ML20062B457

Northeast Utils,1989 Annual Rept.

ML20062B457
Person / Time
Site:	Seabrook
Issue date:	12/31/1989
From:	NORTHEAST UTILITIES
To:
Shared Package
ML20062A991	List: ML20062A987 ML20062B447 ML20062B454 ML20062B457 ML20062B461 ML20062B465 ML20062B469
References
NUDOCS 9010250074
Download: ML20062B457 (47)

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'R E P S R T ' 1 9 8 9

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TiiE REPORT TIIE CONIPANY The sometimes confhetmg forces ot Nirtheet t 'tihties n the parent

'1 competition and regulanon that nim compam of the Nl ssstem icollectn ch characten/c the elecinc unhn mdustn teterred to.n Nl i NU n one of the y base dramatically akered thc largest utihties m the counin and the em nonment --the landwape. it mu lareest in New I neland. w nh somt will-m u hich utihties such e s.M i emplos ce en me about Northe nt t tihties now hee to operate 13 milhon s ustomers in ( iinnect A ut l Iradinonallandmarks of proerew hat and western \lawachusetts changed Those who ignore or nusread these changes uill imd their progres- ( harter ( )ak i neres Int . w # adoca delayed. it not obstructed those w ho i to Nl' dunne lee anonunhn clirrecth Interpret the chances tiin pitil a subsidian Oimparh imithed m new route that leads to their ohi cetnc des clopment and romt . m nership of j

with neither dele nor the need to waste cocencrain in f acihues nanonwide l time and ettort Thc tour stratepes that Northeast l'tihues he implemented in l Electric Operuting Sulnidiaries respinse to thn radically altered 'lhe ( onnecucut laght and Power Tile COVER emironment define our caref ulh ( ompam A path n one of mankind s imonte considered route to reach our objectnes  % estern \lawachusetts Licetns s>1nhoh for progrew It f acihtates enhancing our exsting core businew Compam mosement but becomes a means of and maunu/ing new growth f lohoke % ater Power ( ompam progrew onl3 alter the trmeler he opportunities from the emergmg picked a duecuon-the goal And a competitne nature of the indusin l Support Subsidiaries path presents challenges m the form Nirtheast Nucicar 1.ncrgs of obstacles and branches that retpare Thn annua! report n a position check ( ompany inuclear operahonsi the tracter to measure progrew along the strategic path thscussed m the

%>rtheast i nhoes sen he and to adnnt without hising sight of 1% annual report Progrew toward the

( ompany Isysiemwide sen ice i the Jestination four stratepc goah was not esen but u m as espected NL "s strategic p.u h l Nonutility linestments Subsidiat) the path pictured on the coser n part of essentialh imohes a continuation of Charter Oak 1.nergs Inc the scar-round nature and recreaoonal outstanding senice and calue to its core i cocencration. smal!

lacihh at Northeast l'tilities' Northlicki boninew constituents and planned peer pniductnini

\lount.un pumped-storace hydniclectric expansion in related enero busmewes proieci in Northheki. Ntawachusetts it that otter dnersity, stabiht). and added l Realt3 Subsidiaries iHustrates the theme for thn annual profitabiht) We are committed to the The Qumnchtuk Compam icpin it aho symbok/es the harmony coune we base chosen and conunced The Rocky Rner Realty ( ompam that can and should cust between nature that it will best sene our shareholders and !cchnoloo and customers.

Underground facilities at Northfield hfountain

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l ;, ' CONTENTS

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AmierV i 19esiMikaldets.. ._ 7

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Matissit e zW1betniamA 17 Muisshallier

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' Ginuerscated v Trudumm.e g.,,m9 4R ' ,

h' l{lGIILIGliTS 1989 1988 ,i;[ll%',

Operating Revenues $2,206,288,000 $2,079,24N.(H N) 6i Net income' $209,083,000 5233,922,( W M) ( 10.6 )

Earnings Per Common Share * $1.92 S2.15 ( 10.6 )

l Common Shares Outstanding ( Average) 108,669,106 10S,669.106 -

1 Dividends Paid Per Share" $1.76 St.76 -

Sales of Electricity (kWh-Thousands) 24,892,000 24,412,000 2.0 Electric Customers (Year end) 1,251,680 1.235,675 1.3 Construction Expenditures * " $270,589,000 5291,939.000 ( 7.3 )

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l ' Includes discontinued gas operations. See Note I of Notes to Consolidated Financial Statements.

• • Luludes 19189 special stock dntribution related to the discontinuance of gas operations. See Note t of Notes to Consolidated Financial Statements.

"'l.scludes nuclear fuel.

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Reliabihty of the energs we pnnide n competitne enuronment m w hich we J ohen as imponant to our (ustomen as now operate-sh kan 4 %tW

( the pnee they pay for n. ()ur relmNhts 4Am.6annettmut j piandGat for the year impnned by 22 percent s.

, Oserall. the Connecticut ()cpanment Grow AniWWa This represents the initial result trom of Pubhe l tihts Control i DPl ( i T 4 8 Mira d O @ h the first two years of a sisacar capital respinded tawrabk to propwals of Fhe impnnement program for our Connecticut IJght anJ Power Compam

., e trusine of hit II""'""" ion and Jntnbution w stem it iCIAPi aimeJ at eoidmg a !*v ratt j jy *

$ nig m 4 ciIW9e m . aise rellects the positne impact of our i

I s alsu Faue#As increased tree-tnmmmg expenditures.

case to increase rates m luun In a lant decision. the DPl. ( suspenJcd-on IN endhigem aN . S = w hich meraged 522 nulhon annua lh

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^ ' condition that ('l A P not file a rate ..ne for 19vs and DA9 I madetslWHen#tt

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. 'M: niyyogl;Earporate Danng lvW W took sescral steps to  ! .* "*'l ~ T%

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' of the$dnweettes reduce the cost of semor capital % e replased a 550 milhon preferred sto k I

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sale of gas busmess awets to call ' .% 'JC ' ' ' . ' ##"

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$20X milhon of hich-coupon bonds

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Also. we twued 520 milhon of "- 1 M" " ' ' -

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2i F . _- N. 1959 to increase competitn enew in our

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eore businew, w hich. ultimately, will benefit ratepayers and shareholders- 61^

" fyn i Strategic Actisity 2: Imprm e ...7... i ..

J- 1 NL"s Financial Wrformance

, improsed financial pc tormance n in 19su -an carher requirement that j : -

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directly tied to regulati n control of CLA P deter in 199n the net pniceeds rate lesels and structu e It's a sen 4 .

from capacity sales in eseew of those i f.} . - -

difficult path, and the one along recognizeJ in rates estabhshed m 19%

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which we saw the le:.st progress And.on the conditKin that CLAP not tile he,ppew dunng 1989. How eser we saw a rate case dunng the first six months of t3er%euw x modest signs that regulators are takmg 1990. n allowed CIA P to amortt/c the

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prehminan steps in the direction 1%9 capacity sales deferral aser the last that weie been adweatme as a sis months of 199tt The DPl C also necewan response to the Increasingly

. . .[. _ ' approsed the equal shanng by ratepaers x.. . ~ . .-.

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Rehab% of the energs we pnwide is competitne enuronment in w hich we e him atwty ohen as imponant to our customers as now operate til Mit%4DtittIW4A the pna they p.n for it ()ur reliabihts tagunya gg ,

for the year impr ned bs 22 percent ( h erall. the ( onnecticut Department tutw Amasa ' Thn represents the initial resuk f rom of Pubhc l tihn C ontroli Dl4 ( >

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.. the first two scars of a sn-year capital responded taorably to propWh of Ihc

= impnwement program for out ( onnecticut laght and Power ( ompam g g. transmission and distnbution ssstem 1t ICIAPI armed at amiding a low r.ite

+1a%eEndegy g aho reflects the positne impact of our case to increase rates in lWi in a Junc

[  ! a Wsite fo@tl8~ 4 increased tree tnmming expenditures. decnion. the DPUC suspended-n ths WWW#h ( which meraged 522 nulhon annually W*

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tot 19% and 19W condition that CLAP not tile a rate case

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% , HeftipdL5 swale . , . Dunng low Nl took seseral steps to l .

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replaced a 550 milhon preferred stock .

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oppahrti g iwue called in 19e with a lew espensne preterred stock issue. % e

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. <  ! Aho. we issued $20 mdhon of 'N W

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W e're proud ot' the progress made dunng f > '

g1 1989 to mcrease competitnenew m our

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benefit ratepayers and shareholders ...

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St 'ategic Acthit) 2: Imprm e 1.1.n . .

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Nt"s Financial Performance h c impros ed financial performance is m 1959-an earher requirement that directly tied to regulaton control of CIA P deter m 1990 the net proceeth rate leseh and structure. Iti a sen trom capacity sides m excew of those

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difficult path, and the one along

,, . recognized in rates estabhshed m 1955 kree w which we saw the least progress And, on the condition that CLAP not tile m,p A '

. dunng 1989. Iloweser. we saw a rate case dunng the hrst six months of 999: 2' rce ~

. modest signs that regulators are taking IW L it allowed CIAP to amorttze the J prehminan steps in the direction 1959 capacity sales eterral oser the last that weie been admeating as a sa months of lu9n The DPUC aho

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ERFORMANCE-

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THE RIGHT PATH Efficient generation of elecinc p>wer others m which Nl has enutlements 95.h percent. Dunng the past the years.

to meet customeri needs n a maior pnnided 56) percent of our total the capacity tactor was an outstanding critenon for esaluating a utthtyi suppis encres requirements dunng 14W NJ 4 percent.

performance. The Nt 'sptem supphed its customers 24.9 bilhon kilowatt-hours Esen though each of the four plants Esen though Niilhtone 2 was taken ikWh) of electncin m 1989 and aho operated bs NU was out of senice for out of senice for l' weeks in 19W was able to wpph capacity-shon reluchng and maintenarice at some time for normal refuchng and maintenance unkties in New England with an dunng the year, their composite capacin and to inspect its steam generator aserage of 1.3 milhon kilowatts (kW) of tactor w as 64 h percent. compared to awembhes. the uniti 19N9 capacity capacity. Thew sales helped satnty the the national aserage of 65.3 percent. f actor was t4.7 percent. onh shghth region's energs needs and also pnnaded The composite capacin tactor for the below the national aserage.

a gwitise cash flow to NU. sesen umts we operate and or hase ent tiements m was 71.2 percent m 1989 Millstone 3. a pressurtzed-water reactor.

The year-end electncal generatmg had a capacity factor ot 70.6 percent in capacity of the NU sptem, net of sales Since Connecticut Yankee (CY I began 1989. Since startup,it has achiesed an and purchases, was 5.4t4 megawatts commercial operanon on Januan 1. (nerall capacity factor of 73.2 percent.

(MWL 'the NU splem had identical 1968. Ntf has achiesed an enviable higher than any similar plant in the wanter and summer peaks of 4.858 NtW leadership PNtion for the safety and United States except for one still to on Januun 4. and July 27.1989 The efficienes of its nuclear operations. undergo refueling.

aggregate capacity tactor for the tour CT was taken out of senice in tuelear plants operated by NU has September 1989 for planned retuchng NL"s leadership guition for plant nsistenth been well ab(we the and maintenance Dus shutdown was efficienes is matched by its reputauon national aserage. In addition. extended because of unanticipated as a safe operator of nuclear facil:nes. In availabihty of towl-steam units n maintenance on the fuel assembhes and a 1984 Nuclear Regulaton Commnsion abtwe the New England userage. In on an internal reactor component. CY t NRC) report-a critique of an terms of mailable capacity and had been in contmuous operation for emergenes eserene-the NRC gase us  !

operatmg efficienes. NU s supply 461 dap. surpassing its previous record high marks for our demonstrated abihn performance is on the nght path of 417 dap. Only four other l'nited to protect the health and safen of the States plants hase operated conanuoush pubhc and found neither violations noi Nuclear for mare than 400 dap. weaknesses. but mans areas of strength.

Nl: operates tour nuclear plants with a And. in NRC Sptematic Assessment combined rated capacity of 3.268.5 MW. Millstone I had an 80.4 percent of Licensee Performance (SALP)

Nll o currenth er.:itled to 5 ' percent capacity tactor m 1959 it had the reports based upon intense 16- to 15-of the output of these tacihues. Nuclear highest capacity tactor of any boihng. month esaluations 01 ses en areas of generation trom these plants and three water reactor in the world m lush, at performance. Millstone units 1. 2. and 3 Operations room at Connecticut Valley Electric Exchange

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F 1 cach achiesed the categon "1" SALP in March 1989. the pumped-storage the transfer capabihty will merease to ratings (defined as: performance hgiroelectnc facthty at Northfield 2JkO M W.

substantially exceedmg requirements Mountam (see the photograph on and an aggresme management atutode the mside front etwer) was rerated at NEPOOL will purchase sesen milhon tow ard sitely ) and two categon 1JNI MW. an b percent capac@ MWh annualh oser a ten 9 ear penod "2" rat.,gs (detined av pertomiance merease Thn tacihty proudes NL"s share will be 223 percent abose that needed to meet reculaton peak load power for NL"s customers requirementu n achiesed sn and for sale to other New England Cogeneration And catepon "1" ratmgs and one categon utihticula the New England Power "2" ratmg m its last NRC S \LP Small Power Production Pooli NEPOOL L Dunng 19w.19 quahty mg es aluation cogenerators and small-power produ,.ers Three Millstone employees and one A

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[' d 4- under long term contracts Thede former contractor emplosee base made numerous allegations of sitety problems a aginellWin

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contracts accounted for approximatch and personnel difficulties at Millstone. M. g 4 percent of the system's total needs

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,Wht By 1992. 28 contracts---equnalent to An intensne imestigation by the NRC found no significant salet) items but

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' " 564 MW-will supph atuut 13 percent gp of NL"s total anticipated load.

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I supply source-one that we'll agency within the NRC is reuewmg the -

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probably reh on more in the next ten personnel nsues and is expected to S fJ' years. But, it is one that should be release its findings in late spring 1990 .

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NU takes udety concerns raised bv .

e sources in temis of overall customer employees ven senously and has -

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valuewapacity needs. pnce. and undertaken a number of mitiatives including the creation of a new.off site.

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high-lesel pwtien, to help resoke -

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in l9Sh and 1989, NU negotiated Fouil'Ilydro

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'. capacity contracts designed to recoser Nt"s aserage capacity costs. These sales NL"s fossil-tueled generating units help flydro-Quebec Interronnection will supply in excess ot 3N0 megaw att-to meet intermediate and peak load Under Phase I of the Hydro-Quebec years of capacity to other New England conditions supplementmg the baseloads interconnection, neath 40lukU utihties oser ten years. This is a win wm of the nuclear units. Oserall. these units megawatt hours (MWh) of hydropower '

situation. in w hich the purchasing exceeded their availabihty targets and were imported to New England from utihties acquire capacity at costs that produced 36 percent of the electricity Hydro-Quebec in 1989. NU is entitled are competitise with their other used by the NU system in 1989 to 23.6 percent of the 690-MW transfer alternatives, and NU ratepayers benefit capabihty of Phase 1.

trom over $N U million in resenues.

Hydroelectne plants prouded 3 percent Dunng 1989. NU prouded an aserage of our totalenergy requirements in Phase 11 of the interconnection, of approximately 500 MW per month in 1989 scheduled for completion dunng 1990, under these contracts.

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• . i ENERGY-SECURE FUTERE

-At the end of 1%7. prior to the stan up NU System Load Growth responsible plan for adequate of Connecticut Yankee. NU relied upon For 1989.we forecasted growth of pmer supply.

fossil fuel for 89 pertu.: of its energy. 2.8 percent in our customers' electric fly the end of 1984, the mix had demand while actual demand increased Our integrated demand and supply changed dramatically, with nuclear by only 2.0 percent. Our ten-year planning process is the starting point in prmiding for 57 percent, fossil fuel for (1989 through 199S) forecast of retail the development of SU's comprehensise j

% percent, and the remaining 7 percent sales growth projects an average long-range load and resource plan, coming from hydro, cogeneratkm.and annual increase of 1.7 percent, versus an j

Current forecasts identify a 1999 independent peer production. actual 43 percent annual increase for summer peak load demand of 5.951 the 19f01988 period, megawatts (htW) and a 2009 demand of De benents of this commitment to 6,998 MW. Rese demand lewis at: net nuclear energy are substantial. Even he major factors contributing to this of the peak-load reductions from our w hile we're carrying the capital costs skwer projected rate of growth are demand-side programs, for our nuclear capacity, our overall increased conservation measures, self-price per kilowatt hour (kWh) remains generation. a skudown in the region's The 2009 capacity requirement of 8 NO j

. bcks the average for major utilities in economic growth, and a softening in MW would have been 9.217 MW absent j

- the Northeastem United States. residential construction markets. the savings of our demand side Reflecting the slowdown in residential programs-914 MW. Of the 8303 MW Furthernwre, we're the only major construction, we are forecasting capacity requirement, cogeneration and

electric utility in New England with residential power sales increases contracts with small independent power cal, tangible protection against energy averaging 1.7 percent annually producers are anticipated to supply ortages through the end of the century. throughout the 1990s, compared to 572 MW. Firm purchase commitments

or at least a decade, we can asold the 1.9 percent in 1959 and 6.7 percent in from Hydro Ouebec and the high costs associated with adding both 1987 and 1988. contributions from Seabrook I will .;

capacuy under ever more demanding represent 454 MW.he continued i design constraints. His certainty of Load And Resource Planning operation and repowering of existing supply also provides planning flexibility i he essence of planningis to foresee generating units at existing sites. 'i at a time when the emironment for potentialneeds and toidentify additionaldemand side management  ;

acquiring capacity is in a period of rapid - alternative means to meet those programs, and the continued pursuit of reorganization and institutional change. needs. For electric utilities, resource best priced power from outside the NU l We are increa<ngly able to sellour planning for the future means system will satisfy the remainder of our capacity surplus to supply short examining the relatiw merits of forecasted requirements. De result i regional utilities, providing them with demand-side and supply-side options, of these measures is the ability to meet -

ectmomical power w hile helping to hold l which together can synthesize a total NU sptem energy requirements down our rates least cost and emironmentally into the twenty first century without the

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Commitment to customer service and supply reliability T

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46 need t, add any major new generutmg replaced with cmered conouctor to

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capacity Our estem planning Weather can be a key to merall estem reduce tree caused interruptions. rehability in any year, and 1989 was no capabihties are keeping us on a path that exception A tomado like storm on assures our customen of adequate

• Approumateh 2m dhtribunon energy, economically prosided as a reclosen were installed to

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result of our least owt planning focus automaticalh isolate faulted circuit n o 12 ~ "

$ptem Reliabilit) sections whil'e mimmizing the .s M . Y. c. '

number of customers mterrupted.

Adequate supply of enerp and tair pnees tor that energs are two of the 4 . . . . . . jormp.j 3 Gesen new switching systems three tactors m the eqe ition that were mstalled to alks automatic Q .: 7.n MI*' 1 i '

E determine our customers lese l ot , gy . -

i restoration of senice to customers -1515 ' V percephon of t ! as a salued suppher w hen another portion of their ot energs semeet he ilurd and most circuit expenences an outage.

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measure of a utibtyi abiht) to panide ~:'.' -

• Almost 13Jm lightning arresters L. ' , ens,[ mNH a dependable supply of Fwer. even '?.

were installed to imprm e the  ? J. t minute of esen day, eser, day of esen year.

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1988. Its pnman ob leethe is to focus our ,

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aimed at impnwed system reliability ;J efforts to reduce outages We backed up are for tree trimming along our ' g . . . f. tg this resohe to impnwe system rehabilit) 21JXX) miles of distribution imes. -

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with a tirm tinancialcommitment. % e Tree-trimming is the single-most

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hase committed oser $100 milhon to effective factor in pnwiding reliable capital budgets over the next sn year July 10 resuited in widespread line semce in the NU senice area. w hich damage in westem Connecto.t.

penod to impnne the rehabiht) and userages 175 trees per mile along our affecting 17S 000 customers. We're capabiht) of our transmiusion and lines compared to a nationwide particularly proud of the taet that dntribution ( TA D) network. Our aserage of 70. Dunng 1989. NU spent emergency planning procedures.

capital espenditures for TA D rehabihty 523.5 milhon on tree tnmming, more meluding th dedicated ettorts at s2o imprmements donng 1989 amounted to than double the 1986 lesel.

$lh milhon. compared to $9 nulkon in hne crew members from NU and other 19C Noneapital financial commitments utihties, had power completely restored '

The combination of dramatically to nuwt customers within 45 hourt base hkewwe msteased dramatically. increased tinancial commitment and the focus pnwided by the lhamples of our commitment to a more reliabihty task force is yielding very rehable TAD system are summanzed by positive results. During 1989, the key the folkming actisities that were reliabihty statistic used to r..easure completed in 1959-perfonnance improveJ by 22 percent, compared to 198S For the year, we

• Oser . miles of bare oserhead p.ovided our customers with an dhtnbution conductor were average reliability ot 99.%5 percent.

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I L CLEAR PATH TOWARD CONSERVATION Since we started the purney along the and disadsantaged by proerams that educatumal and mformanonal programs I consenation path m the earh IM. addrew their particular circumstances. targeted almost esclusnely at our NU has achiesed an emiable posinon as The capacits smed by CALN! programs residential customen By the mid-1%

a national leader in the desciopment and continues to become more sigmheant in Nl' and its regulators recognued that implementation of mn.natne and resource planning. helpmg to deter the changes in focus and approach were cheetne consen anon and load- need for additional baseload capacity necessan to m ;mue the benefit-management K &l N1) programs. In represented by C Al N1. This recogniuon piss.CIAP helped pioneer the C&LN1: Strategic Significance and ensumg action under the auspices of estabhshment of the Collaboratise The fact that electne utihties now the Collaboratne Process resulted in Procew concept. m w hich all mierested operate in a compeutne milieu gnes two maior changes. First. more parties in Connecticut contribute to the our CA LN1 programs esen gieater emphasis was placed on commercial dewiopment of statewide conservation sigmficance. Rese programs are a vital and industrial customers. for the sen d programs in a cimstructive, component of NU's strategs to protect simple reason that they represent the nonadsersanal environgtent. NUN and strengthen our core business. They largest potennal for energs savmgs. This leadenhip in C&l.N1 programs and its offer an effectise alternatne to the change didn't mean the abandonment of committnent to the Collaboratne opuons available to our customers. residential programs. Ra:her. residential Procew were demonstrated again during helping to avoid unecononne bspaw programs contmue while new 1989, when WN1ECO spearheaded a of our sptem opportunines hme been made asailable Collaboratne Procew for Niassachusetts to our commercial and industnal in Januan, end tollowed up m They achieve this objectne in two customers. Second. to achiese the j fptember by being the first of the six wap. First, the savmgs participating energs-savmg potential of these larger ohed utihties to submit specific customers gain from our CALN1 customers. CA LN1 procrams became programs t. he N1assachusetts programs kmer their energs bills lew educanonal and more result + j Departmem of Pubhe Unlines (DPU L sigm itly. Second. our wilhngnew onented Tbs change required These proposah are currently under to wons aith these large customen. substantially increased expenditures review by the DPU and to share our energy expertise with and will conunue to do so. Our C&l.N1 them. enhances their appreciation of budget was 57 milhon in 19NL Properh designed and implemented, the total salue NU can pnwide. compared with a 1989 commitment CALN1 programs can panide sutwtantial Perceived value is the most signitkant of $33 million.

benefits to the utilities. their customers element in the decision to remain in and the twerall social and economic the NU sptem. Despite the impressive increase in health of the region. Participating evenditures,it is not our phikwophy to ratepayen gain the direct benetiis of C&LN1: Philosophy l spend as much as we can, as fast as we reduced energy ustge. and these same Our early progress along the can. Rather, iti to use just enough benetits are made available to the needy conwrvation path was characterized by incentive to make consenation happen Calhl provides benents to industnal and commercial customers r-

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and to penuade customers that NU 1

- pilot program in which NU arranges projects admmntered by the i represents a beneraalue alternatoc.

zenwinterest kums and provides grants Connecticut Housing Irnestment A: the same time we hope to persuade to mstali cost-effecthe consen ation Fund. and to programs oftered by regulaton to proside incentnes for measures m pubhch owned mulufamily CONN 5 AVE and NtawSase. which NL"s CA LN1 ettorts housmg complexes. Energy Value w ater are nonprotit consonia of unhn Heatmg is the NU load-management compames pnwidmg energy audits and U&LM: Results and Outlook program in w hich quahfymg customers weatheruauon senices.

The cumulatne erlect of consenanon programs m the New England region m n[a indestrial and Commercial reduced the 1989 summet pcak Programs. N( s mdustrial and load by 2 percent. represenung a commercial customers uill wn e os er 4:4 megawatt d!%l saving Nl 1.0 bilhon kW h of electricin oser the accounted for to Nf%' of thn kleume of consenation measures that reduction. equal to 5 percent of our W will be mstalled as a resu! al programs peak load. Ih FM the regionwide '

ottered in 14W Dunne 1939. NL '

summer peak reducuon due to CA LN1 "

estabhshed a 51 million resoh mg-loan j n projected to be L7to St% of which 1

fund for zei mterest financing of energs NL"s contnbut on will be about one- ,-

improvements in acute care hospitah third, or nearly m) N1%' As a result of under the Connecticut thwpital 1980 actn sues NU customers will sase "

Association loan Fund: by year-end.

some billion kikmatt hours (kWh) proposals trom eight hospitah had been oser the lives of the conservi: tion P' accepted. totaling $550.m I of im estment measures that will be installed-enough  %

for energwefnetenev progrants. Under energs to meet the electne enerp needs "

l another new 198X-89 program-Farm ofoser 230.000 homes for a year. -

Share-NU pnwides audits and cash incentives for farms and agneultural Residential Pmgrams, N L "s iesidenual e

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businesses. 395 audits were conducted l customen will une more than 5  %.' -

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m 1989 with some fannen projected to i milhon kWh of electricity oser the sase as much as 20.000 kW h annually.

hietime of measures mstalled through recene reduced rates in eschange for the seven residential programs time chick or radio control of their Through fhe other CAL.N1 programs oftered m 1939 heaters: 1.795 new installations were NU assists its small to-medium and completed and 1.741 replacements large industnal and commercial The Ntax-A4tiser program is one were made in 1989 lhree WNIECO customer with a mix of consohing, of two new projects put into effect consenanon progrtmis proside new construction design. and r ifit dunng 1989. Through it. NU offers affordable energy saving measures nrojects. An excellent indication of the consenation measures for homes with for lower income customers, by sc ipe, creativity, and effectis eness of pennanently installed electric heating supplying light bulbs, home audits NL consenation measures is the fact and shares m the cost of ceihng and conservation measures, and that they were the only United States insulation and storm windows. By incentis es to replace older, inetficient utility programs selected by top year-end.100 homes had been refrigerators. NU aho participates in Swedish energy officiah for modehng weatherued. Thra housmg projects residential programs through its . crucial aspects of their countrywide were selected for a new Pubhc llousing contributions to conservation klan consetvation program.

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ARTH DAY 20: NEW PATHS FOR THE ENVIRONMENT As Amenca enters the decade of the statted with skillful and uncomt lonly Ums and obsenes fiarth Day 20. we 4 someone said back around the ome dedicated peoplf h.n been ef t ctne at also obsene the beginn.nc of the third of the first 1.arth Da). ~ A pollutant l the deheate busiaew ( t riroheting n merch a resource out at place '

decade for the Enuronmental pubhc health Ihe three esamples lie cued echo thn Protection Ageng t f.PAi lhus it's i appropriate to resiew the progress we as obsen anon 50 let s look for new and Ikit it has not been enough Amenca imaginaine wa>s to keep resources

) a nation hase made smce our nat onal needs to conf ront the single largest i strategs for the enuronment was trom u mding up as pollutants l.eti f ailure of our water quaht) make preser: ion of pollution the I concened in the early ICt A h is esen impnwemem e(forts-a problem as i

more appropnate to reassess our current guidmg philosophy o1 waste famihar in Um as it was m lh That management. l.et's assert a hiera:chy envuonmental agenda problem is nmott: the water that cames of salues that begins wtth pollunon the soils and builds the sediment that presenuon then moses to waste For 20 years. EPA has or. rated at the transports the oil and tarm chemicals.

intersecten of science and public minimtzation and reevchng-and the pollution that misses the treatment only as a last resort. to t atmem policy: forwarding .ome 250 rules a plants. Runoff constitutes half of our and cleanup year to he OffLe of N1anagement and nation's water quality problem. and the Budget for ., '<iew: engaging questions answer to it must remam a hical or in other words. we need a more of health and economics esen week. state responsibihty EPA has been associated with-has coherent and somprehensise approach played a major role in-an outstanding And so the goal-the usion if you A second problem confronting our water wdi-that I hase for the third seriesof achievementsof nublit poliev supply is touc>-many of w hica are iring an era that did not know many em tronmental decade o this: Leti being carried in the air. N!any of these create a new generation of mparable successes.

toxies were not understood 2tlyears ago; environmental responsewincludmg some couldn't acn hase been detected. new laws and mstitutions-that are I don't want to clatm too much, but i Now we know that toucs are penasne.

recau a comment by Hill Ruckelshaus capable of meeting the challenges of lhe) pass from air to water, from land to when he headed EPA. Harking back to this decade and the next centun. To groundwater and back, freely. achtese tho goal. I propose we kiok the time in 14hS when the Cuyahoga more boldly toward legislation and River caught tire he s ud . hat although l mally, we must recogmze that our "the waters may not be fishable or pohcies tocused upon five objectnes:

country is headed straight into a ensis

• Presentmg pollution instead of swimmable, at least they're no longer of waste disposal. I don't use the word

+1ammable." That's not a bad metaphor transfernng it to other parts of the

" crisis" lightly, and we're not in one enuronment.

ter our fint two decades at EPA. We've yet, but a third of our landfill.s will be put out a lot of fires; mam more will + 5etting pnonties to achiese the obsolete in fise years--nearly all of greatest possible rehtions in risks not occur because a vigorous agenet them filled within 20 years.

to human health and the environment.

Unnut environmeJtalperspechve of Earth from the moon j @f" pgp c .g:C^9 u& N d5bpneM ar t 5

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waste too much. Countnes like West

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in policies for other sectors such Germany and Japan waste half or a third "

as encrgs. transportanon. and of what we do per capita, and they are <

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productne. compeutnc. and successful.

• Allocanng our resources most mewSdh Wammente

' ^f effectncly to achiese our goah .n We can do better A new ethical 1 _ Piate@ao Aynci econonucalls as possible '

awareness of nature. Its needs. and our -

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• l.nsunny the adminntratne responsibihty is aborning in Amenca -

conustene and practicahty of Ihe impulse to imprese is there.  ;

our programs ggag,g People and their communines uant

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i f4undepen te mtormanon. programs. and guidance, i - ". stive1Qssinstw The philosophy behmd these ob l ectnes .md they are prepared to act. . 5 o$s$ east GibsN h n prolound imphcanons for the )

'M M" nation's ens nonmental laws and

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3 programs.11 we take it beyond thn nanon and much of the world at .

- neadutIPAe soluntars ettortwand I propose to do a turning point with regard to the  ;~ , ' . 1989 , t so-then we will ask new questions of environment There is something  :

our laws. We will ask whether dtstinctly new atout our situation.  ! -

industnal pn cesses cannot be deugned in Europe, as m the United States, .- . ^ "

to recapture matenah that now go up public concern for the environment has  ; a ,

the chimney or out the pipe. And we never been higher; expectations of :s i

will refashion our regulations to governments have rarely-if .

create powerful new incenhves to eser-been greater; and the opportunity .

! presen. pollution to make real and la. sting progress is  :> ,m I surely as near as it has been for many .

l AkeaJy, some corporations are years--within reach, it seems, of **

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) implementing programs that our hands.

l sigmticantly reduce pollution of sarious '

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sorts, particularly air toxies. I commend and encourage such efforts. I beliese all As President Bush said recently,

'Through millions of individual g~ s ,

of us-a3 mdniduah. as industriahsts, as decissortv-smple, es eryday, personal '

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environmental group members as choices-we are determining the fate i' j government regulators-mereasmgly of the Earth. So the conclusion is also -

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should ask new and meaningful simple: We're all responsible, and it's  ;- , . ,

queshons about resources. Questions surpnsingh easy to mose from being ~

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part of the problem to being part of  ;

'.b-l a better, less polluting process by the solution.'  ;. -

, x which to manufacture this product" How will this product be used and i dhposed ot? ' '

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l Air Redh s euas a Jmwn from an i All across this countrs, people are addmu he deinered recentA to the  :

i increasinelv aware that, as a societs, we

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REGULATORY PATHS NU's strategic plan was doeloped to regulators are closing the pokes actions we proposed to penmt CIAP respond positneh to two trends that gap--we're getting closer hut we re not to file a Connecticut rate increase represent challenge to alli gulated still on separate paths appheation in FM The deenion electric utihties. The 'irst is emergmg of the DPUC prouded for a shanng competition from customers energs Earnings Related Policies between ratepayers and shareholders senice alternatn es. including self. Eanungs contmue to be adsersch of any canungs that esceed the last generation and unregulated power attected by costly dnalkmances, as alkmed return on equn) and also producers. The second n chrome the result of actions by Connecticut suspended an earher order and financial underperformance resulung and N1assachusetts regulators and the prosided for the current recogninon from regulaton and legislatise Connecticut Legislature, of portions in resenues of ali proceed 3 from deenions that keep rates at artifietally of NU's imestments in Niillstone 3 capacity sales. After the tinal km loch. We have identified and are and Seabrook. NU must support the 20 percent of WN1ECO's alkmed pursumg a larp iumber of carrying costs ot' the investments that Niillstone 3 insestment has been opportunities available to us that will have been disalkmed while receiving phased into rates in July 1990, we strengthen our core business, improse no support from ratepayers. should expect that the Department of financial performance, and alkm us to Pubhc Utilities ( DPi l will recognize take full advantage of available Similarly, a 19% Department of to a greater extent WNIECOi full expansion and disersification Public Utihts Control (DPUC) costs of providing senice to it ,

opportumnes. Howeser, m seseral key decision refused any shareholder customers. And in both Connecticut areas, we continue to be constrained bv benefit from the sale of Niillstone 3 and Niassachusetts. we are begmning I presailing regulaton practices. 'Ihus, pmer to other New England utihties, to see consideration et ratemakmg NU consistently seeks to persuade esen though sorr .J percent of our concepts that depart from traditonal tegulaton to adopt measures that investment is not geoserable cost-of service pnneiples and proude recognize presailing economic and thrcugh retail rates. Eanungs base meentnes for supenor perfonnance competitne condiuons aho been adversely aflected bs the

• relucta ce of regulators to recogmze Competition and Public Policy While the legislatne and regulaton all oper costs at the same time Under the nght circumstances. self-hsues are complex, they tend to rates are ung increased to retleet the generanon may be beneficial. since the tall mio either of two basic areas- phase-in of the alkmed Ntilhtone 3 added capacits lets a utihts postpone one more direeth a3sociated with tm estments. costly new capacits investments.

earmngs. and the other impacting However, NU has sufficient existing our ability to compete fairly and Still we are makmg some progress, capacity, and significant additions effectnely. Oserall, our successes and the regulatory outkiok for the of self generated pmer would be m both areas base been modest, but tuture appears somewhat bnghter. detnmental to our remaining we are makmg progress. NU and The DPUC reacted favorably to customers, w he would hase to Heanng room at Connecticut s new Legislative Ottice Building

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l ubsorb the fixed costs of our custing ratepayers an extra $1.9 bilhon tw 1% but keeps the system. As rates increase to coser these That will significantly worsen our abihty " municipal rate" costs other large customers would to be competitise. for SCRRRA l hierally be forced mio self-generanon. I j smer from the addmg still more rate preuures on the I ortunately. the DPUC has abandoned trash of customer l remaining customer base a "first-come tint-sened" method of municipalities ,

choosing the facilities from which we I

To hmit tho dommo etteet. W urges must purchase pmer. Under that NU continues to I the adoption of cost. based rates ssstem. payments dunng carh years chauenge the need to that would ehmmate current cross- of contracts reflected deselopers' purchase any trash-subsidies that penalve our larger Jeterminations of their needs anJ not ( , to enerp electneits customers with rates up to 10 percent competitne forces in in place. the $ j at the " municipal oser our true cost of prosiding their DPUC substituted a compeutne p gM rate " In Januan enetp needs while residennal rates are below cost. In one mstance, we

" ranking anJ selection" procew While not an ideal solution. this g 4 IWu. CIAP filed smt m both federal persuaded Connecticut regulators to change does proviue a ranonal most m a direction that will alleviate process for choosing projects that are g

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• and Connecticut j courts challengmg the deletenous ellects of crow- more cost etfeetne and offer better the municipal rate.

sutwidies. As a result.our largest salue to our ratepayers. A similar The issue a not one customer resersed-for at least three competitn e bidding process has also of challenging the ,

Scarwpreviously announced plans to been instituted by the DPU in concept and benetits i self generate most of its energy needs. Massachusetts. of tntsh-to energy l pmer. Rather. it is Selbback generation by Qualifung State law requires NU to purchase -

the rate penalties---

Facilities (OFs) also results m a electncity from trash-to energy plants ~;

M the forced

worsenmg of our competitise position. In an earh test case. NU challenged a subsiduation of We recognue that enerp from OFs DPUC decision that required NU to trash doposal I will be e crucial part of our supply in purchase pmer trom the Southeastem through electne rates--that are at twue.

the futu e.when NUN loads base Connecticut Regional Resources Progress has been made-with the grown be 'ond the capacity of our own Recoven Authority (SCRRRA) plant assistance of the courts-but more get. ranon and that OFs also yield at the " municipal ate" rather than at remains to be done.

the etticiencies of cogeneration or the CLA A anded cost-w hat it would adsantages of use of renewable cost us to generate an equisalent In the realm of publie poliamakmg.

resources. However, as a result of amount of pmer. That decision would we are seeing evidence of a directnes m federal and state base required CLA P customers to consergence of our goah and those legislation and from our regulators. subsidue the plant oser it.s hfe tw about of the regulators. Gradually. the we are purchasing OF enerp at prices $4 million on a present value basis. inequities of short-sighted decaions that currently far exceed our own costs As a result of our legal challenge. the are yielding to more comprehensne to generate. We estimate that contracn. DPUC issued a decision that allows policies that reflect the changed alreads in place will result in our C11P to purchase power generated competitive climate and the true customers' rates bemg 5 to 7 percent from refuse supplied by SCRRRA energy needs of the region.

higher early in the IW0s than they municipalities that are not CL&P otherv sould N and will cost our customers at " current avoided cost!

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ERVICE-THE PATH TO ADDED VALUE We pnnide customers with semees that Community Senice the emergenes fuel tunds. Operanon go beyond the electricity they u c. It is NU is committed to enhancmg the Fuel in Connecticut and Good Neighbor these additional senices that proude economic utahty and quahts of life m Energy Fund in Niassachusetts, hase added value.To remain a quahty the communities we sene. This resulted m SIN milhon m company and pnnader of energnenices. NU must be commitment takes many tomis. rangmg customer contributions smee program as adept at customer and commumty from mformational and educanonal inception m 1983.

relations as we are in system programs for mdisidua.s to financial l

! performance and capacity plannmg. contributions and in kind semces for Special Olympics, an internanonal the support of a broad range of sports and n creation program for Customer Service chantable endeasors. special needs individuals, is worthw hile j Rere are two basic pathways by which not only because it encourages mentally l we maintain contact with our customers. We have a special obligation to allesiate and physicalh disabled athletes to De first is customer-inith..J typically the hardships of our kiwer income and compete, but also because volunteers by calbng one of our sonice centers. special-needs customers sia company- are there to cheer them on. Since 19M.

which operate 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> 9 day, every sponsored and cooperative programs NU has been a corporate sponsor of the l day. Our semce represent. tives are that proside uninterrupted senice and Connecticut Special Olympics Wmter trained to respond to inquines nromptly. energy sasings. Programs to assist these Games. De week-long event includes courteousiv, and effectively. groups were strengthened in 1989. cross-countn and downhill skiing. figure l WRAP, our innovative weathenzation and speed skating, exhibitions, and l De second path h company initiated. program, completed its first full year. entertamment. Oser the years. hundreds irect marketing programs and media Some 3,NU homes and apartments in of NU employees base helped mmunications are the pnmary 127 Connecticut cities and towns enthusiastically in a vanety of wap to nethah used to disseminate recened the comprehensive senices ensure the success of the games information of interest to large they needed. Through the spirit of solunteensm. NU numbers of customers; consenation and its employees ennch the lises of the l and load management programs Several hundred communits senice athletes and their families and their designed for small to medium sized msohement grants supported own lives as well. In recognit on of the commercial and industrial customers employees' personalinvolvement in leadership and solunteers prosided by are publicized by such means. Since areas of critical need, such as NU,it was honored in 19S8 as the 1987, senior officers have made shelters transitional housing, food Outstanding Organization of the year perwnal contacts with major customers drives. AIDS prevention, and job by the Connecticut Special Olympics.

to listen and leam how we can best training programs and education. Our meet their expectations. contmued support and promotion of Connecticut Special Olympics wmter Games 8

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@ 4" ' This sertmn rontains manaerment's 5 above book value. The consis.tently > wcre deferred in order to reduce -

o ~ Ilassrsvnent ofNorthcar's Utilitics' tihr ' I market.to book ratio' increased from : = resenues required from customers in the 3 k ' l J rompany or Nulfir antia/ condiskin und the ' 21.18 at December 31.L 1988 to 1.40 at future and were not available as El lprincipalfactors Eith as inrpart on the . December 31c 1989. The closing price camings for investors. Nes erthelewi  !

f V ,rrSles ofoperatinni Thh dtwuntgi ilmr4H of the company's common shares at - ' management belieses that imestors J ' br trad in conjuncti<fn n,th theinpanfs year.end 1989 was 522W per share. . benelit indirectly from this situation

• 1 smolidairdfinam ial starmices amt.  ; Common dividends paid in-1989 and because these capacity sales help .

~

foordoter; - 1988 were $1.76 per share, in January CL&P's electric rates to remain 1990 the company's Board of Trustees competitise at a time w hen custortm s b decided to maintain the current annual may otherwise seek out ahernatise,

,p dividend les el at $ 1.76 per share. The . lower cost sources of energy. The (

g Financial Condition Board concluded that a dividend resenues from the capacity sa'es uili y*

increase at this time would not be also help limit CL&Pi need to apply

[ g* ' Osersiew ' - appropriate after considering the for future rate increases.

3 The company i earnings peryhare company's current high disidend payout . -i

'i KEPS) decreased to $1.92 in,1989 from ratio 11989 dividends w cre 91.7 percent . . Other encouraging signs include the -

-- $2.15 in 1988. The decline in company of eamings) projections indicating suspension, for 1990 of the capacity .

g i camings during 1989 was the result of only modest earnings grow th in the nen sales deferral since CL&P did not file for 1

.' . higher refueling and maintenance . seseral years, and the disidend a rate increase in 1989. This stems from E 6 g outage costs n't electric production ' requirements on new common share a June 30,1989 DPUC Supplemental l

facilities, the loss of eamings from issues that will tr needed to finance the Decision (Supplemental Decision) and ' S divested gas nuets, unusually moderatf .Public Service Company of New 'an August 10i1989 clarifying order

g fwcather throughout most of 1989, and ! Hampshire (PSNH) acquisition. which provided for this suspension. The 1 p, the general impact of inflation on most - . .

, capacity sales will provide CL&P with i 3

(expenses in 1989, Thi $decrease was . The $119 million after tas Millstone 3 an increase in net resenues although the

' pytially offset by cost containment write offin 1986 continues to adsersely amount is dependent on CL&Pls succeu

,4  : measures instituted by management and - affect the company's financial in selling capacity in 1990. In addition. 3 H

f

higher sales. Unusually moderate = c condition, because it reduced the equity the Supplemental Decision also ,

9 Mweather throughout mos.t of 1989 base for ratemaking purposes on which authorized CL&P to begin amonizing _ 4

[ y}M) ovey 1988.

limited the sales increase to 2 percent CL&P is allowed to cam its return on '

eq'ulty tROE). Previously enacted into revenues. in the second, half of 199).

, the capacity sales deferred in 1989

'{

Connecticut Department of Public 'should CL&P net 61e for a rate increase

, i . Despite the decline in camings per L Utility Control (DPUCI regulations and in the 6rst half of 1090. This could Share, the company continues to. 7 Connecticut legisladon that established - provide the company with an increase in .:

improve the quality of its earnings now: a $4.7 billion " cap" on the construction resenues ot about $10 million during the l y ' that 80 percent of the allowed cost of ' costs of Seabrook i also adversely second half of 1990, w hen the company '  !

?/  ! Millstone 3 has been phased into rate - uffect the company because of the - . anticipates its earnings will be below its . ,

l , ' base in both retail jurisdictions. NU's inahility to record allowance for funds' - currently allowed ROE. Management 1 4!

principal utility subsidiariesiThe used during construction ( AFUDC) and believes that these resenues will permit i L Connecticut Light and Pov er Company the continued write-off of capital CL&P to postpone a rate increase ,. J (CL&P) and Westem Massachusetts espenditures since 1987. . application until the second half of 1990, j w , Electr e Company (WMECO);are

,, allowed to cam a noncash retum on the Not.wilhstanding management's concern For information regarding nuclear ; j

.' ' 4,L20,perce,ntl portion of Millstone 3 not with the company's eamings and equity decommissioning, environmentalf ,

j O , ?yet included in rate base. As noncash base. certain management actions and matters, and other contingencies, see " ,

feamings on Millstone 3 are replaced - - other events are aimed at improsing thel " Notes to Consolidated Financial' b jfwith cash earnings. management - company's financial condition. For Statements." f

, ;# kbblieves'that CL&P's and WMECO's example,in 1988 and 1989.CL&P- u

(, - kfy financist ratios wili improseJhe- ' initiated and entered into' arrangements PSNH Si( 9 percent of noncash earnings has- . to sell over 3.800 megawatt 4 ears of In December 1989, Northeast Utilities ,

capacity over a ten-year period. The Service Company (NUSCO) filed with j Q Q) . year dropped from 51.4 ending' December percent 31,1988 to. for the and transmission revenues capacity the United States Bankruptcy Court for 4 " % 33.9 percent for the year ending - from these sales are estimated to be the District of New Hampshire (the oser $600 milliori However, under Bankruptcy . Court) an amended Joint

[eDecember31,1989. J */ ,

~ Connecticut rate setting principles in ' Plan of Reorganization (the Plan);

f n 1989, the market price of the - .effect throughout 1989, these 1989 undee which NUSCO's parent, NU, 3 j

resenues. not included in base rates. would acquire PSNH. The Plan w as l m,3 company's common shares remained i ti j

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' negotiated w ith3nd proposed jointly, and raising antitrust objections to the' ' the benefit of a favorable rate agreement 7 by, the official cominittees of PSNH % - proposed acquisition. I to support the debt service, and to debt c equity Accurity holders and unsecured : .

incurred by Nonh Atlantic which

f

, Af( . crediters and of PSNilN themortgage third. holders of aThe bondo majorityif the proposed PSNil acquisition would hase the benent of a firm power -

occurs. NU would initially Anance the contract with the reorganued PSNil. In present PSNil management agreed to  : purchase with a combmation of hght of the temporary nature of the cosponsor the Plan shortly before it was common stock and tenn loans totaling increase in leverage, the contractual . t Oled. The Plan is the only plan of about $40 million. It is contemplated arrangements that will be in place to .

reorganization that has gained the. that the NU term loans (5230-5310 support the debt. and the increased 1 consensus of the many negotiating million) would be repaid from the diversity of regulatory risk that parties in the PSNH hankruptcy. w hich pnxeeds ofinumg NU common shares consolidated NU will esperience. NU - i haibeen going on for almost two yeart oser no more than three years The management is confident that the initial Solicitation of s oles for the Plan from remaining financings will be done by leverage is an acceptable and prudent PSNili creditors and shareholders the two new NU subsidiaries:

.{

' . trade-off for the acquisition benefits.

began in January 1990. lleari .gs in the reorganized PSNil and North Atlantic, llankruptcy Court to confirm the Plan Reorganized PSNH will iwue and sell NU management belieses the  ;

are scheduled for April'1990.

up to 5612 million ofits first mortgage acquisition of PSNH prosides an -

bonds, borrow approximately 5320 opportunity to achiese an oserall:

The Plan calls for distribution of million through a tenn loan facility, reduction in costs for the current and approsimately $2.3 billion of cash and auume or refund at a more favorable future ratepayers of the NU system. [

j securities to PSNH creditors and rate about $212 million of pollution w hile providing real benefits for its "

l security holders, with an optional"two- control revenue bonds issued by PSNH. shareholders. Specific areas for L step" approach under w hich a stand. and issue and sell 5125 million of - expected cost saving* include a alone PSNH could be reorganized by preferred stock. North Atlantic will l

g . reduction in costs for the operation and mid-1990, if regulatory approvals for a issue 5355 million of first mongage maintenance of Seabrook. savmg> from H complete acquisition of PSNH by NU bonds and up to $205 million of improving the asailability of PSNH's are not in place by then. If that occurs, contingent notes, under w hich it will fossil steam generating facilities, energy j

the llankruptcy Court's confimtation haie no obligations until Seabrook, savings achiesed by the joint operation'

. N - 1 order would have the stand.alone PSNH North Atlantic's principal auet, has of the combined NU and PSNH - 1 L ). '

enter into an agreement to merge with a reached specific milestones in its systems, sas ings from a reduction in the p,

newly Iomied NU subsidiary when all .

licensmg by the NRC and it, operation, combined sysnmi New England nierger conditions are satisfied. When Power Pool NEPOOL) capabihty the acquisition is completed, reorganized

~

As a result of acquiring PSNH. NU's responsibility resulting from the j L PSNili 35A percent interest in consolidated capitalization would disersity of peak loads between PSNH Seabnok would be transferred to a - initially have a higher percentage of debt and the rest of the NU system, and a separate NUiubsidiary, Nonh Atlantie ; than if the acquisition did not occur.The reduction in PSNH's purchasing, . ,

W Energy Corporation iNorth Atlantic), additional debt would be at the NU les el administratise. and general costs. Eh '

w hlch would sell Seabrook's output to and at the acquired company level and reducing costs, NU can better maintam . 3 the reorganized PSNH. would not affect the capital structure of - affordable electric service and can also NU's esi< ting operating companies. The reduce the threat that the largest electrie l

=The Plan requires appmsals from the consolidated debt a3 a percentage of total customers wili leave the system and -

- llankrupte) Coun, the New Hampshire consolidated capitalization would, on a - turn to self. generation. The ,

Public Utilities Commmion, the pro fonna basis; increase from consolidation of the two service Securities and Eschange Commiwion.

i the Federal Eiiery) Regulatory approsimately 56 percent prior to

. acquisition to approximately 65 percut

. territories also offers lan opportunity for j diversification that reduces risks for n

. Comminion, the Nuclear Regulatory following the acquisition. The both areas. For additional information iI Comminion tNRC), and other percentage of NU's common equity in its regarding PSNH, see the " Notes to government agencies. Although NU has total capitalitation is projected to be Consolidated Financial Statements.'

sought accelerated regulatory review of approximately 27 percent after the . t the proposed acquisition; and has acquisition is completed, but it is Seabrook Project presented extensise infonnation about anticipa:ed to rise abose 30 percent On March l,1990, the NRC inued a m the benefits of the acquisition, within about two years. full-power operating license for  !.

T

, ; regulatory approvals are not assured. Seabrook I and provided for a brief stay

. Othe'r utilities have indicated that they The temporary increase in leserage on a to permit opponents to appeal the '

gyg[n - intend to oppose NU's proposal by consolidated basis is attributable ~ issuance.The stay enables opponents to-

( 4 ; challenging NU's transminion access primarily to debt incur ed by the tile legal appeals to the operating

( pokeies in these regulatsy proceedings reorganized PSNH, which would have license Assuming the appeals do not x .

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ly> nucicar fuel requirements for Millstone Ic .' proposed rate increase is needed to . '!

June 1988 and June 1989 DPU retail rate -

12, and 3. As of December 31/1989, the recover additional costs resulting from ; decisions and a December 1988 DPUC

> trust's investment in nuclear fuel, net = 'innation and new. expanded services. retail rate decision. The rate moderation ,

Jof the fourth quarter 1989 leape . including conservation and load- fund decrease in 1989 renects one aspect  :

. . . payment made on January 31,.1990. ~'

management program activities that the of a February 1988 DifUC decision : i utihty will proside. (the February 19SH Decision) which ' l

s 4 authon/ed CL&P to n cogmze in res enues. 7 4 * - W.g tig Q,4 . Y l Accounting Standard -

over the 12 month period beginnme' I i

? 1

^-

"""5  ; The Financial Accounting Standards -

- Board has amended a previously inued January 1; 1988, a portion of'resenues - .

t

resened prior to January 1,1985.. 3 income tax accounting standard. The1 The resenue resene represented a ys g y

- accounting standard requires. among -

other things that regulated utilities .

lesel of resenues in exceu of that required to cam a specified ROE.

^ ; ,

reflect, on their balance sheets, the Electric sales,includmg, sales associated

)

!( .

\ L"+, gU . taxei related to the cumulative amount with energy delhered but not billed.

l t- y C ,_ ,, .,-- -

of Meome tax timing differences for increased 2.4 percent primarilf because '

, , , ( tangir(CesmlM1 _ n- which deferred taxes have not been of the continued economic growth'in y 5, 7.aewWed i <

' provided. The company expects that the region, partially offset by the efIeet f j x newgiquggag . $ - when the new standard'is adopted in ' . of more moderate weather in 19M9.

h' t. 0: MWs88'WlYO ' , 1992,it will increase anets and.

. Igets 4

i

.f. ' liabilities by approximately $1.1 billion Operating : venues related to the rate  !

' D g , t, , but will not have a material effect on moderation fund increased in 1988 1 1

' p 4 ; 4 ' '~ net income. compared to 1987, because, effective  ;

gggggeressNOW S$444 .

January l',1988. the February 198h - ,j

. . . '.?  : Results of Operations: Decision discontinued CL&P's--

' >D ' . . . . . . . .

. requirement to resene a lesel of f', , . . .,

?The relame magmtude of the various revenues in excess of that required to : ,

s( was $264.9 million, Nuclear fuel  : expenditures incurred by the system's earn a specified ROE. In addition. the i

,t .'  ; requirements for Millstone' I,2, and 3 continuing operations is illustrated in February 1988 Decision ordered CL&P :

(

of $334.3 million for the years 1990 to the chart on this page. to recognize in reienues.os er the j

- L1994 are expected to be financed by, 12. month period beginning January I. t athe trust, 4 Operating Resenues ~1988, a portion of those res enues 4

- Operating revenues increased $127.0 - reserved prior to January 1J 1938.  ;

l ' Rate Matters . .

million from 1988 to 1989 and increased - ' Revenues related to regulatory decisions o_ :In June 1989,the Massachusetts ' $201.2 million fmm 1987 to 1988. The decreased in 1988.' primarily because of jf LDepartment of Public Utilities (DPUp components of the change in operating the February 1988 Decision which. a

} , (inued is dechion granting WMECO resenues for the past two years are among other thingsc provided for a $ 10 na $l7,9 million. or approximately provided in the table on this page. -million refund to electric customers ini Ii ' [6 perdent, increase in annual revenues ' January 1988 and lowered CL&P's' 3

y j of its requested $283 million. In its Fuel cost recoveries increased in'1989, allowed ROE. Electric sales increased in ' T i decision;the DPU granted WMECO primarily because of higher sales and 1988, compared to 1987, primarily

[jW s the entire fourth step of the fise-year ' higher energy costs. Revenues related . because of the continued economic L phase in of its "used and useful" to roulatory decisions increased growth in the region and higher cooling

- investment in Millstone 3, bnnging the - . prim.sily because of the effects of and heating requirements in 1988.

K '

phased in total to 80 percent, and  !.

,s ._. increased WMECO's allowed ROE

' fromIl2.75 percent 1013.00 percent. Change in Operating Resenues l Increase /(Decrease)

On December 15,1989 WMECO filed g9g9 393g ,933 g937

& : an application with the DPU requesting 1 3 an increase in annual revenues of """ # """"

om i$32.5 million,or 10.2 percent, A i t

.significant portion of the requested rate Fuel cost recoveries $ 95.8 $ 53.2

. increase will allow WMECO to phase Regulatory decisions - 43.8 (30.3) ,

,- 7 in the fifth and finalinstallment of . Rate moderation fund (58.6) 106.6

,h Millstone 3' construction costs into Sales and other 46.0 71.7

'W

.w

customers' rates.The balance of the o;

Total revenue change $127.0 $201.2 y [,

, -)

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A - ,-

4

s.=

g y~ ' Electric Energy Espenses in the federal statutory tax rate. This .

X

~ AFUDC and Deferred Millstone 3

" Electric energy expenses. which include decrea e was partially offset by greater . Return '

_ fuel and nei purchased and interchange plant imestment and higher . ' The deferred return on Millstone 3 power, increased 579. l million iri 1989

[]b as compared h) lo88, primarily because of higher kilowatt-hour tkWhs .-

decommisdoning lesels in 1989, decreased 549.8 million. primanly because CL&P and WMECO had Depreciation expenses increased $14.3 additional portion of their reemerable

requirementund higher cost purchases ~ million in 1988 as compared to 1987. Millstone 3 im estments phased into

. from wgeneratori and other utilities .primarih because of greater plant rate base in ,19M9 as compared to the

. innsyhout the region. partially offset imestment and higher same period in 1988.

by the tuatching of resenues and. decommissioning levels.

espenses under the provisions of the . Total debt and equity AFUDC decreased ,

. company N energy adjustment clauses Amortization of Deferred $22.0 million in 198M as compared to '

Millstone 3 Return 1987.Thn decreae was caused.

Electrie enern 'expemes increased ^ The amonkation cf deferred Millstone 3 . primarily by CLAPi decision not to 559.2 million in 1988, as compared to ' return decreased $l7.1 milhon in 1989 accrue AFUDC on Seabrook I, f' 4 1957.This merease was primarily - as compared to 1988, primarily because effecme January 1.198S. since because of higher LWh requiremente 'the February 1988 Decision allowed reemery of such AFUDC was no Y ' and higher cost energy purchases from - CL&P to accelerate,in 1988 only, the longer comidered probable. The other utilities throughout the region. amortiration of deferred phase in costs, deferred return on Millstone 3

. Other Operation und Maintenance 1

.effectise January 1.1988. This decrease was panially offset by the effect of decreased $ 17.6 million, primarily j because CL&P and WMECO had p Expenses the Supplemental Decision requiring ' additional portions of their reemerable '-

. Other operation and maintenance CL&P to increase its amonization of Millstone 3 investments phased into i expense.s increased $36.7 million in . deferred Millstone 3 return balance by rate base in 1988 as compared to the i

' 1989 as compared _to 1988, primarily an amount equal to 50 percent of those same period in 1987. )

' because of higher costs ass'ociated with earnmgs in eteess ofits allowed ROE refueling and maintenance actisnies at of 12.9 percent. - Interest Charges fossil and nuclear electric pnxtuction - Interest charges increased 518.9

': 4 facilities. highar transmiwion and - The amonization of deferred Millstone 3 million in 1989 as compared to 1988,

{Uh aistribution i . ; awoeiated with return increased $66.7 million in 1988 as primarily because of higher aserage ' )'

storms, and ti general impact of compared to 1987, primarily because the interest rates throughout 1959 and intiation on mmt expenses, parually February 1988 Deciuon allowed CL&P interest accrued on spent nuclear fuel  !

offset by higher sales of capacity and to begin amortizing deferred phase in disposal costs. ,

management \ cost. containment effons costs.cffectise January 1,1988.

in 1989. 7

.i Tuses ~

Other operation and maintenance . Federal and state income taxes (

= expenses decreased S64.6 million in decreased $20.2 million in 1989 as 4 1988 as compared to 1987, primarily compared to 1988, primarily because of

. became of higher sales of capacitGn . lower taxable income. Tases other than o

t988, lower nuclear refuehng and . income tases increased $8.3 million,

, maintenance outage expenses in 1988, primarily because of higher Connecticut and the effect of cmt. containment gross earnings taxes resulting from a "

measures implemented by higher lesel of resenues in 1989 and .

L ' management. additional Connecticut sales taxes.

13 Depreciation Espenses Federal and state income taxes '

p Depreciation expenses decreased increased $33.9 million in 1988 as k J$9.1 million.in 1984 s compared to compared to 1987, primarily because of l- 1988. primanly because of 'egulatory higher taxable income, partially offset 1

, decisions.These decisions required by a lower statutory tax rate. Taxes

CL&P and WMECO to reflect excess other than income taxes increased U L deferred taxes implicit in net of-tax $18.3 million in 1988 as compared to allowance for borrowed funds used 1987, primarily because of higher

.. L . expemes associated with Connecticut P(k during construction depreciation expenses. The as a -reduction to excess gross earnings taxes and Connecticut deferred taxes resulted from a decrease sales taxes.

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. Company Report ' ' '

l , Report of Independent : i

' Public' A'ccountantsE A The consolidated financial statements >

d jof Nonheast Utilities and Autsidiariev . .s <

i M and other kcctions of this Annual To the Board of Trustees and ,  ;

. Report were prepared by the company _  : Shatchniders qhrrheast Utilities.

.These financial statements, which were .

, 1 e iaudited by Anhur Andersen & Co.',  % have audited the consolidated As discussed mobe fully in Note 7. a _,

were prepared in accordance with : balance sheets and consolidated '

, number of uncertainties currently exist'-

' generally accepted accounting . jtatemems of capitalization of. relatinF to The Connecticut Light and ~ L[

principleiudng estimateg and i Northeast Utihties ta Massachusetti

~

- Power Compann ins estment in th'e-4 judgment, w here required, and giving ; . trusti and subsidiaries as of Seabrook nuclear project ( Becausel j

, icondderation to materiality. .

. December 31,1989 and 1988, and the management is unable to prediet how. '!

related consolidated statements of these uneenainties will be resobedl r The companihas endeavored to r ' income, common shareholders' equity, they cannot now predict w hai ponion otl -

es'tablish a control environment that ' cash Dows, and income law for each - the investment in the Seabrook proje4 ,

encourages the maintenance of high - of the three years in the period ended (appmsimately 5207.2 million at J j itandards of conduct in all of its December 31,1989. These Gnancial i December 31.19891 will ultima' tely.

business activitfes. The' company : statements are the responsibility of be recoserable.

j _ maintains a system of internalf .

the company's management; Our = .

]

l a'c counting controls that is supported by - responsibility is to express an opinion Hartford, Connecticut l' '

an organization of trained management- ' fon these Gnancial statements based on - February 16,1990; j l

, L personnel; policies and pnicedures, and , our audits. i 4 a comprehensive program of internal ' - ARTHUR ANDERSEN & CO. y L ~' audits. Through established programs, ~ We conducted our audits in accordance - 2 l;  : the ' company regularly. communicates to  : with generally uccepted auditing '

N l, fits management employees their' standards. Those standards require that < l L . . ; intemal control responsibiliticiand L we plan and perform the audit to obtain .[

l-policies prohibiting con 0icts of interestJ reasonable assurance atxmt w hether'the 1 l ' if , . eJ. ,.  : financial statements are free of material 'j

}The Audit Committee of the Board of .

misstatement An audit includes l} Trustees is compmed entirely of outside f esamining, on' a test basis, evidence 4 i = trustees. This conimittee meets-. > . supporting the amounts and disclosures '}

lV ' per,iodically with mimagement. the .

in the financial statements. 'An audit  ;

Lintemal auditors, and the independent also includes assessing the accounting -

g  :: auditors to review the activities of each principles used and signiGeant l' and to discuss audit matters. financial

~

estimates'made by mimagemen', as well

reporting, and the. adequacy of internal - as evaluating the overall finimeial i controls.' ,

statement presentation. We believe that l our audits provide a reasonable basis . ;i' Bee'ause of inherent limitations in any for our opinionJ

• ; system of intemal controls, errors or y irregularities may occur and not be. In our ooinion, the financial statements ~}

(detected.The company belteves. , preferred to above present fairly,in all ,

i ~ l howes erithat its s) stem of intemal material respects;the financial position 1

[ gecounting controls'and control . of Northeast Utilities and subsidiaries .

t . 3 environment provide reasonable as of December 31.1989 and 1988, and

' ' d Msurance that its assets are 5afeguarded - the results of its operations and cash' .1 i y , jfrom loss or unauthorir.ed use and that ' Dows for each of the three years in the -

Gits financial records, w hich are the basis  ; period ended December 31.1989,in- x S / for the preparation of all Gnancial

, conformity with generally accepted

, Estatement.s, are'reliablec accounting principles. ,

i >

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P NORTHEAST UTILITIES AND SUBSIDIARIES Wn j, 41 >

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, ;;? ' /For the Years Ended December 31;

-1989 1988 Iggy .

Nh0UMDd4 Ot DOlI4ft, f Mtpt %han, mIormation g f/7 ' Operations Escluding Discontinued Gas Operations:

- (?perating Resenues.. $ 2,206.288 -

/ '

. . . . . ,. . .. .. . . $ 2,079.248 $ 1.878.082 l M . Operating Espenws: <

i

, p Operation i aE J Fuel... . ,

.406.075

, . ..e.... .. . , , . . .416.092 3M5.725

i Purchased and interchange power, net... . . , , . .. -97,645 8.252 (20,542) -

l Other...,... .'. 501,585 514.165 561.979

. hiaintenance.. ., .. .. .. . .. 240,587 191.271 e

20s.023 -

Depreciation . . . . . .- . 197,630 206.769 192,431

.(- ' Amortiration of deferred Niillstone 3 return.. 51,780 - 68,894-

' i 2.i71 i

~ Federal and state income taxes tSee Consolidated '

p ' Statements of income TasesL .. . . .. . . . 'l51,401- 176.372 123.160

, r Tuses other than income tases.... . ... . . ... . . 174.480 166.174 147,879

Total operating expenses.. . .. . . . . . .. . . . 1.821,183 1.747.989 1.6tK) 826 i

.-Operating income.. . , . . .. . . . . . . . . . . . . 385,105 331.259 ' 277.256

Write off of plant costs.. . . .. , , . . . . . . . . . .. . . . . (9,010) (9.717) (24,122). t

' Ot he r, ne t .. . . .. .. . .... . .. . .. . . , .. . 10,548.-

. . . . ... . .. . . . . ,. 6.661 J(2,468) ',

' ' income taxes--credit... . .... . . . . . . . 27.797 .39.015 52.216 d L Other income, tiet.. 1

.. . . . .. .. .. , . 84,027 123.588 144.678- ,

. ulncome beforc interest charges.. . .. .. 469,132 454.847 421.934 e th

. op i ' Interest Charges JN ' Interest on iong term debt ., .. . .. . 230,212 219.793 203.065 Other interest. ~ .. . . , . . ,, '22,538 ' 14,078 17,713 +

- Allowance for borrowed funds used during construction.. .. .. . . . . . . . . , , .. .. , ,,. . C,876) ' (5,527) (16.632)  :

1 Deferred Niillstone 3 retum-borrowed i funds, net of income taxes . . . . , . (19,770) (36,923)

(35.3241 Interest charges, net.' ... . . . ., . .. , , , , 227.104 191,421 168.822 . ,

income after interest charges . .. . .. . . . . . . .. . . . _242,028 263,426' 253,112 > i Preferred Disidends of Subsidiaries.. . . . .. . . .. . - 38,803. 38.582 ' 38.583 ~

l.

Income from Continuing Operations.. . , ,, .. . . . . 203,225 224.844 ' 214.529

- Income from Discontinued Gas Operations (Note 1).. ' 'j

. 5,858 9.078 14.616 -

W - Net income ... . . . . . . . . . . . . . . . .. . .. $ 209.083 $ 233.922 $ 229.145- L' g Earnings Per Common Share:

, 1 Continuing operations.. . . . . , . . .. $ =- 1.87 $ 2.07 $ l.97 1

]  ; Discontinued gas operations (Note 1)., . , , . . . , , .. .05 .08 .- .14  ;

. Net income., , ,, . . .

$ 1.92 '$ 2.15 $ 2.11

a. . . . . , . . . . , . . , .

'c '

nCommon Shares Outstanding (average).. , , , ,, . . .. . 108,669,106 108.669.106 108.669.106 oy. tg rf.

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g m W NORTHEAST UTil .'IES AND SUBSIDIARIES

. . ~ =

S M . W ..- ., ' .lhe accompanyin. g notes are an, integral part of these financial statemems.

, _f 2.

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4 c.

c . For the Years Ended December 31. 1989- 1988 1987-e (Thousands of Dollaru w.

f(C Income .. Cash Flows From Operations:

hefore prefened dividends.. . . 4 . . . .. $ - - 242,028 $ 263.426 $2 253,112 j l

ls Adjusted for the following: 'l

Depreciation and amortipation of leased property.. . .. . .. 282,712 '307.836 30.i,957_ 3 Defened income taxes and insestment tax credits, net., . . 37,506 40,722 51.473 Deferred return-Milhtone 3.. . . .. . . . (62,1771- (l11,927) (129.541)

' Amortization of defened Millstone 3 reti.m.. . . . . .. 51,780 68,894 2,17i Rate moderation fund.. . . . . . . . -- . .

(77.694) 25,3N ~

Write off of plant costs.. ... . . .. , , .

. 24.122 .

L' D Amortization of deferred charges and other _.  ;

l nuncash items... .. . ..... . . . . . . . . . f6,065 37,781 _ (42.07 I i -

-l Changes in wotLmg capital: I o Receivables and accrued utility resenues . . . .. . . . . . (41,898) (61.131) (10.831):

Fuel, materials, and supplies . , . . . . . . . . . . . . . .. . . . . . . (24,767) . (3.183) (16.268) ,

a . Accounts payable . . . .. .. . .. . . . . . . .. .. .. . 38,967 -(3,370) (11.027) 1

' Accrued taxes.. . . . . . . . . , . . . . . . .. . .. . .. . . . . . . , 10,360 78.971 (57,430)' '

< Other w orking capital (excludes cash).'.. . .. .. ,, . .. , .. ... (22,727) 10.083 11.204  ;

l. LNet cash flows fro:n continuing open,tions... . . . ... . . . 567,849 550,408 4N.175 ,  :

Net cash Dows from' discontinued gas operations (Note 1).. . . . . . . . . .. 15.716 23.794 30.348-

' Net cash Gow s from operations.. . . ....... . . . . . 583.565 574,202 '434.523- f Cash Flows From Financing Activities: .t l- - Prefened stocL ., , . . , , . . . . , ,, . .. . . . . 125,000 $3.500 :80.000 .

f Long. term debt... . . . . . . . . . . . .. . .. . . . . .. . .. 170,121 313.000 328,549 .,

,, . Increase in obligations under capital leases.., . . . . . . 32,515 87,006 114.128 l Net increase (decrease) in short. term debt,.. , , , ... . .. . . . . .. (25,000) -(56.500) 83,000

' [i ' '

Reacquisitions and retirements of long.temi debt and preferred stock .... . . . , .. ..... ... . . . . . . . (390,168) (247,462; (232,N35 )

7 Premium on reacquisitions and financing expenses . , . . .. . -(3,538) (12.979) (23.8021-1i '  : Repayment of capital lease obligations.. . ' . .... . . . , , ... '(103.283) (108.516) (121.627).

Cash dh idends on prefened stock... . .. , , , (39,779) (40,510) (40.451)

Cash dividends on common shares... ... . , . . , , , . (191,258) (191'257)

, (191,258)-

Special dhidend-discontinuance of gas operations . ,, , , , . .. .. (101.012) - -

j- Net cash Dows from financing activities.. ., . .. . . ..... . . (526,402) (203.7181 (4,296) -

1 1nsestment Aethities:

L Investment in plant 6% ding capital leases):

Electrie and otinr utility plant., . . . . . . .. . . . . (259,430) (265,560)  :(304,939)

' Gas' utility plant; . ., , . .. . . . . . .. - (11,159) - -(26.379) (24.558)

Nuclear fuel.. . . . . . . . . . . . . . ... , , , , (22,636)  ;(86,976) (122,163)

\ , t.ess: Allowance for other funds used during con'struction .. . ... (2,713) (2.537) (13.467) =  !

Net cash Dows used for in estments in plant. .. . . . (290,512) (376.378) (438.193) ~

Discontinuance of gas operations (Note 1).. . . . .. . 244,980 - -

Other investment activities, net., , , , , .. . , . . . ., , , ,. (16,975) - -

- Net cash Hows used for investments ; , ,, ,, , .. . . . (62,507) (376,378) -(438,193) ~

Net Decrease In Cash For The Period .. . . .. .. . . , , . . . . . . . . (5,344) - (5,894) (7,966)

~ Cash beginning of period.... . . . ., , . . . . . . . . . . . , , . . . . ...... 13,878 1 19,772 27.738-

Cash end of period.. . . . . . . . . . . . . . . . .. . . .. . . $- 8,534 $ 13.878 $ 19.772; Supplemental Cash Flow information

Cash paid durin'g the year for:

Ititerest' net of amounts capitalized during construction..

, . .. . $ 244,239 $ 224.187 5 214.202

, Income taxes . .. . .. . . , , , , , , , , , .. . , . . . $ 90,479 5 30.509 $ 72.889 I

NORTHEAST UTILITIES AND SUBSIDIARIES s

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

P ' ( C- .

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• For the Years Ended December 31. 1989 1988 y 1987-iThouunds or Dollars, ewept percenugeo M :The components of the federal and state income tas provisions ~  ;

J[A * }': ; Cunent charFed to continuing operations are:

income tases:-

Federal.... . . . . . . . . .. .. $ ' 60,7% , s 70.607 $'

.. .. '15.706 ,

S tate .. . .. ..... . . . . . .

26.027

. . . . . . . . 25.302 3.765 l l ' ,, Total cunent.'...... ... .

Deferred income taxes; net;

... . .. 86,098 96.634 '9.4714 j Federal .... ... .. . . . . . . . ..

44.275: 50.895 j

. .. . .. 81.323 State... ,, ..... . . . . . .. . . . . . . .. .. . . , 8.002 3.305 '12.152

' e Total deferred., .. . . .. . . . . .. ... . .. t 52.277 56.200 93.475- d

, 'insestment tat credits. net ... . . . ... . .. . . . . . . . . . (14.305) (8.557) - (2.5M2 r '!

~ Total income tax expense . . $: 124.070- 144.277'

. . . . .. . .. .. . .  ?$ s i10.364 -

l c The components of total income tat espense are classified as follow s:

4, income taxes charged to operating expenses.. q i

n . . . . . . . . ... .. $1 151,401 $- 176,372 .S' '123.160..

1 income taxes associated with the amortization of 9 i li

,l i deferred Niillstone 3 retum-borrowed funds ...~.. .

' income taxes associated with the allowance

. . . . . . . (13,942) , (18.805) --.< j o

j

' for funds used during construction (AFUDC) und deferred hlillstone 3 retum-borrowed funds.. .. . ... .. 14,40J 25.725 L 39,4201 Other income taxes-credit . .. .... .. . . . . . . . . . . .. . . . (27,797) (39.015) 152.216) i Total income tax expense!. . .. ... .. . ,. ... . . . ... . .. .. . . . $ - 124.070 ' s' 144.277- .$ I 10.3M

=l i

Deferred income taxes are comprised of the tat elTects j

( of timing differences as follows:

4 Liberalized depreciation, excluding leased nuclear fuel . .. .  :$ ' 58,418 S 72.616 $

81.367!

']N Construction overheads.... . . . . . . . . . . . . . .. . . . . . . . . . . . 110,473) .-(l .360) . 7.082 J j fe Liberalized depreciation on leased nuclear fuel,

l. settlement credits, and disposal costs . , , , . . . . . .., 7,068 (8.172)  ; (9,591 ) - .i Q

. Decommissioning costs;..... . ., 942 -(2,680) -

1366)=

Energy adjustment clauses , ...... . ..

l

.c 6,772 14.825) (21.3951 d b - AFUDC and deferred Niilktone 3 return, net ; . .. . .. 465 6.920 39.420 j

,^..' .- = Rate moderation fund... '.., . . . . . . . . . . . . . , . .. . . . . 856 28.826 4 12,509)

' Write.off of pl.mt costs.. ,.

1 l

. . . .. . . . . . . . . . (3.871) (4.029) (5.854( j Attematise minimum tas .. ..... . ... . . . . . . . . . . . . . . .. - --

(15.895).  ;

' Contributions in aid of construction.. . . . . . . . . . . . . . .. ... (2,690) (5.200) - (5,674) E  !

L '

Loss on bond redemption... ...... .. , . . . . . . . . . . . . . . . .

2 1,666 . (42) T 6.847! I

< Pension accrual... . ...... ... . . , . . . . . . ... 7,587 '(5.130) - (2.957) ,

.'Other... .. . . . . .. . . . . . . , . . . . . . . . . . . . . . . . . . " (2.866) - (4.154) 4.833

. Deferred income tases, net..

, , . . . . . . . . . . . . .. . $ 52.277 - $ 56.200 ~$ '93.475

[ The elfective inconie tax rate is computed by dividing total income tax ,

d expense by the sum of such taxes and income after interest charges.

4 _A '

The differences between the effective rate and the federal statutory i i in.9me tax rate are:

Federal statutory income tat rate.... . . . .- 34.00 % 34.00 % 39.95 crc Tai effect of differences:

w - Depreciation differences.. . . . . . . 1.25 3.10 :1.69

', 1 s Other funds portion of AFUDC not recognized as H, income for tax purposes.. . . . .

g .. . .. . .. . (.25) - (.21 ) (1.48) '

% ,< Deferred hlillstone 3 retum--.:other funds.. . . . . . . . . . . (3.94) (6.25) (10.36) -

, f Amortization of deferred hiillstone 3 return-other funds.. . . 3.50 4.25 .18 i

'f . Construction overheads-portion not deferred.. . . . . . . . .. (3.14): (1.07) (.51) : 1 K  ; investment tax credit amortization..., . . . . . . . .. .. .. .. (2.62) (2,10) ' (2.43)

- State income taxes, net of federal benefit . . . . . . . 6.08 5.18 2.62 - ,

- Other, net . , . .. . . .. . . . . . . . . . . . . . . . .. (.99) (1.51) .70 C b Elfective income tax rate.... . .. . ... .... . . . . . . . . . . . . . . 33.89 % 35.39 % 30.36 % -  !

A,.,h

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, SNORTHEAST UTluTIES AND SUBSIDIARIES e G i The accompanylng notes are un imegral part of these financial statements.

N '

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- - At December 31. ._-

~1989' 1988 4

f. ,_m.' .

frhomas of Doll uu .

ir .

m

• AS4ettL w .t (

! ' V Utility Plant, at original cost:;

M Electric e . . ... .. .. ,. . . . . ~ . . . . . . . . . . . . . . . . . . . , 56.396,326 . 156.199.446-

,((>  ; Other ...... ..-... . . ... ..-... .. .. . . . . . . . .. . . . . . . . . . . 89.999 ' 77.9I5-7 ;7 ,

6,486.325 6.277.36l'  !

w' ^ L'ess:l Accumulated provision for depreciation'. . . .m.... . . . . . . - . . . , . . . . .

1,779.107 - 1.628.751  %

P 4,707.218 4.648,610 L L Constructioniork in progress (CWIPL.. ... ... . . .. .. . . . . . . . . , - . . . 329,409 ~ 325.104 .

e e,

' Nuclear fuel, net. . . ,, , . . . . . . .. . .. . ., ,, . 277 !91 348.316.- 3 +-

[ . .

I Net utility plant, continuing operations.,

. . . .. . . . . . . . . . . . . . . . . . 5J14.218 5.322.030 ' ]

p' Discontinued gas plant (includes CWIP of 56.641.000 in 1988)(Note 1).. . ,, ...

- '347,244 i ,

lP ,  : Leu: Accumulated provision for depreciation... . . . . . . . . . . . .. . . . . . . . . . . . .

92.657 Net discontmoed gas plant..- 254.587. "

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Q .i

-Total net utilpy plant.. .. ...... .... . . . .. . .. . .. . .. . . . . . . . . . . . . . . . . . . . . . . . -5.314.218 5,576.617 y l ' Other Property and Insestments:

Investments in regional nuclear generating companies, at equity... ... .. .. . . . . . . . . . 66,264 64 / 77

. Investments in transmission companies, at equity.., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - . , -24,738 s '-

> Other at cost..... .. ... . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , , , . . . . 26,071 33.214 3 a >

117,073- 97.891! ,

' Current Assets: . .

. . j q

~

Cash and special deposits,. ..... . . .. .. . . . . . .. . . . . .. .. .. , ,,, . . . , , . . . . . ~ 8,534 13.878l Receivables, less accumulated provision for uncollectible

^

c{

j Q ! accounts of $8,452,000 in 1989 and 59.623.000 in'1988.. , .. 283,690- 270,409' QtAccrued utility revenues;.

. . . . , , . . 106,005 99,448 - .'

]

L Fuel _ materials, and supplies. at average ; . . . . . . . . . . . . , , , , , , , . . . . . .. 160,977 144.747

Prepayments and other .. .. . . ..... .. . .. . . . . . ... .. ., . . . . . . . . = 25.676 -15.571- l s

.O g

e 584,882 = $44.05i d '

Deferred Charges::

,f n: U Unamortiied debt expense i. . . .... . . . . . . . . , . . . . . . , , . . . . . . . . . . . . . . . . . . . I13,327' 12,577 I f = Energy adjustment clauses, net . . ... .. .... . . . . , . ., . ., . . . . . . . . . . . . . . . . . . . . 25,005  : 26,232 1

y i Unrecovered spent nuclear fuel disposal costs...... . ... .. . . , . . . . . . . . . . . . 27,879 - 25.433 3 g, Q Canceled nuclear project !.. ....., , .. ,.. . .. .. .. .. . . . ..

xDeferred costs-Millstone 3,..

. ....., .. .., . . . . . . . . . . . . . . . .. .16,6% 19.205- u 4 4 .. . . . . . . . ., .- . ,, ,, . . . . . ... . ,, 279,368 :276.015'

, M Amortirable property investment---Millstone 3.. ... .. . .. .. . . . . . . . , . . ,71.942 . 82.369' E >

Other,. , , , ,.. . . . . . . . . . .. .. . . . .. . . . . . , , . . . . . . ,, , 72.812' 104.216 :

,h ,J 507.029 - 546.047 : 0 J M 4 Total Asset.s.. . . .. .. , , ,

.. . . . . . . . ... . . . . . - . . ' $6.523.202 $6.764.608

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t NORTHEAST UTILITIES AND SUBSIDIARIES y N y* The accompanying notes are an integral part ot' these financial statements. -

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s 1989 1988

,  : (Thousat< of Donssi >

L /  % Capitalization and Llabilities . =y

D

' J Capitalization:lSee Consolidated Statements of Capitalization) 4

~ Common shareholders' equityt . q Common shares. 55 par value-authorised 225.000.000 shares:

outstanding 104.669.106 shares in 1984 and 1988. .

.l

.. . . ... .. .. .. $ . 543,346 5' 543.346' -i

,i1 Capita 1 surpius, paid in .

. , , .. . . . . . . . . . . . .. .. .. 455,174 ~ 456.626 '  !

s 3 Retained camings.. . . ... - . . . ., . . .. .. .. . . .. 753.875 = 837.062

. Total common shareholders' equity.. ., , .. . . .. . . . . . . 1,752,395 1.837.034 L ,

- Preferred' stock not subject to mandatory redemption.. .. . . . .. .. . . 394,695 344.695 Preferred stock subject to mandatory redemption.. , , , .. . .. . . . 179,392 -109.392 Long term debt ,... ...... . ... .. . . . . . . .. . . .. 2.546,716- 2,706.57I Total capitalization ... . .. . . .... .. . . . . . . . .. . 4.873,198 4.997.642-a

!: r

,. Obligations Under C9;ntal Leases; .... .. .. . . . .. .. . ,,. ... .. . . . 225J13 306.582 Current Liabilities:  !

L Notes payable to banks.... .... .. . . . .. ... . . .. .. .. . .. .. ... . . . li,.A)0 . 95.000

' Com mercial paper.. , ..... . . .. .. ... . .. . .. . . . . , .. .. .. . . . . ., , .. .. . , 106,000 51,000 4

- Long term debt and preferred stock-current portion . . . . . . . . . . . . . . ..... . 80,885 .125,812 i

Obligations under capital leases-eurtent portion.. . . .. .. . . , .. .. . . .. ., . , 115,933 : 103,770 . .

' Accounts payable ... ... . .. .. .. . .. .. . .. . .. . ... . . . . . .... .. . . . . 169,144 '140.399 q

~ Accrued tatesi. ..

... . ,.. . . .... . .. .. . . . . . . . . . . . . . .. , . . 147,756 133.372'

' Accrued interest.. .... . ... .. . . . . . . .. . . .. . . ... . . . . . . .. . .. . .. . .. . . 51,491 63.567 1 Other.. 49,968-i i

m

(-

736,177

'59.269 772.189

1 i

, Deferred Credits: .

Accumulated deferred income taxes. , .., , ,. . . . . ., . . . . . . . . 409,553 ' 382.817 Accumulated deferred investment tax credits. . ., , . . . . . .. . . . . . . . 228,020 -254.456 .

h

,  : O t he r ... . . . .. . .... . . , . , , _ . .. . . , . . . , . , , .., . . . 50,941 :50.872' j - 688,514 - 688.145

Commitments and Contingencies (Note 7) 4

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Total Capitalleation and Liabilities. . . . . . . . . .. $6,523,202  : 56.7M,608 l

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f f . NORTHEAST UTILITIES AND SUBSIDIARIES 7 lThe accompanying notes are an integral part of these financial statements.

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1989 1988 j

]

tThousana of Donam Common Shareholders' Equit) (See Consolidated Balance Sheets) . . . . . $ 1,752,395 5 1.837.034' Cumulatise Preferred Stock of Subsidiaries:

A $25 par salue-authori/ed 11,600.0Khhares at December 31.1989 and 1988; 1 outstandmg 10.340.000 shares in 1989 and 5.340.(XK) shares in 1988

' $50 par value-authorfied 9.000.(NKhhares at December 31,1989 and 1988; outstanding 5.661.745 shares in 1989 and 5.760.5(M shares in 1988 #

' 5100 par value-authori/ed 1JXN)JMIO shares at December 31.1489 M and 19A8; outstandmg 350JNN) shares in 1989 and 1988 j Current Redemption Current Shares Dnidend Rate pricewal Outstandinc @#

1 Not Subject to Mandatory Redemption: 1

$25 par value-Adjustable Rate ' $ 25Jki 4.140.000 .. . 103,500 53.5(x) d

$50 par value-$ 1.90 to $4.80 - $ 50.50 to 5 54.00 5.123.895 .... 256,195 256,195 1 5100 par value-57.72 to $9.60 5103.5 I to $ 103.99 350J100 . .. .. '35,000 35JMX1 1 Total Preferred Stock Not Subject to Mandatory Redemption... . .. . . . . . . -394.695 344.695 P ,Subj ect to Mandatory Redemption:(b) i

$25 par value-$1.90 to $2.275 5 26.90 to 5 27.25 6.200.000 .. ... 155,000 80J100 M L $50 par value-55.24 to $5.76 - 5 52.76 to 5 53.93 -537.850 ... 26,892 l

__ 31.832 7 Total Preferred Stock Subject to Mandatory Redemptiona . .. . . . . . . . - . . . 181,892 111.832 Less: Preferred Stock to be redeemed within one year.. . . . . 2,500 2.440- l p ' Preferred Stock Subject to Mandatory Redemption. Net . 179,392' 109.392'

-d Long. Term Debt:tc) ,

3 First Mortgage Bonds- a

higmtg . lmerest Rates q 1990 ~ 4-7/8% to 13.359. . . . . . . 2,500 28,380 l

, 1992 4 3/C~ . . . . .. 8,000 8,000 1 m 1993 41/44 to 121/4% . . ... . . . . . . . . . _ . . . . 140.000 250.000 1"94 ~4-I/2% to 12 3/8% . . . . . . _ . ,. . .. 107,000 .I81.624 -

1995 1999 5 5/89 to 104. , , .. . . ,, . 500,000 500.000

~2000-2004 E7-3/84 to 11% ... . .. . . . .. .. .. . 515,000 519.754 .

2005 2009 8-7/8% to 9 3/89 ...... . . - . . . . . . . . . . . . 155,000 I$5,000 .

2010-2014 15 % . . . .. . . . .. .. . . . .. ., . . . . .. -

11.217

- _l 2015 2019 7 3/8% to 12%.. .. . . . . . .. , 320.236 208.734 ' l i

Total First Mortgage Bends . .. . .. .... . . . . . .. 1,747,736 1.862,709 A Other Long. Term Debt- m

' Pollution Control Notes-1998 2007 ' 5.90% to 6.50% . . . . . . . .. . . . . . 26,020 26.140  !

'2003 2018- Adjustable Rate . . . .. . 415,500 - 415.500.  !

-Notes- l

1989 1992 7.969 to 9.234. . . . . . .. . . . . . , 155,000 250JX10 Fees and Interest due for spent fuel disposal costs . . . . . . . . .. . 137,153 126.298 '

/Othera. . . . . . . . . . . . . . . . . , . .. . 150,483 155.498

' Total Other Long. Term Debt.. . . .. . . . . . . . . . 33 1 156 973.436 Unamortised premium and discount, net.... . . -. . . ... .

(6,79() (6.202)

Total Long-Term Debt . . . . .. . . . . . . . . 2,625,101

• 2.829.943

' Less amounts due within one year..- . .. . . . . .. 78,385 '123.372 Long-Term Debt. Net... . . . . . .. . . . . . . . . .. . .. . 2,546,716 '2,706 571 -

g- Total Capitalization.. .. . . . . . . . . . _ . . .

$ 4.873,198 5 4.997.692 Q:  % i NORTHEAST UTILITIES AND SUBSIDIARIES

'9

/ '

The accompanying notes are an integral part of thew financia' statements.

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.-;; 4 q .g M During their respective initial five year redemption ' Essentially, all utility plant of The Connecticut Light and

~

g / . periods, each of these series is subject to certain refunding Power Company (CL&P) and Western Massachusetts

. L hmitatjons. Redemption prices reduce in future years. Electric Company (WMECOh w holly ow ned subsidiaries

( j of Northeast Utilities,'is subject to the liens of their - I hL .

respective first mortgage bond indentures. In addition.

ib) Changes in Preferred Stock Subject to Mandatory CL&P and WMECO have secured 5346.1 million of

' Redemption: pollution control notes with second mortgage liens on-l

% wa,oronueo Millstone 1, junior to the liens of their respectiie first ,

e' ' Balance at January 1,1987.. . . .. 51ri6.832 -mortgage bond indentures. j a Issuci . . . .. . . . .  : 80.(XX)

I

Reacquisitions andf in connection with the July l.1989 disestiture of its pas i*s , Retirements .~ . , 141.(KKh business. CL&P extinguished its obligations with respect' ' f; Balance at December 31.1987., 205,832 m5 million principal amount of its Series P First and-

[-

Reaequ.Nt , ions and Refunding Mortgage Bonds and 525 milhon principal-

. Retirements.. ...n. ... . . . . ' 194.00(b amount.of its Series R First and Refunding Alertgage -

" Bonds. CL&P extinguished its obligations with respect to- *

' Balance at December 31.1988... .. , '111,832 these two series by depositing funds into irresocable . .

, luues o. . . . . .. . . .... . . 75,000 trusts on June 29,1989. The interest income and principal - i

. Reacquisitions and from the trusts' investments in United States Treasury ~ ,

i Retirements ... .. . . .. (4,940) issues will be used to meet the interest and principal  ?

Balance at December 31,1989.... $1N1,892 payments of both the Series P and Series R obligations as T they come due. At December 31,'1989. $25 million:

. . principal amount of the Series P Bonds and $25 million The minimum sinking fund provisions of the series principal amount of the Series R Bonds remain '

q subject to mandatory redemption aggregate $2.500,000 out.standmg but are considered extinguished for financial >

in 1990 and'1991, $4,000.000 in 1992 and 56,500,000 reporting purposes.

Lin 1993 and 1994, in case of default on sinking fund L payments, no payments may be made on any junior stock 3

J .

= by way of dividends or otherwise (other than in shares of 9(' l . junior stock) so long as the default continues. If a -  !

-" = subsidiary is in arrears in the payment of dividends on any - j outstanding shares of preferred stock, the subsidiary . t 4

.would be prohibited from redemption or purchase of less ' 3 than all of the preferred stock outstanding. ~!

1 l

'i

-(e) Long term debt maturities and cash sinking fund -

.g requirements on debt outstanding at December 31,1989

=

, for the years 1990 thmugh 1994 are approximately C 578.328.000, 5101,561,000. 580.405,000, 5148,755 h00,  ;

Y and $ll6,M101KX). respectively, in addition, there are :

I annual 1 percent sinking- und improvement fund

, requirements of approximately $17.296,000 for 1990, V y. 517.280,000 for the years 1991 and 1992,517,200,000 for q 1993, and $15,950,000 for 1994. Such sinking. and

, improvement fund requirements may be satisfied by the M g- deposit of cash or bonds or by certification of property q additions i.

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Earningss 4Thouund'.of Dollarn TotM ,

f f L Bilance at Januar.) 1.1987.. .. . . . .. . . ... . S 543.346 5 465.258. 5 756.486 = ' S 1.765.090 I

) '

Net income for 1987... . . . ... . .. .. . . . . . l229.145  : 229.145  ;

Cash dividendf on common shares-51;76 per share.. . . (191.258) (191.258);

1 Preferred stock inuance and retirement expenses. 'f s and premium on reabquired ' preferred stock . ,

(6.684 r 16.6R4 ) .

M t & Sale of minor ' ubsidiary.. s .,. . . .. -(24) 24

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1-Hilance at December 31,1987.... ~

. ..m.. ....,.. - 543.346 . 458.550 794.397 ..I 796.293 Net income for 1988.. , , . , . . . . . . . .. . , . .. 233.922 233.922; 1 W i Cash dividends on common shares-51.76 per share. (191.257) (191.257)' '

h- '

, . Preferred stock issuance and retirement !

• expenses; net of amortization.. . . . .. . .. -- (1.924)

( 1.924 ):

.. . ... o

. BIlanee at Decemher 31,1988. . ... .... . . . . . . ... . . . .  : 543.346 : 456,626 L ..837,062? 1,837,034 1

-Net income for 1989;....-.. . f

. ... . . . . ... . < 209,083; 209.083 '

Cash ldividinds on common shares-51.76 per share.....' ... - (191.2581 l (191.258).

. . Preferred stock issuance expenses, net of .

9 $ / amortitation . ... . ... . . . . . . . . . ... .. .... . L(1,452) L l1,452)'- $

i S

,M

[ ' j' .pecialdividend-discontinuance of gas;j operations.j NMb I ) .. . (101.0l$1 .. .. . ...... .... . ...(101.012 . . . . ..6 .

7 c  ; .

, ,  : Hilance at December 31,1989.. . .. . ..... $ 543.346 $ 455.174 - S 753.875 , ' $ 1.752.395 >

yn ~

i /.. (a) Cenain consolidated suhsiduries have dividend restrictions imposed by their

+ ' clong-term debt agreements: At December 31.1984, these restnctions totaled ~

55u7 million.The subsidiaries' unrestricted, undistriboted retained eamings a*e

,l R not available for distnbution to Northeast Utilitiev shareholders until such .

L ' 'i!- 1 eamings are made available through the declaration of dividendsJ j{

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E ' l. Summary of Significant Accounting Policies the United States Department of Energy (DOE) for the

[W disposal of spent ' nuclear fuel and high-level radioactive

(.) Principles of Consolidation: Northeau Utilities (NU or w aste, For nuclear fuel used to generate electricity prior to -

l - the comp.my )is the parent company of the Northeast April 7,1983 (prior period fuel), payment reay be made

!.  ; Utilities system tthe system). The consolidated financial- anytime prior to the first delivery of spent fuel to the 4 i' statements of the company include the accounts of all DOE. At December 31,1989, fees due to the DOE for the k

, 3: wholly owned subsidiaries. Significant intercompany disposal of prior period fuel were approximately $137.2 .

[ . transactions have been climinated in consolidationL million, including interest costs of $55.0 million. As of

~

December 31; 1989, approsimately $109.3 million had i

'- Public Utility Regulation: NU is registered with the been collected through rates. U

. Securities and Eschange Commission (SEC) as a holding ,i Lf f company under the Public Utihty Holding Company Act of Fees for nuclear fuel burned after April 7,1983 are paid to ~!

l '1935 t 1935 Act), and it and its subsidiaries are subject to the the DOE on a quarterly basis. -r L provisions of the.1935 Act. Arrangements among the system

, ' companies. outside agencies, and other utilities covering insestments and Jointly Owned Electric Utility Plant:

[ - interconnections, interchange of electric pow cr, and sales CL&P and WMECO own common %k 4 four regional L of utility property are subject to regulation by the Federal nuclear generating companies. These companies, with the Energy Regulatory Commission (FERC) andkr the SEC. system's ownership interests, are.

The operating subsidiaries are subject to further regulation a j for rates and other matters by the FERC and/or applicable Connecticut Yankee Atomic Pour lj state regulatory commissions and follow the accounting - Company (CY) 44.0 9.

fpolicin prescribed by the respectise commissions. Yankee Atomic Electric Compny 31.5% ' d

.. Maine Yankee Atomic Power Discontinued Gas Operations: Effective July 1,1989 Company (MY) .

l 15.0%

l, .NU divested the gas business of its wholly owned Vermont Yankee Nuclear Power

(

)L subsidiary The Connecticut Light and Power Company Corporation (VY) .l2.0G '

V 1CL&PL The gas business divestiture was effected to a comply with the requiremenn of the 1935 Act.The distiture created a new independent gas holding The system's insestments in these companies are

-conipany system, with Yankee Energy Systemilne , t YES) . accounted for on the equity basis. The electricity produced

c as us parent. The diyestiture was co'mpleted by means of a . from these facilitics is committed to the participants based l[ Bpecial stock dividend to NU shareholders. YES is on their ow nership interests and is billed pursuant to  ;

~ completely independent of NU, except for limited services contractual agreements. ,

rendered to YES, at cost. over a three. year transition  !

period under a service contract and facility leases. CL&P and WMECO have a 65.17 percent joint ownership interest in Millstone 3. a 1,156-megawatt (MW) nuclear Resenues

Utility revenues are based on authorized rates generating unit. As of December 31,1989, plant iin-apphed to each customer's use of electricity. Rates can be service and the accumulated provision for depreciation Increajed only through a formal proceeding before the included approsimately $2.3 billion and $219.1 million, s

= ~appnynate regulatory 'comrmssion. At the end of each respectively, for the system's share of Millstone 3. The '

4ecounting period. CL& P and Western Massachusetti system's share of Millstone 3 expenses is included in the

, :q i Electric CompanyiWMECO, a w holly ow ned subsidiary corresponding operatiry expenses on the accompanying ,

g  : of NU) accrue an estimate for the amount of energy Consolidated Statements of income. I L .. . , dehsered but unbilled.

n. Depreciation: The provision for depreciation is y p + Spent Nuclear Fuel Disposal Costs: Under the Nuclear calculate'd using the straight.line method based on

%te Policy Act of 1982. CL&P and WMECO must pay estimated remaining useful lives of depreciable utility

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+

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,(' l ..)' i f p! ant in-service, adjusted tor salvage value and removal Allowanee for Funds Used During Construction Mr% f costs as approsed by the appropriate regulatory agency. (AFUDCH AFUDC; a noncash cost calculated in- j

["

~

Except for major facilities, depreciation factors are . accordance with FERC guidelines, represents the  !

] applied to the userage plant in ser6 ice dc6ng the period. estimated cost of capital fundiused to finance the '

Major facilities are depreciated from thclime they are system's construction program. These costs, w hich .,

placed iniervice.' When plant is retired from service, the are one component of the total capitalized cost of i

ori Final cost of plant, including costs of remostil,lew construction, are not recognized as part of the rate

salvage,is charged to the accumulated provision for . base for ratemaking purposes until facilities are  ;

4 depreciation. For nuclear production plants, the costs of placed in service.

removal, less salvage, that have oeen funded through 4 external decommioioning trusts will be charged to those The effective AFUDC rates under the prosof income

trusts. See Note 2. " Nuclear Deccmmissioning," for tax method for 1989 and 1988 we (10.1 peicent and h additional information. 9.1 percent, respectisely,in;!987 'AFUDC was. I capitalized at 9.4 percent,except1 a trash to-energy i De depreciation rates for the several classes of electric project and Seabrook I, which were capitalized on a  ;

. plant in-service are equivalent to a composite rate of 3.4 net of-income tax basis at 6.2 percent and 6.7 percent,

. percens m 1989,3.5 percent in 1988, and 33 percent - respectively, in 1987, in conjunction with the establishment of a $4.7 billion income Taxes: The tax effect of timing differences statutory " cap" on the construction costs of Seabrook I, (differences between the periods in which transactions effective January 1,1988, CL&P stopped accruing : ,

' affect income in the financial statements and the periods in AFUDC on its Seabrook l' investment. For additional j

~ w hich they affect the determination of income subject to information regarding the Seabrook project, see Note 7, tau is accounted for in accordance with the ratemaking " Commitments and Contingencies."

. treatment of the applicable regulatory commissions. See '

l Consolidated Statements bf income Taxes on page 27 for Energy Adjustment Clauses: CLdP: Retail electrie-A ?the components of income tax expense, rates include a fuel adjustment clause t FAC) under w hich ,

fossil fuel prices abose or below base rate lesels are i l

The company has not provided defened income taxes for charged or credited to customers. Administratise

! certain timing differences during periods u hen applicable proceedings are required each month to approse the FAC

- regulatory authorities did not permit the recovery of such charges or credits proposed for the following month, income taxes through rates charged to customers. The Monthly FAC rates are also subject to retroactise review

cumulative net amount of income tax timing differences and appropriate adjustment by the Connecticut for w hich deferred taxes have not been provided was Departmen't of Public Utility Control (DPUC) each

approximately $750 million at December 31,1989. As quarter after public hearings. Effective January 1,1989 allowed under current regulatory practices, defstred taxes the DPUC adopted a better tracking and more timely

-.no: previously provided are being collected in customers' FAC.This mechanism does not permit the recovery of all rates as such taxes become payable, changes in fossil fuel costs.

In December 1987, the Financial Accounting Standards The DPUC did not allow deferred fossil fuel accounting

_ Board issued Statement of Financial Accounting for the period January 1,1989 through December 31,1989 '

t 'Standardi No. 96, Accomningfor /ncome 7ines (SFAS and continues to disallow deferred fossil. fuel accounting.

~ 96 SFAS 96, as amended, supersedes previously issued The DPUC is permitting CL&P to recover prior deferred <

income tax accounting standards and will be effective in fossil fuel balances, which at December 31,1989 1992. The company expects that when SFAS 96 is adopted amounted to $54.4 million and $10 million, over a it will increase assets and liabilities by approximately $1,1 remaining period of six years and one year, respectively.

• j; billion but will not have a material effect on net income. without earning a return. ,

NORTHEAST UTILITIES AND SUBSIDIARIES l

l 'W L

I

_ _ _ _ _ . . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _a

I e

3 1 l

The DPUC has approved the use of a generation investment in Millstone 3 is to be phased into rate base in l' l

= utilitation adjustment clause w hich levels' the e{fect on

) . fuel costs caused by variation 3 rom f a specified composite-four 5-percent steps beginning in 1992. The amortization j and recovery oi' deferrals through rates began January 1, V nuclear generation capacity factor 170 percent effectis e l

1988 and will end no later than December 31.1995. As of--

January 1.1989). At the end of a 12-month period ending December 31.1989. $108.9 million of the defened return.

July 31 of each year, these net variatiom from the' amounts

j including carrying charges, has been reem ered. j included in haw. rate cost les els are refunded to. or collected from, customers mer the subsequent Il month il3fECO

Under the temn of the original Millstone 3 ,

period beginning in September. Should the annual nuclear phase in rate order, WMECO must apply to the DPU for s

capacity factor fall below $$ percent. CL&P would hase. resenue increases sufficient to reemer the Niillstone 3 to apply to the DPUC for permission to recover the installments as they are to be phased in. On June 30.1989

.:dditional lu11 expense. During the period from August I. the DPU allowed the fourth of fise equal annual 19M to July 31.1989, the composite nuclear generation installments of the "used and useful" portion of factor foi !he sesen operating New England nuclear units WMECO's imestment in Millstone 3 to be added to in w hich CLAP has an ownership interest w as 75.7 WMECO's rate base. At December 31,1989. 5282.6 ,

percent, resulting m a fuel cost savings of approsimately million, or 80 percent, of the "used and useful" porti<

$29.1 million, of WMECO's imestment in Millstone 3 was in rate base, leaving $70.6 million, or 20 percent, of WMECO's it3fECO: As permitted by the Mesachusetts Department recoverable Millstone 3 investment for future phase in.

of Public Utilities (DPU). WMECO defers the difference between forecasted and actual fuel costs until it is Beginning in 1986. the DPU has permitted WMECO to tecovered or refunded quarterly under a retail fuel reemer the portion of its Millstone 3 investment

' adjustment clause. Massachusetts law requires the representing the amount currently determined to be I establishment of an annual performance program related "unuseful" by the DPU (560.5 million at December 31.  ;

to fuel procurement and use. The program establishes 1989) escluding the applicable equity AFUDC, mer a l q perfonnance standards for plants owned and opera:cd by ten year period, without earning a return. On June 30 J WMECO or plants in which WMECO has a life of unit 1987 WMECO also began to reemer the deferred return, contract. Therefore, resenues collected under the includmg carrying charges, on the reemerable but not yet WMECO retail fuel adjustment clause are subject to phased in pertion of its imestment in Millstone 3. This refund pending review by th DPU. To date there base recovery will take place oser a nine-year period. As of been no significant adjustments as a result of this program. December 31,1989, $17.5 million of the deferred return.

including carrying charges, has been recovered.

Phase in Plans: As discussed below, both CL&P and WMECO are phasing into rates the recoverable parts of On December 15.1989, WMECO filed an application their respective Millstone 3 investments. These plans, as with the DPU requesting the fifth and final annual currently designed, are in compliance with Statement of installment of the phase in plan to become effective on Financial Accounting Standards No. 92, Rexulated July 1,1990. -

I Enterprises tecountingfor Phase in Plans.

CLdPAs allowed by the DPUC, CL&P is phasing into rate 2. Nuclear Decommissioning base its allowed im estment in Millstone 3. The DPUC has ,

provided for full delerted earnings and carrying charges on A 1989 decommissioning study realfirms that complete the portion of CL&P's allowed im estment in Millstone 3 and immediate dismantlement at retirement is the most

. not included in rate base. 'Ihrough December 31.1989, viable and economic method of decommissioning the l . CL&P had placed into rate base $1.4 billion, or 80 percent, three Millstone units. The estimated cost of of its allowed investment in Millstone 3. The re naining decommissioning the system's ownership share of these

$351.3 million, or 20 percent, of CL&P's allowed units is $678.7 million in year end 1989 dollars.

, (D

?V 1

. NORTHEAST UflLITIES AND SUBSIDIARIES E

L

," i '

~

Decommissioning studies are reviewed and updated Interest included in capital lease rental payments w as l 1 2 n . periodically to reflect changes in decommissioning $31,177,000 in 1989, $29,524,000 in 1988, and l f

L(v ,. requirements, technology, and in0ation.- $31,392,(XX) in'1987, CL&P and WN1ECO have established independent Substantially all of the capitallease rental payments decommissioning trusts for their portion of the costs of were made pursuant to the nuclear fuel lease decommissioning Niillstone I,2, and 3. agreement. Future minimum lease payments under the

, nuclear fuel capital lease cannot be reasonably estimated Aiof December 31,1989, CL&P and WNIECO has e - on an annual basis due to variations in the usage of

}' collected through rates $94.3 million for future nuclear fuel.

decommissioning costs, of w hich 568.9 million has been transferred to external decommissioning trusts, Although a Future minimum rental payments, escluding annual

portion of the estimated total decommissioning costs has nuclear fuel lease payments and eAccutory costs, such been approved by regulatory agencies and is reflected in as property tases, state use taxes, insurance, and . -'

'the depreciation expense of CL&P and WN1ECO, the maintenance, under long. term noncanceiable leases, as companies beliese resenues in amounts greater than those of December 31,1989, are approximately:

currently being collected will be required to pay the full projected costs of decommissioning, Capital Operating Year Leases Leaws_

1 Thousands of Dollaru

3. Leases 199(L. . . . ,, s 6,400 s 25.600 1991. , 6.Mio 21,4m CL&P and WNIECO have entered into a capital lease "- '

agreement to finance up to $530 million of nuclear fuel for gn94 , _ 3yo up Niillstone I and 2 and their share of the nuclear fuel for After 1994.. .. . . _ . . . 41.900 50MO

, . Niillstone 3. CL&P and WN1ECO make quarterly lease Future minimum lease

(, payments for the cost of nuclear fuel consumed in the pay ments .. ,, '74300 $ t 31.700 reactors (based on a units.of production method at ra.es Less amount representing which reDect estimated kilowatt hours (LWh) of energy interest- . . . . 31.100 provided) plus financing costs associated w ith the fuel in Present value of futus -

the reactors. Upon permanent discharge from the reactors, mimmum lease payments

ownership of the nuclear fuel transfers to CL&P and f r other than nuclear fuel.. 43.600 WNIECO. Present value of future nuclear fuel lease pay ments.. 297.600 The system companies have aho entered into lease Total -_, , mm agreements, some of w hich are capital leases, for the use '

of substation equipment, data processing and office equipment, vehicles, nuclear control room simulators, and

4. Short Term Debt office space, The prosisions of these lease agreements generally provide for renewal options. The following The system companies have various credit lines totaling rental payments base been charged to operating expense: $400 million. Of this amount, $350 million is available Capital Operating t NU, CL&P, and WNIECO through a revolving. credit Year Leases Leases agreemem with a gmup of 11 banks. The maximum 1989,... ..$ 127.602.000 $ 29,274,000 ng mt un th agrumem b 1988.. . . 138.065,000 27,298,000 $350 million less amounts borrowed by WNIECO

, 1987.. ... .141,185,000 31,794.000 (not t exceed $105 million) and by NU (not to exceed

$100 million). NU, CL&P, and WN1ECO may borrow fr NORTHEAST UTILITIES AND SUBSIDIARIES

4; , ,._ _ _..

j ,

4 funds on a short tenn revolving basis using either fixed- The components of net pension cost are:

rate loans or standby loans. Fixed rates are set using iL competitise bidding. Standby loan rates are based upon f'$,$dM"d'd y  %  %

p - several alternatis e variable rates. NU, CL&P and iThousanos ui poii.uu WMECO are obhgated to pay a facility fee of .1875 senice cost.. .. 531.020 - 531.843 $32.812

[ . percent per annum on their propertionate share of the Interest cost.. 61,415 59.715 54.318 y  : commitment. At December 31,1989, NU, CL&P, and Retum on plan assets .. (160,750) (84.8251 - 06.81l a WMECO had an' aggregate of $10 million outstanding Net amortization . 'l2.N52 - 10.431: (31.1 9 ) j

- under this agreement. Net pension cost... 514.537 c 517.214 s19.15x

{

The remaining $50 million is as ailable to the NU sy stem '" "I#N"# P#" " ' * * * # "E"""*E "'

companies through a revolving credit agreement with a l

group of seven banks. Under this agreement, the NU For the Years Ended 1 system companies can borrow in the aggregate an December 31. 1989 N W  !

amount not to exceed 550 million.-Loans under this Discount rate . 9.5% 9.59 8.59 agreement are on a short term revolving basis in the form Expected long. term raie .)

f retum.. 9,7 9.7 9.7 of either Eurodollar Loans based on the London Interbank Offered Rate, plus 3/8 of I percent, or as C m[eman n/ Progression Alternative Base Rate Loans at the greater of the prime rate or 1/2 of I percent over the Federal Funds Effective Rate.'This agreement will expire on August 25.1991 The following table represents the plan's funded status unless extended, on an annual basis, for a maximum of rec nciled to the consolidated balance sheet:

four years beyond the expiration of the initial three year At December 31. 1989 toss term.' At December 31.1989, there were no borrowings (thousands of Douaru - i under this agreement.

Accumulated benent obligation.

includmg 5439,8&t.tXK) of sested ,

benefits at December 31.1989 and  ;

- 5 Retirernent Plan 5386.618.txx) of sested benents at December 3 l,1988.. 5471.387 $419.781 The company's subsidiaries participate in a unifonn i Projected benent obhganon.. 720,994 694,315 noncontributory defined benefit retirement plan covering all regular system employees. Benefits are based on years '*f,'n p , ,',',f,'.. M74.792 768.txit of service and employees' compensation during the last Ntarket value in exec 5s of projected five years of employment. Total pension cost, part of benent obhgation.. , 153,798 73.686 j.

t which was charged to utility plant, approximated Unrecognized transition amount.. 0 0,837) t34.233) 'i

$14,537,000 in 1989, $17,214,000 in 1988, and Unrecognized net gain . , _ . . (140.607). i67.259)

$19.158,000 in 1987. Accrued pension thabihty).. 5(17.646) 5(27.806)

' It is the policy of the sub3idiaries to fund annually an The following actuarial assumptions were used in amount at least equal to that which will satisfy the calculating the plan's year.end funded status:

requirements of the Employee Retirement income Security Act and the internal Revenue Code. At December 31. 1989 1988 Pension costs are determined using market related Discount rate.. . 9.0% 9.59

.; values of pension assets. Pension assets are invested 1' nTemat PmgmWon primarily in equity securities, bonds, and insurance

'***" ' 8 contracts.

i NORTHEAST UTILITIES AND SUBSIDIARIES

1h

' t

. In addition to pension benefits, the company's subsidiaries n ' provide'certain health care and life insurance benefits to . Euthorized its distribution to PSNH's creditors and/ i security holders for veting. A hearing to confirm the plan

! . retired employees.The cost of providing those benefits ~

is scheduled to begin on April 4,1990,if the required was approximately $9,618.(KM in 1989. $7,333.000 in votes cre obtained. '

-1988, and $6.567,000 in 1987, The company recognizes health care benefits primarily as incurred and provides for NU's plan contemplates, among other things, (i) the life insurance benefits through premiums paid to an

- acquisition of all PSSH's common stock by NU;(ii) the insurance company.

transfer of PSNH's 35.6 percent ownership interest in Seabrook to North Atlantic Energy Corporation (North Atlantic), a newly fonned company that will be a w holly

6. Public Service Company owned subsidiary of NU:(iii) the formation of Northeast of New Hampshire (PSNHI [

Utilities Operating Company, a wholly ow ned subsidiary of NU that will assume responsibility for operating i After an unsucceuful eIfort to restructure its finances in '

Seabrook it and (iv) the issuance by NU, a reorganized 1987, PSNH filed a soluntary petition for reorganization PSNH, and North Atlantic of certain secunties.

under Chapter 11 of the Bankruptcy Code on January 28, 1988. Since that time, PSNil's reorganization proceedings NU's acquisition of PSNH's common stock will be hase been pending in the United States Bankruptcy Court  ;

accomplished in a single step if all regulatory approvak for the District of New Hampshire.

are obtained and all other conditions are satisfied in time to accomplish a one-step reorganization. Otherw ise, the L NU announced, on November 16,1989, that it had i plan contemplates a t o-step reorganization under which. j reached agreement with the ofHeial committees '

in the first step, PSNH would emerge from bankruptcy as representing PSNHN unsecured creditors and equity a free-standing,indeoendent company conducting all of security holders and the major holders of PSNH's third PSNH's current utility operations and retaining its interest mortgage bonds on a jointly sponsored pian for NU to in Seabrook. At that stage,it would not be an NU

'( acquire PSNH, On November 22,1989, Northeast Utilities ,

( Sersice Company, a w holly owned subsidiary of NU, on subsidiary. However,in accordance with the Bankruptey Court's confirmation order, it would be lmund by a merger j'

behalf of SU. and the Governor and the Attomey General agreement with a newly formed subsidiary of NU, under of the state of New Hampshire entered into a Rate which it would agree to merge that subsidiary imo PSNH

!- Agreement for PSNH, providing for a comprehensive rate w hen all regulatory approvah and other conditions are program for PSNH based on sesen annual 5.5 percent rate satisfied. Then, in the second step that would take place increases and a revised fossil. fuel and purchased. power when regulatory approvals are obtained and all other adjustment clause. On December 13,1989. PSNH  ;

L conditions are satisfied. PSNH would be acquired and annount ed that its Board of Directors had voted to support would become an NU subsidiary through the merger NU's acquisition plan, and on December 18,1989, the described abose.

Governor of New Hampshire signed into law a bill authorizing the New Hampshire Public Utilities NU's acquisition plan places an aggregate valuation on '

Commission (NHPUC) to implement the rate program if it PSNH of approximately $2.3 billion, which is the amount is found to be consistent with the public good. The first to be made available for distribution to PSNH creditors temporary retail rate increase of 5.5 percent was put into and shareholders. The plan assumes an $828 million net c effect on January 1,1990; that increase is to be held in book value for PSNH's operatmg assets. Of the $2.3 escrow by an escrow agent approved by the NHPUC. The billion value NU proposes to value the Seabrook assets at NHPUC proceeding with respect to the NU acquisition

$700 million and the operating assets at approximately plan is scheduled to be completed by June 1,1990.

$1.6 billion. This will write down the value of Seabrook and assign a $789 million premium to the operating assets.

On January 2,1990, the Bankruptcy Court approved the ,

The premium would be recovered through New disclosure statement with respect to NU's plan and Hampshire rates in accordance with the Rate Agreement.

NORTHEAST UTIUTIES AND SUBSIDIARIES E

P Numerous New England utilities and govemmental . On August 23,1989.the DPUC approved an agreement jq agencies have objected to the acquisition and raised issues w hich The United illuminating Company (Ulh an ,

) . about NU's transmission policies. Although NU has sought unaffiliated Connecticut utility, entered into with various V - accelerated regulatory review of the proposed acquisition, state officials, providing for the amount of Ul's imestment

- and has presented extemise infomiation about the benefits 'in Seabrook I th,,t will be recognized in UI's rates. Under of the acquisition. regulatory approvals are not assured. the agreement, approximately 54 percent of UI's total Seabrook't investment through December 31.1989 will be The financing for NU's proposed acquisition of PSNH recinized in UI's rate base o er a fis e year period. CL&P will be effected by NU and PSNH, and does not im olve has been negotiating with state of0cials in an effort to CL&P, WMECO, and Holyoke Water Power Company, all achieve an agreement with respect to CL&P's investment operatmp compames of the NU system. Howeser, as in Seabrook i that is comparable to the Ul agreement, subsidianes of an integrated public utility system, the Although no final agreement has been reached, such an operating companies will share in the economies that are ageement among state officials must be reviewed by expected to result from the proposed acquisition. the DPUC, and,'if approsed. could require a further write.down of CL&P's $190.5 million invest' ment in  !

Through December 31,1989, NU has expensed Seabrook 1.  !

approximately $14.5 million of costs associated with the acquisition of PSNH. Management cannot predict the extent to w hich CL&P will be permitted to recover its Seabrook I investment.

7. Commitmats and Contingencies Seabrook 2 has been canceled by the joint owners.

Through December 31,1989, CL&P had recovered ,

Construction Program: The construction program is approximately $8.8 million of its retail investment in subject to periodic review and revision. Actual Seabrook 2. CL&P has been granted $2.5 million of construction expenditures may vary from such estimates annual revenues to recover a portion of its remaining retail due to factors such as revised load estimates, inflation, investment in Seabrook 2, w hich at December 31,1989  ;

Q resised nuclear safety regulatiom, delays, difficulties in amounted to $16.7 million. The DPUC has not permitted the licensing process, the availability and cost of capital CL&P to cam a retum on this imestment, and the granting of timely and adequate rate relief by regulatory commissions. as well as actions by other Hy dro-Quebec: Along with various New England ,

regulatory bodies. utilities, NU has entered into agreements to finance and construct additional transmission and terminal The system companies currently forecast construction facilities (Phase 11) to import electricity from the expenditures (including AFUDC) of $1.49 billion for the Hydro-Quebec system in Canada. The Phase 11 project

. years 1990-1994, including $311.7 million for 1990.'In is currently estimated to cost approximately $490 million

addition, the system companies estimate that nuclear fuel of which approximately $410 million has been '

requirements will be $339.3 million for the years 1990- expended or committed as of Decernber 31i 1989, 1994, including $96.8 million for 1990. These facilities, which are scheduled to be placed in l-service in late 1990, would increase the capability of the l; Seabrook: CL&P has a 4.06 percent joint. ownership Hydro-Quebec interconnection to 2,000 MW. Upon l2 interest in the Seabrook project. At December 31,1989, completion of Phase 11, NU is expected to have a  ;

l CL&P's construction work in progress balance included 22.66 percent equity ownership approximating an imestment of $190.5 million in Seabrook I, in $35 million in the Phase !! facilities. Under the accordance with management's judgments, for financial '

temis of the Phase il equity agreement, NU guarantees L, reporting purposes, CL&P continues to write off cash the obligations of other participants that have lower l costs in excess of its recorded Seabrook I investment and credit ratings. NU receives compensation for such no longer accrues AFUDC on that investment. guarantees.

F /

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l: NORTHEAST UTILITIES AND SUBSIDIARIES l:

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Millstone 2: Corrosion, pitting, and denting of tubes Department of Environmental Protection, or the (

/N within steam generator assemblies base been problems N1assachusetts Department of Environmental Protection. In d found at numerous nuclear units. These problems were addition, the company cannot estimate the potential liability first identified ht Atillstone 2 in a 1977 outage. Since for future claims that may be brought'against the company then. the unit's steam generator system has been the by pnvate parties, flow ever, considering known facts, l

- subject of regular inspections and repairs. In light of the existing laws and possible insurance and/or rate treatment.

extensive repairs that have been required it will probably management does not believe such matters will hase a become necessary to replace Niillstone 2's steam material adserse effect on the company's financial position.

generators in the early 1990s. Commitments hase been l made to procure spare steam generator subassemblies, Nuclear Insurance Contingencies: The Price-Anderson and plans are being developed to prepare the site for Act currently limits public liability from a single incident l replacement. If a steam generator replacement becomes at a nuclear power plant to $7.8 billion. The first $200 necessary, an outage of five to six months could be million of liability would be prosided by purchasing the involsed. The total cost of the replacement (including the maximum amount of commercially available insurance.

ost of equipment being procured but excluding Additional coverage of up to a total of $7.2 billion would replacement pow er costs) is estimated to be 5200 million be provided by an assessment of $63 million per incident. l including AFUDC. levied on each of the I15 nuclear units currently licensed ,

to operate in the United States, subject to a maximum

~

Ensironmental Ntatters: The NU system is subject to assessment of $10 million per incident per nuclear umt in regulation by federal, state, and local authorities with any year. In addition,if the sum of all public liability respect to air and water quality and the disposal of toxic claims and legal costs arising from any nuclear incident substances and hazardous and solid wastes. The cumulatise exceeds the maximum amount of financial protection, long. term economic cost impact of increasingly stringent each reactor operator can be assewed an additional 5 environmental requirements cannot be estimated. Ilowever, percent, up to $3.2 million or $362.3 million in total, for  !

,. to comply with such requirements, the system may incur '

all 115 nuclear units. The maximum assessment is to be significant additional costs in connection with the adjusted at least every five years to reflect inflationary ,

? generation and transmission of electricity and the storage, changes. Based on CL&P's and WA1ECO's ow nership transportation, and disposal of by .pnxlue: and w astes. The interests in the three Niillstone units. the NU system's system may also encounter significantly increased costs to maximum liability would be $175.4 million per incident.

remedy the environmental effects of prior disposal in addition, through CL&P's and WN1ECO's power

- practices. These changing environmental requirements purchase contracts with the four Yankee regional nuclear could hinder the construction of new fossil. fuel generating generating companies, and CL&P's ownership interest in l units and could require extensise and costly modifications Seabrook I, the NU system would be responsible for up to to the system's existing hydro and fossil-fuel generating an additional $70.5 million per incident. Payments for the units. The system may also face significantly increased NU system's ownership interest in nuclear generating costs for work centers and other facihties as a result of facilities would be limited to a maximum of $37.2 million environmental regulations. per incident per year.

The extent of additional future environmental cleanup costs  !

l insurance has been purchased from Nuclear Electne l- is not estimable due to factors such as the unknow n Insurance Limited (NEIL) to coser: (i) certain extra costs l magnitude of possible contamination, the possible effects of incurred in obtaining replacement power during a future legislation and regulation, the possible effects of prolonged accidental outage with respect to CL&P's and l - technological -hanges related to future cleanup, and the WN1ECO's ownership interests in htillstone 1,2, and 3, I difficulty of determining future liability,if any. for the and CY, and (ii) the cost of repair, replacement, or l cleanup of sites at which the company has or may be decontamination of utility property resulting from insured l designated a potential responsible party by the United occurrences at htillstone I,2. and 3, CY, htY, and VY. All i States Environmental Protection Agency, the Connecticut companies insured with NEIL are subject to retroactive 1 Q i NORTHEAST UTILITIES AND SUBSIDIARIES 1

.h

4 1 h.- '

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• K, (Q f

• assessments iflosses exceed the accumulated funds . -

4 ' available to NEIL. The maximum potential assessments .

t t. i

$ .M ' aga nst CL&P and WNIECO with respect to losses arising during current policy years are approximately $17.0

%M~ million under the replacement power policies and 512.8-million under the property damage and decontamination g[T policies. Although CL&P and WhlECO have purchased i" l the limits of coverage currently available from the y

i "'

conventional nuclear insurance pools, the cost of a nuclear h.

incident could execed available insurance proceeds.

y ..

,)

'p sin addition,imurance has been purchased from American

' Nuclear insurers /htutual Atomic Energy Liability Underw riters, aggregating $200 million on an industry I

• basis, for coverage of worker claims. All companies insured under this coserage are subject to retrospective assessments of $3.25 million per reactor. The maximum potential assessments against CL&P and Wh1ECO with 1

respect to losses arising during the current policy period i; are approximately $12 million.

Financing Arrangements for . he Regional Nuclear Generating Companies: The o 5 ners of CY, including i CL&P and Wh1ECO have guaraweed their pro rata shares

[* of 522.0 million' 17 percent Series A Debentures. The fg m

guarantees of CL&P and WhlECO sggregate $10.1 million.

~f' i jh (,'

CL&P and WA1ECO believe that the : *gional nuclear q

generating companies aill require additiinal external '

financing in the next several years for construction

. expenditures. nuclear fuel, and other purpose 3. Although the w ays in w hich each regional nuclear generating company will attempt to finance these expenditures have

' not been detemiined, CL&P and WNtECO expect that they may be asked to provide direct or indirect Gnancial '

support for one or more of these companies.

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, NORTHEAST UTILITIES AND SUBSIDIARIES o

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, 1989 1988- 1987 1986.' f

. (Thousands of Dollars, except percentages and share datai e , Balance SNeet Datat.

i Net Utility Plant- e a ,

' Continuing Operations ~. .. . .. 55,314,21N '

yj 55.322.030 $ 5.265.428 55.128,125  ?

Discontinued Gas Plant Ia).. . . . . . . . .

'54,587- 237.903 'i 224.581' Total Auets . . .... -. . .- . . .. .. . . . . . 6,523,202 6.7M.608 6.663.794 ' 6.299.755 )

Total Capitalization ib).. ., .. . . . .. . 4,954,083 5.123.5(W 4,743.914.-

4.956.080 1 j Obligations Under Capital Leases (b).. .. . .. . 341,246 410.352 432.714 441,183  !

l income Data:

Continuing Operations:

'{

. Operating Revenues , .;.. . . . . . 52,206.288 52.079.24H

$ l.878.082 5 1.828.303i Net income . . .. . .... . . '203,225 224.844

~ 214.529 171.234:

Eamings per Common Share.. . .. . . . . $ 1.87 5 2,07 5 1.97 $ 1.58

. Discontinued Gas Operations (a):

Operating Revenues . . . .. . . . . . . . . . .. $ 124,229 $ 200.243 $ 202.816 5 203.814 .

Net income . . . . .. . .... . .. ,. .... .. 5,858 9.078 14.616 10.705:

Earnings per Common Share.. , ... . . .... . . . . . $ 0.05 ' $ 0.08 - $ 0.14 $ 0.10 :

Common Share Data: >

1 Eamings per Share . . . . . .. . . . . $ 1.92 5 2.15 1

$ 2.11 $ 1.68

' Dividends per Share... $ 1,76 5-1.76 ~

$ 1.76 ~ S 1.68  !

Payout Ratio (% ).. ..... .. . .. ,. . . . . . . . . 91.7 81.9 83.4 100.0 -

Number of Shares ,

. Outstanding-Average . . . . . 108,669,106 108.669,106 108.669.106 108.352.517

' Market Price-High .'.. .. . .... ... $ 23 ' $23%

l 528 $28% ,  !

Market Price-Low.. . . . ... .. . . .. .. $ 18% $ 18% $ 18

-t $ 17% :

. Market Price-Closing Price l

~\

- (end of > ear) . . . .... . . . . . . . $22% 519 % 520 % $ 24% -

Book Value per Share (end of year).. $16.13 516.90 516.53- $16.24 1 Rate of Retum Earned on Average

- Common Equity (G).. . . .

11.8 13.0 12.8 10.4 Dividend Yield tend of year)('t).. . 7.8 8.9 8.7 j 6.9 Market to-Book Ratio tend of year).. ,, , . . , 1.4 1.2 1.2 1.5 Price. Earnings Ratio (end of year)... . , . .. .. .  !!.7 9.2 9.6 14,4 j

- Capitalization:(b) .

Common Shareholders' Equity.

, .-. $ 1,752,395 51.837.034 51.796.293 $ 1.765.090 -

Preferred Stock Not Subject to Mandatory Redemption.. . . . 394,695 344,695 291,195 'I 291.195 Preferred Stock Subject to Mandatory Redemption.. . 181,892 111.832 - 205,832 166,832

• Long-Term Debt.. 2,625.101 2.829.943 2.662.760 2.520.797 Total Capitalization . $4.954.083 55.123.504 54.956.080 54.743.914

- (a) See Note i of Noses to Consolidated Financial Statementt (b) Includes portions due within one year.

O NORTHEAST UTILITIES AND SUBSIDIARIES

, .-,.., s n.

1985- '1984 = 1983- -1982 1981-- 1980-LThousands of Dollan. etcept pen;entages and share data) l f,Q^

b5 55.204.687 54.650.428 54,122.692 53.570.710 $ 3.175.641 ' i S 2.885,414 ; .

214.115 2N.187 :192,861 183.322. 166.959 151.032 f l 6.I47.720 - 5.507.040;- 4.957.927: 4.309,368 . 3.940,I44 3.641.960 4.681,995 j 4.3 I9.4N ' 3.954.569 3,465,395 3,189.493 ~ 2.824.567, '

440.587 392.593 337.636 286.603 14,563 14.218 1

51.861,011 51.870.822 51.650.082 51.538,773 51.473,789 5 1.179,161: .I 277.768 276,615 209,905 143,040 82,788 86.503-

- 5 2.62 5 2.73 5 2.24 .5 1.67 5 1.17 5 1.22 l 5220.010 $ 224,430 $ 238,999 5 224.447 5 181.268 5 145.384' l 10,773 12,323- 11.M3 8.202 8.615- 5.964 5 0.10 5 0.12 5 0.13 5 0.09 5 0.12 . 5 0.09 ,

5 2.72 5 2.85- 5 2.37 5 1.76 5 1.29 5 -1.31 5 1.58 5 1.48 5 -1,38 5 1.28 5 1.18 5 1.10 k 58.I 51.9' ,58.2 72.7 91.5 84 0 4 106.221.131 101.398.235 93,497.945 85.777.230 73.783.201 67.555.006..

5 18 % S l4W $ 13% $ 12W 59% 5 9% -

5 13 % '510 % 5 11 % . 58% $8 57%

,] -

l (/ $ 174.- $ 14% 512W $ 12W 5 9W 58 516.21 5 15.07 513.84 512.96 512.83 513.45. :i I7.4 - l 9.8 . I 7.8 - ' I3.8 9.9 0.9 8.9 10.4 11.3- 10.6 12.9 13.8  ;

i.1 0.9 0.9 0.9 0.7 0.6 6.5 5.0 5.2 6.9 7.1 6.1

'.~

. $ 1.738,871 51,575.705 51,361,724 51.159,698 51.013.205 5 917,244 ,

291,195 291,195 291,195 291.195 291.200 291,200-

'i

!85,833 186.978 I88.547 iN.461 66,f01 53.209 2.466.096 2.265,526 ~2.113.103 1.910 N1 1.818.487 1.562.914 i 54.681.995 54.319.4N 53.954.569 53.465.395 53.I89.493 5 2.824.567 ,

l-l-

i 1

NORTHEAST UTILITIES AND SUBSIDIARIES l -' .

. - g . .

d & n ,:n

'l o . .

h)Q,,$j:-

Ni-h[.]htf@p~ gp @ l Quarter Ended ,

1 l

by 141999 - March 31 June 30 September 30 -.. - December 31 -

'O ~ dK (Thouands of Dollars, except per share data) -

-0. Continuing Operations: 4

', < J ,'l

,' $ 559.610 = $ 510,203

$ 562,363 $ 574.1121

%, Operating Revenues.- . . . . .. .

< . l,

": $ 105,083 $ 103.646 - . $ 88,177 : H

. Operating income.. . . . . . . .

y -

.$ '. '8.199

% 4

. Net income = . . . . . . . . . . . . . . . . . . . . . .$ 60,758: $ 40,490 $ 55,918 -' $ 46.059

',' ,7 i Eamings Per Common Share.. . .. . . . . .. 5 0.56 $ 0.37 $ 0.51 $ 0.43 LDiscontmued Gas Operations (an .

In y Operating Revenues... . .. . . .. .. . - . . . . . $ 85,780 $ 38.449 $ -

.m ,

, Operating income.. . . . . $ 12,728 - $ 41 $ -

$ - h e

f 9 Net income (Loss).. .. . . . .. . . . . . . . $ 9,341 $ (3,483) .$ -

c, t~-

ft Earnings Per Common Share. . .. $ 0.08 - $'0.03) $- $-

.1988 '

IContinuing Operations:

' Operating Revenues... . .... . . . . . . $ 537.490 $ 469.922 $ 543.841 ' $ 527.995 - ,,i

Operating income.. ....-. .. . . $ 84.140 $ 71.991 $- %.844 $ '78.284 l j! " Net Income... . . . . . . . . . . .. . $ 55.643 $ 43.976 ~ S 65.650 '

$ 59.575 l t Earnings Per Common Share.~. . . . . , . . . $ 0.51 $ 0.40 $ 0.60 $ 0.56 0 l>

..f ' Discontinued Gas Operations (a): b+

A - ; Operating Revenues.. .. . .. . $ 78.199 $ 34.999 $ 23.612 - .S'63.433 '

< LOperating Income.. . . $ 13.(M2 $ 2,125 $ (l80) $ - 6.824 -

L Net income (Loss).. ..... .. . .. .. S 9.860 $ (l.142) $ (3.388) $ 3.748 J i

N Earnings Per Common Share... . . . . $ 0.09 $(0.01) $(0.03) $ 0.03 s(al See Note I of Notes to Consolidated Financial Statements.

i 1

. t t

n H CONSOL IDA1F D GE NE HAL OPL HATlNG SI ATISTICS .i O t

)

,, gp 4 r

l. i ;. l 1989 1988 1987 1986 1985

' System Capability-MW (a).. .. .. . 5,%3.7 ' 5.737.7 5.5M.5 5.972.8 5.462.9 - ,

u , System Peak Demand-MW.. . . . . . 4,858.0- 4.883.3 4.590.5 4.241.5- 4340.2 l

Nuclear Capacity-MW (a) . . .. . . 2,397.1- 2.590.4 2,420.2 2.681.4 1.932.2 {

~

Nuclear Capacity Factor (%)(a)c. . . .. .. . 71.2 79.2 74.9 75.7 66.0 l Nuclear Contribution to Total I  ; Energy Requirements (%)(a) . . . . 56.8 68.5 68.5 67.1 47.6 l: . ~ (a) Includes company entitlements in regional nuclear generatmg companies, net of capacity sales and purchases.

NORTHEAST UTILITIES AND SUBSIDIARIES

_ _ _s m ,

, ~

1

H iAf46 i K H l)i tl int ( if(M A i it >N 2:

'. 1 l'

j l

l Shareholders .. Transfer Agents and Registrars j As of January 31. lWO, there were 151.37f common i The Connecticut Bank and Trust Company, N.A.  !

shareholders of record of Northeast Utilities. ' Stock Transfer Department

t

~ One Constitution Plaza

' Hartford. Connecticut 06115 Common Share Infot;mation . .

Ths common shares of Northeast Utilities an: listed on the State Street Bank and Trust Company '

New York Stock Exchange. The ticker symbol is "NU,"

Corporate Stock Transfer Department '

althouFh it is frequently presented as "Na st Ut"in s anou' 225 Franklin Street I financial publications. The high and low sa es prices and Boston, Massachusetts 02107 ~

disidends paid for the past two years by qua1ers are shown I below:

Form 10 K Quarterly Northeast Utilities will provide shareholders a coo) of its l Disidend 1989 Annual Report to the Secur8.nes and Exch:.nge Year Quarter - High 1.ow - Per Share Commission on Form 10.K,'ine;uding the financial ,

1989 First $21 $18% $0.44 statements and schedules threto, without charge, upon -

~{

Second 223/s- 19W 0.44 receipt of a written request sent to: '

Third 23 20W 0.44 Fourth 22 % 20 % 0.44 Theresa H. Alisop Assistant Secretary ,

19h8 First $23 % $19 W S0.44' Northeast Utilities .!

Second 20 % - 18 W 0 44 Third 20 % 18 W 0.44 P.O. Hos 270 )

Hartford, Connecticut 061410270 Fourth 21 W ~ 19 % 'O.44

^ Dividend Reinvestment and Common Share Purchase Plan The company has a Dividend Reinvestment and Common .

Share Purchase Plan under which all common shareholders may use their dividends to purchase additional common y

, shares. The company absorbs all brokerage fees for purchases under the plan.

The Connecticut Bank and Trust Company, N. A., One '

Constitution Plata, flattford, Connecticut 06115, is the company's dividend-paying agent and administers the company's Disidend Reinvestment and Common Share Purchase Plan.

Annual Meeting '

' Die annual meeting of shareholders of Northeast Utilities I will be held on Tuesday, May 22.1990, at 10 a.m., at 1.a Renaissance in East Windsor, Connecticut, which is located at Exit 45 (Warehouse Point-Ellington) of.

Interstate 91.

NORTHEAST UTILITIES AND SUBSIDIARIES E

i

< M.pnIgU.i UfuJii$$MfWICE COMPANY "

/

- ~.

R- ,

a A H OFFICERS =

' Chairman and Chief Esecutive Officer . Keith R. hian in William B. Ellis - Purchasing and Alaterials Afanagement John W. Noyes -

Pres.i dent and Chief Operating Officer Regulatory Relations Richard A. Reckert I:mard kl. For Fossil: Hydro Engineering and Operations:

Wayne D. Rombeig Esecutise Vice President Nuclear Operations

. John F. Opeka Walter T. Schultheis Engineerine and Operations Pon er Supply Planning and Research \'

C. Frederick Sears

' Senior Vice Presidents Nuclear and Environmenta! Engineering Robert E. Busch George D. Uhl ChiefFinancialOfficer Controller John P. Cagnetta Richard P. Wemer Corporate Planning and Regulatory Relations Generation Engineering and Construction Frank R. Locke Customer Service Regional Vice Presidents '

Edward J. Niroczka Roben G. Abair Nuclear Engineering and Operations Western Alassachusetts Lawrence H. Shay Richard R. Carella Administrative Services Eastern

(

Walter F. Torrance, Jr. Lesley C. Gerould i

i Secretary and General Counsel Southern Roy C. J. Normen Vice Presidents , Northern C. Thayer Browne Alfred R. Rogers Treasurer Central

. Tod O. Dixon Robert W. Zonghetti information Resources Western - l

.Raymond E. Donovan Alarleting and Consumer Services Assistant Secretaries  !

Albert J. Hajek Theresa H. Allsop Corporate Performance Services and Organi:ational Contro Douslas R. Teece ,

' Barry liberman Karen G. Valenti

' Humon Resources Francis L Kinney Assistant Treasurers

. Public Affairs Robert C. Aronson Hugh C. htacKenzie Arthur H. Hieri Transmission and Distribution Engineering and Operations Eugene G. Vertefeu\lle i-Executive Changes-Robert E. Busc h. semor vtcr pressdent, mas elected to the posanon of charffinancual oficer effecnvr February I.199th Busch succeeds Bernard .\t. Fon a s chieffinancial nFcer; Fo r n ull contusue as president and chief operannt officer Philup T Ashton. semor uce pressdent and generat manager -Gas Group. and John l. Smith. nce prestJeno.-Operations tGasI. resignedfrom NU to take Pounons n oth Yanker Energy Synem. Inc.. the dneurd gas business.

Retirements-Renring on July I, I939. after 39 years of service. nas Leonard A. O'Connor. vice prendent--Fmance and Accourunne As of February 1,1990 aan.

t

X [ OFFICERS - -TRUSTEES i

>'g .

'/ LWilliarn B. Ellis . -

'+# Richard L.Creviston

$ JChairman of the Board and Chief Esec'utive Officer Chairman and a Director

\ l Bernard M. Fox - NESB Corp. and its subsidiary banks d

'~

President and ChiefOperating ODicer *t Donald W. Da'vis F Robert E. Eusch Chairman of Esecutive Committee and a Director ; _ l

\ Senior \' ice President ana Chief Financial ODicer'- The Stanley \\i>rks Itools, hardware, and industrial L

'?

' products)

. Walter F. Torrance, Jr. =

Senior tice President. Secretary, and General Counsel *+# Donuld J.'Donahue Chairman C. Tlayer Brow ne Afagma Copper Company

\' ice Presulent and Treaswer -

• + William B. Ellis

George D. Uhl Chairman of the Board and Chief Etecutive ofjicer '

l1ce President and Controller *

• + Bernard M. Fos Theresa H. Allsep '

[ Assistant Secretary President and Chief Operating Officer

• t* George H. Harvey Ktren G. Valenti

Assistant Secretary Chairman of the Board. President. ChiefExectaire ' A Of]icer.and a Director

'Rohert C. Aronson Pitney Bon es Inc. imalling and office products. business .

' Assistant Treasurer "

^

supplies, andfinancialservices> '

Arthur H. Hierl' #t Eugene D. Jones i Assistant Treasurer Senior \1ce President

, Eugene G. Vertefeuille Greiner Inc. (consulting engincers)

Assistant Treasurer f* Elltabeth T. Kennan.

)g ,

President A Afount Holyo!e College

• +t Denham C.1 unt, Jr.

Chairman. Chief Erecutive Of]icer. and a Director

- Lunt Silversmiths

+#* Hurke Marshall Nicholas deb. Kat:enbach Professor of Law Yale Lau; School

• t William J. Pape II, Publisher ,

\\taerhury Republican and American (newspapers s

1. t S. Caesar Raboy Retired President. Chief Operating ODicer. and Director Connecticut AiutualLifk Insurance Company .

+# Norman C. Rasmussen a Executive Committee Professor ofNuclear Engineering

+ Finance Commnttee Afassachusetts Institute of Technology

1. Audit Committee t committee on organiunon, *+# Albert E. Steiger, Jr.

Compensauan and Boans Atratn President. Chief Executive officer, and a Director

? Corporate Responsibihty Commnttee Albert Steiger, Inc. (department store chain) jAllliam O Badey restgned as a Trustee in 1%W: he u as elected to serve as Cha:rman of the Board of Yankee Energy Svstem Inc.. the parent corporation of NU's Jnvested gas Imsmess.

Eduard B Bates retircJfrom the Board m 1%9 in accordance with the Boarits retirement pohcy.

Wuham K. Relliy reugned as a Truster m l%N. he nas appennted by Prendent Bush to be AJmenntrator of the Umred States Enarvnmental Protes own Agency.

>g b of Februan I. !W

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The NU seruce area stretches from the Connecticut shore to the Berkshires in

c' ~

Massachusetts and cos ers approximately 5.890 square miles (4.400 in Connecticut s c and 1.490 in Massachusetts) in 208 communities ( 149 in Connecticut and 59 in -

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From small rural communities to bustling cities. NU senes 1,251.680 electric DO customers in two of the most prosperous, changing states in the nation. (CLAP ' * ** A*"

serves 1,060.112 customers in Connecticut. In Massachusetts. WMECO serves -

MN.H NmW Awi 191.573 customers and HWP senices w holesale 44 large industries and two , '.'

municipal electric departments.)

[ . .,

'NU is in the process of acquiring the assets and the operatmg business of Public Senice Compim) of New flampshire (PSNil). Addition of PSNil to the NU system would stretch the northern reaches of the NU senice area to Canada, and add 5.445 square miles m 19S communities in New Hampshire. PSNil senes 3M.275 electnc customers.

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