SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JANUARY 5, 1998
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BANGOR HYDRO-ELECTRIC COMPANY
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(Exact name of registrant as specified in its charter)
MAINE 0-505 01-0024370
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(State of Incorporation) (Commission File No.) (IRS Employer ID No.)
33 STATE STREET, BANGOR, MAINE 04401
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 207-945-5621
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Current Report, Form 8-K Date of Report
BANGOR HYDRO-ELECTRIC COMPANY JANUARY 23, 1998
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ITEM 5. OTHER EVENTS
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STORM DAMAGE
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Beginning on January 5, 1998, much of the State of Maine experienced
weather conditions that included snow, sleet and freezing rain, culminating in a
sleet storm on January 7, 8 and 9. Heavy icing conditions caused trees to fall
into power lines and also caused power lines to fall from the added weight of
the ice. Damage to transmission and distribution equipment was widespread
throughout the Company's service territory. One of the Company's major
transmission lines serving the eastern part of its service territory was
entirely destroyed for a stretch of approximately eight miles. By January 9, an
estimated 60,000, or roughly 60%, of the Company's customers were without power
at the same time due to damage from the storm. The Governor of Maine declared a
state of emergency, and President Clinton declared the State of Maine a Federal
disaster area.
The effort to restore power and repair transmission and distribution
equipment has been extensive. Lineworkers and tree crews from throughout the
eastern United States and Canada participated in the effort, and by January 18,
power had been restored to all but a few of the Company's customers. The cost
of the restoration is still being determined but it is expected to total as much
as $5 million or more. The Maine Public Utilities Commission ("MPUC") has
issued an order authorizing the Company to accrue incremental storm damage
expenses for future recovery through the rates charged to customers. The MPUC
is expected to investigate the prudence of the costs incurred and to establish a
time frame for the recovery of the prudently incurred costs. The Company
believes its storm damage costs were prudently incurred and that it should,
therefore, be allowed to recover them in rates.
PROPOSED INCREASE IN RETAIL RATES
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As previously reported, the Company requested in 1997 that the MPUC
authorize an increase in its retail rates by an amount designed to increase
annual revenues by approximately $22 million. Pursuant to the requirements of
Maine law, the MPUC must issue its decision by February 9, 1998, and it is
expected that any rate increase authorized will take effect on or before March
1, 1998.
On January 16, the MPUC's advisory staff issued a recommended decision,
or "Examiners' Report", which calls for an increase in the Company's annual
revenues of approximately $13.6 million. While there are many factors that
explain the difference between the MPUC staff recommendation and the Company's
requested increase, much of that difference is attributable to the proposed
accounting treatment of various costs and the deferral of other costs for future
consideration, including the deferral of certain costs associated with the
Company's ownership interest in the Maine Yankee nuclear power plant pending a
determination by the Federal Energy Regulatory Commission of prudence issues.
While those accounting recommendations would affect the timing of receipt of
revenues by the Company and would require the Company to finance the payment of
the associated costs, they should not significantly affect the Company's
earnings during the period that the new rates are effective.
The MPUC staff recommendation is based upon a determination that the
Company should be allowed to earn an annual return of 12.75% on common equity.
It also includes a proposal for a "rate plan" under which the Company's rates
would be subject to an annual adjustment beginning on May 1, 1999 to account for
inflation with an offset for assumed increases in productivity. Other than that
annual adjustment, the Company would not be permitted to change its rates unless
its return on equity exceeded or fell short of the allowed return by more than
400 basis points.
All parties in the Company's rate case will be permitted to file
written comments on the MPUC staff recommendation before it is considered by
the MPUC. The MPUC may accept or reject, in whole or in part, the MPUC Staff
recommendation. Accordingly, the Company cannot predict the final outcome of
the rate increase request.
FINANCIAL COVENANTS UNDER LENDING AGREEMENTS
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As previously reported, the Company has negotiated with its bank
lending group new levels of financial covenants contingent upon the
completion of certain transactions relating to a power sale contract with
UNITIL Power Corp. on or before January 15, 1998. Those transactions have
not yet been completed, but the banks have agreed to extend the deadline and
waivers of potential financial covenant violations until February 15, 1998.
BANGOR HYDRO-ELECTRIC COMPANY
by /s/ Frederick S. Samp
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Frederick S. Samp
Chief Financial Officer
Dated: January 23, 1998