ML20101N107

Corp 1995 Annual Rept. W/

ML20101N107
Person / Time
Site:	Vermont Yankee
Issue date:	12/31/1995
From:	Duffy J, Weigand J VERMONT YANKEE NUCLEAR POWER CORP.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
BVY-96-42, NUDOCS 9604080242
Download: ML20101N107 (37)

Text

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VERMONT YANKEE '

NUCLEAR POWER CORPORATION

• ~ s '~~ Ferry Road, Brattleboro, VT 05301-7002 g '

ut et v to y V ENGINEERING OFFICE I, 580 MAIN STREET

,j DOLTON. M A 01740 (508)773-6711 April 3,1996 BVY 96-42 United States Nuclear Regulatory Commission ATTN: Document Control Desk Washington, DC 20555

References:

(a) License No. DPR-28 (Docket No. 50-271)

Subject:

Vermont Yankee Nuclear Power Corporation - 1995 Annual Financial Report in accordance with the provisions of 10CFR50.71(b), enclosed is one (1) copy of Vermont Yankee Nuclear Power Corporation's annual financial report, including the certified fmancial statements, for 1995.

Should you have any questions regarding the enclosed material, please contact this office.

Sincerely, VERMONT YANKEE NUCLEAR POWER CORPORATION tifft/J .

James J. Duffy f

, Licensing Engineer I

Enclosure i c: USNRC Region 1 Administrator USNRC Resident inspector - VYNPS j USNRC Project Manager - VYNPS '

, _ 24 PDR es122, ADOCK 05000271-A0 I PDR

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1995 Annual Repohth

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Year at a Glance I

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M Turbine Retrofit Project cesanon of Bas > ness 2 Vermont Yankee replaced both low-pressure turbines - a first-of-its-kind project in the industry and resulted in a 12 megawatt output increase. The Pres"*"t s I enm 3 i

w project is expected to save Vermont Yankee's custorners in excess of $100 l j milkon over the remaining license life of the plant. " # 9*' 4 1

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E Production - Capacity Factor C '""""'" 3 *" U *""

• 5 l l ,. .. . . . . .. During 1995. Vermont Yankee set three new records for production of elec-1 1 .

Management Rewew 6 l  ; . . . ... . . . . .. .wg tricity. (1) highest capacity factor in a year with a refueling shutdown

b. (86 7%); (2) highest 18 month cycle capacity factor (95.9%); and (3) highest

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Finanaal Renew 11 j 3 one month production record (October,1995 - 389.3 million net kilowatt hours generated) ggggn g, gg ggg I j PMc Aumununts 12 j _m M S mulator - New Technology 2

$ [ Vermont Yankee was the first company in the world to successfully use a statements of income PC to run a control room simulator. The single personal computer replaced

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( two large main frame computer systems and is contributing to substantial Baunce sheets g g savings for Vermont Yankee and its customers.

. Assets 14 y B Safety Record t

Vermont Yankee concluded 1995 with its bestever last-time accident n{

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/ record. The National Safety Council rar.ked Vermont Yankee as the nation's i j third best utility of its size for industrial safety.

l Smtements of Cash f krus 16 b k- b No'es to Finanoi Sta!wmnts 17 p- M Refueling Outage - Planning and Costs j .

Exceptional planning allowed Vermont Yankee to complete its refueling Bord of D""ttm 34 shutdown in 47 days and $1.5 million under budget.

j _ - y, Othcers 35 j

E Vermont Yankee Vision - Plan 20/20 j Vermont Yankee launched Plan 20/20 "A Model for Success", introducing

. the Company vision "to be a desired source of electricity for the next 20

4 years" The Plan provides a framework to ensure Vermont Yankee's contin- Vermont Yankee j

ued success as an industry leader in the safe. reliable and efficient produc- Nuclear Power Corporation tion of electricity. Ferry R ad 8rattieboro. Vermont 05301-7002

errnont Yankee Nuclear Power which are the sponsoring utilities that VCorporation was incorporated are entitled to and obligated to pur-t under the laws of the State of chase the output of the Plant.

Vermont on August 4,1966. The Under the tenus of the Company's l Company was fermed by a group of Power Contracts each sponsor is New England utilities for the purpose obligated to pay Vermont Yankee l of constructing and operating a monthly, regardless of the Plant's nuclear-powered generating plant operating level, or whether or not it is (the " Plant"). operating, an amount equal to its enti-The Plant commenced commer- tiement percentage of Vermont cial operation on November 30, Yankee's total fuel costs, operating 1972, and, except during mainte- expenses, decommissioning costs and nance and refueling outages, has been an allowed return on equity. Also, in full operation since that time. The unJer the terms of the Capital Funds Plant is licensed by the Nuclear Agreements with its sponsors, the Regulatory Commission to operate sponsors are committed to make funds until 2012. available for changes or replacements Located on the west bank of the needed to maintam er estore opera-Connecticut River in Vernon, tion of the Plant or to obtain or main.

Vermont, the facility has a gross max- tain licenses necessary for its opera-

) imum dependable capacity of approx- tion. The names of the sponsors and imately 535 megawatts. The com- their respective entitlement percent-mon stock of Vermont Yankee is ages of Vennont Yankee's capacity and

, owned by thirteen utilities, mne of output are as follows:

i 4

l Central Vermont public Service Corporation 15.0%

i Green Mountain power Corporation - 20 0 New England power Company 20.0

The Connecticut Light and power Company 9.5 Central Maine power Company 40

public Service' Company of New Hampshire l 4.0 Cambridge Electric Light Company 2.5

[ Montaup Electric Company 2.5 Western Massachusetts Electric Company 2.5 100.0 %

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mont Yankee completed 1995 with an 86.7% capacity factor-our best -

en r in a year with a refueling outage. That means the plant produced elec-tricity aimost continuously, except during the seven week refueling and mainte-nance outage in the spring. (Capacity factor measures how much electricity a plant actually produces against the amount of power it could generate ifit oper-ated without interruption all year at full power.)

During the refueling outage, Vermont Yankee became the first boiling water reactor in the world to complete the replacement of two low-pressure turbines.

The turbine project work was completed in just 391/2 days - well within the projected schedule and budget. As a result of the replacement, Vermont Yankee has increased its electrical output by approximately 12 megawatts without using more fuel.

The refueling outage was extremely well planned, using manpower and resources efficiently. As a result, the Company completed refueling in 47 days and $1.5 million under budget.

Vermont Yankee continued its excellent nuclear and industrial safety records. We experienced no lost-time accidents during 1995, surpassing our previous record of 569 consecutive days.

Vermont leads the nation as the state with the highest percentage of electri-cal generation produced from nuclear power- approximately 80% As Vermont's major source of electricity, we strive to keep our cost per kilowatt hour competitive. In 1995, Vermont Yankee generated electricity for 4.68 cents per kilowatt hour. This cost includes all facets of Vermont Yankee's operations, including decommissioning, low-level radioactive waste disposal, and fees paid to the Department of Energy for high level radioactive waste disposal. The more widely reported statistic, operations and maintenance cost (exc'uding fuel), was 1.88 cents per kilowatt hour.

To ensure the Company's continued success, Vermont Yankee launched a new strategic plan in 1995, incorporating our vision to be a desired source of safe, reliable and efficient electricity. With employees dedicated to safety, pro-fessionalism, leadership and continuous improvement, Vermont Yankee is well positioned to remain a leader in the competitive future of the industry.

$ s J. Gary Weigand 3

s Operating revenues $180.4 $162.8 10.8 (Net income _ 6.8 6.6 10 Total assets 5f.3 512.1 3.7 l I Average number of' shares of common!

! stock outstanding (thousands) 392- 392-- 0.0 Earnings per average common share $17.30 $16.79 3.0

[ Dividends. paid per common share 18.65 16.00 16.6 Book value per common share (year end) 137.40 138.80 (1.0)

( " 1,3 Kilowatt-hour sales (billions) 3.86 4.32 (10.6) l Cost per kilowatt-hour (cents) 4.68 3.77- 24.1 Number of employees (year end) 337 340 (0.9)

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Central Vermont Public Service Corporation 31.3 % 122,653

[New England Power Company 20.0 78j02 Green Mountain Power Corporation 17.9 70,088

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!The Connecticut Light and Power Company 9.5 37,242 Central Maine Power Company 4.0 15,681

!Public Service Company of New Hampshire 4.0 15,681 Burlington Electric Department 3.6 14,301

Cambridge Electric Light Company 2.5 9,801 Montaup Electric Company 2.5 9,801 l Western Massachusetts Electric Company 2.5 9,800 Vermont Electric Cooperative, Inc. 1.0 4,213

' Washington Electric Cooperative, Inc. 0.6 2331 -

Village of Lyndonville Electric Department 0.6 2,387 100.0 % 392,481 5

Plant Perfonnance D Capacity Factor During 1995, Vermont Yankee Yankee continues to improve upon its achieved an annual capacity factor of already outstanding record of reliabil-86.7%, which broke its previous ity. The graph below depicts the record of 84.4% for a year with a Company's annual capacity fac.or refueling outage. Also, Vermont since the commercial operation "An 86. 7% Yankee achieved another production began in 1972 and compares it to the record this year with an 18 month industry average for both pressuri:ed cycle capacity factor of 95.9%. A and boiling water reactors.

Capacity [IlClOr cycle is the 18 month operatsnal Vermont Yankee's lifetime capaci-period between refueling outages. ty factor of 75.8% makes it one of the Due to the addition of new low pres- top five boiling water reactors nation-

- Our beSt sure turbines in April 1995, Vermont wide for consistent electricity produc-Yr.nkee was able to achieve its high- tion. This distinction also makes us ect one month output ever, in the only boiling water reactor of the ever in a year October 1995, with 389.3 million net 24 that went on line before 1985 to kilowatt hours generated. What is have a lifetime capacity factor of remarkable about Vermont Yankee's more than 75%. ,

with a refueling capacity factor in 1995 is that, even From the beginning of its com- l though we conducted a refueling out- mercial operation in 1972 through age, we still ended the year as one of the end of 1995, Vermont Yankee has Outage" the top-ranked plants in the industry. generated over 78 billion kilowatt-With this performance, Vermont hours of electricity.

100 %

Industry Average f S

72 73 74 75 76 77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 6  ! S Refueling Year Cl Non-refueling Year l

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O Plant improvements i Vermont Yankee became the first budget and is expected to save our a j j General Electric BWR (Boiling customers in excess of $100 million d

l Water Reactor) in the world to over the remaining life of the plant. I

! replace two low. pressure steam Because the new turbines are more turbines, casings and related compo- efficient, Vermont Yankee's electrical nents. The replacement effort output increased by 12 megawatts, or finished ahead of schedule and on approximately 3%.

l 0 Plant Economics Operation & Maintenance Costs (Cents per KWH) '

Vermont Yankee, despite

! having the handicap of 1991 1.22* 1.47 w

being a relatively small M992Liu -.,nn.-n,n.-g ., il 95nm,.,-- 0a sag -c.,4,, 1J5E, plant, has operation and 1993 2.36 1.55 g_94 h1, _d l.ll*;,.ia,cdl.56.; Oj

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h maintenance costs that S2 .

i j compare favorably with _1995 1.88 **

l the industty as iilustrated Wuding fuel aM Adminostrate and General hpenses.

by the chart. Won-refuelong Year **Not Avilable 0 FuelEconomics Nuclear Fuel Costs (Cents per KWH)'

i Vermont Yankee's fuel costs continue to be 1991 0.61 0.68

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below the industry aver- r1992 g i ~l m a"a 0.57U" n 220.63e. 'a J age as illustrated by the 1993 0.582 0.60

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chart. L1994 C .1 .i i .to.522 x m 2 n o.621 M 1995 0.512 **

' includes spent fuel disposal rates locludes DOE ennchtnent site cleanup fee

• • Not Avariable D Total Cost of Power Total Cost of Power (Cents per KWH)

• Vermont Yankee contin- .

[ ues to be a low-cost pro- 1991 3.69*

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j ducer of electricity. The il992 M ;Li f 2441Q ,JJ chart illustrates Vermont 1993 5.34 r- w --m

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i T.ankee's cost per kilo- L1994i m a _ ' , gmmi.a 3.77$

watt hour of electricity 1995 4.68

generated. 5-year average:4.39 E Cumulative Cost of power. 3.328 i

'litlusrve of allcosts 'Since comrnercialoperatoons beganin 1972 %refuelong war 7

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1 M Low-level Radioactive l l

Waste Disposa: The Company provides 55% of The proposed Compact between the electricity we produce to Texas, Vermont and Maine was Vermont utilities, which give approved by the respective states dur- Vermonters the benefit of our low ing 1994 and is expected to be rati- cost electricity. Also, since 45% of fied by the U.S. Congress during our output is sold to utilities outside 1996. Deliveries are projected to of Vermont, we are one of Vermont's j begin during 1998. largest exporters. The value of our exported electricity to other New E impact on the Vermont Economy England states during 1995 was over in 1995, Vermont Yankee contributed $81 million.

$49.2 million to the Vermont econo-my in the form of employee wages, location of Vermont Yankee Customers state and local taxes and fees, pay-ments to Vermont vendors, and divi- 60%

dends to Vermont shareholders. The 50 %

chart below shows the distribution of these payments during 1995. 40 %

Contributions to 1995 Vermont Economy

.p w Dollarsin Mdlions 79 %

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ip 10%

State Tax $8.4 f LocalTax $

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2b i t"3 Vermont 55%

.,,l t"'"'"l Massachusrts 7.5%

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Vendors $9 8 Dividends $4.0 PayroII $22.0 i

8

n USLeaders Vermont leads the Nation with Nuclear Power Generated by State (1994) the highest percent of total electric -"- - -

generation in the state from nuclear Vermont 81.5 power (81.5% during 1994). The fol- 'ceinscriceth .. 17tri._]

lowing chart compares the percent of Maine 7s.6 nuclear generation by state based on [#ewMsey ; . _ [#.#( j year-end 1994 statistics (1995 statis- South Carolina 60.2 "No lost-tirne tics were not available at the t me of [ftlisoisi.;, [, , [52.7 .]

this publication). New Hampshire 52.2 IViel"I*: -. ~u3s[L3 accidents during Pennsylvania 39.8

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, "171 ]

1995, surpass-O Funding for Decommissioning Vermont Yankee continues to fund Decommissioning Trust totaled $141.3 the ultimate decommissioning of our million out of a projected decommis- ing our previous plant with the goal of restoring the sioning cost of $347.4 million (1995 plant site to its original condition dollars). The graph below depicts once we have concluded operations. decommissioning funding status: record of 569 At the end of 1995, the consecutive 100 %

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'93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 t*'3 fundAssets V"3 UnfundedOccommissioning Cost 9

M Industrial Safety M Refueling Outage Length Vermont Yankee continues to main- Vermont Yankee's refueling outages tain its excellent record on safety. have consistently been shorter than With the support of a formal safety the average for U.S. boiling water program, a safety suggestion program, reactors for outage duration. This is and the employee safety manual, attributed to excellent pre-outage j Vermont Yankee surpassed its record preparation and safe, efficient comple-of 569 consecutive days without a lost tion of activities during the outage.

time accident. Along the way to this The Company had its best planned I record, the Company passed one mil- outage in 1995, as shown by the low-

! lion hours without a lost time acci- pressure turbine retrofit being com-i dent and made 1995 the third calen- pleted ahead of schedule. Less down-dar year without a lost time accident. time during these outages translates In 1995, the National Safety Council into higher generation and lower cost ranked Vermont Yankee as the per KWH. The chart below compares nation's third best utility of its size for Vermont Yankee's outage lengths to industrial safety. the industry average. l 1  !

i Refueling Outagelength (Days) i i

i 1991 84 w.,

gbhSGu$1,4:MwNa&2Nasiniu

..-vnmeme kOOUNEMOeShL m m m m~tm m w y$ Q 3 1993 59 77

, y g er m. m agy p y ,y - p 19.,iLaz u m a a wa.q k.a;

[y 9.4 p .ym x &hm amw m y ,& Law.a hcg w a.a j 1995 47 64 i *Non-refueling Year l

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i perating revenues of the Interest income increased by $1.8 0 Compar.y are billed and received million in 1995 due to higher than from customers based on the terms of expected earnings on the Spent Fuel its Power Contracts. Under those Disposal Fee Defeasance Trust and contracts, customers are severally higher levels of short term invest-required to pay the Company an ments during 1995, amount equal to their respective enti- Total interest expense increased "... the first riement share of the Company's total by $1.4 million in 1995 primarily due fuel costs, operating expenses and a to a higher DOE interest charge relat-return on net unit investment. ed to the Spent Fuel Disposal Fee. boiling water Operating revenues increased in Declines in long term interest 1995 from 1994 by $17.7 million, or expense sine 1993 reflect lower bor-10.8%, primarily due to higher oper- rowing requirements related to delays reactor in the ating and maintenance costs related of the low-level radioactive waste to the scheduled refueling and main- compact fee payments and reflect the tenance shutdown in 1995. retirement, repayment and refinanc- world to Maintenance expense increased $12.2 ing of debt at lower interest rates.

million and other operating expenses Net income and the associated increased $7.0 million, both reflect- income taxes increased by $0.2 mil- complete the ing differences in costs between a lion and $0.3 million, respectively in year with a scheduled refueling and 1995. These increases were the result maintenance shutdown (1995) and of higher differences between the replacement of one without (1994). The plant oper- Company's net unit investment and ates on an 18 month refueling cycle, total capitalization computed in with the last scheduleJ refueling accordance with the Company's for- two low-pressure completed in May,1995. mula rate, approved by the Federal Nuclear fuel expense decreased by Energy Regulatory Commission

$2.7 million in 1995 from 1994 (FERC). turbines" reflecting the scheduled refueling shutdown.

Decommissioning expense increased $0.8 million in 1995 due to the rate schedule approved by the Federal Energy Regulatory Commission (FERC) during 1994 and effective January 1,1995.

11

The Stockholders and Board of Directors Vermont Yankee Nuclear Power Corporation:

We have audited the accompanying balance sheet of Vermon Nuclear Power Corporation as of December 31,1995 and 1994, and the related statements ofincome and retained earnings and cash flows for each of the three years in the period ended December 31,1995. These financial state-ments are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurare about whether the financial statements are free of material misstatement. An audu includes examining, on a test basis, evidence support-

, ing the amounts and disclos,res in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presenta-tion. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vermont Yankee Nuclear Power Corporation as of December 31,1995 and 1994, and the results of its operations and cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.

bw. A LLP Boston, Massachusetts l Jamtary 25,1996 12

Years ended December 31, Is h f?dki~ ""ME[ E C* L " T h@ ,C [ M Y M (Dollars in thousands except per share data)

[ Operating revenues.' $ 100,437 ' $ 162,757' $ 180345}

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Nuclear fuel expense 19,771 22,520 19,526 Other operating expense 75,587 68,591 74,013 Maintenance expense 30,373 18.193 31,405 Depreciation and amortization expense 14,445 14.404 13,707 Decommissioning expense (NOTE 3) 12,670 11,860 11,315 Taxes on income (NOTE 11) 2,360 2,830 3,777 Property and other taxes 10,225 10,004 9.961

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[ Total operating expenses 165,431' 1'48,402 161704]

[0perating income 15,006 14,355 16'441) ov, , ,v x., e u ;, e : .- , ,

Net earnings on decommissioning trust (NOTES 3 and 6) 8,226 5,271 5,653 Decommissioning expense (NOTE 3) (8,226) (5,271) (5,653)

Allowance for equity funds used during construction 2 110 92~

Interest 4,240 2,397 1.550 Taxes on other income (NOTE 11) (1,729) (986) (623)

Other, net (95) (5) (232)

[ Total other income and (deductions) . 2,418 1,516 .

787l Income before interest expense - 17,424 15,871 ' 17,228]

r oto , y . s p o ,

Interest on long-term debt 5,682 6.173 7,281 Interest on spent fuel disposal fee obligation (NOTE 9) 4,958 3,367 2,450 Allowance for borrowed funds used during construction (6) (257) (297)

' Total interest expense 10,634 ' 9,283 9,434!

Net income 6,790 6,588 7,794 Retained earnings at beginning of year 1,376 1.067 1,178 8,166 7,655 8,972l Dividends declared 7,320 6.279 7,905 Retained earnings at end of year $846 $ 1.376 $ 1,067 Average number of shares outstanding in thousands 392 392 392 Net income per average share of common stock outstanding $ 17.30 $ 16.79 $ 19.86 Dividends per average share of common stock outstanding $ 18.65 $ 16.00 $ 20.14 See accompannng notes to hnancial statements.

13

t3 Assets December 31, V8GWW (Dollars in thousands)

Electric plant, at cost (NOTE 7) $ 376,761 $ 376.551 Less accumulated depreciation 225,257 212,569 Construction work in progress 869 645

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Netiec~tric p'iant 152,373 164,627j Yankee vision . Nuclear fuei, at cost (NOTE 7):

Assemblies in reactor 65.116 69,108 Fuel in Stock 0 20,038 to be a desired Spent fuel 311,640 287.700 376,756 376,846 Less accumulated amortization of burned nuclear fuel 348,213 333.990 Less accumulated amortization of final core nuclear fuel 8,500 7,849

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I [Nein~u~cliar~iuil" 20,043 '35,007

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e/0Ctr/Cify I tiet utility pIsni ' '172,416 '199,634 Cash and cash equivalents 14,001 1,285 for the nexf Accounts receivable from sponsors 14,824 16,742 Other accounts receivable 1,554 1,471 Materials and supplies, amortization 16,768 17,165 20 years" Prepaid expenses

~

5,120 4,753

[Totallur~ rent issets 52,267 41,416 Deferred decommissioning costs (NOTE 3) 32,687 38,238 Accumulated deferred income taxes (NOTE 11) 22,659 20.740 Deferred DOE enrichment site decontamination and decommissioning fee (NOTE 5) 13,332 14,200 Deferred low-level waste facility expenses (NOTE 16) 26,539 26,458 Net unamortized loss on reacquired debt 2,516 2.698 Other deferred charges 1,667 1.563

~

ITotalileferred charges 99,400 103,897 Decommissioning trust (NOTES 3,6 and 8) 141,330 113,256

Spent fuel disposal fee defeasance trust (NOTES 6,8 and 9) 65,880 53.939 f ITotaitong-term funds 207,210 '167,195

> 14 $ 531,293 $ 512.142 See accompanying notes to hnancial statements

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) O Capitalization and Liabilities December 31, 1

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Common stock equity:

j Common stock, $100 par value, authorized 400,100 shares,-

i issued 400.014 shares of which 7,533 are held in Treasury $ 40,001 $ 40,001 1

Additional paid-in capital 14,226 14,226 j Treasury stock (7,533 shares at cost) (1,130) (1,130) 1 j Retained earnings 846 1,376 f [ ' Total common stock equity, 53,943 ' 54,473j Long-term obligations, net (NOTES 7 and 8) 75,845 75,845 i f Totalcapitalization~ ' 129,788 130,318 Commitments and contingencies (NOTES 3,15 and 16)

[ Spent fuel disposal fee and accrued interest (NOTES 8 and 9) 89,014 ' B4,055 !

j Accounts payable 1,892 4,072

Accrued expenses 11,904 15,356 s

j Accrued low-level waste expenses 4,171 2,858

) Accrued interest 1,333 1,116 Accrued taxes 1,670 1,767 Other accrued liabilities 4,088 3,946 2

Tdtal current liabilities 25,058 29,115' Accrued decommissioning costs (NOTE 3) 179,516 155,310 Accumulated deferred income taxes 52,535 55,763 Net regulatory tax liabihty (NOTE 11) 7,998 8,351 Accumulated deferred investment tax credits 6,047 6.581 Accrued 00E enrichment site decontamination and decommissioning fee (NOTE 5) 11,367 12,092 Accrued low-level waste facility expenses (NOTE 16) 24,044 23,935 Accrued employee benefits 5,926 6.622 Total deferred credits 287,433 268,654.

$ 531,293 $ 512,142 See accompanytng notes to financial statements.

15

Years ended December 31, EM?BITeP?M4F . $8MM (Dollars in thoasands) i Net income . $ 6,790 : $ 6,588._ $ 7,794.:

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of nuclear fuel 14,874 17.581 15.410 Depreciation and amortization 14,445 14,404 13.707 Decommissioning expense 12,670 11.860 11.315 Deferred tax expense (5,500) (3.225) (979)

Amortization of deferred investment tax credits (534) (431) (577)

Nuclear fuel disposal fee interest accrual 4,958 3.367 2.450 l l

Interest and dividends on disposal fee defeasance trust (3,752) (7.265) (1,402)

Decrease (Increase) in accounts receivable 1,836 (1.457) 1,365 l

(Increase) Decrease in prepaid expenses (367) (804) 432 Decrease (Increase) in materials and supplies inventory 397 (84) (219) l l

(Decrease) Increase in accounts payable and accrued liabilities (4,177) 2.628 3.729 Increase (Decrease) in interest and taxes payable 120 1.042 (605)

Other 1,385 2.086 (111)

[. Totaladjustment's 36,355._ 44,702' I44,515; l

Net cash provided by operating activities .- ^43,145 ' 51,290 - 52,309 l

Electric plant additions and tetirements (2,191) (2.086) (7.229) l Nuclear fuel additions 90 (20,083) (18,303)

Payments to decommissioning trust (12,818) (11,925) (11.250) l Payments to spent fuel disposal fee defeasance trust (8,190) (8.190) (8.190)

[ ' Net cash used in investing activities (23,109) (42,284) .. (44,972)

,. ...m . .

Dividend payments (7,320) (6.279) (7,905)

Issuance of Series I first mortgage bonds, net - -

75,125 Retirement of first mortgage bonds including redemption costs - -

(74.629)

Payments of long-term obligations (19,968) (133.945) (137.911)

Borrowings under long-term agreements 19,968 130,154 138.410 j

Net cash used in financing activities . (7,320) (10.070) (6,910)

Net increase (decrease) in cash and cash equivalents 12,716 (1.064) 427 Cash and cash equivalents at beginning of year 1,285 2.349 1.922 Cash and cash equivalents at end of year $ 14,001 $ 1.285 $ 2,349

' See accompanying notes to financial statements

NOTE 1. Nature of Business Vermont Yankee Nuclear Power Corporation (the Company) was incorporated under the laws of the State of Vermont on August 4,1966. The Company was formed by a group of New England utilities for the purpose of constructing and operating a nuclear-powered gen-erating plant (the Plant). The Plant comm . iced commercial operation on November 30, 1972, and, except during maintenance and refueling outages, has been in full operation since that time. The Plant has a gros + maximum dependable capacity of approximately 535 the firSt megawatts and is licensed by the Nuclear Regtdatory Commission to operate until 2012.

NOTE 2. Summary of Significant Accounting Policies Company in the (a) Regulations and Operation-Vermont Yankee Nuclear Power Corporation is subject to regulations prescribed by she Federal Energy Regulatory Commission ("FERC"), and the Public Service Board of the WOT/d to SUC-State of Vermont with respect to accounting and other matters. The Company is also sub-ject to regulation by the Nuclear Regulatory Commission ("NRC") for nuclear plant licens-ing and safety, and by federal and state agencies for environmental matters such as air quali- CeSSlu//y use a ty, water quality and land use.

lhe Company recogni:es revenue pursuant to the terms of the Power Contracts and Additional Power Contracts. The Sponsors, a group of nine New England utilities, are sev- perSonalComputer erally obligated to pay the Company each month their entitlement percentage ef amounts equal to the Company's total fuel costs and operating expenses of its Plant, plus an allowed return on equity (12.25% through July 31,1994 and 11.0% thereafter). Such contracts also to run a obligate the Sponsors to make decommissioning payments through the end of the Plant's service life and completion of the decommissioning of the Plant. All Sponsors are commit-ted to such payments regardless of the Plant's operating level or whether the Plant is out of ConfrO/ TOOm service during the period.

Under the terms of the Capital Funds Agreements, the Sponsors are committed, subject to obtaining necessary regulatory authori:ations, to make funds available to obtain or main. Simulator" tain licenses necessary to keep the Plant in operation.

(b) Depreciation anJ Maintenance Electric plant is being depreciated on the straight.line method at rates designed to fully Jerreciate all depreciable properties over the lesser of estiraated useful lives or the Plant's remaining NRC bcense life, which extends to March,2012. Depreciation expense was equivalent to overall effective rates of 3.83%,3.84%, and 3.74% for the years 1995,1994 and 1993, respectively.

The cost of additions, including replacements and betterments of units of property are charged to electric plant. Maintenance and repairs of property and replacements and renewals of items determined to be less than units of property are charged to maintenance expense. The cost of property retired, plus removal or disposal costs, less salvage, is charged U to the accumulated provision for depreciation.

(c) Amortization of Nuclear Fuel i

The cost of nuclear fuel is amortized to expense based on the rate of burn up of the indi-vidual assemblies comprising the total core. The Company also provides for the costs of Jis- l posing of spent nuclear fuel at rates specified by the United States Department of Energy

(" DOE") under a contract for disposal between the Company and the DOE.

The Company amorti:es to expense on a straight-line basis the estimated costs of the f

final unspent nuclear fuel core, which is expected to be in place at the expiration of the l L_

Plant's NRC operating license in conformity with rates authorized by the FERC. l l

(d) Amortization of Materiah, and Supphes The Company amortizes to expense a formula amount designed to fully amorti:e the cost of the material and supplies inventory that is expected to be on hand at the expiration of the Plant's NRC operating license.

1 (e) Long-term I unJs Effective January 1,1994, the Company began accounting for its investments in long-term funds at fair value as required by Statement of Financial Accounting Standard 115.

See NOTE 6 for further discussion of this change in accounting method.

(f) Amorti:ation of l_ms on Reacquired Debt The difference between the amount paid upon reacquisition of any debt security and the face value thereof, adjusted for any unamortized premium or discount, related unamorti:ed debt expense and reacquisition costs, applicable to the reacquired debt, is deferred by the Company and amortized to expense on a straight-line basis over the remaining life of the new debt issuance.

(g) Allowance for Funds Used During Construction Allowance for funds used during construction ("AFUDC") is the estimated cost of funds used to finance the Company's construction work in-progress and nuclear fuel in-process which is not recovered from the Sponsors through current revenues. The allowance is not j realized in cash currently, but under the Power Contracts, the allowance will be recovered in cash over the Plant's service life through higher revenues associated with higher depreci-f j ation and amortization expense.

AFUDC was capitalized at overall effective rates of 6.01%,5.42%, and 5.92% for 1995, 1994 and 1993, respectively, using the gross rate method.

(h) Decommi.ssioning The Company is accruing the estimated costs of decommissioning its Plant over the

Plant's remaining NRC license life. Any amendments to these estimated costs are account-18 ed for prospectively. See NOTE 3 for further detail.

(i) Taws on income The Company accounts for taxes on income under the liability method. See NOTE 11 for a further discussion of the accounting for income taxes.

Investment tax credits have been deferred and are being amortized to income over the lives of the related assets.

(j) Cash Equivalent,.

For purposes of the Statements of Cash Flows, the Company considers all highly liquid short-term investments with an original maturity of three months or less to be cash equiva-lents.

(L) Reclassifications Certain information in the 1994 and 1993 financial statements has been reclassified to l conform with the 1995 presentation.

(1) Earnings per Common Share Earnings per common share have been computed 3b dividing earnings available to com-mon stock by the weighted average number of shares outstanding during the year.

(in) Use of Estimates.

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 3. Decommissioning The Company accrues estimated decommissioning costs for its nuclear plant over its l

remaining NRC licensed life based on studies by an independent engineering finn that assumes that decommissioning will be accomplished by the prompt removal and dismantling method (DECON). This method requires that radioactive materials be removed from the plant site and that all buildings and facilities be dismantled immediately after shutdown.

Studies estimate that approximately seven years would be required to dismantle the Plant at shutdown, remove non. fuel wastes and restore the site. Studies also assume that spent fuel wdl be stored on-site in a dry fuel storage facility until 2025. The Compmy implemented rate changes effectise January 1,1995 based on a settlement agreement with the FERC which allowed $312.7 million, in 1993 dollars, as the estimated decommissionin'; cost (NOTE 4). This allowed amount is used to compute the Company's liabihty and billings to the Sponsors. Based on an assumed cost escalation rate of 5.4% per annum and an expira-tion of the Plant's NRC operating license in 2012, the estimated current cost of decommis- 19

sioning is $347.4 million and, at the end of 2012, is approximately $816.6 million. The

present value of the pro rata portion of decommissioning costs recorded to date is $179.5 million. On December 31,1995, the fair market value of the Decommissioning Trust was

$141.3 million.

Billings to Sponsors for estimated decommissioning costs commenced during 1983, at which time the Company recorded a deferred charge for the present value of decommission.

ing costs applicable to operations of the Plant for prior periods. Current period decommis-sioning costs not funded through billings to Sponsors or eamings on decommissioning fund assets are also deferred. These deferred costs will be amorti:ed to expense as they are funded

. over the remaining life of the NRC aperating license.

Cash received from Sponsors for plant decommissioning costs is deposited directly into the Vermont Yankee Decommissioning Trust in either the Qualified Fund (i.e., amounts

- currently deductible pursuant to the IRS regulations) or the Nonqualified Fund (i.e., collec-tions pursuant to FERC authorization which are not currently deductible). At December 31,1995, funds held by the Trust were invested in corporate bonds, govemment secunties

! and equities. As discussed in NOTE 4, in connection with the rate changes effective Januarv 1,1995, the Company changed its decommissioning investment strategy as autho-ri:ed by the FERC. Interest camed by the Decommissioning Trust assets is recorded in other i

income and deductions, with an equal and offsetting amount representing the current peri-od decommissioning cost funded by such eamings reflected as decommissioning expense.

The staff of the Securities and Exchange Commission has questioned certain of the cur-rent accounting practices of the electric utility industry, including the Company, regarding the recognition, measurement and classification of decommissioning costs for nuclear gener-ating stations in the financial statements of electric utilities. In response to these questions, the Financial Accounting Standards Board ("FASB") has agreed to review the accounting ,

for removal ccets, including decommissioning. The FASB has not yet reached any conclu-sion on this matter. However, the Company does not believe that any changes to the Company's current accounting practices for decommissioning costs, if required, would have an adverse effect on the results of operations due to its current anJ future ability to recover decommissioning costs from sponsors.

4 NOTE 4. FERC Rate Case Matters On June 15,1994, the Company (ded an application with the FERC to change its whole-sale rates based on a settlement reached in advance with interested parties. The pnmary changes to the Company's wholesale rates included (1) an increase in the decommissioning cost estimates, a revised decommissioning fundmg schedule, anJ a revised decomtnissioning investment strategy, (2) a reduction in the rate ofietum on common equity frotn 12.25% to 11.0%, and (3) various billing changes necessary to reflect the implementation of the requirements of Statement of Financial Accounting Standards No.109, Accounting for 2D ,

Income Taxes, to deduct certain reserves from the calculation of net unit investment under

the Power Contracts, and to include in rates certain payments that the Company will be required to make to obtain the use of a low-level waste disposal facility (NOTE 16). On September 2,1994, the Company received FERC approval. The rate decrease related to the reduction in the rate of return on common equity went into effect on August 1,1994. All other rate changes were effective on January 1,1995.

The revised estimate of decommissioning costs approved by FERC is $312.7 million, in 1993 dollars, and the revised schedule of future annual decommissioning fund collections reflects an annual decommissioning cost escalation rate of 5.4% and a financial inflation rate of 4%. The approved investment strategy for decommissioning funds under which those funds will be invested uses a balanced approach subject to strict guidelines which cover permissib!c and impermissible investments, diversification criteria, and quality stan-dards. Under the approved investment strategy, no more than 30% of the Decommissioning Trust funds can be invested in common or preferred equities and no more than 35% in cor-porate bonds.

NOTE 5. Other Deferred Charges and Credits in October,1992, Congress passed the Energy Policy Act of 1992 which requires, among other things, that certain utilities help pay for the cleanup of the I)OE's enrichment facili-ties over a 15-year period. The Company's annual fee is estimated based on its historical share of enrichment services provided by the IX)E and is indexed to inflation. These fees will not be adjusted for future business as the DOE's future cost of sales will include a decontamination and decommissioning component. The Act stipulates that the annual fee shall be fully recoverable in rates in the same manner as other fuel costs.

In 1995, the Company paid the fourth of the 15 annual charges. As of December 31, 1995, the Company has recogni:ed a current accrued liability of $1.1 million for the fee payment expected to be made in 1996, a deferred credit of $11.4 million for the expected 10 annual fee payments that are due subsequent to 1996 and a corresponding regulatory asset of $13.3 million which represents the total amount includable in future billings to the purchasers under the Power Contracts.

In 1994, the states of Vermont, Maine and Texas each ratified legislation to join a low, level radioactive waste disposal compact for the purpose of disposing of low level radioac-tive waste in the state of Texas (NOTE 16). In 1994, the Company recorded a deferred credit of $23.9 million to recogni:e the $27.5 million compact fund requirements less amounts on deposit with the Vennont Low Level Radioactive Waste Authority ("VLLR-WA") and a correspondmg deferred debit of $26.5 million which represents the total amount to be incluJed in future billings to the purchasers under the Power Cor. tracts.

These amounts have not changed during 1995. On June 30,1994, the VL1 RWA was elimi-nated and its responsibilities transferred to the Vermont Department of Natural Resources.

Ratification of the compact is still pending in the U.S. Congress.

21

NOTE 6. Long-term Funds Under generally accepted accounting standards, the Company must account for its investments in certain debt or equity securities by classifying each such security as either trading, available for-sale or held-to-maturity securities. Both tradmg and available-for-sale securities must be reflected on the balance sheet at their aggregate fair values. HelJ to-maturity securities are reflected on the balance sheet at amorti:ed cost.

The Company has two irrevocable trusts which are invested in debt and equity securities.

The Company has classified the Decommissioning Trust as available-for-sale securities.

This trust had a ner unrealized gain of $6,735,000 as of Decembe. 31,1995 which reduced deferred decommissioning costs because the company will not realize this gain; rather, the gain will be used to reduce future billings to customers. The Spent Fuci Disposal Fee Defeasance Trust is classified entirely as held-to-maturity as the Compan) has the positive intent and ability to holJ all securities in this trust to maturity. %ese securities require no adjustment to market as of December 31,1995.

The book value and estimated market value of long-term fund investment securities at December 31, is as follows (Dollars in thousands):

1995 1994 M @h M. C 1 .78.TE li M 3 YI 2 C E 3 U.S. Treasury obligations $ 67,220 $ 69,787 $ 29.296 $ 28.636 Municipal obligations 30.118 32,283 83.530 81.986 Corporate bonds 21,093 21,285 - -

Stocks 12,345 14,156 -

Accrued interest and money market funds 3,819 3,819 2.434 2.4 34 134,595 141,330 115.260 113.256

[siawlawiliguM4Fanissiinonies Short-term investments 65.235 65,235 53.176 53.176 Corporate bonds and notes - - - -

Accrued interest and money market funds 645 645 763 763 65,880 65,880 53.939 53.939 Total long-term investments $ 200,475 $ 207,210 $ 169.199 $ 167.195 f'ursuant to the Company's arrangements with its customers, the difference between mar-ket value and book value of the Decommissioning Trust has been recorJed as a decrease to deferred decommissioning costs. The Company's contracts with its customers provide for full recovery of decommissioning costs and any excess or shortage in the funJ including

' those resulting from investment performance will be refunded to or collected from cus-tomers.

U

L 6

At December 31,1995 and 1994, gross unrealized gains and losses pertaining to the long-term invest-ment securities in the Decommissioning Trust were as follows (Dollars in thousands):

[. , .( -. [ >;_yf [;; y,;y [ .;.(; _

Unreahzed gains on U S Treasury obhgations $ 2.578 $ 48 Unreahzed losses on U S. Treasury obligations (11) (508)

Unrealized gains on municipal obligations 2.167 728 Unrealized losses on municipal obhgations (2) (2,272) '

Unreahzed gains on corporate bonds and notes 215 -

Unreakzed losses on corporate bonds and notes (23) -

Unreakzed gains on stocks 1,820 -

Unreahzed losses on stocks (9) -

$ 6,735 $ (2.004)

For the two years ended December 31,1995 and 1994, gross realized gains and losses pertaining to the long-term investment securities were as follows (Dollars in thuusands):

.. +7 , . .

~-

'.'(.. '

. 3 ' f. L U : g: ;.1 f.:.~ i TotalSale Gross Realized TotalSale Gross Realized Proceeds Gain loss Proceeds Gain loss Decommissioning $158,925.904 $2,703,333 $(585,795) $35,826,252 $210,900 $(613.540)

Spent fuel disposal fee defeasance - - - $3.200,000 $7.500 $(2,000)

Matunties of short-term obligations, bonds and notes (face amount) at December 31,1995 and 1994 are as follows (Dollars in thousands):

' [:.;[-[ [' _ _ :,;;. 3. f g) [c3.g Decommissioning Disposal Fee Decommissioning Disposal Fee Trust Defeasance Trust Trust Defeasance Trust Within one year $ 2,004 $ 65,891 $ 25,335 $ 52,237 One to five years 51,683 - 42,069 -

Five to ten years 46,410 -

30.210 -

Over ten years 14,990 -

13.638 -

$ 115,087 $ 65,891 $ 111,252 $ 52,237 23

NOTE 7. Long-term Obligations A summary of long-term obligations at December 31,1995 and 1994 is as follows (Dollars in thousands):

TW?

First mortgage bonds: Series !- 6.48% due 2009 $ 75,845 $ 75,845 Totallong-term obligations S 75,845 $ 75.845

" Vermont The first mortgage bonds are issued under, have the terms and pnn isions set fonh in, and are secured by an Indenture of Mortgage dated as of October 1,1970 between the Company Yankee was and the Trustee, as modified and supplemented by 13 supplemental indentures. All bonds l are secured by a first lien on utility plant, exclusive of nuclear fuel, anJ a pledge of the Power Contracts and the Additional Power Contracts (except for fuel payments) and the able to achieve Capital Funds Agreements with Sponsors.

In November 1993, the Company issued $75.8 million of Series I, first mortgage bonds stated to mature on November 1,2009. The Company applied the proceeds of the bond its highest one issuance principally to retire the remaining Series D, Series E, Series F, Series G and Series H first mortgage bonds including call premiums totaling $3.7 million. Cash sinking fund requirements for the Series I first mortgage bonds are $5.4 million annually beginning in month output November 1999.

The Company has a $75.0 million Eurodollar Credit Agreement that expires on December 31,1996 subject to one optional one year extension. The Company issued com-ever - 389.3 mercial paper under this agreement with weighted average interest rates of 6.08% for 1995 and 4.28% for 1994. Payment of the commercial paper is supported by the Eunxiollar Credit Agreement, which is secured by a second mortgage on the Company's generating million kilowatt facility.

NOTE 8. Disclosures About the Fair Value of FinancialInstruments hours" The carrying amounts for cash and temporary investments, trade receivables, accounts receivable from sponsors, accounts payable and accrued liabilities approximate their fair val-ues because of the short maturity of these instruments. The fair values of long-term funds are estimated based on quoted market prices for these or similar investments. The fair val-ues of each of the Company's long-term debt instruments are estimated based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities.

24

The estimated fair value of the Company's financial instruments as of December 31 are summarized as follows(Dollars in thousands):

.y':,gjQ.: 3.,g:q yy;@ g h g;gQE.,y..

Cost Estimated Cost Estimated Amount Fair Value Amount Fair Value Decommissioning Trust $ 134,595 $ 141,330 $ 115.260 $ 113.256 Spent Fuel Disposal Fee Defeasance Trust 6S,880 65.880 53.939 53,939 Long-term debt 75,845 73,493 75.845 63,331 Spent fuel disposal fee and accrued interest 89,014 89,014 84.055 84.055 Fair value estimates are made at a specific point in time, based on relevant market infor-marion and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the esti-mates.

NOTE 9. Spent FuelDisposalFee The Company has a contract with the DOE for the permanent disposal of spent nuclear fuel. UnJer the terms of this contract, in exchange for the one-time fee discussed below and a quarterly fee of 1 mill per kwh of electricity generated and sold, the DOE agrees to provide disposal services when a facihty for spent nuclear fuel and other high level radioac-tive waste is available, which is required by contract to be prior to January 31,1998.

UnJer the Nuclear Waste Policy Act of 1982, the DOE is responsible for the selection and development of repositories for, and the disposal of, spent nuclear fuel and high-level radioactive waste. The Company, as required by that Act, has signed a contract with the l DOE to provide for the disposal of spent nuclear fuel and high level radioactive waste from I

its nuclear generation station beginning not later than January 1998; however, this delivery schedule is expected to be delayed significantly. It is not certain when the DOE will accept high-level radioactive waste from the Company and other owners of nuclear power plants.

Extended delays or a default by the DOE would lead to consideration of costly alternatives involving serious siting and environmental issues. The contract with the DOE requires the Company to pay the DOE a one-time fee applicable to nuclear generation through April 6, 1983, of approximately $89 million, with interest to date of payment, and a fee payable quarterly equal to one mill per kilowatt-hour of nuclear-generated and sold electricity after April 6,1983. The Company has elected to pay the one-time fee, with interest, just prior to the first scheduled delivery of spent nuclear fuel to the DOE. The Company has primary 25

responsibility for the interim storage ofits spent nuclear fuel. Current capabihty to store spent fuel at the Plant is estimated to be adequate for the next eleven years. Meeting spent fuel storage requirements beyond that period coulJ require new and separate storage facili-ties, the costs for which have not been determined.

The Company, among others, is involved in legislative actions involving the DOE to establish appropriate relief mechanisms and protection for customers. The outcomes of these actions are uncertain at this time.

The DOE contract obligates the Company to pay a one time fee of approximately $39.3 l million for disposal costs for all spent fuel discharged through April 6,1983. Although such amount has been collected in rates from the Sponsors, the Company has elected to defer payment of the fee to the DOE as permitteJ by the LX3E contract. The fee must be paid no later than the first delivery of spent nuclear fuel to the DOE. Interest accrues on the unpaid obligation based on the thirteen-week Treasury Bill rate and is compounded quarter-ly. Through 1995, the Company accumulateJ $65.9 million in an irrevocable trust to be used exclusively for defeasing this obligation ($89.0 million including accrued interest) at some future date, provided the DOE complies with the terms of the aforementioneJ con-tract.

NOTE 10. Short-term Borrowings The Company had lines of credit from various banks totaling $6.3 million at December 31,1995 and 1094. The maximum amount of short term borrowings outstandmg at any month-end during 1995,1994 and 1993 was arproximately $0.0 million, $0.2 milhon and

$0.2 million, respectively. The average daily amount of short-tenn borrowings outstanJing was approximately $0.1 million for 1995, $0.2 million for 1994, anJ $0.3 million for 1993 with weighted average interest rates of 8.48% in 1995,6.60% in 1994, and 5.75% in 1993.

There were no amounts outstanding under these lines of credit as of December 31,1995 and 1994 NOTE 11. Taxes on income The Company uses the liability method of accounting for income taxes. The liability method accounts for deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to differences between the book basis and the tax basis of assets and liabilities (" temporary differences").

For certain items, the Company's allowed rates have recognized income tax expense on a different method. As a result, the Company has recogni:ed net liabilities to customers of

$8.0 million as of December 31,1995 and $8.4 million as of December 31,1994 represent -

ing taxes collected from castomers in excess of amounts that would have been recorded under the liability method. These amounts will be systematically returned to customers by reducing future power bills.

26 1 .

The components of income tax expense for the years ended December 31,1995,1994 and 1993 are as follows (Dollars in thousands):

'.' ? L L.;. 7 J- E.:?.V. M ; U fD'li M L. j as.il d T$$iR E l.li

~

Current federalincome tax $ 6,684 $5,111 $ 4,236 Deferred federalincome tax (4,846) (2,839) (1,059)

Current state income tax 1,710 1,376 1.097 Deferred state income tax (654) (386) 80 Investment tax credit adjustment (534) (432) (577) 2,360 2.830 3,777

^ l [ G- I.2 [ [.":7 ,l.f.V ).,) .O ( . f 'll 'l. :.'d.Ql8;;l:Q('@

. .ll ' .

Current federalincome tax 1,376 784 496 Current state income tax 353 202 127 1,729 986 623 Totalincome taxes $ 4,089 $ 3,816 $ 4,400 The Company's effective income tax rates differed from the federal statutory rate of 35% for the years ended December 31,1995,1994 and 1993 are as follcws:

R; :. . .. l j. J ^ *l J ).l.e.% ~.{'S 7l:]If 19%.N 1,? % 2.L}

Federal statutory rate 35.0 % 35.0 % 35.0 %

State income taxes, net of federal income tax benefit 8.4 7.4 6.9 Investnient credit (4.9) (42) (4.7)

Book depreciation in excess of tax basis 2.9 2.3 2.0 Flowback of excess deferred taxes (4.0) (3.5) (3.6)

Other 0.2 (0.3) 0.5 37.6 % 36.7 % 36.1 %

The significant components of deferred tax expense for the years ended December 31,1995,1994 and 1993 are as follows (Dollars in thousands):

{ g .;T3 .y f f T y 4,.i; M .c y'l. g .$ 7 @ Q g g g y,i ijgig [ j Decommissioning expense not currently deductible $ (1,643) $ (432) $ (351)

Tax depreciation over (under) financial statement depreciation (2,020) (1,566) (978)

Tax fuel amortization over (under) financial statement amortization (994) (19) (255)

Tax loss on reacquisition of debt over (under) financial statement expense (73) (99) 1.887 Pension expense deduction over (under) financial statement expense 237 (397) (167)

Postemployment benefits deduction over (under) financial statement expense (269) 77 67 Matenals and supplies deduction over (under) financial statement expense (36) (325) (335)

Low-level waste deduction over (under) financial statement expense (489) (211) C%)

Flowback of excess deferred taxes (432) (359) (44.2)

Other. net 219 106 191

$ (5,500) $ (3,225) $ (979) 27

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31,1995 and 1994 are presented below (Dollars in thousands):

~

l ;Ilr: ' C-Mk2.j,D lE;-l . J..< .lL - . ~ [.

Accumulated amortization of final nuclear core $ 3,431 $ 3.168 Nuclear decommissioning liability 5,204 3.309 Regulatory liabilities 5,273 5.619 Accumulated deferred investment credit 2,441 2.656 Accumulated amortization of materials and supplies 2,693 2.657 Pension and retiree benefit liabilities 2,705 2.673 Accrued low-level waste disposal costs 1,728 1.162 Other 895 880 Total gross deferred tax assets 24,370 22.124 Less valuation allowance (1,711) (1.384)

Net deferred tax assets 22,659 20.740

. '. 1.j . 'f - ( . ". . y.f n y::]c;-L::.:-; '. f'j f '.. g '. . . . j Plant and equipment (47,721) 150.805)

Other (4,814)

(4.958) _

Total gross deferred tax liabihties (52,535) 155.7 "

Net deferred tax liability $ (29,876) $ (35.023)

The valuation allowance is the result of a provision in Vermont tax law which limits refunds resulting frorn cartybacks of net operating losses.

NOTE 12. Supplemental Cash Flow Information The following information supplements the cash flow information provided in the Statements of Cash Flows (Dollars in thousands):

f .f f f fl(:';; QMlf. , . .1. AC'(, j .

Interest (net of amount capitalized) $ 5,184 $5.108 $ 7.632 income taxes $ 7,981 $ 7,525 $ 7,070 NOTE 13. Pension Plans The Company has two noncontributory pension plans covering substantially all of its employees. Benefits are based on age, years of service and the level of compensation during the final five years of employment. The Company's funding policy is to contribute each year, the net perialic pension cost for that year. However, the contribution for any year will not be less than the minimum required contribution unJer federal law or greater than the maximum tax deductible amount.

28

The aggregate funded status of the Company's pension plans as of December 31,1995 and 1994 is as follows (Dollars in thousands):

g .; . 7 , . ,m Vested benefits $ 11,070 $ 8.718 Nonvested benefits 1,498 1,136 Accumulated benefit obhgation 12,568 9.854 Additional benefits related to future compensation levels 6,059 5,126 Projected benefit abhgation 18,627 14,980 Fair value of plan assets, invested primarily in equities and bonds 22,199 16.559 Projectad benefit obligation in excess (less than) of plan assets 3 (3,572) $ (1,579)

Certain changes in the itcms shown above are not recognized as they occur, but are amortized system-atically over subsequent periods. Unrecognized amounts still to be amortized and the amount that is included in the balance sheet as of December 31,1995 and 1994 appear below (Dollars in thousands):

Unrccognized net transition obhgation $876 $936 Unrecognized net gain (10,102) (8,559) ,

a Pension liabihty included in balance sheet 4,869 5.511 Unrecognized prior service costs 785 533 Projected benefit obligation in excess (less than) of plan assets $ (3,572) $ (1,579)

The increase in the projected benefit obligation from $15 million in 1994 to $18.6 million in 1995 is primarily the result of changed plan assumptions.

The following are pension plan assumptions as of December 31,1995 and 1994:

Discount rate 7.25 % 8.0%

Compensation scale 4.0% 4.5%

Expected return on assets 8.5% 85%

29

Net pension expense for the years ending December 31, included the following components (Dollars in thousands):

FCgn,pgwMyAlg Service cost - benefits earned 3953 $ 1.282 $ 1.141 Interest cost on projected benefit obligation 1,275 1,361 1.288 Actual (return) loss on plan assets (4,868) (1.530) (1.792)

Net amortization and deferral 3,120 186 631 Net pension expense $480 $ 1.299 $ 1.268 NOTE 14. Postretirement Benefits Other Than Pensions The Company uses accrual accounting for postretirement benefits other than pensions

("PBOP" or "PBOPs"). The Company accrues PBOP costs determined in accordance with appropriate actuarial assumptions and includes this amount in its monthly power billings to Sponsors. The Company is funding this liability by placing monies in separate trusts. In order to maximi:e the deductible contributions permitted under IRS regulations, the Company amended its pension plans and established separate VEBA trusts for management and union employees.

Prior to the effective date of the Company's new rates on January 1,1995, a portion of l its PBOPs were collected from customers through inclusion of such costs in decommission-ing estimates and related customer billings. The total amount of PBOP costs included in decommissioning billings were $2.7 million. In the Company's rate order, effective January 1,1995, FERC provided that the $2.7 million amount in the decommissioning fund for PBOPs will remain in the decommissioning fund and reduce future decommissioning funding requirements. FERC has further provided that the cost for PBOPs is fully recover-able from customers.

The following table presents the plan's funded status reconciled with amounts recognized in the Company's balance sheets as of December 31,1995 and 1994 (Dollars in thousands):

( , - . d..

. Li :

. . . . ~ - . ~ ~ . . . , . . . . .

.~. ~ ; n ;,MM & WA& -.i :..A%w .vm ..': i 's ', : 1 .. &1 ' '<'

~

,i; Retirees $ 1,454 $1.187 Fully eligible active plan participants 1,225 1.100 Other active participants 8,911 8.209 Total accumulated postretirement benefit obligation 11,590 10,496 Fair value of plan assets, invested primarily in short-term investments 5,334 2E91 Accumulated postretirement benefit obhgation in excess of plan assets $ 6,256 $ 7,605 Unrecognized net transition obligation $ 6,617 $ 7,030 Additional unrecognized transition obligation 2,488 2.563 Unrecognized net gain (2,849) (1.988)

Accumulated postretirement benefit obligation in excess ci plan assets $ 6,256 $ 7.605

__ ___ .._ _ . _ _ . _ _ _ _ _ _ . . __ ._ __ . _ - ~ . . -

The net periodic postretirement benefit cost for 1995 and 1994 includes the following components (Dollars in thousands):

._.. . . . . . :. . a . ; . . ,~.- - ; \. y . .. . w -ww

..x -

.! . ,_ . . , _ . ' ' , ' . , f,... ,.'a;\.'

. . . , f.h Service cost $ 755 $732 Interest cost 763 691 Actual return on plan assets (859) 84 Net amortization and deferra! 965 54 "ReCOgD/ Zed /D Net periodic postretirement benefit cost $ 1,624 $ 1,561 For measurement purposes, a 12% annual rate at ucrease in the per capita cost of cov. 1995 by the ered benefits (i.e., health care cost trend rate) was assumed for 1995; the rate was assumed to decrease gradually to 6% by the year 2001 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For /\/af/Onal Safety example, increasing the assumed health care cost trend rates by one percentage point in each year woulJ increase the accumulated postretirement benefit obligation as of December 31,1995 by $2.4 milhon and the aggregate of the service and interest cost components of COUDCi/ aS the net periodic postretirement benefit cost for the year ended December 31,1995 by $0.3 mil-lion. The weighted-average discount rate used in determining the accumulated postretire-ment benefit obligation was 7% for the years then ended December 31,1995, and 1994 Dat/OD'S third NOTE 15. Lease Commitments The Company leases equipment and systems under nonct ncelable operating leases. beSt Ut///ty Of Charges against income for leases were approximately $4.9 mdlion in 1995, $3.1 million in 1994, and $3.7 million in 1993.

itS Size (Or Minimum future leases as of Demmber 31,1995 are as follows (Dollars in thousands):

. .; l .. ..' ~

. . . . 2 .l.L h,. 2 7 !' L.j Q M {f@fsh $ @ d 1996 $1245 indUStria/ Safety" 1997 7283 1998 7.262 1999 6.742 2000 4.602 Thereafter 20,709 included in the above lease payments is the cost of a low pressure turbine constructed by General Electric Corporation valued at approximately $30.8 million including installation costs when installed in 1995. Under the lease agreement, the Company will make 120 monthly payments of approximately $383,000 each commencing on July 1,1995.

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NOTE 16. Commitments and Contingencies l V l

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low-level Waste I e l

[ All efforts to site a low level radioactive waste facility in Vermont ended during 1994. '

The Vermont Low Level Radioactive Waste Authority ("VLLRWA") was eliminated and its responsibilities transferred to the Vermont Department of Natural Resources.

f During 1994, Vermont joined with the states of Texas and Maine in a tri-state compact

. to site a facility in Texas for the disposal of low-level radioactive waste. Currently, each

' participating state has obtained approval from its respective legislature. The compact is expected to be ratified by the U.S. Congress during the 1996 session. Although ratification

[.

~ has been delayed longer than originally anticipated, Vermont Yankee will begin sending its waste to Texas during 1998, if such approval is received and facility development proceeds i on schedule. The Company has stored low level radioactive waste on its plant site since July 1,1994. The Company has the capacity to store low-level waste on site until 1999.

[

Management anticipates that the Texas facility will open prior to that date or that other arrangements for disposal can be made. The accompanying financial statements include an

' ' estimate of the cost to dispose of waste currently stored on site. This actual cost of disposal could differ from management estimates if the Texas facility is not available as planned.

A b Any difference in costs would likely be collected from or refunded to customers and would not have a material impact on the Company.

- Under the proposed compact, Vermont would pay the State of Texas $25 million ($12.5 l million when the U.S. Congress ratifies the compact and $12.5 million when the facility f' opens). In addition, Vermont must pay $2.5 million ($1.25 million when Congress ratifies I the compact and $1.25 million when the facility is licensed) for community assistance pro-

[ jects in Hudspeth County, Texas, where the facility will be kicated. Vennont would aho I pay one-third of the Texas Low Level Radioactive Waste Disposal Compact Commission's j expenses until the facility opens. The disposal fees for generators in Vermont and Maine would then be set at a level that is the same as charged generators in Texas. During 1994, f

t . the Company received approval from FERC to recover the cost of this compact from siun-

}' ' sors over the remaining license life of the Plant.

During 1994, the Company recorded a deferred credit of $219 million to recogni:e the

$27.5 million compact fund requirements less the remaining fund balance from the VLLR-j t WA and a corresponding deferred debit of $26.5 million which represents the total amount

! to be included in future billings to the purchasers under the Power Contracts. These amounts have not changed during 1995.

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Nuclear Fuel The Company has approximately $123.8 million of" requirements based" purchase con-tracts for nuclear fuel to meet substantially all of its power production requirements through  ;

2002. Under these contracts, any disruption of operating activity would allow the Company to cancel or postpone deliveries until actually needed. l Insurance l

The Price-An derson Act currently limits public liability from a single incident at a '  !

nuclear power plant to $8.9 billion. Any damages beyond $8.9 billion are indemnified under an agreement with the NRC, but subject to congressional approval. The first $200 million of liability coverage is the maximum provided by private insurance. The Secondary Financial Protection program is a retrospective insurance plan providing additional cover-

-q age up to $8.7 billion per incident by assessing each of the 110 reactor units that are cur-  ;

rently subject to the Program in the United States a total of $79.3 million, limited to a maximum assessment of $10 million per incident per nuclear unit in any one year. The  ;

maximum assessment is expected to be adjusted at least every five years to reflect inflation-ary changes.

The above insurance covers all workers employed at nuclear facilities prior to Jar.uary 1,1988, for bodily injury claims. The Company has purchased a Master Worker ir.surance policy with limits of $200 million with one automatic reinstatement of policy limits to cover workers employed on or after January 1,1988. Vermont Yankee's contingent liability for a retrospective premium on the Master Worker policy as of December 1995 is ,

$3.1 million. The Secondary Financial Protection layer, as referenced above, would be in  ;

exces, of the Master Worker policy. 4 inurance has been purchased from Nuclear Electric Insurance Limited (NEIL 11 and NEIL .II) to cover the costs of property damage, decontamination or premature decommis-sioning resulting from a nuclear incident. All companies insured with NEIL are subject to retroactive assessments iflosses exceed the accumulated funds available. The maximum potential assessment against the Company with respect to NEIL 11 losses arising during the 3 current policy year is $14.0 million and the NEIL 111 maximum retroactive assessment is'

$7.0 million. The Company's liability for the retrospective premium adjustment for any policy year ceases six years after the end of that policy year unless prior demand has been made. ,

fL Frederic E. Greenman Vice President and General Counsel, New EnglandPower Company, Westborough, MA R. Edward Hanson Vice President, Production Operations, ContralMaine Power Company, Augusta. ME(11 DougIas G. Hyde President and Chief Executive Officer, Green Mountain Power Corporation, South Burlington. VT John B. Keane Vice President and Treasurer, Northeast utilities. Hartford, CT l

l E Ray Keyser, JR., Esq. Atterney, Keyser Crowley, Meub, Iayden, Kulig and Sullivan. PC.;

Chairman, Central Vermont Public Service Corporation, Rutland, VT Kevin A.Kirby Vice President, Power Supply, Eastem utilities Associates, Boston, MA (2)

John W. NeWSham  ; ' Vice President, New England Electric System, Westborough, MA (3)

Donald G. Pardus Chairman and Chief Executive Officer, Eastem utilities Associates, Boston, MA (4)

James S. Robinson ,

' Manager of Nuclear Investments and Administration, New England Electric System, Westborough, MA (5)

Stephen E. Scace . Vice President, Nuclear Operations Services, Northeast utilities, Hartford, CT A. Norman Terreri Senior Vice Praident and Chief Operating Officer, Green Mountain Power Corporation, South Burlington, VT Thomas C. Webb Chairman, Vermont Yankee Nuclear Power Corporation, Brattleboro, VT, President and Chief Executive officer, Central Vermont Public Service Corporation, Rutland VI (6)

J. Gary Weigand President and chief Executive 0fficer, Vermont Yankee Nuclear Power Corporation, Brattleboro, VT E Allen Wiley Director of ifydro Operations, Centra / Maine Power Company, Augusta, ME(7)

Russell D. Wright President and Chief Operating Officer, Commonwealth Electric Company, Wareham, MA Robert H. Young Chairman, Vermont Yankee NuclearPower Corporation, Brattleboro, VT President and Chief Executive Officer, Central Vermont Public Service Corporation, Rutland, VT(81 (1) Regned fe%ary 7,1935 (5) Docted Novemter 8.19% e N :w Jnn 1.19%

(?) Detted M4 10,19 % (6) Reywd as CMman Naen* 8.19%

@ NuyM themher B. I'/JS. effecu Janavy 1.1?E W Oected Mor 10.1995 lI)I'4:iped M r/ 10.1995 las Dah d Chaman Number 8 1995 M ,

Robert H. Young chairman (1)

Thomas C. Webb chairman W i

J. Gary Weigand President and Chief Executive Officer Donald A.Reid Vice President, Operations Bruce W. Wiggett Vice President, Finance and Treasurer James P. Pelletier Vice President, Engineering Jay K. Thayer Vice President. Engineering (3)

John P. O'Connor secretary Thomas F. Schimelpfenig Manager of Financial Planning. Assistant Treasurer M)

Thomas W. Bennet, JR. Manager of Financial Planning, Assistant Treasurer (S)

John A. Ritsher, Esq. Assistant Secretary (1) Dened N.". ember 8.1995 (2) Res gned tbvemh:r e. lass (3) E!ected Nwnber H. WJ5 91Elected Apo!1.1995 l5) Reugned Math 31,1995 e

(This report is not to be considered an offer to sell or buy or solicitation of an offer to seII or buy any securityl 35

N.m in%s.., ,

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