Text

Massachusetts Municipal Wholesale Electric Co 1988 Annual Rept.
	ML19327B002
Person / Time
Site:	Seabrook
Issue date:	12/31/1988
From:	Leary G, Slattery R; MASSACHUSETTS MUNICIPAL WHOLESALE ELECTRIC CO.
To:	;
Shared Package
ML19327A998	List: ML19327A997; ML19327A999; ML19327B001; ML19327B002; ML19327B004; ML19327B006; ML19327B008; ML19327B009; ML19327B010; ML19327B019;
References
	NUDOCS 8910240176
	Download: ML19327B002 (42)
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...the teaclership anct vision to anticipate anci effectively aciciress n 1988, after a nur-long examirtation ofour organizatiort's purpose and stnicture, IM1nt'liC hqyin a process ofclunge tint i utilities.

173is pmcess has intvinyl clxinges in management, changes in the organization of M1nrEC and -most notably- changes in M1ntECs(msition uith nqxts to tlx Sathmokpro-

E .,

ject. It also Ixts intvinyl a rv examination of the senice rinvis of the MVWEC member utilities.

and the fxyinning ofan efors to restnicturv seniws to meet inditidual mernher navh 3 i Underlying these changes is an ongoing heliefin the conctpt ofjr> int action - unrking L .: - .. ? . Y -:]l '

togetler to achiar common goak 77t>w is stwngth in numben and the strength of municipal QBf5 Q :

. .& utilities acting together thmugh M1RTEC lxis been demonstmtal time and again.

.__:: .N Note, uv are looking formni tiv 199Cs and the rnany cinnges occunirig in 11x electric ll E utility industry. Wi> are nykfining the mie <>fM11WFC in protiding tiv serriws tint uillenabl,"

its members to rvmain simng and cornpetitite. lie clunges occuning at M1nr7?C nficct a

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commitment to senice and <ptality - a coninittment to impmting an organization that ins i~ pmten the sin >ngth and <fectiteness ofjoint action.

~

J To help us dirvct and implement livse changes ur selected Gary L Ihant as our nere t .

GeneralManager. Mr. Ihtntjoined M1nrEC in April 1983 and he is helping us to nsoliv l ,

, many ofM1ntlics Seabrook pmblems Ilis enthusiasm and commitment to making M1nrEC the Energy Star of the Commanutvathfor its memixr utilities also is helping to set tle stagefor

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<t.toniunh.ai-U...it-n.

nnicour a., w n t r. n Wi> lxnv a nete Chief Financial Oficer in l'irginia H Rutlalge, telv is norting to case the

< un ra,1.., a. n. mi pnancial hunlens ofSeabrvok tehile impmring thejinancial strength and integrity ofM1nrEc^

and its member totilities in additirm, lynn C Ihil became M1ntECs nete Ibuer Supply .11anager in January 1989, uith resyxntsibilityfor oversight of the pouer supplypmgram.

Wk> look to thefuturv ofM1Rr7?C uith confidence and excitement Wt> are making tiv l

changes that uill enable M1nrEC to pmtide the letvl and <ptality of senice needal by its niem -

ber utilities Wi> are confident ofotor abili,y to complete these citutges and excited about liv nsults thusfar.

I 1

Richard E Slatterv George E Lea y 2

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l A Process of Change up

Ibr many years, MMWEC hac ' 3400 l vided its members with a wide range of w

pn>fessional utility services, including a variety c' bulk power supply, financial, 1000 operations, engineering and other 9e***

seniets These senices have been delivered under the terms of a stand- 60c ard Service Agreement, which has been a requirement for membership ir. co MRMTC Costs for these services, many Ifnim/ wind 200 MalattS=Pri7 of which are mandarc.ry, have been , , y y ,

alkrrated am<mg the memtwrs Msed g g g on kikm itthour sales, peak demand or MMWEC/NEPOOL Member Systrms a combination of both.

The Service Agreement is one of threv key dwuments gmtming the relationship between MMTEC and its members The other two are the Rmer Sales Agreement -the take-or-pay mn- reali7al that the one-si7e-fits all app:txich lewl. MMWEC also is studying oppor- placing a greater eraphasis on short4erm traa that has enabled MMWEC to own to providing services may no k>nger be tunities to increase its revenues by power bn>kering to optimize the use of shares in generating plants- and the the best way to meet member needs. marketing its senices beyond the existing resources.

General ik md Resolurim, which gowrns The mandatory Senice Agreement unrked MAN'EC membership. In addition, ur haw made transmis the isstunce of MAMTC bonds. All three for a long time, but MMWEC now is As we omrinue working on these sion issues a top priority because it wi"

_ are subint to reexamination and change moving toward providing its members changes to make MAMT.C more re- he necessary for the MMWEC members in the process of responding to chang- with more service options. There is an sponsive to its members' future needs, to have actess to adeytute and afford-ing member needs. It is imponant to effort under way to customize service there also haw been changes to address able transmission facilities. And, we are note that any changes in the Power packages to meet the needs of individ- the members' present needs. working harder than ever to ensure the Sales Agreement or the GeneralIbnd ual or groups of member utilities. With a shift in focus away from "arge, efficient use of resources through cost-Resolution would not afTect existing This user-friendly approach to central generating stations in New Eng- effectiw load management and conser i

_ Rmrt Sales Agreements and bond issues. providing services may also imulve land, MMWEC is working to weam a ution programs, which will help limit -

Most of the focus to date has been different kMs ofmember4np in MAMEC, number of smaller projects into its the need for new generating capacity.

on the Service Agreement. MMTEC has with costs allocated differently at each members' power supplies. We n'so are

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weakh kx its member utilitics Eventu p1ssible.The MassachusettsSupeme achieving this Energy Star strus are:

and six Vemumt tailities for Priicct No. Judicial Oxat rea!Timxsl the valkiny of

An extrandmary ownmitrewns we mem-ggg, 6,which represcits more dun fulf ti - MANECs Seahnxskoxuracts in a July mittions ber smisfaction and servio, MM41icsomiershipin Sealmmk. An 19H8 decision,lxn die issue reized to s

A reliable pjwer supply putgram of the MMuliC notkm to reargue the krisim the Vemwwit detisitwt has yet to come was denittl by the o)un <ut J.ist 30,19H9 highest quainy a a ownpcikiw ow; 6

squarely frfore the coun. In itsJuly deci-'

1he financial integnty arxl stre.igth to lhe majoraulit r.ning agenciesfue sion, the Comnumweakh's highest axut nxxt memixr system capital fisurxr expressed their onwem almut the im. tpheld the audmarity of municipallight

--4 needs at ownpetitive rmes; lua of the vemset deciske m the txurds in M.tssxhusetts to enter into die

Consasiendy being seen as the segitxul ;

validityof twien M>.6omtraaswith beahnmk omtralswith MMWEC leader in power plant operathm and 3, Massadutsens panicipants it is MMWirs Akxx!)'s Imotors Scavice has suspen- demand-side pungram resuks; lxlief slut the Vemami decismm thics ded MM%1rsll.u aedit raing,StandJn! 1he leadership and vision to anticipme not adwtsely affeo the vahdity of the

'"* '*' '** & Rxx's Ox1x lus pixul MMETCsIMMS anduud adtkessthestraqyc oxurx1 sin & ainstAlas n wm ratingon CrethtWach with negative f

obpectives,intentsas and needs d our uteklyStudies Savings take alfinnative acion and nw>re omper-implications, arxl Duff & l'Irlps has rated member systems.

Cumulatin 1914 -1988 atiw efRms to satisfy the rating agencies. MMMEC delx at IXkP 11,which is just Arxi, until their concems are reschul, These are the values anxldiectiws bekm investnrru grade. that wiB guide MM%TCs work in 19H9 MM4EC wig be unable to realize the Ilowewr, MMWECwas able todxain maximum potential savings faun its delx as it enters its thin! decade of servic separme, investment-grade caulit ratings Massachusetts municipal smilities.

restructuring plans.

from Standaal & Poor's and Duff &

TheVemxwn issue tus surfanx!in a Ihelps for a $2.5 miBion MMWEC !inanc.

e inum i..I etms lawsuit fiksi againtst MMWiiC by Massa.

In the lisuncial areiu, MamliC is ing for the II)dru-Quebec profect.

chusetts municipal utilities in lludson With a prsitim resolution of the Ver-oncentrating on restaxiuring its our- and Italxxly, as well as in the Ouper rnontissue MMWECexpectsthatits staixhng detx arx! restoring the axnpa- 1I lunkrupcy proccalings of the East- Gary L Ifunt overall credit raings wit improve, whkh ny's awnpetitive position in the financialem Maine Elcaric Oxgrratim.'Ihese GenemlMa> sager wiB put the ownpany in a better ptsition nusketplace. Ik wh refku an effort to utilities are assening t!ut their P tiett to restruaure its outstanding dein at minimite the impaa of past and future Ntt 6 contracts with MMWEC slumid be ownpetitiw rates MMWEC financings ont rates in MMWEC wided becatise the Vemxmt decision nenber amunumrees mided the vemumt ctmtraas fnxn the lhe primary setunbhng block to I:ncrgy ?

beginning, leaving MAm1EC wittuxa 100 MMuliC isdeslicated to being the xhievingthese obkx1ims stems from a percent guiticipatieut in the prtiett. market luset), nistorncrdriwn, resuks-Sep. 27. I')HH detish m of the Wmxme MMWECis pursuing alegal strategy oriental Energy Star of the Oxnnwm-Supreme G iust. 'Ihe decisie o mids the desigixxl to resolve this issue as soon as Scalmuk o otrats between MM4EC

~_ _ - - - . - - - -

d

' Fitrly in 1%'% tiv I)tgral Equify

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meper Qvynmstion umirtlat f6tns to I' buikt a unwiduide rmining center ipt

--- Ibs4 econ rivst tnBinclude demnitorres clawsx>m quece, a caferena, arcms-rumalfacifutres -a rrnal<falmut 60ft0tX)

.- .epaarefeet in burkling pace T1cpmfwnedtnnningcentertmuld nnt,1y dorable tiv electric kusd of the purchases from other utilities.

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,, its pourr supply in sma!1er incre-

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'Ihe purpose of these efTotts is ments as demand increases. Ilow-to determine which combination of

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N ever, they also require more work ec ; resources, u Nen integrated with in the areas of snalpis, contecting Q'; . p' g demand management programs, will and financing. MMC also is offer-

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provide each member with a reli- ing its members more decision

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$ ;Ig h' able and balanced mix of resources points as work on these projects '

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at the lowest possible cost. With the proceeds.

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market for power extremely right in Another area receiving more j

cY[ JKi d y m y , j ' _

W New England, MMWEC is keeping attention at MMWEC is the availabil-

g. h!1 b$r. open as many options as it can. ity and cost of transmission, an

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g gy2{. g q Q 3;;.=7 + . 4 .

Smaller and privately owned essential part of any power supply A

aE E power projects, which at present plan. MMWEC has reorganized and J#nistorr .tfumcifwr/ />ghrrng I' tant In n to R > flestf.wtf thwe. I*n6 ton .tran

- rdanning to acomimrvlate tivgmt:1h. en~~ :%f Lif tnw %pth1%nonvg dominate the market for future sup- fortified its pourt supply staff to

! lightingplant .tfanager lim,1 ford tr7ere ;t. mot.cr atttw7r plies, will enable MMWEC to add to nmlal ansurrs to servral <prestions triere u,U tiv fwarr comefmm' //orr

.mu h u, sit o,sr> tru,t ,,vu he ar cut on otherlighttngplantcustomed tilvtt MMWEC Power Supply Program

~an le done to make Ilv insintng cen.

]O5D $fOWDC8 UD$t$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

'er as eneryy egit re--t asfwmrhic? W.F. Wyntan Seony SmrA 9ermy Smte Linit W. 4 Interniettisse t1nie Fenheng twr l .if lfWTCfm uluced tle rnft erinattort lorsrInn- Yamanch. ME Ldm. m Ladb=, m

_tl7sie nmirst by drrining on a numler W W **W" MW W

, af rn ivr ,v resourtes 77v /faqiston Poef: W 6 Od Nn 2 Od/Mamrd Gas Net 2Od 1btalCaperaryr 6t9 MT 343 MT IM w

.Itsigrrment sofar Iris intvdtnipmynt MMWFC ownenertr 22.7 MW 3113 Mud') im Mw rng laurr tiv trairring center trillaffwt 'HR*"ac LWE No. S Seshmtek twe Nnu I Mniston's prvik Irvid and enery7 use. Imentina: Wmedwd. CT W ea.NH vsarninng the martvt for arnikable

, ,m m a, p, Feet, Nedrst Naient cafun rtr andpnm tzng(w>rwr ants in *I C*F*'W ' '

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ssddettorr.1f.tfirTC rs helprnq llenistorr l

lesign an appmpnate mtep w tiv cevu j ,er, rehrtb pmr rdes !)tgrtal rnth fle O %dmienharn for nrnme nher pare,aparm f*T3 irneaw er,2.mn ww under n2w ti

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-inforwration it nmis to deterinnte tiv M**"* * **' M M"' O '*'t

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savings of more than $500,000 for i

9 MWEC's Ibwer Supply l

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yg Center maintains an ex-the AmmEC memtwrs in 1988.

To meet its members' longer-temi tensive database ccmta n-

.6 requiremerts, MMWEC is investigat-l

[R 1/l'C'l' l.'/ /[][][)1

' ing detailed infomaation on each memner utiiity s power

. ing a number orpotentiaigeneraung I resources- from the purchase of

, / > / 'OR / 7 / / /supply / O/and requirements 'Ihis data- three megawatts from a landfill gas-i /[J(> /[f/1[Jg,y/ base is essential in providing the fired generating unit to the possible broad range of power supply construction of a 200-megawatt plant

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services needed by the MMWEC by MMW'EC. A differenticvel ofimes-A' L 0 / /11>l'illll'e members. tigation and analysis is required for ,,,,,,,,,

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i 1hese services -delivered with each resource to determine its suit- s a-6.w' s a -

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! i lob-f speed, accuracy and economy- dl mber systems. ..

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l enable the members to address their , ability for indiv'. ua * " ' meMMWEC

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near term needs, accommodate se w .".' a **n., ,.,,.r.s4 s,.

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t from dozens ofindependent power a, n.p < .e . w.v.w.

4 I growth and plan for the future. producers over the past two years '"#""'""*'"*#

MMWEC is able to forecast theand is in various stages of negotia- uav u m ,s

m. n .v .w l

encry;y and capacity requirements tion for with sestral dewlopers. A power exh memirr on a daily basis as wellplant siting study completed in 1988 as owr the long tenn. Ibily forecasts is the first step in a process that are used in arranging short-term l couldlead to construction of a new j purchases and sales in an elfort to l unit if other resources are not avail-

' match the supply of electricity with

' f able to meet members' needs. In the demand for cadi member system. addition, MMWEC continuously l

I This power supply optimization f monitors the market for contract

, program resuhed in power cost l

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ensure that members receive the hers in meeting the requirements of A l.awrt nte

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optimum lewi of service in the many the state Depanment of Public Utili- . . ...ico i )1 niihd ~ .

different areas of power supply plan- ties. Ibnicipating in Federal Energy

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ning and dewlopment. Regulatory Commission proceedings . %3;;- e ./ .i :: .1ntirli All this work comes together in and representing members in the %, 1i {~ * ]:g!!jjk[hiFUiiii l..a::::.. a ::id: j M -

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the dewh>pment and filing of a New England Ibwer lix>l are among

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~i ic jyglF Iiiih!.g long range forecast of energy needs other regulatory services provided 7

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' DE and resources with the state Energy by MaiWEC. ,,_

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F.icilities Siting Council, as required MMWEC maintains a profession- --

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j, gn by state law. Meeting the siting coun- al, experienced staff to deliver the ,,

cil requirements, which includes the - many qualitv and competitive ser- [K "" .j 2ilgd2gibij;;.!![SI[ ! .n vices needed to support the MMWEC 8 - Al 2 H"'bES E filing of forecasts for each member w system, is but one of sewral n:gulato- power supply program as well as _

individual member system needs. .tras,. i.,,,cus snuniispra utda,.s ua w ,diuse m esfrde,,,.1,,d.s deenty ry services avaibble timxigh MMWEC.

Inne I n-n .n cu,ng alum ta nr<ns udt s{transnuawa>rs .r,, a MMWEC also assists its mem- 1risinnafn,2saufsfaluustitleLop uvuts e 1 suenfwnuar tvinandetron-fannsfre. or sic Netr Mrk itstenr eintle AL11tr1X* snst afde tu nealv eelterruate swity4X1r ie vnee unid L'p 5 J13nt14: trarturtimens arrany,rreroy tosth arr Janryt en:J nyut a nurrdserefkydand utlanr utdsty kr prwne de n ennerres .

nxt<ber ~ ' !.sttA, tur <cuers tiv unions.i Iwsuist. < uf tre Nit:1 sah arn " 11 e Major Con tracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . judi nd: 1.s swerer de fastnv. lent in sufits are orner denn $3 rnoHuns en -

rt. nepsema vaan a renanntm anner Frosest seyerequehet noemenaan M,e summwm k. canana reag=ra answer. nv qurtwt.canata g,4,n,7 , , ,,g,,,p.,a ,,,, g,,, ,,,g ,,y, . aventustfunto r ast usesnpfe , sie tronus Owneri NB thint hy=vt Gurum Fer ,Wut Itswer Audt. Munrs==m NE thaluars Ilydrurlectrec etydnitirsute 'l"d# ##" "" **' ""*#"M'"' Td' Il ' 'l* * 'M . .

Feet: Mulrar ,

JTut 44Ws .' lasrv t/c Insnvrttwens. ,siers jf.tnr7 f5 aleldrto attafw:Afr an 1 heal Capactry 615 MW 2.4fMI MW 690 MEW (maarsrs

300 Mis 4D Average d 62 Mehl 25 35 MW 6w thme IN ,3,,, y p ,,y 7, gn.,. sut18a vissennes(artlesdirddt iAe#s haanh as lea,a 1715 rhac I dmaagli 1717/

(menerast Tersm: hmigh BY)4 U"I** " A'*l"U *$ 5N' AUIU IN '"'""* "* ** * $ 'I"l' h ' d' 4' I ** *"^'

rhac sn 87362 tux >

son aseva .IIIeit sts NI7il fugns tr., sis e untas <> usth t/c regnwsi naap a sotalitr v casing thele Peo. 2 asseressee/nasaan.eo.,.

acasse reets Asmattmare tocashin, lawerme. Ma r= =,me. MA m cine.t ri miwa.se u.eas t anndd />ridars/ir (=- pt., ras 71=ve , sic nsaur nnva vdetA-

'"" "I "" Ai #l' # "' "'" F""' #"'"l#' "'"#'"'K l *' '#" * * *'#"'

owner, acs.c r rs Am.c. w=aup arivic en -n=henw$n ufw b rarv. staters /=il tin enf. uiru t o m> 6 cd um 60s. odmn=ris ca histia c - - Adar d**t de s ' "" t roes, m,h Toe : rap.cery: 37MW w4MW m> MW o M vine =r==> uv uAli- .nce n< pen! Junt 7 4: v,;., npre curatuesofn mcentaveint.ve as MMW leden - b*

(mneract Amanunca Il 5 MW W MW/senvuner ~

9 MW/etreer a5 rowe asues S

(meserart Tcrne: 2il yrses knigh 1715 1hneigli t992

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. s J/. 6' jy l-[MJ this program, customers are paid to stantial amount of data on when and I- Y

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=w If reduce their electric loads when how it.s members' customers use

'f u .- p w , aw, . g ;; ~ .lff4 there is a shortage of power. 'lhis electricity. In fact, MAMEC shared in I [ , :-

,P f 1. g enables members to meet their cyu the 1988 Energy innovation Award.

. S4 city requirements at a cost that is presented annually by the state Exec-

,h

Msm .

~e less than the cost of adding to their utive Office of Energy Resources and

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. ,. V 1 power supply. the U.S. Department of Energy, for 1 ngi*p q ~i

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Sudi progrants readi wellIw>nd its pan in a residential load research h

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[Q_ '"A -J traditional electric utility practiws, project. This is the kind ofinforma-but they are essentia at a time tion necessary to plan and imple-nn nuckh v sururtg ami eetire n. co R wmue nr.nn.not,,a,.stana,rr g, y ;, , 9 3, y ,

- ment flume a crostomer 4tiv ih hv >ke """"L'""""""*"**Y"'""M""*"

cas aminarnc nefurtment, a,ntrac. electricity : re greater than the in- programs.

teti in l'#Wjbr mapr alurrges in its Creases in supply. Al.NEC also is working with Justrrig system to impnr e energr ef/I CieruT. at no crist to tiv nuru rrg Iw >me r or MMWEC has compiled a sub- each of its members to inwrporate tiv urthry Thn>rogh .1Unr FQ Fnergy Sen tce

-!Wfunmence IF\1') r>ntrac ting pn>

qorcrm. Elv lhhsdv minrtu oful retthry is unorksng usth a pninte emigy smust

,_ ment firm ribu h juriffor fle lwntim?

Y\ tem Imfunsts'im'rris irr refunt for a

. Jure oj'pau rr - nergy urrings or w tiv pr e svnr F\l'a>ntrru t tentt.

"le nururtg iv>me\ Jure of sonsngs is npecreal to be Slii.tkkl. uuth the lutam e of ver engs. ainora $16'.otki esung to tiv energyfirm After slut. all Iw sarsrtgr go to tJe ntormny in>me

' .sfeanichtte. tiv impnn ements funv nthu etilh hs dvis af t tru h uaf hva!x urst e-

.tk kshountn pnwsahng sinings in riv snn of rnhoust < afucity anci energy rufenvrment<for tiv utthty as uvil :

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...COHSiStently '""'""'h'"""'" P'"'*P'" "'"d**"'d'*'"d l electricity requires a close management programs.

being seen as

! partnership between a in i989. MMwEC wiii continue .

I utility and its customers. working with its members to imple- .,

. e reg Onal neutiiityoccustoi,om,nen,no, ment cost.cfrectim conservation and ;

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[ggg[gy- [g and for what purpose its customers load management progmms. De- ;

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i use electricity. And the customers mand m.magement programs are an

! demand-sz,cle needtounderstandthegoals,objec- important component of MAMEC's 1.

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YOUrain tives and benefits of demand man- power supply planning process, re-n- -

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t o agement programs. flecting an effort to offset the need j i.

reSZ///S Work in this area took a huge for new elecnic generating capacity, leap forward in 1988 with completion which will help to contain future g 7

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I of MMWECs Demand-Side Capacity power costs.%e objective is to snat*= a=f MI ma=w= cat a *i i as amacene as purewng etarr*mpr Assessment (DSCA), which involved make it as easy and economic to w, g, ,, _ ,,,,, ,, ,,a,,y - ,

4 nearly a year of surveys, interviews, implement demand-side programs -Jrmut:m ,

i research and analysis.%e DSCA as it is to purchase or build new identifies cost-effectiw load manage- generating capacity.

l ment and conservation opportuni- Late in October, MMWEC !

j ties for each of MMWECs member launched its " Dollars on Demand" l

utilities, based on information gath- load management program, a fairly ?j:

l ered from each member's service complex and innovative program I territory. %e study also identifies that is intended to help members ,

t

! what kinds ofincentives, such as meet their peaking capacity require- i l rebates or special rates, may be ments without building or buying .

t i necessary to encourage customer new generating capacity.% rough ; '

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.1 he services needed for ing long-term financial stability. o vd~m , . .7 the/(17G17CiGl W7 mw a

[/7[Cy1'((J1 G/7([ T sound financialplanning and managebudget-A great deal of contingencyplan-ning a nemssaryin 1988 to mm

. l@ g gfy

4 ing. purchasing. account- modate uncenainties related to

{2N 9 Sil'C17gl/310 ing. cash management, auditing and seabrook and AntwECs imusement :

thers- n all available through in the project.While this kind of

177C6/ MC177h61 planning consumes considerable various depanments within MA1WEC,

! primarily the Financ al Senias Center. time and effon, it has enabled S)1Sle177 CGf)l/Gl ,

Use of these senices to plan and AB1WEC to conquer a number of r

f/77d/7CC manage MMWECs finances in 1988 financial challenges, including the n l j7ggg[g gf wtre in large pan responsible for acquisition of financing earlyin MMWECs decision to re-evaluate its 1989 for the flydro-Quebec Phase 11 }

] ,

j C01771;elitz,ve ,mehement ,n the seasree, p,e,ect. p,eiect. ._ _ .,- _-

j. Effectiw planning and management In a successful effort to retain y,( '

, ) [

have helped MA1WEC in effons to and finance its ownership share in <==="*-

reduce its financial exposure to Sea- the IIpiro-Quebec Phase 11 project, 1*["g" ;

brook and focus on the company's AB1WEC entered a $2.5 million credit sr ac= htmuga i financial future. agreement and obtained separate _

j while legal and regulatory deci- credit ratings on the financing. The sions haw placed inordinate strain $2.5 million will be used to finance l

on MMWEC finances over the past MMWECs equity obligations as a --

l sewral years, MMWECs ability to project owner on behalf of13 mem-I cope with adverse conditions is tes- bersystems.The separate credit .

timony to the company's resource- ratings on the Ilydro-Quebec debt, fidacss and commitment to maintain- which are higher than the present l

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! ...CO77Sisle72/zu 7 part of MMWECs Stony Stony Brook participants. , ':

l)e/77g see12 as Br-k Enersz Center divi- xeeniesSteer Breek readr fer ,

l sion,which provides operation requires a number of ,i _!

i l / 6 reg 017al xxwECanditsmemberswitha activities and services: the schedul- '

[ggg[gp[77 variety ofoperations and engineer- ing and planning of plant mair. ,

ing senices.'Ihe primary respibil- tenance outages; the schedulirt - = 0-l pOwerpla727 ity orthis divisen is the operation foci deliseries; the purchase and

/'

'i' and maintenance of MMWECs 511- storage of spare and replacement '

OperaliO11 megawatt Stony Brook pourr plant. parts; the hiring ofcontractors to , 'g: l l

l 1he quality of the senice pro- heip with major maintenance, and l';

f vided by the Stony Brook Energy adherence to a strict prewntise ., , # g yg_ -l Center is evident in the plant's con- maintenance program throughout - M5'nt'A me/w'Wa = .i i

a nya w.-,eom o p us, l sistent rankm.g among the most the year. % ,, s,,,,, ,, w ,,,,% ,,,,,

l +""'**"'*'""

j ellicient fossil-fticled generating MMWEC stafTalso has initiated

stations in the world. Stony Brook plant design modifications that haw 'E 'Z, '

i

! has maintained this high ranking enabled the plant to bum natural -- [

l ewn as power shortages in New gas and operate with greater eflicien- ,

England are placing greater-than- cy and safety. 1 anticipated demands on the plant. Fuel procurement is another l Stony Brook also surpassed its target senice provided bythe Stony ,

l for availability in 1988, which Brook Energy Center staff, which -,

! reduced the rescar capacity require- has reduced fuelcosts considerably ,

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...o. -v- J.a variety cIctwnmunication s~nices ware and software upgrades as wr!!

by ^s - .k ; g. , .j Q 4, .

.i 7'S,j . offered by MAMIC can unlock the as implementatim of an integrated

@y ,.J

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o js ...%,4* i /.3.,.t. i door to mutual agreement on what database management system. "Ihe

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-* 7. ; ; needs to be donc and how to do it. purpost of this progra n is to

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.. A6 * - MAMIC's Information Systems imprme the efficiency and reduce W.ggs s ' . ' .

.; Department is responsible for the the ctst of providing many differert 4;' ~ ;%

. . g, operation and maintenance of the senices to the MANIC members.

-p .A.3 --.- .

company's computer system, which Tnrough its lluman Resources

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4 is necessary to perform a variety of Department MANIC ofTers a num- !

y y'. -

pourr supply and financial senices. ber of services to help member sys l .

, MAMIC completed a mmputer rms with personnel management.

needs study in 1983 that led to the in tevlariInsurwss errrsnmmerrt, at w= =w Me wwm

tttt:r';r R,,,y~ mv

' Such servims as job evaluations; n ,c,,r nes ewur er, trany v d..cumerrts funding of an information systems wage and benefit surms; recruit-

- arulair c om,p,mdenc easyt,rd*as enhancement program. The program ment; workers ctwnpensation; and f..wse in ,rd,v in omfm.c riv rat =d

< r.mmunruttn *n usfus/wirties tf.t ofIrTL.

invohrs extensive computs r hard- Equal Employment Opportunity '

l l - arrd ris memivr utdatres. .tonrTC rn l'RN amongvl tiv instk fnort twsw a f a I?tX < u>mmronr< arneri nMem f

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Auditors
Report Trustcc and Paying Agents Bond Fund Tnrieec To the Board of Directors of ContinentaIIksnA NA Massachusetts Municipal Wholesale Electric Counpany: Oicingq Iainois Paying Agtents We have audited the accompanying statements of financial position of -
Massachusetts Municipal Wholesale Electric Cornpany (a Massadiu- " #' "
7 , .,, g, setts public corporation) as of December 31,1988 and 1987, and the 1976 Senes A Ikmds 1976 Senes A Ikmds related statements of operations and cash fkms for the }rars then ended. 1977Senes AIknis 1977 Series A Iknis
'Ihese financial statements are the responsibility of the Company's man. 1977 Series 11Ikmds 1977 Senes n Ikmds agement. Our responsibility is to express an opinion on these financial 1978 Series A Ikwxis 197H Seiics A Ikmds 1979 Series A Ikmds 1979 Series A ikmds statements based on our audits. 19H0 Series A Ikwxis 1980 Series A Ikmds We conducted our audits in accordance with generally accepted 1981 Series A Ikmds 1981 Series A Ikmds
- auditing standards.'Ihose standards require that we plan and perform the 1981 Series n Ikxxis 1981 Senes n Iknis 1982 Mies A lkmds 1982 Seiin A M audit to obtain reasonable assurance about whether the financial state- 1982 Series n Ikmds 1982 Series n Ikmds ments are free of material misstatement. An audit indudes examining, on a 1984 Series AIkuls
- test bas.is, evidence supponing the amounts and disdosures m. tha finan- 1985 Series A Honds S7unwret Bank offkston, NA 1985 % n w s IhOtmIstre cial statements. An audit also indudes assessing the accounting principles 1987 Series A Iknis 193 Series AIkmds used and significant estimates made by management, as well as evaluating 1987 Series n Ikmds 1979 Series A 3tmds the overall financial statement presentation. We believe that our audits pro. 19Ho Senes A Iknis
. . .. Iksnk ofNerrEngfand NA 1981 Series A ikmds vide a reasonabic basis for our opinion. Ikuton, Akinac/wsetts 1981 Series n iknis In our opinion, the financial statements referred to above present fairly, 1976 Series A Iknis 1982 Series A Iknis in all material respects, the financial position of Massachusetts Municipal 1977 Series A Iknis 1982 Scrics n Ikuls Wholesale Electric Company as of December 31,1988 and 1987, and the **"
results of its operations and its cash ikms for the years then ended in con-m formity with generally accepted accounting principles.
m Arthur Andersen & Co.
l - April 14,1989
_26
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1995 - 1987-Revenues (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $260,696 ~ - $216.238 '
OI Interest I ncome . . . . . . . . . . . . . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.224 26.025'
~ Operatz'oris Totai aevenues aad iaierest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2 4.,20 5242.266
P d"R *"d S'""*P'""
- lbr the3 cars ended Fuel Used in Electric Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,402 December 31,1988and1987 $ 32.265 Pu rchased 1%er . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90.940 76.628 Other Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,565 11.916
,_ Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,157 -4.628 -
Depreciation (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,827 13.772 Taxes Other han Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,706 2.707 144,597 141316 Interest Expense:
Interest Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
139,369 141,122-Interest Charged to Projects During construction (Notes 2 and 5) . . . . . . . . . . . . . (72,191) (72.748) 67.178 68.374 Total operating costs and Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211.775 210.290
~~
Resene for Project Billings (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.000 -
(Gain) Ioss on Cancelled Units . rv.t (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (241) 310 cost of Advance Refunding (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
37.644 14,759 37.954 (Increase) Decreact: in Amounts Recoverable in the Future UnderTerms '
,_ of the Ibwer Sales Agreements (Notes 2 and 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,386 (5.978)
$284,920
$242.266 Ec accompanying notes are an integral part of these financial statements.
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q MMWEC Notes to FinancialStatements
( 1) Mamachusetts Municipal Wholesale Electric Company (MMWEC) ( 2) Significant Accounting Policies, continued 21WEC is a political subdivision of the Commonwralth of Massachusetts, atnh. SP eCf8MM ori7ed to issue revenue bonds secured by revenues derived from Ibser Sales Agree- Prweeds frmi die saks ofrewnue bonds fm Pnyscas are depmited mMmstees ments (see Note 8) with its members and other electric systems to finance the t
& inested unta they are m;uked fw mnstmaion a h senu p.f o snm As construction and ouviership ofclearic power facilities. defined in m1WECs General Bond Resolution, imestments are limited to direct a A Massachusetts municipal clearic department, aurhorized by majority sote of obligationsof orobligationstheprincipalofandinterestonwhichareunconditionaHy
~ he t city's or town's gowming body, may become a member by applying for admissic,n guaranteed by the United States, Mleral gowu .awai agency securities, new housirg to 21WEC and agreeing to comply with the terms and conditions of membership as authority bonds issued by public agenoes or municipalities, direct and general obli-outlined within the m1TEC Dy-l.aws. As of December 31,1988, thirty two Massachu- gations ofcensin states or cenain political subdhisions, bank time deposits evidenced
- setts municipalities urre members. by cenificates ofdeposits issued by banks, and repurchase aga n, cats with prima:v dealers secured by certain securities. Cenain spedal furxis are mow restricted as to hef'S*PP ySyseern l
which of the afo<ementk>ned imestments can be purchased. (See Nute 9.)
MMWECobtains pourt supplycapacity byacquiring interests in various generat-
- ing units from imestor. owned utilities and the operation ofits own electricgenerating Casir and TernpaaryInwstments facilities (Projects). See Note 5 for a discussion of 21TECs construction program and Cenain other furuis are used for power and fuel purchases as weH as for working commitments related to these facilities. In addition,21WEC contracts for pov.er for capital requirements of MMWEC. %ese funds are not gowmed by the General Hond
- resale to its members. Resolution. In addition to the imestment securities delineated in the General Hond Resolution, MMWEC is authorized by the Board of Directors to purthase Canadian
( 2) Significant Accounting Policies currency for cash and forward settlement and to imest in repurthase e wuwith a banks where 21TEC has established accounts. (See Note 9.)
_ 21WEC presents its general purpose financial statements in accordancewith the fannsprics
! Financial Accounting Standards Iloard and utilizes Gowmmental Accounting Stand-
- ards Board pronouncements for additional disclosure requirements. Cenain amounts Fuel oil imentory is accounted for by the awrage cost metixxi. Spare parts imen .
tory is recorded at awrage cost. At December 31,1988 and 1987, fueloilimentorywas presented in the prior }rar's financial statements haw been reclassified for the purpose ofconsistency. valued at $58 million and $23 miBion, respecthely,and spare parts imentoryamounted to
, $4.3 million and $5.1 million, respectively.
Interest Onarged to Projects During Construction m1TEC capitalizes interest as an element of the cost ofelectric plant and other newnees and Unhilled Rewnees
~
Revenues include electric sales for resale provided from MMCs operating propeny while under construction, including an appropriate testing period. A corres-units and power purchases; billings for administratiw and general senices prmided to 1 ponding amount is reflected as a reduction ofinterest expense. ne amount ofinterest capitalized is based on the cost of debt, including amortization of debt discount and MMWECs Service Panicipants; and billings of debt service on cenairi Protects prior to commercial operation of the units within those Projetts.%e detads of rewnues are
- expenses, related to each Project, net of imrstment gains and kisses and interest as fo&m i income deriwd from unexpended Project furxis.
198R 19H7 Nuck 2rFuel ('" #"" "
- Nuclear fuel indudes fuel in use, in stock and in process for Millstone Unit 3 and Electric sales for resale $171,362 $156,33
} fuel in stock and in process forSeabrook Unit 1. FucIin use for Millstone Unit 3 is reflec-
' Service 2,918 2,810 ted net ofaccumulated amortization of $5.3 million and $3.5 million through December Preoperation debt senice 86,416 57,050 31,1988 and 1987, respecti ely.%e cost of nuclear fuel is amortized to Fuel Used in 7 ElectricGenerationbasedontherelationshipofenergyproducedinthecurrentperiod $260,696 $216,238 1 to total expected energy production for nuclear fuel in the reactor. A provision for fuel disposal costs is also included in Fuel Used in Electric Generation based upon Depart- MMWEC biHs its members for costs incurred in pro iding services and purchased
{ ment of Energyguidelines.
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L f MMWEC Notes to FinancialStatements
( 4) Delw, continued ( 4) Detw, continued PlowerSupplySystern Resence Bonds, condnoed Net Resenee AsellsNe she Dek Service, condneeni The aggregate annual principal payments duc on the 11onds in the next five years and prinopal of, premium, if any, and the interest on Bonds and to pay at other
~ are as foDows 1989- $13,780,000; 1990- $16,270,000; 1991- $17,280,000; 1992- obligations against its revenue. Revenues, which include applicable interest camings
$19,765,000; and 1993- $21,140,000. from irustments, are required to equal 1.10 times the annual debt service foreach con-
'the $337.66 miHion of 1987 Series A and B bonds were utilized to extinguish $110 tract year endingJune 30, afterdeduction ofcertain operating and maintenance expen.
- miDion of Bond Anticipation Notes, to refund cenain high-interest bonds issued for ses and exclusiw ofdeprecation. Ibr the contraa }rars endedJune 30,19R8 and 1987, Nuclear Project Nos. 3,4 and 5 and to fund Nudcar Project No. 4 and Project No. 6 costs.
21TEC met the Bond Resolution debt service cowrage requirements for the applic-The $37.6 miDion Cost ofAdvance Refunding, as shown on theStatement ofOperations, able MMWEC Protects.
_ results from the deposit of $160 miHion into a trust account to effectively defease $128 minion in bonds and to eliminate approximately $5 miHion of unamonized debt dis- gg.ex EndedW 34 39,, gag 7 count and expenses.He adence refunding resuhed in the recognition of an account-ing loss of $37.6 minion for the year ended December 31,1987; houver,21WEC (In nousands) reduced its aggregate debt senice payments by approximately $38.8 minion over the Debt Senichw next 31 years and will realize an economic gain (the difference between the present m $Hs,031 $105.985 Other BiBings 719 719 values ofthe old and newdebt service payments) of $21 million. On December 31,1988, Resent and Ormtingency Fund BiHings 10,607 7,3H2
$128 miUion of Bonds were considered defcased.
Total 159,357 114,0R6
"*"CI"I Dedua - Operathg and Maintenance r_xpenses (42,690)
OnJanuary20,1989 MMWECcxecuted a $2.5 million 19895 cries A Rewnue Bond (32.HR6)
_ Credit racility. The three year Credit Facility is at the bank's prime rate for borrowings Available Remnues Net f(Expenses $116,677 $ M1,200 under $1 miHion, borrowings of amounts in excess of $1 miU;on ac rue interest ::t
! Debt Service Requirement $106,070 $ 73.H18 MMWECs option using prime, EurodoDar base rates plus 1 %,and CD ixise ratesplus 1 %.
~
Eurodouar and CD base rates vary depending on the leng h of maturity of the interest Cturage (110% Required) 110% 110 %
rate commitment perial. The balance outstanding at the end of the three irar penod
, maybe uponthemutualagreementofthebankandMMWEC,amortizedoveraten}rar ..
7 The Credit Facility is to finance 21WECs equityonnership in the I IpiroQuebee .
* "** # # '#" "*
8"E *" " '"*"C' Phase 11 transmission interconnection and is secured by contracts with certain '"E " * "I * * * * *
' *'*"'*** * ' "'*"'"" ' 8 Massachusetts municipal systems. Additional drawdowns under the Credit racility are 'I contingent on finalization of tbc Scabrook Settlement Aggan,ent and Amendment of
' ' ' E* #" " # '"" "
~
the f lydro-Quebec 11 transmission facility support .wnmentsgrantingpari ptssulien m!WEC maintains a $10 miHion revohing line ofcredit to temporarily finance cer.
. status to the bank. tain poner pu< chases made by mfTEC for resale under poner purchase contracts.
In February 1988,21WEC filed a petition with the Massachusetts Depanment of Borrowings are secured by the conesponding reccih 7he balances outstanding at
- Public Utilities requesting additional financing authority totalling $98.5 million for December 31,19RR and 1987 werc 531,000 and S334.000, respectiwly. Interest cfmged j Nuclear Project Nos. 4 and 5 and Project No. 6. 21TECcannot determine the timingor on borrowings under the line are at the bank's pnme rate. In addition. a commitment outcome of this filing. fee of M of 1% per annum is charged on the untud ponion of the line based on the
'*N' #" "' #
Net Revenue AvailaMe ForDeMService f In accordance with the provisions of MfTECs General Bond Resolution.
~ MMWEC covenants that it shah fix, revise and coDect rates,toHs, rents and other fees and
_ charges,suffkienttoproducerewnuestopayalloperatingandmaintenancet. pac
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Notes to FinancialStatements MMWEC
( 2) Significan( Accounting Policies conti ,wd _( 4) Debt Rewnues asui Unbilled Rewnees, continued 9limerSupply$ysenn newnee Bones gmwrr oixained on shcir belulf under terms of the Service Agreement and the Ismer To I'mance musmaion d osmership interess in clearic gencrming pmjens, liarduse Agreements. Semcc reventrs are remrded as the exocn3es are incurred. MMETC hsucs timer Supply 5y9cm Newnue ikxxb (ikands).The ikxxb ase sccused Anu mnts which are not yet Inllal are incitakxl in UnbiBed Revenues e m the Simements try a pledge d die revenues denved by MM%TC, under terms d Itmer 5 des Agwe-of I-uunciallimithm. ments, from the <mnership and operatkm of the tw>icos in its gxmer supply syssem.
IArtric sales for resale and pregrratkm detx service revenues are fixal l>y' Pursuant to the timer Sales ts,w.s wah the Protect Partiopants.cach 15 ico Par.
MM4EC's ikurd of Dircours at a level to renner operating a:Kldelx servkrmSts.1he tiopant is obligated to pay its share of tie actual msts telating to the Itencrating units -
dartrence beturen anumnts billed currently under the terms of the Ibwu Sales planned, under cumstruction or in operation.The Propect PanicpantV <dilegakms a:e Agicements and total expenses reonded in the Statement of Ogwrations is durged to not contingent ogwn the cornpletion or operationm stmus dthe units MMETC finan-Anmunts Rconnable in ! ic ! Future Under Terms of the Ibwxr Sales Agreements. cings,other than ol>1igations maturing within one year, require Massachusetts Depart-Amounts Accoverable in the Future Usesfer Ternes ment of Public Utihtics (Dril) approval lhe 15onds consist of 5crial and Term Ikxxis and are comprised of abe fuErming of the 7%merSales Agreensents thDings to Ihijco Partkipants are designed to recover costs in accord.arxr with issues, which, except for the 1967 Senes Il lionds, are suht ect to optional redempiiim the Ibwu Sa:es Agreements.1he biBings arc struaured on a Proico by 1%> ject lusis to approximately ten years after the issue dac, at 103% of the principal anxxmt. descend-systematicaDy provide for dein senice requirennnts, operating fu xis and reserves in ing periodically thereafter to 100K1he 19875cncs in Ikeds are suhico so redempsirm ao ordance with these agreements. Lxpenses are reflected in the Statement of Oper.,- beginning in 1992 at 109% of the gwinopal amount,descendi:q perkxiscauy thereafter tions m accordance with generally accepted anoonting principics.1he difference bet. to 100%
wren amounts fulletl and experned is clurged to Amounts Rensverabic in the Future p.: Interest th.M 31, lintler Tems of the Ibwer Sales Agreements and wiD be recovered tim > ugh future hsue Cost 1998 19H7 bdlings. The pnncipal differences which luve resuked in the net deferral of msts (in1housarmb) indode tiepreciation, costs associated with canctiled or aluixkxxxl proicos, certain .2% $ 63,M $ 6W 19765eries A interest, reserves and other costs. On a cumulative basis, MMWEC has deferred 165 569.6 and $127.7 million of msts as of December 31,19HH and 1987, respectively. 19 7 bene A 6a 165 1977 Senes il 6 82 M 0,W ,
Irwinidtul Iwijens with a cumulative deferral of costs total $119.5 atxt $133.7 miRkm M ,735 65.W 197H Scrics A 6n arxl 1%ncos with mmutatiw Innings in excess of costs total $50.0 arxl $60 mi!!wm at m 135,m IM 1979 5crics A December 31,19HH azul 1987, respectiwly. Erse amounts luve been netted in the I9 bCfiC5 A I *
Stasements of Financial Ibsition. 'the reduction of Anw)unts Rensveralde in ihe Future M,M M ,0 W UnderTermsof ahe Ibwu sales Agreements for Proiccts with biDings in excess ofo nt is 19HI Series A &
19HI Senes il IM 82,m FW primanly due to the hining of interest omis for Pruicos urxler camsinntiswi. 13.4% 65,6e5 65,655 19H2 5cncs A S888C8"C"8 8'(Cas# Hows 19H2 Series 11 10.2% 128,635 129.340 In November 19H7,the Financial Accoutuing5undards th urd issued a new stan' 1984 Series A 11.0% 95,999 95,000 dard, Sutemenu No. 95, which estaldishal suixlards Ibr cash Ik m regxxting. MMEEC 19H5 Serio 11 13.5% 53,200 53,200
.xhipsed these starxlards in 19HH and has restaicd the prior year to omform with the 1987 Senes A W)% 196,260 19H.2M 1983 gwesenutin m. 19H7 Scrics 11 1I M 139,488 139,4'D 1,459,954 1.471.140
( 3) Depreciation I ss:Currtni Maturitics (13,799) (II,190)
IArine pl.nu in servkr is depreciated using the straight-line mettuxL 1he T(ad Ibwu Npply5y9em 4
aggregate anniul pnnisitms for deprecision for 19HH anxl 19H7 averaged 4% of the Revenuellorxls $1,446,U9 $1,459,950 ongnul o or of degwniable swopeny.
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- MMWEC Notes to FinancialStatements
- ( 5) Constmction ml Financing, continued ( 5) Construction and Financing, continued with the General Bond Resolution. The foregomg amounts represent hSMECownership interest by Protect.enclud-OnJune 10,1988, PSNil gaw notice under a prtnision of the SeabrookJoint ing nudear fuel and service m+uy assets.
~~ Ownership gisswnt that hDMIC was in default in its joint ownership obligations.
Pursuant to the sameJoint Ownership Aiwnwni, homTC has fhe months after such nc: ice to cure any defauh. AnmTC did not agree with such notice that a defauk ( 6) Unithlh
- occurred onJune 10,1988 On Nowmber 4,19HH, \Sm"EC and PSN11 entered into a EDNICS I""""Ci in Station indudesw,Pasn panicipatim in Memorandum of Understanding whereby MMTEC retains its fun ownership in Sea. Units 1 and 2. Seabrook's joint owners have autlerned the sale of25 sahrageabic com-bicokStation. Unon the Effectiw Date,the Memorandum and the Settlement A,,re 6 ent ponents and %,u i. si frms the canceDed Scabamk Unh 2.The joim owners haw aM
~ provide, among other things,that all notices of defauk will be resctnded and cownants agreed to aBow 6e cunent N Unh 2 m wion pennh to lague and to talie no not to sue arnong the major joint owners ofSeabrook wiH be effecuve. 'Ihe Settlement action fonenewal. MMETCs net costs, indudirig imems expense in Seabnnk Unh 2 of Ay un gnt also caHs for PSNII to be respW for MMTECs portion of the Scabrook $1123 and $102 maion as d Dtuu.M 31,19H8 and 19H7, .mGm4, has been Stationpree cationalcosts commencingDecemberl.198Htothetuninreicialopera- deferred as an Amount Rumeral-Ae in the Future Under Terms of the Ibner Sales
~~
tion of the tmit or up to $30 million whichever comes first. As part of the Set:lement M' "" "
Agrunxni,?.SmICandPSNIIagreetocanceltheseDbackagreement whichcalledfor On October 22,1981,6e Boston mon CompanycanceDed PHgrim Unh 2 whidi PSNII to purchase Seabrook capacity from MMTEC at cost.The Settlement Asi&dKni is included in MMETCs Nudear Mix 1. MMTECs net costs, induding interest experr.e
- callsforextensionofanexistingtransmissioncontractandfinancialpaymentsbyPSNII associated with the Unit,which aggregated $56.1 and $52.9 miBion asof Dtwu.6 31, to homTC before and after commercial operation of the unit, and limits MMTECs 1988 and 1987, respectivdy,were defened and whe recon red tandenhe tennsofthe e'cposure for decommissioning or canccHation costs to $10 miHion. On April 14,19H9, Nun Sales Ayuumans the PSNII bankruptcy court has accepted the Comprehensne Seabrook Settlement.
There is a tenday appeal period which commences on the entry of an order by the ( 7) Benefk Plans bankruptcy coun. At this ti me, no p2ny has mdicated an intention to appeal.
MhmTC has two non<ontributory pension plans covering sub,-iiaDy28 fu'l-MMTEC has an ownership interest in the fotowing jointlycaned elecmc generating facilities in operation and under <nnstruction: time active su.54 vyw who meet the service requirements as specified in the plan hs. Total pension expense was approximatdy $112.000 in 19HR and $27W MMsTcshme in 1967. MMTEC makes annual contributions equal to the amounts recorded as pen-
C'8'd*Y "" d 3'-
sion expense.The assumed rate of retum used in determining the actuarial prescr'.t
%y ) value ofaccumulated plan benefits was 8.5% in 198R and 1987. ftnsson cousapplicab'e Ivaking ret >r sumy tw=* l'o o
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$ 56.127 5 553s4 invermntiave twer samy twi. A 3u.3 146.e57 145/45 Accumulated plan benefits and plan net assets are as foBows wyman twint wr wyman Una 4 22.7 7,319 7.295 Nudear Mix M 1 M Aeone Unk 3 18.4 50.52s 50.204 Jarmary 1,
. Nudear twnett m 3 ME=one t'na 3 3As 12s,e*6 127.4M 1988 1987 3 ,i,y 3ag,3,g Actuanal Present Value of (In Thousands)
% Acrumulated Plan Benefits:
Nudew Mix k 1 scalvtwa Unn 1 1.9 7,975 7.148
~ Vested $ 468 $ 3t9 Nudear tw3ect M 4 seatmu A Unit t 478 237,727 211,567
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Cd III I32 Nudearrw3nt m 5 scarm=A twe t 12.6 63,7 n 5s.nas
, skint M 6 scalmw*Unt t 69.0 433.911 3'2,3'7 g $g7 g 453
. 743,331 646.940 Net Assets Availabic for Benefits $1,091 $ 712
$1.131.43n s1.033.51a 4
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-e n,n- - , - . - , , , . , ,, , - , - - - - , - e em ,~ -n, - - - v-.--- --.-.--e - --~,er -, . - - - - . - -
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MMWEC Notes to FinancialStatements
( 5) Constructkna and Financing ( 5) C_ +c-Josi and r -- -
_ cositimised A substantial pwtion of MM4ECs construaion and fnuncing pn agram is au rilnu- decommissioning prkw to ksw-power scsting.Vic joint owners have purchased a sueety able to its joint ownership intercsrs in the Scalwook Statkm in Scalmmk. New bond to rncet thc aixne conditiort in view orthe activeopposition to thescahetm* peu-Itampshire. ject by various Massachusetts ofEcials and others, there can be no assurance as un .
MMWEC has an 11.6% joint ownership interest in the Scalmx>k pnico, which whether or when Seatwook Una I wiE become operational PSNil, as a resuk of the continued delay in o)mmercial operation of SeahnxA origmallyomsisted of two pmposed nudcar units of 1,150 megawats each. Unit 2 lus laen cancelled. (See Note 6 - 1Init CanceRatkms kw further details regardingSeatxtmk Unit 1 and its inability to secure cost recovery prior to commercialopermkm ofthe Unst, Urut 2.) G msinxikm of Unit I has been ownpleted and nudear fuel has been kuded. had been expenencingsubstantial difHcuhy in sustaining its fmancial obligmions kw ks O mstructkm of Scalum >k Stat km was completed by New f lampshire Yankee (NI I Yan- 35.6% share of the Scalwook project. PSNil cha5enged the constitutionalwy of New kee) which is currendy a daiske of Public Servke Company of New Itampshire llanphire's asuiO1P law which prohibited PSNil from charging (ustomers kw ojn-(IMil), the gm>jeo s lead participant and lead owner holding a 35.6% share of the struction protects ihm are sweet in operatkm. In January 19HH, the New flampshire .
pn nico. Supreme Coun uphekt the apphcation of the state's amic'IP isw wohilsity, rSell the Scalmmk nudcar sutkm has %.i;s.~ul persistent and substantial cost frtwn induding in rates, increases forScabrook relmed costs until the plant begins com-irmseases ami significant 3dwdule delays, has been the source of amtinuing om- mercial operation. This decision effectively barred approval by the New Itampshire in nersy vwl oppisition inwn govemment officials, regulauxs, intervemxs and others Public Utilities Commisskm of PSNIrs previously fled cas.p.Ky rme relief request and has created financial probicms kw many of its joint owners, indaling MM4TC PSNil filed a request with the United States Supreme Coun seeking funher appcBac Akimugh tertain problems relatingio the Scabrook Unis t omstrucik m sciclule,with reviewofthisopinkwt OnJanuary23,19H9,theSupreaieCoust reicocdtheappealdue the exceptkm ofemergency respmsc plans, have been overctwne and the unit is mm- to the lack of a " properly presented federal question ~
picie,< wher problems and uncertairwies relming to Scalwook remain and are discussed inJanuary 19HH, PSNII filed for protection from ks credkors under Chapact i I of 6 the folkming paragraphs. the licdcral 11ankruptcy Crxic. PSNil has submhted and is cunesuly worlung with the Scalwi=>k Unit I lus recched an operating licertse from the Nuclear Regulmory bankruptcycourt and credators on a plan ofreorganization.1hc bankrupscy rcurgansza G anmission (NRC). The operming hcense is subsect tocendithms which do tw x permit tkm exclusivity perkad has been removed by the bankruptcy coust and several usilstics ctanmercial operankm until cnwig..cy response plans are approved by federal induding the state of New Ilampshire have irxhcmed their ineens in sutwnisting a P5 nil auiluvities. reorgant ation or takeover plan.
In Ooober 19H7, the NRC issued a rule clung that alkms owners of awnpleted OnJune 1,19HH, MMETCs floard of Di ectors adopted a sarategic plan of adhm nutlear plants to oixain an operatinglicense upam NRC appn) val of utility-spwtsored relating to ks Scalmx & joint ownership interest."Ihe plan of actkm cyklenced, anx mg emergeuxy resp mse plans in cases wherestmcs or localitics luve refused u> participac other things, an intention not to pay any future direct obhgations us the Scafwt x A po-in formulating smh guns. InJantury 19H9,stihselucrit *.o publiclxarings,swn.p..cy )cct. Accordingly no addaional payments have been made since that date kw the om-respmse ghns kw New Itampshire ownmunitics within the ten-mile radius of Sea- s'.ruction, maintenance or nudear fuel under the Scabrook Popcc IMsixwsmg Agent two = >k Siat k m were apgwoved by the Anwnic Safety & Ucensing ikurd (ASul). Ni l Yan- agreement. MMETC's gwepayments were exhausted on or aboutJuly 24,19HH. Cestain kee tus pregured and sulwnitted (ww.y..cy response plans for the Massachusetts of theScaixook ji nnt owners,through warious arrangements,have made up the shoerfas intheScalm=Apnijco%cashfkmcausedbyMMETCsi-i.-r.s- TheGmneoicts municipalitics locaico within the ten 4 nile radios of scabank Stathm kw which plans Itne tw a twrn sulmutted by Massachusetts olliciah.1hese plans were denw ww r acd in Uglu and Ibwer G wnpany fumisheti Itwxh to the Scatwon ik proico in locu e 4 MMWTC's a tull scale grated emergeixy preparedness exercise in June 19HH. No (k-Ikiencies payments kw theJtdy 24 un Novtmber 30,19HH perkul. In January 19M9 O wwmikva were rep mal.The plans and ahe graded exercise arecurrently bekwe the Asus whkh is Ught and l\mer Gwnpany released any daims against MMETC associaeed weh its holding hearings therom. payments.1he releaw was awuingent up m the appawal of the Omocokia ikpast-In Sepember 19HH, the NRC issued a ruling retpiring NI I Yankee to denu wwrme ment of Public !!iihty Gwurul, whkh was innt in April 19M9. P5NIf, wish the funk-its thumial abihty to deo wnmission the platu aher L m-pmrr testing in the evenu the rupuy oiurt's appt wal,is currernly making payments rm behalf ei MMRTC MMuTC gOne does tw a of nain a full p =ct license. On Ikt ember 21,19HH, the NRC dceidal on owninues to enf w(v the [wwisk ms of die li met Sales 4,iui.. cms to asstwe slut ade-all pendmg firumiali p uh ficat h m ipest ia ms which werc lwought so iss atsent iori rci.it ing quate reventies arc o ilicocd to mcct delm servkr payments on its lu enh aml o wngdy to N ahn nk 'the NRC rulol, anw mg <ther things, slut $72.1 millk m be pnwidal L w
MMWEC Notes to FinancialStatements
( 8) Conunhetenes and Contingencies, continued ( 8) Conuniennenes and Contingencies,consinned 1%werSeles Agreeneents, condneed hpwerSeles Ag.vennenes, condaned
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delegate certain authorities to MMTEC Subsequent to the Vermont Supreme Court rul- to the validity of the Propect No. 6 Ibwer Sales 4sv.g.W on the 100% participation ing, MMWEC filed a rnouon requesting the coun to grant a rehearing and allow oral issue, as p.b;Ously discussed within the context of the Vermont Supreme Coun deci-arguments on several issues, including potential violations of the US Constitution and sion. MMTEC mowd to compel arbrtration ofthis dispute and the SupenorCourt gran-that the MMWEC claims urre not adequately addressed in the court's dectsson. On ted EMCs motion in accordance with the terms of the Ibwer Sales bu.n.u s January 30,1989,the Vermont Supreme Court denied MMWECs request for a rehearing RMEEC is (m .u dy = king to resolve the ahose noted issues Akhough the ot-t-of the case. MMWEC plans to appeal the decision to the U.S. Supreme Court. come of these challenges cannot be predicted with abolute certahey, it is the opinion The Vermont Supreme Coun decision resuhed in the Vermont municipal Protect of bond counsel, legal counsel, and c u,,;uuu.i that the Massachusetts Protect No. 6 No. 6 Panicipants ceasing to make theirpayments to MMWECand as a resuh ofthis deci- Ibarr Sales 4u nss wiB be deemed to have had 100% panicipation.
sion MMWEC recorded a resene for a substantial ponion ofits Project No. 6 biHings to The Vermont Supreme Coun decision may impact vinuaDy klereica;5eony Brook
' outof-state hnicipants. Shonfalls in the Pro cct No. 6 revenues currently are being Intermediate Unit Ibwer Sales 4sei _no with Vermont municipal systems and the made up from available funds within the Protect. MMWEC beliews that any long-temi related requirements under the General Hond Resolution and IbmerSales 4su.gus
- shortfalls will uhimatelybe recostred from biHings toother Participants under the lbarr to set rates to recover 25 costs.
Sales Agisacnts. MMTEC continues to beliew the Massachusetts Ibarr Sales Agree- In March 1989, Washington Electne Cooperathe of Vermont filed su't against ments are valid enforceable contracts. Man geignt belices the nonpayment by the MMTEC in the Washington County Supenor Coun in Vermont for restitution from
_ outof-state hnicipants will not hase a material ahrrse impact on MMWEC MMEEC for paymerus made under the Proped No. 6 Iburr Sales 4 su Ano. Wash-Due to the Vermont Supreme Coun decision dedaring the Propect No. 6 Vermont ington Electnc Cooperative recerved an ex parte trustee process against other Vermont Part;cipant contracts void ab initio, cenain other Project No. 6 Participants har raised utilities which are making pfEnue under MMWECs Stony Brook Interme6 ate Un.t
~- issues relating to the validityof the Protect No. 6 fburrSales Agreements aBeging that contracts. MMWEC has .u umd this case to the United States District Court for the Dn-100% panicipation is a condition precedent to the validity of the Project Ibarr Sales trict of Ve mont,where hearinFs were held and an order issued to dissal e the trustee Agisacnts On April 14, 1989 the flingham Municipal Ughting P!ar.t and the processcontingent on MMWECgivingnoticeofanyintent to take awaythe Vermont hr-Shrewsbury Electric Ught Plant both filed identical but separate actions in the Superior ucipants Intermediate Unit capacny.
. - Ocnin ofSuffolk County in Massachusetts.ne basis for the complaints are whether the In January 19H6, MMWEC brought an action against the Village of Stowe in the Project No. 6 lbarrSales A,,isu Ants are valid and binding as to them, since as aEeged United States District Coun in Massachusetts seeking a du:,i,ibi that its Stony Brook in the complaints, a condition precedent to the validity of all the Progect No. 6 Ibarr Intermediate Protect Ibwer Sales 4su.gni with Stowe is valid and has brought an
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Sales Amuncnts is 100% panicipation in said Agi&n.cnt, and if the Vermont Wr- action against the State ofVermont and certain of the Vermont Partierpants in Vennect ticipant's contracts are void ab initio, then this condition has not been met. Further,the Supenor Court seeking a dedaration ofMMMECs rights and obligations under its Seomr complaint alleges that anyincrease in Project No.6 biHings as a resuh ofthe nonpayment Brook Intermediate Protect IbwerSales knu u s with them. By agisu g.W of the by the Vermont Project No. 6 Participants is unlawful on the basis that the Project No. 6 parties, the proceedings were inactise pending the decmon of the Vermont Supreme Ibn er Sales Agreements failed to haw 100% participation, and MMWECs use of Prt@ct Court. Subsequent to the Vermont Supreme Court ruling, the case was dismissed.
. No. 6 funds to (tner the shortfaH in receipts constitutes a breach of the Ibwer Sales On August 31,1987. Eastem Maine Electric Cooperauve (EMEC), a 3.6% Partxi-Ap,isnints. pant in MMWECs Protect No. 6, filed for protection under Chapter 11 of the Federal
, The Town of Iludson Ught & Ibarr Department and the City of Peabody Bankruptcy Code. In its pctition, EMEC is asking the coun to reject its contract with Municipal Ught Plant filed on Nowmber 14,1988, a lawsuit against MMWEC, which, MMWEC EMEChasfailedtomakepavmentsrelatingtoitsIbwerSalesApuignicon-among other things, sought to enjoin the MMWEC Hoard of Directors from actmg tract with MMWECsince May 1987. In October 1988, EMECs petition for rejection ofthe
~ upon the Memorandum of Understanding (discussed in Note 5). On Nosember 15, contract was denied by the U.S. Bankruptcy Court.De ;udge conduded that MMWTC 1988, the Massachusetts Supenor Court denied the Iludson/ Peabody injunction re- has a valid claim against EMEC stemming from EMECs payment defauk under the con-i quest, which denial was uphek! by the Massachusetts Appeals Court. On Duuubs 2, tract prior to EMECs entering into Chapter 11. MMWEC has formaEy filed a claim m the 1988, the Town of Iludson Ught & Ibwer Department and the City of Itabody proceedings for the money it is owed. EMEC responded to the claim with a counect-
- Municipal Ught Plant amended their complaint against MMWEC to indode di,L n, v3
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i MMWEC Notes to FinancialStatements .
( 7) Benefit Plans,(ontissued ( 8) Cossesseitsseenes ased C; -* _,rb,cosutisessed Ikaring 19H' MMWEC wtB be required to ak)pt FASil MD. H7, 'Empkners' die expansmn dthelh wuemmace-Aconmting for INE)skxW. MMWEC does not expect die adoption of this starxbrd I"* 55"I to *"~
tion WscII)4xnpietkm M 11 h innia5ysdtahdedkwOW W at a anal have a nuterial impact on its operations or cash Ikyws. estinized at d 5565 rm5xm, d whkh MMWECs duas sisare mE be RN Separately, MME'EC omtrilunes to an emph nec savings plan administered by a MMWTC lias muesgw xxling ,.mu- widt us ..Au h and anodier udwy e at life murance ownpany. All full time empkryces mecing the service requirements are die power received over tiese lines induding recoveryof MMWECs sharc of the metsd cligdde to panicipate in this elefined contribution pbn. Under the gm> visions of the the h plan, MMWECs arxl the empki)ec's contrilxakms vest immediately. MMWEC om.
tnlmted 573,000 and 574,000 wlule the employees contrilxacd $106,000 and 595,000 7triser5eles Agreessnesses durmg 1988 and 1987, respeciwly. InJanuary 19H5, certain resalents d the Toum of Gronon brought suit agawiss the A deferred compensation pbn oliered to empkyyces of MMTEC under Intemal Toum of Groton Municipal 1.ight Department, the Town d Geueon and MMWEC, Rewnue G sde $cctia m 457 was crminatal as of May 31,1988.11an assets annunting to dialiengingthe validstyof the budcar Mir. No.1,Nudcar Prtico Nos. 3,4 and 5 and Pro-5549.000 were distrdxnal upon pbn terminaion to pbn Participants and the associ- icct No. 6 lbser Sales As.m.~~. On Rlxuary 4,1967, the Massadxascits Sequerkir ated in.st an mnt was(kned. Court granted the defendants' motions for summary gudgement and uphek! thevalsday of Groton's Ibwer Sales Asimimus wnh MMWEC The decasson was appealed by the plairudfs e die Malmscus SupmmeJtalicial Gmn. On July 22,19HR, die .W
( 8) Commitments and Contingencies Judicial Court affirmed the lower court's rulwig thus upholdsng the validay of Get*m's N *C# N d '88C5 lbwersales Apmiuus w thi MMWECNo funhcrcourt appealshavebeen filed.Gn*m MMWEC has entcred into a umtraa with the New Ilrunswick Elcoric Ibwer Gxn- continued to make the required p.y-u o to MMETC throughout the perk x1 ofleppl raiwiim (NilElt) for the purchase of 100 MWofcapacity from the Ibint Irpreau nudear dialienge of the Ibarr Sales As.miuo.
uma. The oxurau became cffatim in February 1983, the unit's in-servKe date, and was Vermont Gearic Cooperative, wnh a direct 0 41% osmership share in the Sea-init ully effeaive through Ooober 1987,with options for extensums. MMWECexcM immk protect. ceased nuking 5cabetok oxtstnation payments in January 19M6. Pay-a saxed option in 1988 for a one year extenskm of the contract,simuhancously with ments are being made byother joita owners tocover theshonfat. In adda son to being a olmaining sorne omtraa nw xlifications, t!ut when approval by the Canadian Nat knal dimo W owner in de W pMeo. Wsmom Georm Cooptmise h h Energy Ik urd and crith ownpletion of transmission arrangements will extend the am- involved in Scabrtm >k through ks 7.2% irnerest in MMWECs Pnicca No.6 and has failed tot t dm mgh Ooober 19'Ji.%e contract payment provisions require MMW'EC to pay in to make its monthly guyments to MMWEC since Felwuary 19R6.
aH ewnts certam fixed, operating, maintenance and other charges rebung to de Washington 11oric Cooperatrve of Vernuwa, a 1.96% Paniapant in MMWECs
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Protect No. 6 has been withlmkling its monthly payments sinceJanuary 19MR.
%e final minimum payinents as estimated by MM%TC k >r its pbnning purpm.cs ge g.rmom Puldu- Servia- Depmnau brouglw mtion p MMWEC in a fe e.nh of the years 1989 thnsugh 1992 amount to appn>xinutely $36 milik m. Capacity Supenor Court of Vemm wa in Ooober 19H5 du5cngmgthe vahdery of the Pnico M t 6 ent nienwnts deocase to 50 MW in Ninember 1993 to the end of the o nuraa perk x] of Ibwer Sales Agreenwrus as ernered into by the Vermont PartkM in Nowmher Oouber 1994 thus rulucing the estimated fixed durges for I />3 and 1994 to $33 and 19H6,theSuperior O surtJudge ruicd thm the Ibwer Sales Agreements k w Pnqco Mt 6
$ 15 miUk m, respxtively. MMWEC fus enteral into ctwresponding agreements with its ! MMWECardscwidamsumenWmiinicsmvermomamvdMurderb-nwmbers arxl other utditics to rescB the power- nxwn law. %e ruling @d comeruions by die Wariorn Depnman d PA M-MMWEL ernered into agreements for participation in the interomnnikm be- mWmwmt Gearic GWve nd de'iIage d5mwe'FM @ Wnicm tmwn New Engbix! utiinies arxl the IlydroQuebec cicoric system awar Shedm uke- dia du axumamn invdM M dw n kin-p badmg W.w he pbimifs Quebec (11use 1) which began ownmercul operation in October 19H6. New Engl.and appealed this ruling to the Wrmswu Supreme Gitwt, which heard arguments in Apnl Elairic Transmissiim 0,qmration and Vermont ElcaricTransmission Oxnpany om- 1967. In September 19HR,the vemmwu Supreme Cnurt ruled tha the Pnico Nix 6 tbwer stnxtal the New Engbrxl p mum of the interconncakm at a total cost of almna $140 SM wuhdidnmww mHnksm Msinn innpWiMabinnk )
milhi m, of whk h 3 65L w 55.1 nuth n is MMWECs slure to supp nt. MMWEC lus also bcouse de indak MM dx stamy Judwwhy m m isuo die oiswraos and M
MMWEC Notes to FlnancialStatements
- ( 9) Imestments and Depodes,cordinued canying Market 1)pe ofInvestment Amount Value-(DoRars in Thousands)
Repurchase ,wnnuo $ 11,206 $ 11,348
~
Other 1mtstments:
Certificates of DepocJt 168 168 Treasury bills 97 97 Treasury notes 66,341 65,414 Agency bonds 55,358 54,353 -
Agencydiscount notes 145,5RR '145,529 TotalOther1mestments 267.552 265,%1 Totalln%me $278,760 $276,909 Due to seasonal cash flows during 1988, MMWEC, frtwn tis ne to time, imested in
~ repurchase ags cn m nu with its depository bank that were collateralized bysecurities in MMWECs name hek! by the depository bank. MMTECs practice 5 to monitor the market value of the underlying securities to ensure that the market value equals or exceeds the amount imested.
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MMWEC Notes to FinancialStatements
( C) Commitments and Cendagencies,cositinued ( 8) Cosensitsseesets and Coadsagencies, consiemed PowerSnics Agreeneents, condnoed OennerIsones, condnued daim aDeging, among other things, that its Prtie(t No. 6 lbwer Sales Agreement with aside funds kw its eventual decommissioning. MMWTCs policy is to fund this seserve MM%EC is w >id as a resuh of ahe vemwint Supreme G>urt deciskn MMWEC has mowd requirement over ahe licensed life of the smit (39 years) dwough mrwuhiy biEsngs so to d smiss the o mntcrdaim im most counts and kw a nwwe definne sutemem on rxhcr MMWECI'articipants in the unit. MMWECs slure of the soul estwnaeed ecserve regissee-countsflhe lunkruptcy o sun lus these mot ions under advisement. MMWEC and EM EC mentis $9.3 m Eion of which $552,000 has been funded asof December 31,19sts,and is included in other deferred charges and accrued aq.s.w.
are currently within the diwovery suge of this litigatkn inJanuary 19H6,the l lull Municipal l.igluing Itant filed suit against MMWEC seek- In August 19HH a revised Price-Ander.on Act was enacted.caEmg for a fefecen year ing a desist: tion that its Ibarr Sales As.u...v for Nuclear Mix 1 Nudcar Protects emensson of the madcar liability indemnificmion process /the revised Act hmks puhisc Nos. 4 and 5 and Projcct No. 6 relming to Scalmxik were invalid, and an injunction liabiiny from an inodent at a nuclear power pima to $7.6 biEson.'the primarylayer of against MMWEC o>licoing any amounts from l lull under thc agreements and nxmetary insurance kx the lialiilky, which can be purchased in the commercial market, is damages. The suit d nllenges the validity of these Ibwer Sales Agreemerus on varkaus increased from $160 miBion to $200 miEion. Additional coverate tis 7.1 bimion is no be i grounds, and alleges, among other things, various misrepresentations, tweaches and psovided through a $63 miBion per inodent assessment of each of the 112 curvendy imprudencies by MMWEC On March 5,19H6,the Massachusetts 5uperkw Giun granted licensed nuclear units in the United states.The maximum assessment is $10 miEson per MMWECs nw xions to stay the legal proceedings and compel arbitrat;on of the suit and ancident per unit in any year. Ifthe sum of the liability clasms mid costs fium an inodens kw a preliminary injuncion requiring IluB to pay its share of monthly power costs as exceed the maximum amount of fatancial prosecuon, each scactor operaeor is suhycct roguired by the Ibwer Sales Agreements. On March 21,1986, a single justice of the to an additional $3.2 miBion assessment.~1he maximum assessment issuficci to adpast-Massachusetts Appeals Gmn denied Iluirs petition for relief frorn the ortk.rs of the - ment kw insation every five years. MMWECs interest in the Mitseone Unit 3 asuld sesult Superior Oxan, arxl the matter went to ad>itratkm. In August 1967,the arl>itraor ruicd in a maximum assessmera of $3.0 miEi m.
that the omtrans signed by iluirs ligin Ixurd with MMWEC were valid. The arbitrator MMWEC is rxit cunendy covered under gradual poEuuan hability msurance tus yet to rule on the ether arseged tweaches, imprudencies and misrepresentations relmed to MMWECsStonylkook power plant. Management is not aware ofany maecrial daimed against MMWEC by llull. After withholding payments,Iluu is currendy making daims made during 19HS or outstanding as of th...lm 31,19R6.
payments, under prtncst, in accordance with the court order, which it appealed. Additional information regarding commaments and contingenocs retmove so i
j Itased on the opinions ofIkmd Counsel and other legal counsel, discussions with MMWECs detx and involvement in nudcar projects is discussed in Note 4 - Debt and such o >unsel and ather considerations, management believes that the uhimate resolu- Note 5- Construaion and Finan%
ikm of the aaions described alxm wig rxx have s material, adwrse cifect on the finan- y,,,,,,,,,, ,,4 _ 7
( 9) cial p>sition of MMWEC. AE bank deposits, which amounted to 5140,000 at Duv.4m 31,19HM, are main-Odier Issues tained at a single financial instituthm. 'the Federal Deposst Insurance Gwporzion i Irgislation prop wing amendment ofClupter775ofthe Actsof 1975,the Au mak- cunendy insures up m $100,000 per depiux. MMWECs uninsurd deposas ranged ing MMWEC a public corporation and defining its powers and dutics, was filed by the from zero to $11.7 miBion during 1988 due to seasonal cash Rows, the timing of daily Massachusetts Govenxw's office in 19H6 and cenain same officials in 1987 and 19H8. cash recespu aM favorable camings onerd on dicsc da uM Qe
, lhe pnpised legislation adw> cates among other faaors, restructuring the lioard of Inwamous are simM m cmt @M fw acoction 4monizmio bidw dis-Dircoors, and expanding DI'U auduwity over MMWEC MMWEC has and cominues to count (gwemiumK MMWECs ruwmal gwaaice is to hold its invesaments until mmunty. At opgese the gwposed legislation offering its own altematives thereto. .A .M 31,19H8, aI securkies uMMying repueduse w% and aE other Cenain MMWEC member syvems luve given notices which were subsequently were hdd in MMWECs name by iMepcMeru cusmdians minguidu-rest irxled.of their intentie m to withdraw fnxn MMWEC membership agreement and or Gmumaion FuM Imsces,lhd FuMT'mMee w MMWECs depmisory IWE sudi j service agreement. One notwe ofintenu to widxIraw from the service agreemem was n.purduse agreemenu wen widi cntitics Mu r dun such cusuh im outstanding at year erxt. Witixirawal fr un MMWEC membership does rmt afIcd die indMing au rud imercMare dodd nem y ohhgations of a Ibrticipant .nxier the Ibwer Sales Agreements or other oxuraos.
As a joint owner of the Millsame Unit 3 nuclear unit MMWEC is rcymred to set
e
A Century ofService
.- -- m , YEAltS OF SEm' ICE y g y gn y gy Danvers Ekxtric Dcp.b 64 4 .,, . ,
Middeborough Gas & Electric Dy L.m>4 l
"Mg3g
g~ Ilingham Municipal Ugningliant 1
i f y p Ifun Municipal Ughting11 ant i *
' ?$
Marblehead Municipal Ught Dep_u.xs '
% .at Nonh Attleborough Ekxtric Dq a.ird -
}
$ As . # Reading Municipal Ught Dywhigr4 -
OMr wakeflek! Municipal Ugtn R-p.= u.ms
%. x , e-W i
Gonawd Municipal Ught Dsp.-u (& !
j PuNic power in Massachusetts cele-Oiicopee Municipal Ughting 11 ant i, brated its 100th anniwrsary in January Iludson Ught & Rmer Dsp b>Ks !
1989 when the Danwrs Elco.s.e Divi- :
sion marked a centurvof senice to its '
MunW Ugu R 6 =u'm==
customers. Westfick! Gas & Ekxtric Ught R 3 L.(r4
! Damers Electric generated its first Ikdyoke Gas & Electric Dsp.=b.gid i kikmatt of electricity on Jan. 2,1889, Mansfiek! Municipal Ekxtric Dy=Ligr4 blazing a trail that 39 <xher cities and 1pswich Municipal Udn N._e.(& '
a
. towns in the Commonwealth uvuld soon folknv. Danvers was the first com-
' mtmity in Massachusetts to realize the T@ MunicWgning h :
~
benefits of kxal ownership and control Ashbtanham Municipal Ught 11 ant
, of its electric utility. Shrewsbury Electric Ught 11 ant
, Progressiw thinking and a spirit of Grtnon Ekxtric Ught Dy u.gis independence have enabled Damers Ronicy Municipal Ughting11 ant Electric to conquer the many cha!!enges l it has faced over the past 100 years. An " "" N l ongoing commitment to service and Sterling Meicipal kric Ugn R -uos& i ,
operating in the public interest haw- IkAyston Municipal Ughting 11 ant I brought the community benefits only Gawgetown Municipal Ught Dy-e..cr4 .
j puh*:c pourr can provide. Ikdden Municipal Ught Du,mu.es l MMWEC takes this opportunity to
- uttkton h Ught & water %a.x.4 recogni7e and congratulate Damers l Ekctric on its 100th annhersary, and " "" b"""
to ofter its support and assi9ance in Nnceton Municipal Ugu Depanment ;
I _ ensuring a second successful century of Middleton Municipa! Ught Departmeru
) public pourr service in Massachusetts. South Iladley Electnc Ugtn Dsp.L.Em '
- i t
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ML19327B002

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