Dollars in Thousands) PROPERTY, PLANT AND EQUIPMENT, at original cost (Note 7): Electric
$185 831 $178 261 Gas 24 625 22 940 210 456 201 201 Less - Accumulated depreciation (Note 7) 59 06_7 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 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 Inventories, at 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 85 29 955 29 331 DEFERRED CHARGES AND OTHER ASSETS 1 114 1 036
$229 396 $217 6&&
The accompanying notes are an integral part of these financial statements.
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) a 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 Customers deposits and other 2 975 2 288 29 011 38 892 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 The accompanying notes are an integral part of these financial statements.
STATEMENTS OF INCOME NEW BEDFORD GAS AND EDISON LIGHT COMPANY STATEMEN','S OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978 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 CIIARGES: Long-term debt 4 699 4 779 Other interest charges 1 470 725 l Allowance for borrowed funds used during construction l (1 329) (667) l 4 840 4 837 NET INCOME
$ 6 578 (_6_L_Q The accompanying notes are an integral part of these financial statements.
u
l l STATEMENTS OF UNAPPROPRIATED RETAINED EARNINGS NEW BEDFORD GAS AND EDISON LIGHT COMPANY STATEMENTS OF UNAPPROPRIATED RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978 l l 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 d 1 - ) The accompanying notes are an integral part of these financial statements.
STATEMENTS OF. SOURCES OF FUNDS USED FOR. CONSTRUCTION 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
~'
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 d'.vidends 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 Accrued income taxes (13 592) 181 Other 2 551 130 (10 505) 9 461 Net available from internal sources (639) 17 875 External Sources Notes payable to banks, net 14 950 Notes payable to Parent, net (2 360) 2 420 520 Sale of long-term debt 500 - Net available from external sources 17 870 (1 840)
$ 17 231 $ 16 035 FUNDS USED FOR CONSTRUCTION -
Electric Gas $ 15 115 $ 15 164 1 E20 1 439 17 725 16 603 Less - Allowance for other funds used during construction 504 568
$ 17 231 s 16 035 The accompanying notes are an integral part of these financial statements.
~
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 Association 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. Transac. ions 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 of 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 in 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 month. The Company is permitted to bill customers for the total costs of purchased power, fuel used in electric production, and gas. The amount-of such costs incurred but not yet reflected in customers' bills also is recorded in unbilled revenues at the end of each month.
NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) (1) Accounting Policies (Contlaued) Depreciation Depreciation is provided using the straight-line method at rates intended to amortize 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. I (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 of its 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.
NEW BEDFORD CAS 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 $ 225 $ 927 Deferred
$ 5 $ 676 $251 2 114 1 839 275 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 1188 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 1978 Statutory Federal income tax rate 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 Impact of change in Federal income tax rate on (2) (2) timing difference reversals Other, net (2) - (2) (1) 11% kl%
NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) (3) Interim Financing and Long-Term Debt Notes Payable to Parent The Company had short-term notes payable to the parent Association totaling $7,370,000 at December 31, 1979. These notes are written for a term of eleven months and twenty-nine days. Interest is at the prime 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 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 which are due within one year. Information regarding short-term bank borrowings for 1979 and 1978 , is as follows: { 1979 1978 (Dollars in Thousands) Notes Outstanding - Amount at year-end $14 950 $ Monthly average amount 3 896 347 Maximum amount during the year 14 950 2 360 Weighted Average Interest Rate - l Year-end 16.5% - Monthly 15.5% 7.9% While informal lines of credit exist with several banks, only one such line, totaling $15,000,000 was utilized by the Company as of December 31, 1979. The terms of the line require compensating balances i 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 rate for these borrowings is at 108% of the prime rate. Funds used to satisfy compensating balance requirements are also used as operating funds by the Company and there are no legal restrictions on withdrawal of these funds. Cash on deposit by the Company at banks j where system companies had outstanding borrowings totaled $1,920,000 at December 31, 1979, substantially all of which was intended to meet compensating balance requirements.
NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) (3) Interim Financing and Long-Term Debt (Continued) Long-Term Debt Long-term debt outstanding, exclusive of current sinking fund requirements and related premiums, 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 Series G, 10 5/8%, 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 by 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.
3 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 Requi'rements (Dollars in Thousands) 1980 $ 902 1981 1 187 1982 1 199-1983 1 202 1984 1 152 1 -- - - - -
-4 . - - - . .
NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) (4) Dividend Restriction 1 At December 31, 1979, approximately $489,000 of unappropriated retained earnings was restricted against payment of cash dividends by terms of the Indenture of Trust securing long-term 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 pension 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. i 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 l (Dollars in Thousands) Canal Unit No. 1 - Canal l Electric Company 572,000 (Note A) 1996 $20,126 $1,405 Canal Unit No. 2 - Canal l Electric Company 584,000 (Note A) 2004 54,204 6,758 Pilgrim Unit No. 1 Boston Edison Company 672,000 11% 2000 9,189 3,498 Yankee Atomic - Yankee Atomic Electric Company 176,000 2.5% -1991 662 145
l 1 . NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED), (6) Commitments (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 Service Contract The Company has contracted with Hopkinton LNG Corp. (fifty percent owned by the Parent) for liquefaction and vaporization services over a i 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 of 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 its 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 relate' to commitments by the Company for jointly-owned projects. The Company nas additional commitments of approximately $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.
1 wi'
NEW BEDFORD. GAS 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 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 1980'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 Service Company of New Hampshire 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 form satisfactory to the Company. These units have experienced delays in both the planning and building phases of construction which has resulted 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 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 Hampshire (PSNH), that company's ability to , finance its present ownership interest in the project is uncertain and it is attempting to sell a portion of its interest to other utilities. They also indicated that regulatory delaya and p*,blems of financing construction could require a slowdown in the construction schedule which may further increase the cost of the project. L
A NEW BEDFORD GAS AND EDISON LIGHT COMPANY _ NOTES TO FINANCIAL STATEMENTS (CONTINUE]Q (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. PSNH indicated that high interest rates led to this decision and that the reduced construction schedule would be in effect for several months. P3NH indicated that this action is not expected to change the projected 1983 completion date of Unit No. 1. Each of the participating utility companies finances its own share of the jointly-owned generating units. When these units become operational, the lead participaat acts as the operator 'and bills the participants for their proportionate share of the expenses of the unit. (7) Property and Reserves The major sub-classifications of property, plant arid equipment at December 31, 1979 and 1978 were as follows: Electric Gas I 1979 1978 ~~)979 1978 (Dollars in Thou!4nds) Land and rights of way $ 6 523 $ 6 468 $ 358 $ 336 l 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 - -
)
i Total 1207 513 $193 188 $24_721 $23 052 I a
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 tre 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 24Q
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 (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 1.nprovements 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 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.
NEW BEDFORD CAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) (8) Segment Inf3 rgation (Continued) Operating income of the industry segments includes income from transactions with affiliates and is exclusive of interest expense and income taxes. Iocntifiable 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 - Total Revenues $162_111 $141 684 Operating Income Before Income Taxes: Electric $ 13 419 $ 14 399 Gas 1 S46 461 Total Operating Income $ 14 ffgt $ 14 86Q Identifiable Assets: Electric
$177 846 $168 383 Gas 26 447 24 641 204 293 193 024 Plant capacity under power pur Sase contract 24 592 24 152 Investment in nuclear electri sower company 517 512 Total Assets $229 396 p217_6BB Depreciation Expense Electric Gas
$ 6 829 $ 6 429 648 623 Total Depreciation $ 7 411 S 7 052 Additional segment information relating to property and property additions is '/.own elsewhere in the financial statements.
(9) Pate Increar. Duro g 4979, the Company initiated a rate proceeding before the Massadioset t s Department of Public Utilities (DPU) requesting an annual increase i.' electric revenues of $11,218,000 and $3,434,000 in gas revenues. In January, 1980, the DPU authorized increases in retail electric rates of $5,641,000 and gas rates-of $2,488,000 effective February 8,1980.
NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATENENTS (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 as 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 .l capacities of other companies. For these reasons, this 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 estimation 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 I elements of the Company's productive capacity. Neither does this- l information purport to represent the current value or reproduction costs of the assets or the amounts which could be realized if the assets were sold. t-
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) Replacement 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: 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 Gas 23 939 22 272 79 489 71 745 Other 8 068 8 002 8 068 8 002 210 456 201 201 471 279 420 680 Less - Accumulated depreciation 59 067 53 583 131 368 110 939 Plant in service, net 1151_381 $147 618 1139 902 $309 741 Depreciation expense $ 7 477 A 7 052 $ 16 424 $ 15 042 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 current environmental requirements. Replacement cost estimates were developed by 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 to historical cost data. The relatci accumulated depreciation based on the computed replacement cost was developed by applying the percentage , relationship that existed between gross plant and accumulated depreciation l 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 i expense for the replacement cost of productive capacity was developed by l applying the actual functional class depreciation rates in use to the respective functional class average replacement cost figures. J
1 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 stated 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 recoverable 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 required. 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 1 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 c ' 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. For this reason fuel I inventories are effectively monetary assets. Since 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. '
NEW BEDFORD GAS AND EDISON LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS (CONTINUED) (10) Supplementary Information on Replacement Cost and Effects of Cha,nging Prices (Unaudited) (Continued) 1 Statement of Income From Continuing Operations Adjusted for Changing Prices For the Year Ended December 31, 1979 Conventional Constant Dollar Historical 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 continuing operations would have been $(14 498).
t
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) Five-Year Summary of Selected Financial Data Adjusted for Effects of Changing Prices (Stated in Average 1979 Dollars) Year Ended December 31, 1979 1978 1977 1976 1975 (Dollars in Thousands Except 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 Andex 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.
NEW BEDFORD CAS AND EDISON LIGIIT COMPANY FORM 10-K 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 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, Neu 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 II. Cook None Retired Executive 71 Director, Cape Cod Planning and Economic Development Commission
NEW BEDFORD GAS AND ELIS0N 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 Board, 89 Martha's Vineyard National Bank A. Malcolm Hager 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 Electric Light Company **, Canal Electric Company **, and Commonwealth l Gas Company **. l l
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 Offlecrs). (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 Committec ** Affiliated companies. include: NEGEA Service Corporation, Cambridge Electric Light Company, Canal Electric Company and Commonwealth Gas Company.
Age at December 31, Name of Of ficer (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 President 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 l since 1978 t l Ronald F. Mcdonald (8) Vice President - Customer Service 49 since 1978 l
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 Of ficer (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 John J. Tasillo (12) Vice President - Rates since 37 February 1979 i 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 Manager, 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 Corporation since October 1974. (11) Assistant Vice President and Assistant General Manager since April 1975 and Manager of Employee and Public Relations since 1972 - New Bedford Gas and Edison Light Company. (12) Rate Manager, NEGEA Service Corporation since 1973. (13) Audit Manager, NEGEA Service Corporation since 1975. (14) Mr. Sullivan was employed by NEGEA Service Corporation after graduating from law school in 1975.
NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K DECEMBER 31, 1979 Item 14. Directors and Executive Officers (Continued) There is no family relationship between any director or executive officer 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. j 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 Cont ri bu t ions ** 4 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 the Company. Additionally, no remuneration was paid by the Company to Mr. Donovan, during 1979. His compensation, which exceeded $50,000, was paid by Cambridge Electric Light Company, an affiliated company, of which he was an officer and employee.
Approximately 52% of Mr. Donovan's salary 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. MacDonald, Smith and Velte is charged 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 Heduction 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 1979, the Association and/or its 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 Plac. Tite 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 $ 6 044 $ 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 I 4 e
.. ~
NEW BEDFORD GAS AND EDISON LIGHT COMPANY FORM 10-K 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) l By: (Sd.) John A. Whalen Comptroller Date: March 28, 1980 I i
3 i NEW BEDFORD GAS AND EDISON LIGHT COMPANY Investments in, Equity in Earnings of, and Dividends Received from Affaliates and Other Persons For the Years Ended December & 1979 and 1978 (Dollars in Thousands) Balance at Equity Balance Equity Balance Name of Issuer and December 31, 1977 Dividends December 31, 1978 Description rf Investment in in Dividends December 31, 1979 Share Amount Earnings Received Amount Earnings Received Amount Common Stoqk Yankee #tomic Electric Company 3 835 $509 $64 $61 $512 $52 $53 5511 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 stock may be sold or transferred except to another stockholder and, as such, no market exists for these securities. to O R o
=
r SCHEDULE XII NEW BEDFORD GAS AND EDISON LIGHT COMPANY Rese rves For the Years Ended December 31, 1979 and 1978 1979 1978 (Dollars in Thousands) Doubtful Accounts i 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 $ 471 $ 736 l l l I
NEW BEDFORD GAS AND EDISON LIGHT COMPANY Determination of " Net Earnings" as Prescribeit in Article II Section 3 Twelve Months Ended December 31, 1979 (Dollars Expressed in Thousands) Gross Earnings Operating Revenues $162 777 Other Income 1 825 Aggregate Gross Earnings 164 602 Deduct Operating Expenses $29 006 Maintenance 7 165 Gas and Electricity Purchased 95 681 Provision for Depreciation (See Note) 5 851 Provision for Taxes Cther Than Federal Income Taxes 9 483 147 186 Net Earnings $ 17 416 Interest on Long-Term Debt S 4 700 Times Long-Term Debt Interest Earned 3.71 Note: Provision for Depreciation has been computed as follows: Depreciable Plant and Property Electric Gas Other Total December 31, 1979 $173 484 $22 994 $ 2 193 $198 671 December 31, 1978 166 103 21 666 2 100 189 869 Total $339 587 $44 660 $ 4 293 $388 540 Average for Period $169 794 $22 330 $ 2 146 $194 270 Rate 3.10% 2.15% 5.00% Provision for Depreciation $ 5 264 $ 480 $ 107 $ 5 851 Assuming an interest rate of 13% the Company could issue an additional $30,830,000 of long-term debt under the net earnings test as defined in the indenture. Under the current capitalization test, the Company could issue an additional $6,031,000 of long-term debt and still meet the required debt / capitalization ratio (50/50). Additional long-term debt can be issued in conjunction with issues of common stock as long as this capitalization test is met. i l
NEW BEDFORD GAS AND EDISON LIGHT COMPANY The Company has banking relationships 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 which are due within one year. In connection with these short-term financing arrangements, the Company has an understanding with the banks from which it borrows that it will maintain average cash balances, determined from the banks' records, equal to a percentage of borrowings outstanding. The terms of the line of credit outstanding at December 31, 1979 requires a compensating balance 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. There are no legal restrictions on withdrawal of these funds. Public utilities, the issuance of whose securities are not regulated by state regulatory commissions, are deemed to fall under Section 204 (f) of the Federal Power Act. Under this Section, issuance of securities by a Utility, in excess of 5% of the par value of the other outstanding securities, requires approval by the Federal Energy Regulatory Commission. Short-term notes payable of the Company are not regulated by the Department of Public Utilities of the Commonwealth of Massachusetts and, as such, may fall under the provisions of this Act. The aggregate principal amount of long-term debt which may be issued by the Company and outstanding at any one time shall not exceed the amount at the time permitted by law, but otherwise is not limited except for those restrictions relating to interest coverage tests and capitalizable property addition provisions explained in item 4 and which are defined in Sections 1, 2 and 3 of Article II of the Company's Principal Indenture. The issuance of preferred stock or preference stock is not authorized under the Company's charter documents. The issuance of this type of stock is not prohibited but would be contingent upon amendment of the charter documents by the stockholders, receipt of necessary directors' approvals and approvals of agencies of the Commonwealth of Massachusetts having jurisdiction over these matters. Additional issuances of common stock of the Company is also contingent upon receipt of the authorizations described above. I l l
.~
. e c
W 1u)76 NEW BEDFORD GAS AND EDISON LIGHT COMPANY ATTACHMENT FOR ITDI NO. 2.g. RATE DEVELOPMENTS Electric Gas Granted Test year utilized Calendar 1978 Annual amount of revenue increase requested - test year basis (000's) $11 218 $3 434 Date petition filed July 17, 1979 Annual amount of revenue increase allowed - test year basis (000's) $ 5 641 .$2 488 Percent increase in revenues allowed 4.6% 11.3% Date of final order January 31, 1980 Effective date February 8, 1980 Rate base pending (000's) None Construction work in progress included in rate base (000's) None Rate of return on rate base authorized 10.31% Rate of return on common equity authorized 12.61% Revenue Effect (000's) Amount received in year granted (approximately) $ 5 484 $2 396 Amount received in subsequent year (approximately) $ 6 244 $2 846 Pending Requests (No cases are currently pending) Test year utilized Amount (000's) Percent increase Date petition filed Date by which decision must be issued Rate of return on rate base requested Rate of return on common equity requested Amount of rate base requested Amount of construction work in progress requested for inclusion in rate base
^* +; ,
4 Regulatory Environment - (Massachusetts Department of Public Utilities) Rate Base - Original Cost (Average test year) Construction Work in Progress - Not allowed in rate base Allowance for Funds Used During Construction - Normalized (Follows calcu-lation prescribed by FPC Order No. 561) Deferred Income Taxes - Deducted from rate base Investment Tax Credits - Pre 1971 Unamortized Investment Tax credits are treated as a deduction to rate base for rate-making purposes. No deduction is made for post 1971 credits. The annual amortization of both the pre and post 1971 Invescisnt Credits is a reduction of the total cost of service. Fuel and Purt. rased Power and Cost of Gas Sold - The Company has adopted a power cost charge clause which provides for the separate computation and billing to customers of costs of purchased power _and fuel used in electric generation. The clause requires the periodic 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 for a given period. To the extent that recoveries under the clause for such period do not match actual costs for the period, an appropriate adjustment is reflected in the next ensuing period's computations. The Company recovers on a current basis the total cost of all forms of gas used to supply customers through an overall cost of gas clause. 9 s l l
if 6
~ '
< 6[lc OIO111111011f11cil[l[J Of [Ilssitc[}1tscits
.\
t. x;, h.3q =
,' A .4 , ' DEPAllTMENT OF PUBLIC UTILITIES January .31,,1980
!...- .,(lj: ,
D.P.U. 20132 '- Investigation by the Department on its own motion as to the propriety of the rates and charges set forth in the following - schedules: Electric M.D.P.U. NO. TITLE 572 Territory Served . 573 Residential Rate 574 Residential Space Heating Rate 575 Off-Peak Water Heating Rate
-576 General Rate 577 Commercial Space Ileating Rate 578 General Power Rate (Closed) 579 Medium General Rate 580 Large Industrial Power Rate 581 Street Lighting Rate 582 Outdoor Lighting Rate 583 Breakdown or Auxiliary Service Rate 584 Idle Plant Standby Rate 585 -
All-Electric School Rate (Closed) 586 Power Cost Charge 587 Line Extensions 588 Optional Residential Time-of-Use Rate 589 Optional General Time-of-Use Rate 590 Optional Medium General Time-of-Use Rate 591 Optional Large General Time-of-Use Rate 502 Cancellation Supplement to Municipal Service Rate 521 Cancellation Supplement to Electric Rato Adjustment E D
. . ~ . ,
Gas M.D.P.U. NO. TITLE 592 Territory Served 593 , General Service Rate 594 Domestic Rate 595 Domestic Heating Rate 596 General Space Heating Rate 597 Air Conditioning Rate 598 Large General Rate 599 Apartment liouse Rate (Closed) 600 Public Hou3ing Rate (Closed) 601 Cost of Gas Adjustment 280 Cancellation Supplement to Municipal Service Rate 522 Cancellation Supplement to Gas Rate Adjustment filed with the Department on July 17, 1979 to become effective August 1, 1979 by New Bedford Gas and Edison Light Company. APPEARANCES: May Bilodeau, Dondis & Landergan Fral.klin M. Hundley, E3q. 294 Washington Street Boston, Massachusetts FOR: New Bedford Gas and Edison Light Company. Francis .'. Bellotti, Attorney General (By: James Meehan, Esq.) One Ashburton Place Boston, Massachusett,s FOR: The Department of the Attorney General
TABLE OF CONTENTS - I. INTRODUCTION....................................... 1-3 II. RATE BASE.......................................... 4~7 III. COST OF SERVICE....................................'8 A. Attrition Allowance.......................... 8-10 B. Wage Adjustment............................. 11-12 C. Employee Benefits Adjustment.... 6......... . 13-14 - D. Storm Damage................................ 15-16 Depreciation................................ 17-18 E. F. Property Taxes.............................. 19 G. Interest Expense............................ 20 H. Allowance for Funds Used During Construction...........................'..... 21-23 IV. RATE OF RETURN.................................... 24 A. Cost of Equity.............................. 24-39 B. Capital Structure........................... 40-45 C. Composite Rate of Return.................... 46 V. RATE DESIGN....................................... 47
^
A. Allocation of the Rate Increase......... ... 47 B. Outdoor Lighting Rate Schedule, M.D.P.U. No. 581............................ 47 C. Transfer of Gas Costs to Base Rates......... 50 . VI.
GENERAL COMMENT
S.................................. 51 VII. REVENUE DEFICIENCY CALCULATIONS................... 52-53 VIII. ORDER............................................. 54-55 O
.~, .- - ..... _ ..- .. .. - . ... . - . . - . . - - . .
u...v. . s.
.Page . One I. INTRODUCTION On July 17, 1979, New Bedford' Gas and Edison Light Company i (" Company" or "New Bedford") filed with the Department of Public Utilities (" Department") revised rates and charges designed to produce $14,652,000 of additional annual revenues, i The proposed increase represents an increase of $11,218,000 for the electric department and $3,434,000 for the gas 3
i department. The additional electric revenues appro<imate a 9.38 percent increase over current rates while the gas increase approximates 15.55 percent, resulting in a combined increase for the two departments of approximately 10.34 percent. The proposed rates were to become effective August 1, 1979 but I were suspended by the Department pursuant to G.L. c.25, S 18 and c. 164, S 94 until February 1, 1980,unless otherwise ordered , ) by the Department.
! On August 29, 1979 an evening hearing was. held by the i
! entire Commission in New Bedford, Massachusetts at which time i the public was afforded an opportunity to conment and be heard on the proposed increase. Thereafter, evidentiary f ' hearings were held in the Department's offices in Boston over a period of seven days. Francis X. Bellotti, Attorney j General of the Commonwealth (" Attorney General") was granted-1 l intervenor status. Also intervening in the case was the f Town of Falmouth which was primarily interested in the Company's street lighting conversion program and the proposed l .
- u...v. ~v--~ .
.Page Two Outdoor Lighting Rate.
The Company selected the 1978 calendar year as its test year for this proceeding. In support of its request ! for rate relief the Company filed the prepared written i testimony, schedules and exhibits of five witnesses: Mr. Jeremiah V. Donovan, Executive Vice President of the i j Company, testified on general operational matters including 4 l power supply, gas supply and facilities utili7ation; Mr. Earl G. Cheney, the Company's Chief Financial Offic:er, was the I Company's cost of capital and rate of return .iitness; Mr. Russell D. Wright, Col. troller of the Conrsny, was concerned I with cost of service and rate base; Mr. J. JL es Tassillo, Jr., Vice President - Rates of the Company, was ro ponsible for the rate area; and Mr. G. Robert Faust, an insependent 1 consultant, was made available for the depreciation practices l of the Company.1 / The Company is a subsidiary of the New 1Mgland Gas and Electric Association ("NEGEA") and serves approximately 246,700 electric customers in 41 cities and t'.wns and supplies gas to approximately 50,000 customers in 11 cities and towns.
-1/
The testimony of various witnesses in thic proceeding was " virtually identical to that which was given in a recent rate case involving another operating subridiary of' NEGEA. See, Cambridge Electric Light _ Canalny, D.P.U. 20104 (1979).
~ _
Alt'hodgh there may be similarities between these cases con-cerning our treatment and discussion of various issues, wc 4 have reviewed each witnanc' pracentation within the ! confines of this case. 1 i h
- . , ,_ ~. , - - -
s' p.P.U. 20132 Page Three The Company's last request for rate relief was filed on November 11, 1974. As a result of that filing, the Department granted the Company interim rate relief of
$3,980,000 for the sale of electric'ity and $251,000 for the sale of gas. D.P.U. 18193-A (1975). Additional relief in the amount of $4,360,000 for the sale of electricity and
$831,000 for the sale of gas was granted in ti.e final Order.
D.P.U. 18193 (1975). O e t
D.P.U. 20132 Page Four II. RATE BASE For the purposes of this proceeding, the Company presented a rate base which conforms to the Departnent's practice of using an average rate base for the test year. The Company, however, is proposing two adjustments to plant in service. During the test year, the Company retired certain liquid propane facilities and equipment in New Bedford and in January 1979 requested permission from the Department to amortize the undepreciated portion of thoac facilities over a three year period. The Department subs _quently granted the request. The adjustment climinated the facilities at the beginning and end of the test year. The Attorney General did not take incue with the rate base adjustment to reflect the retirement since the effect of the adjustment is to reduce test year rate base to a greater extent than would have resulted from the use of the rate base averaging convention, and in any event is of a minimal amount because of the corresponding reduction in the depreciation reserve. We find the adjustacnt to be proper. The Company, rather than using the composit.e method on this retirement, has taken the preferred apprccch that this re-tirement is unlike routine retirements in that it is a large and clearly identifiabic unit of property. Boston Edison Company, D.P.U. 19991 (1979); Fitchburg Cas and Electric Light Company v. Department of Public Utilities, 359 N.E. 2d S
s
- D.P.U. 20132 Page Five 1294 (1977). In connection with the amortization, the use of the Extraordinary Loss Account results in a better cash flow for the Company and provides for an earlier recovery of the loss. Furthermore, it helps to maintain the integrity of the Depreciation Reserve established as. a result of de-preciation studies.
We also find that the Company, in connection with this retirement, does not appear to have taken into consideration the tax adjustments which relate to the r. cognizable tax loss of $141,000. We therefore have incransed the Reserve for Deferred Taxes by the estimated taxes on the latter amount. The amount of the deferred tax on the retirement has been then reduced by one-third in order to reflect the taxes that the Company will be required to pay on the amorti-zation beginning with the first year. The cost of service is thus reduced by $22,328. . The second adjustment is the inclusion of the Company's investment in the Wyman Unit No. 4 which consists of an undivided interest of 1.4325 percent. The Wyman Unit No. 4 is a large oil fired generating station which became com-mercially operable during the. Company's test year. The Company included the' entire investment in the unit in the amount of $2,633,000 in rate base rather than one-half of such amount as would be the case if the averaging convention were followed.
D.P.U. 201J2
+ Page Six The Attorney General objects to a departurc.from the conventional treatment accorded plant additions during a test year. lie also argues that the total additions for that year were not unusual and consequently maintains that extra-ordinary recognition is not justified. The Company contends, however, that the addition is distinctive and that it is of sufficient magnitude to warrant the full inclusion of the investment in rate base.
Over a year has now elapsed since the unit began commercial operation. During this period the base rates have not included any additional amount to provide a return to the Company on its additional investment. Even though we might be in-clined to give this addition special consideration, we find the Company's adjustment to be incomplete. The addition of the generation from Wyman Unit No. 4 to the generation mix of the Company can be expected to resvit either in lower power costs if it is used in place of purchased power or, in the alternative, in additional revenues.2 / 2/ The Attorney General maintains that the Company's in-vestment is solely a function of increased demand and is therefore a direct consequence of increased sales. 9 0 5
". D.P.U. 20132 Page Seven Circumstances dictate that the Department should have been provided with the anticipated changes in power costs or revenues to demonstrate the effect of the operation of the unit on the test year results as if it had been in operation for the entire period. For this reason any consideration of an exception to the rate base treatment of this unit is :
not warranted. adjustment The rate base wil'1 therefore not hxdude the to reflect the Company's total investment in Wyman Unit . No. 4 but will be treated in the same way as all other additions. O e l-
III. COST OF SERVICE g, Attrition Allowance i The Company has included a $670,000 adjustment in its cost of service as an attrition allowance. Mr. Earl G. Cheney testified on behalf of the Company that since the last rate case, carnings have never attained the allowed return of 10.28 percent. For the years 1975 through 1978, the Company stated that it earned 8.60, 8.75, 8.17, and 7.67 percent, respectively. Mr. Cheney attributed the shortfall in earnings to inflation and the Department's adoption of an historical rate base and cost of service. The Company expected a similar gap to continue into the future, notwith-standing the rate relief requested in this proceeding. The allowance was determined by'taking .5 percent of the test year rate base. According to the Company's witness, the allowance propounded was a conservative estinate of the expected shortfall in light of the precceding four year experience. In its last rate case, D.P.U. 18193, the Company proposed a similar adjustment but the Department disallowed the attrition allowance on the ground that the evidence had not established the inevitable shortfall between the allowed rate of earnings and the return to bc realized in the future. On the record before us, we find that the Company has again failed to 4 satisfy its burden of proof on the issue of attrition'. Attrition has been defined as the " tendency of the rate of return to diminish in a period of comparatively high R i .
*D.P.U. 20132 f , Page Nino construction costs." New England Telepaone & Telegraph Company v. Department of Public Utilities, 331 Msos. 604, 622 (1954). In inflationary times, as old plant is retired and higher cost plant comes into service, the applicable rate base increases at a more rapid pace than the resultant earnings. There will, therefore, be a corresponding decrease i in the return received in relation to rate tasc. Since an increase in construction costs is the hallmar!. of attrition, a
the mere inability of a utility to earn its r: turn over a historical period does not inexo* bly demonst-rate the phenomena of attrition. The return which a .:.mpany earns depends upon numerous factors, some of which, such as j operating efficiency, are in the control of the utility. Massachusetts Electric Company v. Deoartment of Public Utilitics, 1978 Mass. Adv. Sh. 2143 (1978). Rather, evidence must be - presentcd which shows that an expansion of tha rate base caused by an occalation in construction costr will result in a difference between the allowed return ar.d the earned return. Cambridge Electric Light Company, D.9.U. 20104 (1979). In addressing the subject of attrition, the Company focused on the demonstrable failure to carn the allowed return since its last rate order. The company did not venture beyond such an exposition and, thus, did not attempt to identify specific factors underlying its inability to earn the return. More importantly, the Company presented no evidence on the issue-of increased construction costs. In Massachusetts 1
. D.P.U. 20132 Page Ten Electric Company v. Department of Public Utilitics, 1978 Mass. Adv. Sh. 2443 at 2462, the Sapreme Jud5cial Court ruled, in upholding the Department's disallouance of an attrition adjustment, that a utility which did not develop the reasons for its inability to carn an allowed return and .
link this failure to construction fell short of meeting its ' burden of establiching an entitlement to such an allowance. The Company has failed to meet that burden. Accordingly, the Company's attrition adjustment is disallered. . 4 e i ! i i I l
. D.P.U. 20132 Page Eleven B. Wage Adjustment The Company sought a cost of acrvice adjustment of
$3,174,000 to reflect the full effect of an increase in wages, under its currently effective union contract, for the year commencing on October 31, 1980. The, Attorney General contests the propriety of the adjustment on t.he ground that it extends nearly nine months beyond the Department's convention of adjusting for known and measur:ble expenses for the rate year. He further maintains that recognition of the adjustment would provide the Company t.ith excessive funds over a nine month period that would no- be needed for payroll costs.
In prior rulings on this issue, the Deprrtment has uniformly held that known wage changes which become effective within a reasonable time af ter the issuance c f a rate order and which are a continuing factor in the operations of the utility are proper subjects for cost of service adjustment. Boston Gas Company, D.P.U. 19470; Boston Edir,on Company, D.P.U. 19300; Boston Edison Company, D.P.U. 18515 (1976). In various circumstances, the Department has found a lapse of two, three, or four months reasonable and therefore, allowed the full annualized amount of wage increases. See, Boston Gas Company, D.P.U. 19470; Boston Edison Company, D.P.U. 19300; Boston Edison Company, D.P.U. 18515; Brockton Edison Company, D.P.U. 18340 (1976). The Department had some _ _ _ -M
-_= -.
D.P.U. 20132 Page Twelvo
- difficulty in a recent case of extending the period to somewhat less than six months in which to recognize a similar adjustment. Cambridge Electric Company, D.P.U.
20104 (1979)., The issue presented for our consideration ! in the instant case again concerns the timing of the increase. We agree with the Attorney General that the period between the effective date of this order and the implementation of the wage increase is unreasonable, and accordingly, the Company's proposed adjustment must be disallowed.
- Determination of what is a reasonable period cannot be made by reference to a specific formula, but such a judg-l ment can only be undertaken after consideration of the facts and circumstances of each case. In this proceeding, granting ,
the adjustment would permit New Bedford to immediately begin
~
collecting revenues for an expense which will not be incurred for some nine months. This creates a substantial imbalance between revenues needed to meet the current costs of operating the Company,and expenses. When there is only a lapse of several months, the impact of such an imbalance is offset to a great extent by the benefits derived from recognizing post test year expenses which will soon be incurred. See, noston Gas Company, D.P.U. 19470 (1978). However,'the extent of'the recovery which-would be allowed the company in this case because of the nino , months delay,makes the realization of such benefits tenuous.- We will, therefore, adjust the Company's cost of service by $1,977,000 for thc. allowed wage-increasc. i l 1
D.P.U. 20132 Page Thirtcon C. Employee Benefits Adiustment The Company is seching an adjustment to test year employee benefit expenses to reflect increases in pension, insurance and employee savings plan costs. The Attorney General opposes this adjustment on the grounds that it is based strictly on estimates which are not known and measrrable. We do not find the Attorney General's argument persuasive, although we do share his concern as to the reliance by the Cmpany on estinaten which were rendered nearly thirteen man':hs prior to the issuance of our decision on the Company's rate request. New Bedford, however, in response to the Attorney General's infor-mation requests, did provide a measure of substantiation for its original estimates. For example, the Blue Cross / Blue Shield projection was updated as of May 1, 1979, while the Company's actuary, William Mercer, Incorporated, furnished the Attorney General with background materials concorr.ing the pension estimates. Further, our decision herein concerning the Company's requested wage adjustment allows us to determine an appropriate figure for the employee savings plan. While these materials enable us to make a determination as to the reasonableness of the Company's original estimates, New Bedford has not distinguished itself in meeting its burden of proaf. !bre upSated data for the pari.od of the l l
* ' D.P.U. 20132
. Page Fourteen estimate should have been supplied, particularly in light of the length of time that had expired since the original estimate was formulated. Therefore, we (vill place New Bedford and all other utilities on notice that in future es.oceedings they will carry the burden of corroborating increased costs associated with employee benefits by a showing of actual experience.
e l.--.-... . . - . - - _ , . . _ . . . _ _ _ . _ _ _ _ _ _ _ _ . . . _ _ . . _ _ . ;
' D.P.U. 20132 Page Fiftecn D. Storm Damage, The Attorney General maintains that the Company's filed cost of service should be-adjusted downward in order 4
to reflect the effects of the February 1978 Blizzard. He contends that as a result of that storm, the Company incurred substantial expense and loss of revenues and, accordingly, a test year adjustment should be made. The Company responds by stating that because of its geographic location, it is continually subjected to a variety of types of storms and that the overall impact of the February 1978 storm upon the Company was not unusual. 3/ - In support of its claim, the Company directs the Department's attention to the fact that the storm apparently had no effect on revenues since its revenues for
'the year of the stcrm were higher than the previous year.
While the Company's assertion about the weather in its service area may be true, it is not in itself conclusive. Since New Bedford is a growth company, an increase in revenues may not be indicative of minimal storm losses since revenues might have been even higher if there had been no storm. The record i.s not sufficiently clear to allow the Depart-ment to fully ast:crtain what effect, if any, the Blizzard had on the 1978 test year operations. The Compan'y's answers to the Attorney General's information requests directed to this 4 3! See, BostonEdisonCompany,dhP.U. 19991 (1979). i
D.P.U. 20132 Page Sixteen issue did not focus on storm-related expenses. An analysis of either the total number of hours worked by maintenance crews during the week of the storm or the amount of overtime paid would have been more informative as to the effect of the Blizzard and would have provided a basis for any required adjustment. The answers as submitted and the resulting ! exhibits were not responsive from a cost point of view. Further, a strict revenue approach cannot be utilized for evaluation purposes due to the failure of both the Company - to respond in an appropriate manner and of the Attorney General to press for storm-related cost data. The Attorney 3 + General's five percent per share calculation based on 4 statements at thu stochbolders' meeting does not appear to i [ be an acceptable basis for an adjustment. Consequently, 7 the Department has no basis upon which to determine if an adjustment should be made or what amount should be utilized if such an adjustment were found proper. Therefore, no adjustmdnt will be made for storm damage. 4 I l L : i
t 8 J .1' . U . ZU1J4 Page Seventeen 1 E. Depreciation The Company presented an updated depreciation study which was referred'to by a witness other than the preparer-of the study. While we accept the study for the purposes of this proceeding, there is an underlying policy considera-tion that requires the Department's attention and concerns th.e situation where depreciation charges are recorded by a utility which is part-owner of a plant that is physically
- located at a distance from the company and is not subject to the control of that part-owner but is operated by a sponsor company. It appears that in such instances the depreciation charges of the tmit are based on the part-owner's experience
- in the operation of similar plants. We have reservations about whether this should be the criterion for establishing the depreciation of such part-ownership.
The depreciation rate established by the sponsor company for a particular unit which is partly owned by others should be used separate and distinct from a depreciation' study of the part-owner who does not have access and cannot form'the l appropriate judgments or follow the maintenance policies or conditions of operation of the sponsor company d at would be possibic if it were the sponsor or the operator of the unit. . Since the partial ownership life will equal the life of the J 4 1 h f
, ,- - , , - ~ v - n w -: --
. D.P.U.'20132 Page F,ighteen entire plant, the inclusion of an independant assessment of j plant life under partial ownership may distort the deprecia-tion study of the company. This matter should be resolved I as to all companies and if a di'fferent rate of depreciation.
is.used than that of the sponsor, evidence should be provided in justification of a different rate assigned to such 2 acquisition other than that of the major owner. i a A l + i I f I J f i 3 i i - 1 1 D b 5 * (7
1.- D.P.U. 20132 Page Nineteen-F. Property Taxes Due to the timing.of the hearings,: it was impossible to have a complete tabulation of all the tax bills before the close of the public hearings. As has been the custom 4/ in many rate proceedings before the Department 7 the record was kept open in. order to permit the Company to file up-to-date evidence of its . local property ta:. bills. The Company provided a revised exhibit with its brief'which has been accepted by the Department in accordance with the ruling on this matter made by the hearings officer. The revised schedule provides data for a downward adjustment of $1,716,000 under the cost of service heeding, " Taxes Other Than Income Taxes."
~~4/
See, Lowell Gas Company, D.P.U. 20105 (1979) and Cape Cod Gas Company, D.P.U. 20103 (1979). d
D.P.U. 20132 Page Twenty G. Interest Expense The Company has proposed a method of dealing with the interest expense deduction for tax purposes which attempts to arrive at a rational result for the interest deduction. While the record doet not clearly' describe the method { it can be summarized as #^11ows: The percentage of debt 1 in the capi tal structure is o; . ..ted to the Company's rate- ! base an.d cne resulting amount is considered to be that part i of the rate base that represents the debt capital. This i is then multiplied-by the composite interest rate and that is determined to be the amount of interest expenseE ! which is to be used for calculating the Federal and State Income taxes. t The record does not fully Provide the dita necessary for an alternative method if we were to disagraavith the i Company's proposal. We will therefore'use the Company's method at this tine but by so doing we do not consider the Department
; bound to itlioa this method in any futurc proceeding with 1 . a different record before us.
t } 1 --5/ The Company obtained the same result'by multiplying the-entire rate case by 3.76. . i r-
O.P.U. 20132 Page Twenty-onc II . Allowance for Funds Used During Construction The testimony clicited during cross-examination indicates that in 1976 or 1977 the Company changed its i ! accounting for funds used during construction ("AFUDC") from the Department's usual method to the Federal Energy 1 Regulatory Commission's method. The change was made with- ' out notifying the Department and securing permission.to
~
i implement the change. In the course of his cross-examination, the Attorney General reauested the information necessary to 4 provide a comparison of the two methods, which the Company agreed to furnish. The data, however, was not included in J the record but instsad was retained by the Attorney General. Therefore, even if the Department wanted to make an adjustment for rate case purposes, it lacked the information to do so. 1 We therefore will reserve our right to pursue this matter at
~
a later date and our resolution of this issue here should i , not be taken as determinative for the future. While the Company does not have a major amount of l, construction, a policy change of this nature should be approved by the Commission. In many cases of changes in methods or policies, the Department does not become aware of their implementation unless the matter comes to its attention in the course of.the hearing process. The Company also is proposing a change in its treatment of AFUDC for tax purposes. It has indicated that it has
D.P.U. 20132- . 1 Pa90' Twenty-two E i used normalization in place of flow-through accounting for the purponen of this proceeding. While in certain cases the Department'has permitted the normalization of the debt , portion of AFUDC, it has not permitted the normalization of t_he eg'uity portion. Boston Edison Company, D.P.U. 19991 (1979). The Department plans.to hold hearings on the. tax treatment of APUDC and it is anticipated that as a result of ! those hearings-the entire subject will be reviewed and a standard policy will be established. See, D.P.U. 15. The normalization of the debt portion of APUDC as used in some of the prior cases offsets the current ratepayer's tax benefit from the interest deduction on the Company's tax return. This results in an approximate result that the ratepayer that gets the benefit from the property constructed, also theoretically gets the benefit of the interest expense associated with the construction interest through the_ Reserve for Dcferred Taxes account. In this manner, as the ratepayers pay for the AFUDC costs through depreciation, the deferred-tax accounts provide the taxes for the AFUDC that gets f reported as income in each. year. The portion of the,AFUDC that is accumulated as a result of equity funds presents an entirely -different question. The APUDC represented by equity funds does not produce a tax benefit but does result in addit'ional income through 1
. D.P.U. 20132 Page Twenty-three depreciation. By not normalizing this portion of AFUDC, the ratepayers getting the benefit of the plant are required to pay taxes on that portion of the depreciation representing equity AFUDC over th'e life of the property.
Since a resolution of this matter will be the subject of another proceeding, we will only allow normalization of the debt portion of AFUDC at this time. 4
D.P.U. 20132 Page Twenty-four IV. RATE OF RETURN A. Cost of Equity The Company has requested an increase in its allowed return on common equity from 12.61 percent to between 13.86 percent and 14.50 percent. In support of its request, the Company presented the testimony of Mr. Earl G. Cheney, Financial Vice President. The Attorney General opposes any increase on several grounds. The Company's witness began his analysis by explaining that the Company has experienecd substantial growth in its electric operations which to some degree is advantageous to all customers as certain cos'ts are absorbed by a broader base. Such growth, however, creates a problem in that it results in a need for new facilities to meet the needs of existing customers and to serve new customers. The capital intensive nature of utilities thus makes it necessary to raise additional capital in a market which is plagued by high capital costs. lie pointed out that, in contrast,the gas department of the Company has had relatively constant sales over the last ten years with little customer growth and that any fluctuations in gas sales have been largely attributable to weather variations. The witness also noted that the gas operations were relatively small in the overall operation of the' Company.
'p.P.U. 20132 Page Twenty-five The witness pointed out that the awareness of security analysts and institutional investors of the growth in electric customers and sales by the Company and their recognition of the need for additional investment to cope with that growth make it very dif ficul t for the Company to attain its rate of return under inflation with both increased capital costs and rising costs of operation. This factor, coupled with what he refera3 to as regulatory lag, makes it virtually impossible for the Company to earn its allowed rate of return and, as a consequence , it is faced with higher interest costs for new issues of senior securities.
Mr. Cheney illustrated the increased capital costs incurred by the Company by reference to its last issuance of debt securities. The witness stated that the rate of 10 5/8 percent, which the Company negotiated in 1975, was the best he could negotiate under the financial condition of the Company at the time and that cost is presently being factored into the cu'rrent cost of capital.-f/ , The witaess contrasted the Company's investment in utility plant over the past ten years and projected its needs over the next five years to provide an indication of its financing 6/
~
D.P.U. 18522, dated November 26, 1975 approving the issue of $15,000,000, Series G Notes, with a maturity of 25 years at 10 5/8 percent.
, D . P .11 20132 l'a c.I t' Tm n t y -u i x requirements to meet the cost of construction expenditures which are anticipated to total $86.5 million over the next five years. This provides the basis farthe Company's need for a higher rate of return and improved coverages on its debt securities. He stated that he anticipated that a drop in coverages would result in lower ratings and a negative impact on the cost of capital. He concluded that on a pro forma basis,the rate increase and the adjusted cost of service as presented by one of the other witnesses would result in only a slight improvement in the coverages over the 1978 test year.
Mr. Cheney further explained that the Company's need to compete effectively for new debt and equity capital has in-creased because of the estimated construction expenditures over the next five years. However, the witness testified that the recent interest coverage of the test year of 2.44 times shon]d be at least 3 times in order to retain the current security ratings. He maintainalthat even if the full amount of the increase is allowed, pro forma calculations indicate a drop in interest coverage to 1.82 times which he anticipated would result in lower ratings for debt issues and therefore higher interest costs. , Testimony was also presented relative to the increased yields for the years 1969 to 1978 on utility bonds having
*D.P.U. 20132 . Page Twenty-seven ratings of AA and A by Moody's. A schedule offered into evidence through the witness revealed that the average yield on AA bonds for the period 1969 through 1973 was 7.84 percent and for the years 1974 through197bwas8.99 percent, an increase of 115 basis points. Further, the average yields on A rated bonds increased from 7.99 percent to 9.36 percent during the same periods. The witness stated that a comparison of the average yields demonstrates what has occurred regarding interest costs for the industry and provides a benchmark on which to base a proper return on common equity. On this latter point, Mr. Cheney testified that, assuming the relative risk between debt and equity capital remained the same as it was at the time of the Company's last rate case, the cost of equity capital must also have risen at least as much as the cost of debt. Later in his te s t.i mony , the witness indicated that reflection of an -
equivalent increase in the cost of equity capital would result in a return 125 basis points higher than that set in D.P.U. 18193 or a return of 13.86 percent. The witness characterized this rate as the minimum return which the Departmen t should contempla te. Continuing with his analysis,the witness testified that since the Company is unique in that it is a wholly owned subsidiary that is serving a growth-oriented area with both gas and electricity it has little opportunity to earn its e
. D.P.U. 20132 Page Twenty-eight allowed rate of return by using a historical rate base and cost of service. Since it needs new capital to meet its construction requirements, it should be placed in a position to compete for new capital on reasonable terms. His opinion was hased on a survey of the electric industry which revealed an average return on equity of 13.3 2 percent and a survey of the gas industry which showed an average return of 12.91 percent for the year 1978. Furthermore, bect use other industries have averaged an approximate return of 14 percent on equity over the last five years, together with the 'ncreased cost of senior capital, he concluded that the return on equity should be between 13.86 and 14.50 percent.
Since the company is a wholly-owned subtidiary of NEGEA, it wan the witness' opinion that it was impc sible to find truly comparable companies and that there was no m"rket value that could be ascribed to the Company's stock. After having deter-m.ined that the " comparable earnings" method should be rejected, the witnes.s proposed a new test for determining a return on equity. This test involved consideration 'of the allowed return on equity for all electric and gas companics set by this Depart-ment and other regulatory bodies. Mr. Chenc: explained'that at the point of having received a rate order with a given return, all companies would appear to be at a common starting place. lic related this factor to the awareness of potential investors and analysts about the return on equity allo <ted companies in their most recent rate proceedings. The witness presented a schedule which rhowed the
s- 4.uu n usuu results of electric, utility rate decisions for each of the four' calendar quarters in 1978. Taking each of the quarters separately, Mr. Cheney found a remarkable similarity-in the average of the allowed returns from quarter to quarter.. The witness' presentation can be summarized in the following . table: Quarter Year 1st 2nd 3rd 4th 1978 Number of Decisions 30 31 26 35 122 - Average Return on Equity 13.14% 13.05% 13.22% 13.07% 13.12% Thus,the witness found that for the calendar quarters of 1978, the average returns on equity allowed electric utilities throughout the United States were in a range of 13.00 percent to 13.25 percent. Furthermore, the analysis showed that nearly 70 percent of all electric utility rate decisions in 7/ 1978 resulted in returns on equity of 13 percent to 15 percent! According to Mr. Cheney, New Bedford must not only compete for new capital with other electric utilities but m,ust also enter the marketplace where a wide range of businesses, offering diverse investment alternatives, vie for the investor's dollar. To demonstrate the return alternatives available to investors, the witness presented two schedules which set forth the investment options. These schedules, 7
-f Comparable data for gas utilities prepared by the witness showed.that the average return on equity for 25 decicienc during 1975 wac apprcxi:aately 13 percent, with nearly 70 percent resulting in returns of 13 percent to 14.2 percent.
- D.P.U. 20132
. Page Thirty taken from Forbes and Fortune magazines, reveal that some industries, such as aerospace, defense, leisure, and information processing, are largely growth oriented and, therefore, are very attractive to equity investors. From the Forbes article, Mr. Cheney determined that the all-industry five-year average return was 13.9 percent. This return should, as viewed by the witness, approximate the Company's allowed return on equity to enable it to effectively compete for new capital at reasonable costs.
At the Company's currently allowed return of 12.61 percent, Mr. Cheney stated that this Company offered an investment prospect lower than the all-industry average and, accordingly, placed the Company at a competitive disadvantage in attracting equity capital. Based upon the alternative investment opportunities and the increased cost of senior capital, the witness recommended a return on equity of between 13.86 percent and 14.50 percent. In calculating the revenue deficiency, a 14 percent common equity return was utilized by the Company. The Attorney General contests the proposed increase on two grounds. First, he maintains that the Company's witness did not qualify as an expert for purposes of testifying as to the required rate of return. Accordingly, he insists that the Department discount the witness' testimony, in effect giving it little or no weight.
,Page Thirty-one Secondly, the Attorney General objects to the merits of the witness' presentation and contends in particular that the witness postulated no theory or analysis as to the relationship of market considerations and the cost of capital upon which the Department could rely in reaching a reasoned result.
Turning first to the Attorney General's challenge to the company's witness, we cannot accept the position urged upon us. At no time during the course of the hearings did the Attorney General object to either the witness testif ying as an expert'or to particular subjects discussed by the witness in which he ventured beyond his training, education, or experience. Having failed to register a timely objection, the Attorney General cannot now argue that the witness was unqualified. See, Sheinkopf v. Eskin, 350 N.E. 2d 469 (Ma s s . App. 1976). However, as is the case with any expert witness testifying before the Department, the expert's qualifications may affect the weight to be given to his testimony, 'and the Department must examine the basis for his conclusions and the assumptions underlying them. See, Boston Edison Company, D.P.U. 19300 (1978); Brockton Edison Company, D.P.U. 19258 (1978). We begin our discussion of the Company's return on equity by setting forth the standards enunciated in the
~
.D.P.U. 20132.
Page Thirty-two 87 97 Bluefield and Hope cases pertaining to the return allowed utilities. In the Bluefield case, the Supreme Court stated that the retam should be equal to that generally being 'made at the same time and in the same parm of the country on other business undertakings which are attended by corresponding risks and uncertainties. The return should be reaso'nably sufficient to assure confidence in the financial soundness of the utility, and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the discharge of its public duties. 262 U.S. at 692-3. The following statement of the Supreme Court can be found in the Hope case: From the investor or Company point of view, it is important that there be enough revenue not only for operating expenses but also for the capital costs of
- the business. These include service on the debt and dividends on the stock...By that standard the return to the equity owner should be commen-surate with returns on investments in other enterprises having corresponding risks.
320 U.S. at 603. As the Hope and Bluefield cases make clear, our function in fixing a return allowance is to allow a company to earn a return comparable to that earned by similar enterprises of corresponding risk and assure it access to the capital markets. See also, Massachusetts Electric Company, D.P.U. 19376 (1978). We have carefully reviewed the testimony of Mr. Cheney in light of these 8 _/ Bluefield Water Works and Improvement Co. v. P.S.C. of West Virginia, 262 U.S. 679 (1923). 9 _/ Federal Power Commission v. Hope Natural Gas Co., 320 U.S. 591 (1944). . 6 6
.Page Thirty,-three standards and find that it does not meaningfully assist us in focusing upon the equity requirement of the Company.
One of the central flaws pervading the witness' testimony was his complete disregard for the concept of relative risk, so important a part of the Hope and Bluefield formulations. Foregoing traditional approaches which seek to quantify the element of investment risk, Mr. Cheney chose instead to rely primarily upon a recitation of the investment alternatives available to the investing public. The inadequacies of the witness' presentation are substantial. . We would note at the outset that the witness' analysis concerning the rates of returns allowed other utilities in 1978 was in no way intended, and could not be viewed, as an attempt to establish the comparability of the group with this Company. In fact, the witness indicated _ that any attempt to perform a comparative carnings test would be futile in view of the uniqueness of this Corrpany. In order to negate the concept of relative risk, the witness begins with the premise that an analysis of comparable risk and investment attraction are distinct standards which can be employed as alternative means to consider the cost of equity capital. This presumption leads him to suggest that since this Company must compete for funds with .emm t. m Amum-m -' eaa. O em., e g wwa- e-... amusem-w < masa -
D.P.U. 20132 Page Thirty-four diverse investment options, such as utilities as well as other businesses, it can only do so effectively by offering a return which approximates the average return of these enterprises. The Company's ability to compete must be without regard recognized, in the witness', view, to the comp'arability of the risks associated with al-ternative investment ~ opportunities. Mr. Cheney's exclusive reliance upon investment attraction is, however, misplaced. There can be little doubt under the Hope and Bluefield cases that the ability of a utility to attract capital is an important factor in determining the cost of capital. However, it can not be totally divorced from the element of comparative risk. As the witness testified, a business which is viewed by the market to have a lesser degree of investment risk may not have to offer as great a yield as would a business that is. perceived to be speculative and uncertain. Since the market perception if risk is'what distinguishes the return requirement of one company from another, a business of lesser investment uncertainty may not attract those investors willing to accept a higher element of risk for the prospect of a higher return. From this fact one cannot, however, draw the conclusion that the less risky firm is thereby unable to compete for funds. The comparatively lower return offered may very well be attractive to investors l 1 l ,- - - - - ~ - . _ . . . ~ _ _,,__,__, , _ _
b.P.U. 20132
~
Page Thirty-five looking to invest in a company given a particular level of investment risk. Thus, the standards of comparable risk and capital attraction are interrelated since it is precisely with those enterprises of corresponding risk that a utility is in competition for funds. By focusing upon the entire market without reference to the diversity of business risks, the witness simply ignores the effect that an evaluation of corresponding risk has upon the context within which a particular company must compete for capital. Given the witness' assertion that comparative risk among companies affects their equity return requirements, we fail to perceive now we can reach a considered assessment of the Company's cost of equity in - the absence of an analysis directed to this issue. Nor can we accept the Company's claim that it is so unique among business ventures that a comparable earnings approach is impossible. The record contains no factual basis for this claim other than the conclusory statement of the witness that his review of a number of utilities listed in Moody's Utility Manual lead him to this conclusion. Furthermore, comparability is a question of degree and does not require a " mirror" image. As the Court stated in Massachusetts Electric Company v. Department of Public Utilities, 1978 Mass. Adv. Sh. 2443 at 2450: "The cost
. D.P.U. 20132 Page Thirty-six of equity of similar, although not identical, companies could be evaluated, and adjustments made for significant differences in characteristics."
Although Mr. Cheney relied primarily upon his listings of uti~ity and other industry returns, he also presented several other analyses to support his equity recommend-
'ation. The first involves his discussion of interest coverages. The thrust of his testimony on this subject was that the Company's interest coverage should be at a minimum of 3.0 times in order to maintain the current ratings of its senior securities. He goes on to state that even with the requested rate increase, the Company will not achieve the 3.0 times coverage due to anticipated construction over the next five years. The witness did not, however, present any evidst.iary support for his conclusion as to the Company's coverage needs but would have the Department rely upon his bald assertion to that effect. We have rejected such unsubstantiated assertions in the past and must do so in this case. See, Boston Edison Company, D.P.U. 19300 at 56.
Cambridge Electric Light Company, D.P.U. 20104 (1979). Furthermore, the witness established no relation between fixed charge coverage and rate of return on common equity. This part of the testimony, therefore, offers little foundation upon which we can determine a particular equity return.
; . D.P.U. ;20132 Page Thirty-seven 4
The witness also presented testimony concerning the j Company's cost of senior securities as it related to the i return on equity. As described earlier, Mr. Cheney stated that average bond yields have increased by 125 basis points since the Company's last rate proceeding and, therefore, 2: in his opinion, the cost of equity capital must also have risen by the same amount. , 4 j In support of his position, hmmvec, the witness offered no analysis showing a correlation between bond yields
- versus stock yields but again would have the Department rely ! solely upon his judgment. We have indicated, however, that
[ any attempt to draw a correlation between bond yields and i stock yields must be supported by an analysis founded upon
- historical data. See, Boston Gas Company, D.P.U. 19470 (1978).
Only by considering data derived over a reasonable time can a meaningful conclusion be drawn as to the premium which l i?tvestors require for assuming the greater risk involved in I an equity investment as opposed to an investment in bonds. <- Th'e Company's witness undertook no such evaluation, and accordingly, his assertion cannot be used as a basis for establishing a fair rate of return. Finally, the evidence relied upon by the Company's witness to demonstrate the increased cost of senior securities since D.P.U. 18193 shows exactly the opposite of what the I l e , t- . . e .
.. .mau.+.--.... .. ++..,e ..~....- - . '
.m. .. t ... .. ..*-..,....w...
Company socks to prove. In 1975, the average yield on AA rated bonds was 9.44 percent. During the years 1976, 19 ', / , and 1978, the yields on those bonds were 8.92 percent, 8.43 percent, and 9.10 percent, respectively. Likewise, with regard to A rated bonds, the yicid'of 10.09 percent in 1975 dropped to 9.29 percent in 1976, 8.61 percent in 1977, and 9.29 percent in 1978. While the average yield did rise during the five year period 1974 to 1978 when compared with the prior five years on both AA and A rated bonds, the Company simply cannot rely on its own evidence to support the proposition that the cost of senior securities has risen since its last rate case. This Commission is acutely aware of the capital requirements of all public utilities under our jurisdiction, and we are receptive to any well-reasoned and well-presented a testimony on the cost of equity. However, the companies clearly bear the burden of proof on this issue, and that burden has not been met in this case. While there is no formula and no single figure that can be advanced as determinative,. we find it hard to accept a witness' recommendation which is based upon general market trends, broad undocumented judgments regarding a company's needs, and an exposition of the returns other utilities are allowed, regardless of their comparability with a particular company. Closer attention to the dictates of Hope and Bluefield would have better served the Company's- purpose.
.gp,
= . geren. eta,* -9
- t * *
- 4* ess8**g, eDMeePa gr e.g4 dh> q . _ , _yg PfM Mg _
speg Oshag f' , t e..we-gumampu. . e emmer amem es. dams. s om> > e e.a m , aw e .. -b 4 en..., . e. am. 4.. %e, .we.e .. e e es me . o. we e
O.P.U. 20132 , Page Thirty-nine Accordingly, we find that the Company's return on 4 equity will be maintained at its current allowed level of 12.61 percent. e e
'D.P.U. 20132 Page Forty I B. Capital Structure
! In determining its composite rate of return, the ! Company utilized its actual capital structure as of i- ,. December 31, 1978 which consisted of 48 percent long-4 term indebtedness (indenture notes) and 52 percent common ! equity. The Attorney General contests the appropriateness i of employing this capitalization for ratemaking purposes on the grxrds that the equity component is artificially and excessively high. He maintains that the Department l should compensate for the excessiveness by. treating the
- return on retained earnings in accord with the principle approved in Neu England Telephone & Telegraph Company l v. Department of Public Utilities, 327 Mass.. 81-(1951); ..
i j Wannacomet Water Company v. Department of Public Utilities, I 346 Mass. 453 (1963); and Fall River Gas Company, ! 10/ j D.P.U. 18416 (1976).- . The basis of the Attorney General's argument is.that
- the Company has an equity ratio which deviates from the vast majority of other utilities throughout the United States.
I In support of this contention, the Attorney General directs-f 10/ In these cases, the Department accounted for the disproportionate equity component of the companies' capitalizations by basing-the return on retained l earnings upon the composite cost of capital. i i I t ~ t o l
,D.P.U. 20132 Page Forty-one the Department's attention to Moody's 1978 Utility Manual in which only 5 percent of the companies listed therein had equity ratios in excess of 50 percent of total capitalization.
As a consequence of New Bedford's high equity component, the Attorney General states that the effective return on rate base would be higher than that allowed other utilities. The Attorney General further maintains that the inequity
~
of utilizing the Company's capital structure is demonstrated by NEGEA's capitalization. As the consolidated balance sheet of NEGEA and its subsidiary companies reveals, the consolidated entity's capital structure consists of 37.67 percent common equity, 13.22 percent preferred stock, and 49.11 percent long-term debt. According to the Attorney General, the consolidated balance sheet illustrates that NEGEA furnishes the equity capital of the operating subsidiaries with low-cost capital, in the form of preferred stock, that ranges in cost from 4.8 percent.to 9.8 percent, and long-term indebtedness. The Attorney General s6ates that the NEGEA system thereby receives the benefit of double leveraging which tends to maximize the equity return to the parent company by the pyramiding of capital. There can be little doubt that in certain circumstances the Department may disregard the actual capital structure of
*D.P.U. 20132 . Page Forty-two a utility under our jurisdictfon and attribute to it a hypothetical capitalization for ratemaking purposes.
Ncw England Telephone & Telegraph Company v. Department of Public Utilities, 327 Mass. 81 (1954). Our authority proceeds from the recognition that " debt structure and the percentage of debt and equity capital enter vitally into the determination of the amount which the consuming public should pay." New England Telephone & Telegraph Company v. Department of Public Utilities, 331 Mass. 604, 618 (1954). Ilowever, our prerogative in this regard is not without limitation. Within a substantial range, the determination of a company's capital structure is a matter entrusted to management and will not be disturbed unless the capitalization adopted so unreasonably and substantially varies from prevailing utility practice as to impose an unfair burden on the ratepayers. New England Telephone & Telegraph Company v. Department of Public Utilities, 360 Mass. 443 (1971); Boston Gas Company v. Department of Public Utilities, 359 Mass. 292 (l971); Mystic Valley Gas Company v. Department of Public Utilities, 359 Mass. 420 (1971). .Our function is not, therefore, to proceed solely on the basis of what we judge to be the optimum capital structure for a specific company. Rather, ~.r task is to critically view management's decision regarding capitalization and assess whether that
/
4
. i
, D.P.U. 20132 Page Forty-three determination falls within a range of reasonableness in light of usual practice or Department precedent. New England Telephone & Telegraph Company v. Department of Public Utilities, 360 Mass. at 468.
Based upon the record in this proceeding, we find , that there was no evidence hhich indicated that New Bedford's actual capital structure was unreasonable. While the facts introduced by the Attorney General revealed that the Company's capitalization varied from other utilities, that showing alone does not demonstrate the inappropriatendss of the Company's conservative approach. The focal point on this issue is not whether there is a difference among companies, for certainly there will be, but whether, . in departing from prevailing practice, a particular utility has adopted an unreasonable capital structure to the detriment of its ratepayers. New Bedford has traditionally maintained a capital structure with an equity ratio slightly in excess of 50 percent, and the Department has never questioned the Company's determination. See, D.P.U. 18815 (1976); ly D.P.U. 18194 (1975); D.P.U. 17307 (1972). We cannot ly We would note that under provisions of NEGEA's indenture on collateral trust bonds, a subsidiary is prohibited from having a capital structure with a debt component exceeding common equity. The Company has not, however, posited the existence of the indenture restriction as a bar to our review of its capitalization.. As the Attorney General correctly notes, such a private agreement could_not' divest the Department of its authority in a ratemaking proceeding to consider the reasonableness of a company's capital' structure. 1 w...,..... . , . < . . m
. . . 5
.,----.---e.e.2 - . - - - -
D.P.U. 20132
. Jage Forty-four now state that an equity ratio of 52.0 percent is so unreasonable as a matter of law as to unfairly burden New Bedford's customers.
s. With regard to the Attorney General's reference to double leveraging, we would note that the double leveraging effect does not itself constitute evidence of the impropriety of a subsidiary's capital structure. Furthermore, both the Department and the Supreme Judicial court have explicitly rejected attempts to base a subsidiary's I cost of capital or capitalization upon the parent company. Massachusetts Electric Company v. Department of Public Utilities,
! 1978 Mass. Adv. Sh. 2443; Massachusetts Electric Company, i
D.p.U. 19376 (1978). . The Attorney General has requested that the short-term borrowings from the parent company be included in the Company's permanent capital structure. He strongly suggests that the use of 364 days for the length of the borrowing is a technical attempt to avoid placing the loan in the "over one year" category which would make the borrowings subject to G. L.'c. If4 SS 14 and 15. As a general rule, short term borrowings from whatever source are treated identically. There is no reason to treat borrowings from a parent company differently from any other borrowings secured under " arms-length" conditions unless it is found that such borrowings are prejudicial to the company and its ratepayers or it is demonstrated that such borrowings are for a time period and magnitude which indicates that the borrowings constitute in effect a
b J
.D.P.U. 20132 Page Forty-five f
a part of the company's method of permanent financing. A review of the amounts of short-term indebtedness reported in the annual returns of the Company which were borro.ied from the parent within t'he past five years show a markr.d degree of fluctuation and, in our opinion, do not reveal a pattern suggesting a mode of permanent financing. Therefore, the short-term borrowings will not be included as part of the capital structure of the Company. I l l E
$ a 1
k . I i r $ 1 i, l l I l' i
,s ,
L--_...mm_._____ _ _ _ _ _ _: _
. ]
D.P.U. 20132 Page Forty-six C. Composico Rate of Return There being no dispute as to the cost of the Company's long-term debt, the composite allowed rate of return is 10.31 percent, calculated as follows: Capitalization Percentage Cost Cost Component Long Term Debt 48.0 7.83% 3.76% Common Equity 52.0 12.61% 6.55% TOTAL 100.0% 10.31% 4 1 05- . .-- . - _a ____- -- -
D.Y.U. Luk
- Page Forty-seven V.- RATE DESIGN A. Allocation of the Rate Increase The Company initially filed rate schedules which imple-pented, to a limited extent, the results of a fully allocated cost of service study performed by the Company. While the t
hearings were in progress, the pepartment issued two rate decisions in which it clearly indicated that it wished to I l consider rate restructuring in separate proceedings devoted exclusively to that purpose. Boston Edison Company, D.P.U. 19991 (1979) and Bay State Gas Company, D.P.U. 19920 (1979). The Company subsequently filed with the Department schedules of rates and charges for both its electric and gas departments which essentially allocated the revenue deficiency , on an equal percentage basis among the rate schedules. The new schedules also contain changes which are designed for more I i efficient rate administration such as the simplification of the
, rate structure and the consolidations of certain rates which 1 ! were largely a carryover from predecessor companies. The i I
Commission will allow for the changes as proposed by the Company and elects the equal percentage increase to each rate schedule. B. Outdoor Lighting Rate Schedule, M.D.P.U. No. 581' During the course of the public hearings,the Company presented testimony as to the propriety of rates and charges 4 S- - - _ --
* .mg
"'# N
. Page Forty-eight contained in a revised Outdoor Lighting Rate Schedule, M.D.P.U. No. 581 filed on November 15, 1979. Cross-examination by the Attorney General and the Town of Falmouth ("Falmouth") followed.,
On December 21, 1979, after the close of the public hearings, the Company and Falmouth jointly submitted a
" Stipulation Concerning the Appropriate Form of the Outdoor Lighting Rate Schedule" (" Stipulation") . The Stipulation contained a second revision to the outdoor lighting rates.
We have reviewei both the first revised outdoor lighting. tariff and the Stipulation. For the reasons set forth below, we reject that portion of the Stipulation regarding the rates and charges for theservice and allow instead the consolidated struct're u and charges contained in the first revised filing. Due to the manner in which the Stipulation was presented, there was no opportunity for either the Department or Attorney General to hear testimony and cross-examine witnesses regarding the basis for the rates which Falmouth and the Company offered. The lateness in filing the Stipulation thus precluded an on-the-record analysis of the proposed rates and is a factor which bears upon our rejection of the rates. Also,we are particularly e
- '*"*' - M- m ,. . -_'. , , , ,, _ _
D . P. t '. 20132
. Page Forty-nine concerned with the attempt evidenced in the Stipulation to move away from rates that more accurately reficct the' cost i
of providing the service. Such a concern was emphasized by us in another proceeding involving New Bedford. D.P.U. 19388 (1978). Finally, while the rates prcvided for in the Stipulation are lower as to incandescent lighting than those of the first revised filing, this benefit apparently'was achieved at the expense of those communities which commit themselves to converting to high pressure sodium-vapor lights. . Although we cannot accept the magnitude and the, method-ology uscd in determining the rates noted in the Stipulation, that document also contained a special provision entitled f " Landmark Incandescent Service" which can be severed from the other aspects of the Stipulation. This classification is one which we support and, therefore, we will allow the Company to include this provision as pcrt nf the. revised outdoor lighting rates approved in this Order. Tb 2asic annual rate for that provision will be calculated by s..e Company using the same methodol'ogy as that employed in the first revised outdoor lighting tariff. In complying with this Order, the Company shall submit workpapers and calculations which explain in detail the method-
- ology used in determin ing 'the new rate; under this schedule.
r . T f- A 9-- -
_ o. . ..
. Page Fifty C. Transfer of Gas Costs to Base Rates The company also proposes a change in gas rates by removing a portion of the gas cost from the purchased gas clause and i
j transfering it to base rates. This will not affect the total 1 amount of the bill that would be rendered but places an amount I in base rates which more closely results in the collection of the cost of gas through the base rates. The Attorney General a opposes the change on the grounds that the separately stated ; charge provides the customer with price signals as to the cost
! of gas and thus encourages conservation, powever, there may j
be some confusion with the electric fuel clause which separately ! states all fuel costs in compliance with the statute, while the gas clause is a mechanism which is designed to recover gas costs over and above those recovered in the base rates, over a full heating season. Under the Company's proposal the base l rate recovery will be closer to the pipeline rate of gas while the purchased gas clause will reflect any change in costs either above or below the pipeline' rates. The Attorney General's arguments are not convincing and therefore the transfer of costs from the clause to base rates is allowed, l j .. I d 9
< en e. y g ,gy ,g me, # .g ,a J - ee s- g 4 , w mi ese e b p[
.p e. e y s9 m 9 e - en seen e ogggo W h* W'Ne
i D.P.U. 20132 7
. Page Fifty-one VI.
GENERAL COMMENT
S The Company's preparation of its case generally con-formed to the requirements of the Department's prior rulings. However, where New Bedford propDsed to depart from the customary methods of handling certain items, the record at times lacked essential data that would have enabled us to consider modifying the proposal. Further, the practice by the Company and the intervenors of holding frequent conferences
, in an attempt to resolve minor issues outside of the formal hearing process, has at times complicated rather than expedited the process. The consolidated tax return filed by NEGEA and the accounting for AFUDC were issues which seemingly were removed from our review by mutual agreement between the Attorney General and the Company.
It must be recognized that even if the Department does not occupy the formal role of an intervenor, it is still a party in interest in terms of exercising its regulatory or judiciary function. It is not appropriate for the parties themselves to
' decide which issues shall be placed before the Department.
Unless attention is given to making the Department aware of issues which by agreement will not be pu'rsued, it may become necessary to require a condensed summary of each meeting of the parties held outside of the hearing process.
. . . _ ~ . _ _ - - . -
Average Rate Base Test Year Ended December 31, 1978 L (Dollars in Thousands) Combined Electric Gas Utility Plant In Service $194,367 $172,273 S22,095 Reserve for Depreciation and 51,220 45,956 5,264 Amortization Net Utility Plant . 143,147 126,317 16,831 Add - Prepayments 83 73 10
- Fuel Stocks 1,208 383 825
- Other Materials and Supplies 2,865 2,666 199
- Cash Working Capital 4,392 3,090' 1,302
- Investment in Generating Companies 384 384 -
Deduct - Customer Advances for Construc- 1,088 1,088 - tion
- Customer Deposits 1,755 1,560 195
- Reserve for Deferred Taxes 15,768 13,091 2,678
- Pre 1971 Unamortized Investment 764 660 104 Tax Credit Rate Base $132,704 $116,514 $16,190 1
, Cost of Service and Revenue Deficiency Test Year Ended December 31, 1978 . (Dollars in Thousands)
Combined Electric Gas Operation and Maintenance Expense $117,542 $ 92,831 $19,711 1
- Depreciation and Amortization
- Expense 7,265 6,477 788 i
Deferred Tax on Amorti7ation (22) (22) Taxes Other Than Income Taxes 8,259 6,841 1,418 j Massachusetts Franchise Tax 1,089 954 135 Federal Income Tax 7,209 6,317 892 Amortization of Investment (250) (225) (25) Tax Credits Return on Rate Base 13,682 12,013 1,669 (132,704 x 10.31%) l Total Cost of Service $149,774 $125,208 $24,566 Revenues Sales of Electricity / Gas 139,459 117,428 22,031 Adjustments (39) - (39) Other Operating Revenues , 2,225 2,139 86 Total Operating Revenues 141,645 119,567 22,078 Revenue Deficiency $ 8,129 $ 5,641 $ 2,488 4 l l 1
~
~~^~'
Page~" Fifty-Four , VII. ORDER Accordingly, after due notice, hearing, investigation and consideration, it is ORDERED: That M.D.P.U. N0mbers 572 to 591 inclusive and Numbers 502 and 521 for Electric Service and Numbers 592 \ to 601 inclusive plus Numbers 280 and 522 for Gas service filed with the Department on July 17, 1979 be and are hereby j disallowed; and it is FURTHER ORDERED: That the Company may file new schedules of rates and charges designed to produce additional gross revenues of $5,641,000 from the sale of electricity above those yielded from the rates presently in effect; and it is FURTHER ORDERED: That the Company may file new schedules of rates and charges designed to produce additional d, gross revenues of $2,488,000 from the sale of gas above those s
. yielded by the rates presently in effect; and it is FURTHER ORDERED:
That such new rates and charges shall become effective as to gas and electricity consumed on and after the date hereof, but not earlier than seven days after the filing thereof together with supporting data demonstrating that such schedules are in compliance with this Order; and it is FURTHER ORDERED: That the new rate schedules shall be designed in compliance with this Order; and it is t
,. . - - - - ,, , . , , . - v- ,Q.-
I
- ne
~
FURTIIER ORDERED: That the Cost of Gas Adjustment Clause shall be designed in compliance with thi.s Order. By Order of the Department, w ' TDRIS R. PCTE, Chairman I N wan Y, OI/ N . BON $ALL, Commissioner iS
- 1 N 8'7
. GEORGE ~R. SPRAGUE,' Commissioner A true copy -
Attest; CHRISTOPHER C. RICH Seeretary 9 f b I 't e
+
i 1 e a 4
' '.. ~.:::2. ._. . * - ~ ~ ~ ^-------_-.:_.._
Appeal as to matters of law from any final decision, order or ruling of the Co'mmission may be taken to the Supreme .Tudicial Court by an aggrieved party in interest by the filing of a written petition praying that the order of the Commission be modified or set aside in whole or in part. Such petition for appeal shall be filed with the Secretary of the Commission within twenty days after the date of service of the decision, order or ruling of the Commission, or within such further tiriie as the Commission may allow upon request filed prior to the expiration of the twent; days after the date of service of said decision, order or ruling. (Sec. 5, Chapter 2,5, G. L. Ter. Ed. as most recently amended by Chapter 485 of the Acts of 1971; 4 9
. 9 a
O t e 4 e e e 4
- O O
e e 4 e e G
- e 9
e O e i L}}