ML20151P204
| ML20151P204 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 04/15/1988 |
| From: | Backus R SEACOAST ANTI-POLLUTION LEAGUE |
| To: | Moore T, Rosenthal A, Wilber H Atomic Safety and Licensing Board Panel |
| References | |
| CON-#288-6128 OL, NUDOCS 8804260107 | |
| Download: ML20151P204 (13) | |
Text
- _ _ .
0
& (sI28 .
B AC KU S. M EY E R & S O LO M CWWETED AttOR N EYS AT LAW U3Ib 116 LowcLL STREET P o. 8 O x s i r., J '/l.T c',",0 JO MCYCR* es tPR 20 All:53 .
Sitvf N A SOLO *40N MANCHESTER N. H osios ,y3 3 ,3, m 3 M AnTIN R J CNKINS 4 03 668 7272 , ,
TO M At* a 0WEEt7 3 D AR MIOH A E L C IPAVEC .
Fi J BAANCH ,
April 15,1988 Judge Alan S. Rosenthal, Chairman Judge Thomas S. Moore Judge Howard A. Wilber Atomic Safety and Licensing Appeal Panel U.S. NRC Washington, DC 20555 Re In the Matter of: Public Service Company of New Hampshire, et al. (Seabrook Station, Units 1 and 2)
Docket Nos. 50-44?-OL and 50-444-OL
Dear Judges:
I am enclosing for your consideration and inclusion in the record on appeal, excerpts from the Public Service Company of New Hampshire Forn 10-K for the year 1987. We believe you are entitled to consider this material, in connection with the pending waiver petitions, since these are portions of a document not only prepared by an Appellee and adverse party, but because they are portions of a document that that party is required to prepare, and which is required by feder31 law, to be complete and accurate.
Due to the bulk of the 10-K, and the expense of reproducing it, as well as the f act that most of the report deals with matters irrelevant to the issues before this Board, we are at this tine only furnishing what we believe to be the pertinent portions of this report. The Appellee, PSNH, may if it wishes, of course, furnish this Board with a complete report.1 8804260107 880415 PDR ADOCK 05000443 G PDR IIn view of this Board 's Order of April 13, 1988, received this s}Y)(,3 de .e, the Board may want to inquire of Appellee why it did not itself furnish this 10-K to the Board.
s.,
Judge Alan S. Rosenthal, Chairman Judge Thomas S. Moore Judge Howard A. Wilber Page 2 April 15, 1988 We would particularly urge the Board 's attention to the paragraph entitled "Cash Flow Problems" on page 1 of the report, and the paragraph entitled "Need for Power" on pages 4 and 5 of the material.
In the paragraph headed "Cash Flow Problems" the company notes -
that it has ceased paying interest on all of its debt to the date of its bankruptcy filing, January 28, 1988, but goes on to note that it is in the "process of filing a motion with the Bankruptcy Court to permit, during the pendency of the bankruptcy proceedings at least until February 1989, payment of principal and interest on the First Mortgage Bonds, the General and Refunding Mortgage Bonds and debt secured by any such bonds." (such a motion has now been filed.)
The report then goes on to state: "If the Bankrupcty Cour t determines that holders of Third Mortgage Bonds are also entitled during pendency of the bankruptcy proceedings to receive payments of interest, the Company anticipates that its cash flow would by early 1989 become iradequale to make such payngnt_nnd to pay all of the Company 's regaining ongoing _ expenditureg& These expenditures _ include monthly _ payments for the Company 's approxirately 35% share __of the exoendituras_for the Seabrook Plant (see "Seabrook Nuclear Plant" below) , the Company 's capital expenditures for maintaining and adding to its other plants and facilities, purchases of power including payments to small power producers, payment of taxes periodically owed to the State of New Hampshire and local cities and towns, and other normal operating costs and expenses."
Finally, the Company revet k 3:
Indeed, even without payment of_ interest on Third Mortgage Bonds during the bankruptcy proceedings , in the absence of rate increases, the company 's cash flow may be inadequate at times to_ meet all of these other expenditures.
(Emphasis added.)
- J
Judge Alan S. Rosenthal, Chairman Judge Thomas S. Moore Judge Howard A. Wilber Page 3 April 15, 1988 In the next noted paragraph, "Need for Seabrook Power," the Company states once again its belief that Seabrook power is needed in the region, and states that:
The company will, as long as resources are available, therefore continue to fund itc share of Plant expenditures unless ordered by the Bankruptcy Court to reduce or cease such funding. It is anticipated that continued funding of the Seabrook Plant may be opposed by certain of the Company 's creditors.
In short, the 10-K reveals that, on the Ccmpany 's own admission, it may be unable to continue to fund its Seabrook obligations, j despite its stated desire to do so, either because it may be y ordered to resume interest payments on Third Mortgage Bonds, which would impair its ability to meet Seabrook obligations, elsewhere estimated to be 212 Million Dollars before the anticipated commercial operation date now suggested to be January 1,1990, or because "certain" of the Company 's creditors may seek to have the payments stopped , or , and f.ndependent of either of these contingencies, because it may not be able to meet its estimated requirements, including Seabrook payments, without a rate increase, although no rate request is pending.
Respectfully submitted, A. Backus, Attorney for acoast Anti-Pollu tion League RAB:jsr Enclosure cc Attached Service List
.c .
DOCKETED USNRC Alan S. Rosenthal, Chairman Thomas S. Moore Atomic _ Safety and Licensing Atomic Safety and Licensing
. Appeal Panel Appeal Panel 18 MH 20 A1153 U.S. NRC U. S. NRC Washington, DC 20555 Washington, DC- 20555 Opi;E S, :M. -.. .
Howard A. Wilber JosephFlynn, Asst.Gn.Edd5k[.Yl['[~'
Atomic Saf ety and Licensing F ed . Emerg . Mgmt. Agcy .
Appeal Board 500 C. St. So. West U.S. NRC Washington, DC 20472 Washington, DC 20555 Office of Selectmen Sherwin E. Turk, Esquire Town of Hampton Falls Office of Exec. Legl. Dr.
Hampton Falls, NH 03844 USNRC Washington, DC 20555 Carol Sneider, Esquire Judith H. Mizner, Esquire Assistant Atty. General Silverglate. Gerner, Baker, One Ashburton Place Fine, Good & Mizner 19th Floor 38 Broad Street Boston, MA 02108 Boston, MA 02110 Ellyn Weiss, Esquire Paul McEachern, Esquire Harmon & Weiss Matthew Brock, Esquire 20001 S Street NW 25 Haplewood Avenue Suite 430 P.O. Box 360 Washington, DC 20009 Portsmouth, NH 03801 Roberta Pevear Jane Doughty l State Rep. Town of SAPL Hampton Falls 5 Market Street Drinkwater Road Portsmouth, NH 03801
, Hampton Falls, NH 03844 Thomas Dignan, Esquire Atomic Safety and Licensing Ropes & Gray Appeal Board Panel 225 Franklin Street U. S. NPC Boston, MA 02110 Washington, DC 20555 Docketing & Serv. Sec. Mr. Robert Harrison Office of the Secretary Pres. & Chief Exec. Officer USNRC PSCO l Washington, DC 20555 P.O. Box 330 2
Manchester, NH 03105 i !
4-
')'
George Dana Bisbee, Esquire Attorney General's Of fice State of New Hampshire Concord, NH 03301 1
i Atomic Safety and Licenaing Board Panel U.S. NRC Washington, DC 20555 h
r l
i i
t r
SAPL.1 (Service List / Appeal Board (50-443-01-1, 50-444-01-1)
W -
,,-+,r,--- --e~n,.,,,,e,._ , ,, , , , , _ , , , _ _ , _, __ _ _ _ _ , _ ____ _ _ __
n wu -
rENs M ;
l SECURITIES AND EXCHANGE C051511SSION ; '
WASHINGTON. D.C. 20549 -
ggi[h
'D s
i/ FORM 10-K Ie;i
/. P ANNUAL REPORT PURSUANT TO SECTION 13 qd5(chsc 5 >
p'/ OF Tile SECURITIES EXCH ANGE ACT OF 19ti\ ' Yit$g For the Sscal year coded Commission F' ' " beNLW r.S December 31,1987 1-63 0 N'[J PUBLIC SERVICI[tactnarrw t COMPANY of teg,strant in charwr) as speinQeF NEW HAM'P$b NEW hah 1PSHIRE 02-0181050 (stsw or Oder Jurin&ction (I R.5. Employer ofIrcorpcration orOsgwd snon) IdentiSc4 don No.)
1000 EL51 STREET,51ANCHESTER, NEW H A51PSHIRE 03105 tAdates of Pritzrp:1 Execen,e Otrx<s) (Zip Caie)
Registrant's telephone number, including area code: 603-669-4000 Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchage on Title of Each Gass . Which Recittered Common Stock, SS Par Value New York and Pacific Stock Exchanges Wanants to Purchase Common Stock Pacific Stock Exchange Preferred Stock, $25 Par Value, Ilfo Dividend Series . New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value, ll.247c Dividend Series New York Stock Exchange Siriing Fund Patened Stxk, $25 Par Value,157c Dividend Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,177, Dividend Series New York Stock Exchange Sinking Fund Pnfernd Stock, $25 Par Value,15.44% Divideod Series New York Stock Exchange Sinking Fund Preferred Stock, $25 Par Value,137c Dividend Series New York Stock Etchar.ge Siriing Fund Preferred Stock,525 Par Value,13.807c Dividend Series New York Stock Exchange General and Refunding Mongage Bonds, Series B 12?c due 1999 New York Stock Exchange General and Refunding Mongage Bonds, Series C 141/27 due 2000 New York Stock Exchange General and Refunding Mongage Bonds, Series E 18'o due 19S9 New York Stock Exchange Deferred Interest Third Mongage Boods, Series A 13 3/4?c d:e 1995 New York Stock Exchange 15 3/47 Debentures due 1988 New York Stock Exchange 14 3/87, Debentures due 1991 New York Stock Exchange i
157c Debentures due 2003 New York Stock Exchange l 171/77, Debeatures due 2004 i
New York Stock Etcha ige Securities registered pursuarit to Section 12(g) of the Act:
Title of Cass Preferred Stock, $100 Par Value,3.35'u Dividend Series Preferred Stock, $100 Par Value,00**e Dividend Series Convenible Preferred Stock, $100 Par Value,5.50*c Dividend Series Prefened Stock, $100 Par Value,7.92?c Dividend Seri+s Sinking Fund Preferred Siock, $100 Par Value,7.MSc Dividend Senes t Sinking Fund Prefened Stock, $100 P r Value,9.00?c Dividend Series Indicate by check mark whether the registrant (1)l.as filed all reports sequir-d to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for ruct shoner period that the reg 3trant was required to file such reports), and (2) has been subject to such filing requirements for due past 90 days.
Yes.L. N o_,_.
The aggregate market value of the shares of Common Stock 53 par value, of the Company beld by non-affihates of the Company was $134,785,156 ou March 25. IM8. j Indicate the number of shares outstanding of each of the re gistrant 's classes of common stock, as of the latest practicable date. ~'
Ga,u Outst1ndme at March 25.1988 Common Stock, $5 Par Value 37,201.127 Shares N s O
- e. .
/ ;
. PUBLIC SERYlCE COMPANY OF NEW HAMPSHIRE 1987 FORM 10-K ANNUAL REPORT Table of Contents PARTI f.Agt item i Isusiness !
Item 2 Properties 12 Item 3 legal Proceedings 13 Item 4 Submission of Matters to a Vote of Security Holders 15 Item 4A Executive OfScers of the Registrant 15 PART II Jtem 5 Market for the Company's Common Equity and Rela;ed Security Holder Matters 17 Item 6 Selected Financial Data 18 Item 7 Management's Discu:sion and Analysis of Financial Cendition and Results of Operations 19 Item 8 Financial Statements and Supplementary Data 23 It m 9 Changes In and Disagreements with Accour: ants o'n Accounting and ,
i Financial Disclosure 42 PART III Item 10 Directors and Executive Of6cers of the Registrant 42 Item 11 Executive Compensation 45
- Item 12 Security Om oership of Certain Beneficial Owners and Mr.nagement 48 1 Item 13 Censin Relationships and Related Tnuactions 48 PARTIV l Item 14 Exhibits, Financial Statement Schedules, and Repons on Form 8-K 49 i
i i
PARTI Item 1. BUSINESS Introduction Public Service Company of New Hampshire (the "Company")is the largest electric utility in New Hampshire, operating a single integrated system wbich supplies electricity to approximately three quarters of the State's population.
It distributes and sells electricity st retailin approxim ately 200 cities and towns, including Manchester, Nashua, Porumout h.
Berlin, Kc:ne, Laconia and Rosbester,in the State of New Hampshire. It also sells electricity at wholesale to five other utilities and municipalities. The Company was incorporeed in 1926 under the laws of the State of New Hampshire.
Bankruptcy of'The Company Bankruptcy Filing. On January 28,1988, the Company filed a voluntary petition for protection under Chapter 11 -
of the United Sta tes Bankrupt cy Code. The Company is now ope rating its business as a de btor-in-possession. The Company i filed for protection under the Bankruptcy Code because the cash generated by the Company's operations was insufficient to satisfy its capital requirements and to pay interest u it came due on the Company's outstanding lodebtedness. The Company was unable to consummate exchange offers with its debtholders designed to redcce its debt sersice obligations.
The New Hampshire Public Utilities Commission ("NHPUC")did not act on the Compar y's request for an emergency rate increase based on the Seabrook Plant because the New Hampshire Supreme Court detennined that New Hampshire's anti-CWIP law prohibits such a rate increase prior to operation of the Plant (See "Item 3., Legal Proceedings New Hampshire Public Utilities Commission"). The Cornpany concluded that the bankruptcy filing was necessary to avoid attachments of its property by certain debtholder represcutatives and to avoid the filing of an involuntary bankruptcy petition.
Cr sh Flow Problems. The Company ceased paying interest on its unsecured debt in October 1987 and ceased p33 ing interest on the remainder ofits debt on January 28,1988, the date of the Sling of the petition in bankruptcy. The Company is in the prxess of filing a motion with the Bankruptcy Court to permit during the pendency of the bankruptcy proceedings at least until February 1989, payment of principal and interest on the First Mortgage Bonds, the General and Refunding g Mortgage Bonds and debt secured by any such bonds. If the Bankruptcy Court determines that holders of Third Mortgage {
Bonds are also entitled during pendency of the bankruptcy proceedings to receive payments of interest, the Company 1 anticipates tbat its cash flow would by early 1989 become inadequate to make such payment and to pay all of the Company's ('
remaining ongoing expenditures. These expenditures include monthly payments for the Company's approximately 35%
share of expenditures for the Seabrook Plant (see "Seabrook Nuclear Plant" below), the Company's capital expenditures ,
for maintaining and adding to its other plants and facilities, purchases of power including payments to small power ;
, producers, pannent of taxes periodically ow ed to the State of New Hampshire and local cities and towns, and other normal 1 operating costs and expenses. Indeed, even without payment ofinterest on Third Mortsage Bonds during the bankruptey 3
proceedings,in the absence ofrate increases,the Company's cash flow may te inadequate at times to meet all of these other expenditures.
Any financing for tbe purpose of raising funds to make necessary capital expenditures, supplementing inadequate cash flow, or otherwise, and the granting of any tien on Company assets to secure financing during the bankruptcy proceedings would require approval of the Bankruptcy Court and possibly otber regulatory bodies. Any such financing and tien 3 ould
! likely te opposed by some of the Company's creditors. The Company believes that it will be dif6 cult to achieve any l substantial amount of such financing.
The Company ceased paying dividends on sbases ofits Common and Preferred Stock in 198.s and until the dividend arrearages with respect to shares of the Preferred Stock are cured, the holders thereof will continue to have the right to elect a majority of the Company's Board of Directors, a right which they have exercised since 1985. If a reorganiration can be achieved,it is anticipated that any reorganintion plan filed and confirmed in the bankruptcy proceedings might result in substantial alteration or elimination of some or all of the current rights of the bolders of shares of Common and Preferred Stock.
Reorganization Plan. Until May 27,1988 (and thereafter to the extent the Bankruptcy Coun extends said date)the Company has the exclusive right in the bankruptcy proceedings to propose a reorganization plan. The Company is attempting to develop steb a plan. It is believed that some level of rate inereases will be essential to develop and implement I
a successful plan. De plan could involve a sale of the Company or cenain ofits assets or a split-up of the Company and its assets into two or more companies, resulting,in the latter case,in a potential change in rate regulation to the Federal
- Energy Regulatory Commissico ("FERC").
Aoy plan m ay involve substantial restructuring of the Company's debt and equity with the Comparfs existing equity and unsecured de6tholders likely to receive securities having substantially rhfferent rigbts and values, Coorttrnation of any reorganization plan is likely to require a substantial period of time during which the Company will remain under the jurisdiction of the Bankruptcy Court. It is not possible at this time to predict the nature of any such plan, the amount of recovery achieved by the Company's debt and equity bolders, the likelibood of the plan's acceptance by the Company's creditors and equiry bolders or its approval by the Bankruptcy Court and any other regulatory bodies having jurisdiction. ,
or the length of time it will take to implement such a plan.
Both the New England Electric System and North?.ast Utilities have publicly expressed an interest in the acquisition ;
of certain of the Company's assets; neitber have expressed interest in acquiring the Company's curnot interest in the Seabrook Plant. Preliminary discussions with both e atities bave be gun but the Companyis unable to predict w ben or w bethe r any arrangement satisfactory to the Company,its credity andits stockholders could be reached with either entity. Any -
such arrangement would also be subject to the approval of the Bankruptcy Court and other regulatory bodies having jurisdiction, ne Company's Service Area and Construction Program.
Service Area, ne Company has very substantial capital requi'ments to saisfy ifit is to provide adequate senice to its fast growir,g service area. This senice ana continaes to expericace rapid population and economic growth and one of the lowest unemployment rates in the nation. Megawatt.bour sales to retail customers increased 6.19e for 1987, due
- m ainly to a d.7?c inereasc ia tbe avera ge number of retail custome n; ;erved by the Compaf.y. Continue.d growth in tnegawati-
. . bour sales will be dependent on continued econc.mic growthin New Hampshire, weatter, the competition from other energy sources and suppliers, and the price of electricity. De Company experienced a de:rease it: p. rime sales (sales of electricity exclusive of unit or capacity power supply contrr.ts) of 2.8?e for IV37 and increases of 2.87c for 1986 and 4.7?e for 1985, ,
compared to the same periods a yeat earlier.The decrease in prime sales for 1987 and the smaller increase for 1986 reflects the loss, effective October 1,1986, of two of the Company's aholesale customers, which previously accounted for 12?e of the Company's total annual prime sales and approximately 8?e ofits total annual revenues from prime sales. See
. Competition . Actual and Potential Loss of Customers", below.
Construction Program. The Company's noo.Seabrook construction program for the five-year period 1988-1992 is curnntly esum ated to be approximately $314,100,000 and its sbare of the pre-operational testing and other Seabrook Plant capital addi tions are estimated to aggngate $178,700,000, based on an operation date for the Seabrook Plant of January 1,1990, wbich has been assumedj2ffmancialplanciaspurp.cses. The Ccmpany cannot tiredict w ben. it at alI3UlTant will commen:e operation. The following table sets forth the Compr.n7s esumated capital expenditures for tse peric i
[
Non Seabroek habroek Tplal i 19SS S 46,600,000 5 70,S00,000 $117,400,000 j 1989 58,300,000 71,500,(00 129,800,000 1990 64,800,0M 9,900,000 74,700,000 1991 79,200,000 12.900,000 92,100,000 1992 65,200,000 13.600 000 78,800,000 a Total 5314,100.000 $178.700.(00 $492.600,000 i
l It is possibk *. bat additional expendatures roa) N required to meet reFulatory and environmental requirements at i the Seabrook Plant and the Company's other generating facilities. The estimated Seabrook expenditures for 1988 and l 1989 w err expensed in 1957. See Note 3 of Notes to Financial Statements.
I Seabrook Nuclear Plant The Company is the principal owner of a treently completed but not yet operating nuclear-fueled steam-electne 2
l 1
1
o .
'. generstlog plant at a site located in Seabrook, New Hampshire (the "Seabrook Plant"), having a Westinghouse pressurited water reactor with a rated capacity of t.150 me awatu,utilizior ocean water for condenser cooling purposes. Various other New England c'ilities an participatingin the ownership of tha Seabrook Plant under a loint Ownership Agreement. The ownership interesu in the Seabrook Plant, are u follows:
Public Service Company of New Hampshire 35.56942 %
The United Illuminating Company 17.50000 EUA Pcwer Corporation
- 12.13240 Massachusetts Municipal Wbolesale Electric Company 11.59340 New England Power Company 9.95766 The Connecticut Light and Power Company 4.05985 Canal Electric Company 3.52317 Montaup Electrie Company
- 2.89989 New Hampsnire Electric Cooperative,Inc. 2.17391 Vermoot Electric Generation and Transmission Coopentive,Inc. 0.41259 Taunton Municipal Lighting Plant 0.10034 Hudson Light and Powur Department 0.07737 100.00000 %
- Both these companies are subsidiaries of Eastem Utilities Associates.
Responsibi'Jty for construction and preoperationa! maintenance of Unit I has since 1984 been vested in a division of the Compahy known as the New Hampshire Yankee Division. Effeetive upon receipt of all required regulatory approvals, the New Hampshire Yankee Division would be reconsJtuted as an independent corporate entity, to be known as New Hampshire Yankee Electric Corpontion("N.H. Yankee"). The.foint Owners of the Seabrook Plant would own the new corporation and be represented on its goveming board in proportico to their nwoership of the Seabrook Plant. The existing agreement between the Company, as agent for the Joint Owners, and Yankee Atomic Electric Company ("YAEC") for the provision by YAEC of engineering, quality assurance, and other services for Seabrook Unit I would then be administered byN.H. Yankee. ltiscootemplatedthatatsomefuturetime,subjectioNuclearRegulatoryCommission("NRC") approval, N.H. Yankee is to be given respcasibility for the operation and maintenance of Unit 1.
No serious deficiencies have been identified in the quality assurance program for the Seabrook Plant, shith ts a comprehensive program for verification of engineering, construction, testing >nd vendor compliance with design nquirementt N tCregulations and code requirements. However,there can be no assurance that such deficiencies willnot be identiGed Operating Lleense. The process of obtaining appr ,als and permits for the Seabrook Plant has been long. complex, consistently opposed by a number ofintervening groups and plagued by lengtl.y delays. These factors have resulted in gnatly increase.1 costs for the Seabrook Plant. Continued opposition at the regulatory level and through court appeals is virtually certain.
In October 1986, tbe NRC granted a 40-year operating license for the Seabrook Plant subject to cenain conditions, including, among others, successful completion of fuelloading and zero power testing, successful low power testing and approval of radiological emergency response plans by tbe NRC, Fuelloading and rero power tests have been successfully completed. While an NRC bearing p.ml10 March 1987 uthorized commencement oflow pow er testing and operation, timely administrative appeals of tht: atboritatica bave delayedissuance of the final order until certain issues, including one related to emergency response pts.uning, are satisfactorily nsolved. In view of the matters discussed below,it is uneenain when either low power testing or operstion will actually commence.
Tbc NRC's curnnt ngulations will not permit full power operat on i until emergency radiological response plans are in place for each of the cities d towns within a ten-mile radius of the Seabrook Plant, which includes 17 towns in New Hampshire and six in Massachusetts. Revisions to the initial plans for the New Harc.pshire tow ns which were submitted to the NRC in 1986 bave been evaluated by appropriate agencies. While the Federal Emergency Management Agency
("FEMA")initiallyindicate d that it was unable to conclude that the Ne w Hampshire plans were adequate to prote et the public health and safety in accordance with current NRC requirements in the event of a major radiolog.ical release from the Seabrook Pirnt which would require eitber sheltering and/or evacuauon frorn the neighboring beach areas, FEMA submitted. in Marrb 1988, revised te stimony. nodi fying its position. It is anticipate d tha t the evidentiary proce edings be fore
(
3
- - - - - - - - - - - - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - . _ _ _ _ _ _ _ _ _ _J
i O e an NRC hearing panel will con:lude in hiay 1988 with rtspect to the Ne w Hampshire plans but that additional proceed ngs before the NRC and in the courts will follow.
An integral pan of the nntificatinn system contained in the radiological emergency response plans for the Seabrook Plant was tM placemeat of poles with sinns throughout New Hampshin and biassachusetts communities within the ten--
mile emergency planning zone. On hfar:b :9.1988 the New Hampshin Supreme Ccun ruled,in a decisico reversing a lower coun determination, that sirro pole instausdons for the purposes of radaological emergency response plannir,g w ere statutorily permissible and that revocadon of pole U:enses and the rem ovaj of siren poles sought by cenain New Hampshire towns could not te requind. Sino poles have, bonever, been removed in the 51assa:busetts towns within the emergen:y phnning zone. De issue oflack of ability to meet the NRC's early w arning emergency response plan criterion by means of sirens has now teen raised by intervenors in the oogoing NRC proceedings regarding low power operation authorization.
De Joint Owners bave submitted to the NRC for rniew an ajtemadve early warning system for the biassa:husetts communides. The Company cannot predict wbat altideaal delays will result prior to final approval for both low pou er and full power operation.
No emergeo:y response plans for hiassa:busetts or the six hiassa:husetts towns have teen submitted by biassachusetts huthorities to the appropriate federal agen:ies fer rniew and approval. The Govemor of hiassachusetts, who is also a candidate for the Presidency of the United S:stes, has stated bat he is a:tively opposed to the operation of the Seabrook Plant and will not submit su:b plans. He bas taken a tise steps to prevent the development of su:h plus and to impede continued suppen for the Seabrook Plant by cenain Joint Owners located it, hiassa:busetts. In view of the refusal of the biassachusetts Governor to submit plans, there is currectly only one realisde altemative for completing the emergen:y planning process and that is approval by the NRC of plans prepand without the current cooperation of h!assa:busetts authorides. In December 1987 a proposed change tecame effeedse to the NRC's rules to permit the submission of utility spontored emergency response plans in the absen:e of cooperation by state and local authorities in the planning effort.
. Various groups,in:luding interveoors opposing tbt granting of any operating license to'the Seabrook Plant, have appe11ed the NRC's action to the l'nited States Coun of Appeals. De Company is unable to predi:t the nature or timing of any decision by that court, ne NRC bas decided that a state, local or utility plan must be filed before fuelloading and low power testing, and that any utility emerpocy response plan,in:luding one for the Seabroek Plant, must provide for:neasures by the sponsor
. of the plan to compensate for the abseo:e of governmental participatico in emergen;y planning. Dese NRC requirements has e not previously been imposed w ith respect to any nuclear pow er plant. In September 1987 a u'ility emergen:y response plan for the biassachusetts towns witin the emergency planning zene w as submitted by the Joint Owners for review and evaluation by the appropriate federal authorities. nis plan T vides rneasures to compensate for the absence oflocal and state governmental partbipation in the emergen:y planning process. He Company cannot predi;t w ben FEhtA and SRC l reviews of the emerg eney response plan will be completed and w bat the out:ome wili te with respect to any litigation be fore l the NRC and the courts cen:erning the plan.
l here is continuing strong local opposition in hiassa:busetts and New Hampshire to parti:ipation in the emergen:y planning process and the accident at the Chemobyl generating station in the Soviet l'aion has intensified that oppositien i
as w ell as more gernral opposi'en to ou: lear pow er nationally.ne Jeint Owners' request for an operating license bas been a::ively opposed by intervetars in the NRC pro:cedings,in:!udmg tb Attorney General of b!assa:busetts, wbo bas appeared in opposition in virtually every regulatory proceeding involving the Seabrook Plant ard continues to oppose its optatien. Certain hiassa:husetts, New Hampshire and other Senators and Coogressmeo, as w ell as most Demo:ratic and Republican contestants in the February 1988 presidential primary in New Harnpshire, have stated publicly their opposition to operation of the Seabrook Plant witout develepment of approved emergency response plans. Here have also been several attempts in Congress, a]though unsue:essful to date, for federal legislation specifically directed at preventing operation of the Seat, rock Plant. Bere is no assuran;e that su;b intervention will not also delay actual operation even afier authorization for full pow er r peration is issued by the NRC. In th- case of another ele:t.ic utility, experien:ing similar state and 1o:21 refusal to cooperate in the planning process, the utility prepared emergency response plan sdll bas not teen approved by the NRC and w bile the fa ihty bas been operating at low power authori:ation for some time, full power operation ha; not yet commenced, nearly three y ears after completico of construction. _
Need for Seabrook Po= er, ne area ser ed by the Company continues to experien:e rapid population and econc mic Frowth and one of the low est unemployment rates in the nadon. If the Seabrook Plant is not pla:ed in service t-fore the early 1990's, the Company may be unable to meet the increasing demand for electric energy. ne Company continues to teliese that the Seabrook Plant is a needed energy source for the New England region ne Company also telieves that 4
, o .
successrul operation of the Seabrook Plant and its reDection in rates is a necessary element to muimize recovery for the Company's security bolders. TM Company will, as long as resources are available, therefore continue to fund its_ share of Plant expenditures unless ordered byAllanigypicy_CounJo.Jeduce or_ cease su:b fun _ ding _!_t_is anacipated.thatJhe continued fundmg of the SeabToIPlant may be opposed by certain of the Company's creditors.
Change in Seabrook Plant Accounting. The Company's financial diffi:uldes are dirretly related to the magni-tude ofits investment in the Seabrook Plan, _nd to the Company's inability to base its rates upon the cost of this project prior tc,its operabon (currently assumcd to be January 1,1990 for finan:ial planning purposes). The Company determined that, should the Seabrook Plant be permitted to become operational, political and compedtive pressures would not permit the Company to recover the recorded cost ofits investment in accordance with raditional utility rate making pra:ti:es.
Aecordingly, the Company changedits method of accounting forits investment in the Seabrook Plant to eliminate AFUDC from capitalized costs and to recognize capitalized interest and associated income tu effects. This change in method of accounting effe ctively restat es the cost basis of the Se abrook P! ant t o eliminate the previously assumed e frects of re gula tion.
Management believes the Cotapany's other plant assets should not be similarly adjusted because the Company's rates are based on recovering their recorded costs through the rate making process.
The effect of the change in method of accounting for the Seabrook Plant, effective January 1,1987, was to in:rease the 1987 pretu loss before the cumulative effect of change in Seabrook Plan: accounting by $51.3 million. However, income tu benefits (in the form of reductions in accumulated deferred tues on in:ome which were estabbshed in recogni:.ing the cumulative effect of the change in Seabrook Plant accouuting)of 571.0 million, associated with 1987 losses from operations,resulted in an overall net decrease in the 1987 loss before the cumulative effect of the change in Seabrook Plant accounting of $19.7 million (or $0.53 per share).
The adjustment of $398.7 miUion (including a provision for deferred tues e'n income of $98.1 rnillion) to apply the new method retroactively was recorded as a reduction in 1987 income. See Note 2 of Notes to Financial Statemena Seabrook Prudence Audits. Analyses of the pruden:e of the management of tbe design. engineering and eenstru: tion of the Seabrook Plant have teen completed or will hereafter be completed for various state regulatory agen:ies in New England to determine the extent to which the costs of the Seabrook Plant may be in:ludedin rate base by its past or prennt owners. Prudence auits have also been commissioned and completed for censin of the Seabrook Joint Owners,in:!uing the Company, Only the audit conducted for the Connecticut Depanrnent of Public Utibry Control found any signifi: ant portion of the construction costs incuned at the Seabrook Plant should be disallow ed on the basis of alleged impruden:e.
Other Seabrook Participants Other Seabrook Joint Owners subject to the jurisdiction of regulatory authorities in New Hampshire, Connecticut, Vermont and Massachusetts, and the Federal Energy Regulatory Cornmission CFERC"),
have been or are pu .ntly involved in proceeings in eachjurisdiction reg arding the Seabrook Plant including proceein gs regarding the prudesce of management of design and construeden of the Plant. The Company cannot predict the out:ome of these proceedings.
While the Massachusetts Murdeipal Wholesale Electric Company ("MMWEC") bas from time to time experienced difficulty in securing Massachusetts regulatory approval forits longaerm finan:ing for the Seabrook Plant and bas abo been the subject oflaw suits by certain ofits members designed to invahdate cenain take--or-pay power contra:ts related to the Seabrook Plant and to withhold payments urder those contracts, these regulatory problems and lawsuits have not affected MMWEC's continued pannent ofits share of Seabrook Plant costs. HowsmmDVEC has noti _fied the_ Joint Ow ners that, bv the end of 1988,its ability to connue paymcatrfit.sihar: of SeabreekPlant costs wiu bedepend ntxpen approval by the Massa:busetts Depanment of Public Utdities of a funber financing of approximately $ 100 million, Cen ain entities, with w tuch MMWEC has purchased power contracts obligating the payrrie~nior Seabrook Plant costs, in:!uing Eastem Maine Electric Cooperadve, Inc., abich has filed for protection under the Fed ral Bankruptcy Code, hase d2scontinued pannent of their share of such cnsts to MMWEC. MMWEC has instituted hti Fation against two of these entities seeking, among other things, the resumption of such payments to it unir the purchased power contracts.
Smce February 1956, the Vermont Electric Generation and Transmission Cooperative, Inc. ("Vermont Cooperatn e"),
which holds an approximau 0.1% ownership interest in the Seabrook Plant, has discontinued payment ofits share of the Seabrook Plant costs, as well as its payments . s a member of MMWEC. Cenain Joint Owners, including the Company, have since tben been providmg funds against future payments due from Vermont Cooperative to assure that funds are available to meet the Vermont Cooperadve's share and it is anticipated that these arrangements will continue 5
m .
, in January 1988, the New Hampshin' Electric Cooperative, Inc. ("NHEC"), which holds an approximate 2.2% own.
ership inte rest in the Se abrook Plant notified the other Joint Owne rs that it was suspending pannent ofits shan of Seabrook P1 ant costs.Two Joint Owners have since then been pmvidinsn f_unds for the NMEC's share of Seabrook P1 ant costs on a similar buis to that for the Vermont Cooperative. The NHEC has also announced that it hu defaulted on pa>Tnents of principal ard interest on its loans with the Rural Electrification Administation ("REA") and has begun discussions with the RE A regarding a restructuring ofits debt. .
EUA Power Corporation, the holder of an approximate 12.1% ownership interest and a subsidiary of Eutem Utilities Associates ("EUA"), has notified the Joint Owners that it u ill not have sufficient funds to make the cash interest pannents due in May to the bolders of certain debt securities issued to finance its share of ongoing Seabrook Plant costs, absent successful completion of negotiations with such bolders for modifications to the payment terms of such securities. EUA has indicated that it also intends to seek regulatory approval for the issuance of securities by EUA Power Corporation, the proceeds of which will enable EUA Power Corporation to meet its share of future Seabrook Plant costs.
Decommission!ng. Pursuant to a statute enacted in 1982, a New Hampshire State Nuclear Decommissioning Finance Committee (the "NDF Committee") w saestablished to determine the requirements for funding the costs associated with the decommissioning of nuclear gem ating facilities. The NCF Committee is required to determine the method to fund such costs. The NHPUC is authorized to permit the utilities owning an interest in the facilities and subject to f tsjurisdiction to recover from their customers on a per-generated kilowatt-bour basis the amounts paid into the fund for euch purpose over a period of years. A New Hampshire Superior Court decision in September 1986 required the NDF Committee to establish procedural rules and regulations and thereafter to hold adjudicatory rather than legis!stive bearings regarding the funding of the costs. In the spring of 1987, the NDF Committee commenced a discovery period whereby parties to the proceedings reviewed decommissioning estimates and funding payrnents. Hearings on the issues have been concluded and the NDF Committee is expected to issue its position for comments in the summer of 1988.
Insurance. The Federal Price-Anderson Act provides, among other things, that the maximum liability for damages resulting from a neclearincident would be the greater of the maximum amount of financialprotection required by the N'RC to be carried by licensees or $720,000,000. As required by NRC regulations the owners of the Seabrook Plant have insured against this risk by purchasing the maximum available private insurance (presently $160,000,000), and entering
, into a retrospective premium insurance agreement which provides the balance and have entered into an indemnity agreement with the NRC. Under the Price-Anderson Act, owners of operating nuclear facilities may be assessed a retrospective premium of up to $5,000,000 for each reactor owned in the event of any one nuclear incident occurring at any cactorin the United States,with a maximum assessment of $10,000,000 per year per teactor owned. As a part own r of other New England nuclear facilities (see "Joic: Projects" below)in addition to the Seabrook Plant, the Company would be obligated to pay its proportionate share of any such assessments, w hich presently amounts to a maximum of $2,830,000 per incident.
Cenain provisions of the Price-Anderson Act erpired on August l.1987, and Congress is considering severalproposals to amend and extend the Act. In this connection the Uruted States House of Representatives, on July 29,19S7, passed a bill which would raise tbe public liability limit associated with any nuclear incident to $7 billion. The bill would expand the esisting retrospective premium insurance concept to cover this maximum liability. The owner of each licensed re actor would be liable for approximately $66 million per incident, provided that not more than $10 million would be required to be paid per year. The United St-tes Senate hu under consideration another bill relating to the extension of the Act. Until a bill is adopted by both the Senate and House of Representatives and signed into law by the President, the provisions of the Act a hich expired August i,1987, will continue to apply to all currently licensed reactors. The Company is unable to predict what action Congress might ultimately take regarding the Price -Anderson Act and w hat effect such action or expiration of the Price-Anderson Act might have on the Company's potential liability.
New England Power Pool
, A New England Power Pool ("NEPOOL") agreement, to which the major investor-owned utilities in New England including the Company, and certain municipal and cooperatise utilities are parties, has been in effect since 1971. The NEPOOL ngreement provides for joint plioning and operation of generating and transmission facilities and also incorporates generating capacity reserve obligations and provisions regarding the use of majur tr.nemission lines and payment for such use.
6