UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-2301
BOSTON EDISON COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1278810
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
800 Boylston Street, Boston, Massachusettes 02199
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-424-2000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 14, 2001
Common Stock, $1 par value 100 shares
The Company meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q as a wholly-owned subsidiary and is
therefore filing this Form with the reduced disclosure format.
Part I - Financial Information
Item 1. Financial Statements
Boston Edison Company
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands)
Three Months Ended March 31,
2001 2000
Operating revenues $ 466,162 $ 376,443
Operating expenses:
Purchased power 276,785 194,579
Operations and maintenance 51,549 56,360
Depreciation and amortization 42,264 41,534
Demand side management and renewable
energy programs 13,767 13,681
Taxes - property and other 18,126 16,765
Income taxes 16,388 11,493
Total operating expenses 418,879 334,412
Operating income 47,283 42,031
Other income, net 832 815
Operating and other income 48,115 42,846
Interest charges:
Long term debt 11,800 14,325
Transition property securitization 10,798 11,946
certificates
Other 2,414 682
Allowance for borrowed funds used during
construction (553) (597)
Total interest charges 24,459 26,356
Net income $ 23,656 $ 16,490
========= =========
Per share data is not relevant because Boston Edison Company's common stock is
wholly owned by NSTAR.
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Boston Edison Company
Condensed Consolidated Statements of Retained Earnings
(Unaudited)
(in thousands)
Three Months Ended March 31,
2001 2000
Balance at the beginning of the period $ 352,832 $ 1,462
Add:
Net income 23,656 16,490
Subtotal 376,488 17,952
Deduct:
Dividends declared:
Dividends to Parent 32,323 15,000
Preferred stock 1,490 1,490
Subtotal 33,813 16,490
Provision for preferred stock redemption and
issuance costs 60 60
Balance at the end of the period $ 342,615 $ 1,402
======== ========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Boston Edison Company
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
March 31, December 31,
2001 2000
Assets
Utility plant in service, at original cost $2,553,700 $2,522,682
Less: accumulated depreciation 843,895 825,367
1,709,805 1,697,315
Construction work in progress 33,249 39,820
Net utility plant 1,743,054 1,737,135
Equity investments 15,587 15,512
Other investments 9,640 9,599
Current assets:
Cash and cash equivalents 4,005 12,125
Restricted cash 3,625 3,625
Accounts receivable:
Customers 228,775 200,479
Affiliates 39,528 54,392
Regulatory assets 154,780 193,641
Accrued unbilled revenues 51,727 66,879
Materials and supplies, at average cost 16,722 15,621
Prepaid pension expense 155,172 149,889
Other 6,172 5,919
Total current assets 660,506 702,570
Regulatory assets 801,966 780,974
Other deferred debits 47,893 46,250
Total assets $3,278,646 $3,292,040
========== ==========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Boston Edison Company
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
March 31, December 31,
2001 2000
Capitalization and Liabilities
Common equity:
Common stock, par value $1 per share
(100 shares issued and outstanding) $ - $ -
Premium on common stock 479,226 482,004
Retained earnings 342,615 352,832
Total common equity 821,841 834,836
Accumulated other comprehensive loss, net (117) (117)
Cumulative nonmandatory redeemable
preferred stock 43,000 43,000
Long-term debt 577,434 577,618
Transition property securitization
certificates 548,000 584,130
Total long-term debt 1,125,434 1,161,748
Total capitalization 1,990,158 2,039,467
Current liabilities:
Transition property securitization
certificates due within one year 57,000 36,443
Redeemable preferred stock and long-
term debt due within one year 49,845 50,186
Notes payable 185,000 96,500
Accounts payable:
Affiliates 53,613 116,610
Other 105,548 115,783
Deferred taxes 85,112 99,542
Accrued interest 8,232 24,269
Dividends payable 911 993
Other 140,657 112,416
Total current liabilities 685,918 652,742
Deferred credits:
Accumulated deferred income taxes 493,882 491,098
Accumulated deferred investment tax credits 20,098 20,346
Power contracts 25,150 25,868
Other 63,440 62,519
Total deferred credits 602,570 599,831
Commitments and contingencies
Total capitalization and liabilities $3,278,646 $3,292,040
========= =========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Boston Edison Company
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended March 31,
2001 2000
Operating activities:
Net income $ 23,656 $ 16,490
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 40,269 41,534
Deferred income taxes and
investment tax credits (14,806) 8,033
Allowance for borrowed funds used
during construction (553) (597)
Net changes in working capital (42,394) (65,731)
Other, net (27,542) (38,597)
Net cash used in operating activities (21,370) (38,868)
Investing activities:
Plant expenditures (excluding AFUDC) (25,372) (16,353)
Other investments (75) 58
Net cash used in investing activities (25,447) (16,295)
Financing activities:
Long-term debt redemptions - (65,400)
Transition property securitization
certificates redemptions (15,573) (22,154)
Net change in notes payable 88,500 56,000
Dividends paid (34,230) (25,000)
Net cash provided by (used in)
financing activities 38,697 (56,554)
Net decrease in cash and cash equivalents (8,120) (111,717)
Cash and cash equivalents at beginning
of year 12,125 117,537
Cash and cash equivalents at end of
period $ 4,005 $ 5,820
========= =========
Supplemental disclosures of cash flow
information:
Cash paid (refunded) during the period
for:
Interest, net of amounts capitalized $ 28,264 $ 26,975
========= =========
Income taxes $ 708 $ (10,536)
========= =========
The accompanying notes are an integral part of the condensed
consolidated financial statements.
Notes to Unaudited Condensed Consolidated Financial Statements
A) The Company
Boston Edison Company ("Boston Edison" or "the Company") is a
regulated public utility incorporated in 1886 under Massachusetts
law and is a wholly owned subsidiary of NSTAR. NSTAR is
Massachusetts' largest investor-owned combined electric and gas
utility and is an exempt public utility holding company. NSTAR
is an energy delivery company serving approximately 1.3 million
customers in Massachusetts, including more than one million
electric customers in 81 communities and 244,000 gas customers in
51 communities. NSTAR's retail utility subsidiaries are Boston
Edison, Commonwealth Electric Company (ComElectric), Cambridge
Electric Light Company (Cambridge Electric), and NSTAR Gas
Company (NSTAR Gas) and its wholesale electric subsidiary is
Canal Electric Company (Canal Electric). Effective November 1,
2000, NSTAR's three retail electric companies began to operate
under the brand name "NSTAR Electric." Reference in this report
to "NSTAR Electric" shall mean each of Boston Edison, ComElectric
and Cambridge Electric.
B) Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's Form
10-K for the year ended December 31, 2000. The financial
information presented as of March 31, 2001 and for the periods
ended March 31, 2001 and 2000 have been prepared from Boston
Edison's books and records without audit by independent
accountants. Financial information as of December 31, 2000 was
derived from the audited consolidated financial statements of
Boston Edison, but does not include all disclosures required by
generally accepted accounting principles (GAAP). In the opinion
of management, all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial
information for the periods indicated have been included.
Certain reclassifications have been made to the prior year data
to conform with the current presentation.
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures 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
these estimates.
The results of operations for the three-month periods ended
March 31, 2001 and 2000 are not indicative of the results that
may be expected for an entire year. Kilowatt-hour sales and
revenues are typically higher in the winter and summer than in
the spring and fall as sales tend to vary with weather
conditions. Economic conditions also impact sales.
C) Goodwill and Costs to Achieve Amortization
Recorded goodwill is associated with the merger of BEC Energy
(BEC) and Commonwealth Energy System (COM/Energy), effective
August 25, 1999. The merger was accounted for by NSTAR as an
acquisition of COM/Energy by BEC under the purchase method of
accounting. An integral part of the merger is the rate plan of
the retail utility subsidiaries of BEC and COM/Energy that was
approved by the Massachusetts Department of Telecommunications
and Energy (MDTE) in July 1999. Significant elements of the rate
plan include a four-year distribution rate freeze, recovery of
the acquisition premium (goodwill) of approximately $490 million
over 40 years resulting in annual amortization of approximately
$12.2 million, and recovery of filed transaction and integration
costs (costs to achieve) of $111 million over 10 years. NSTAR's
retail utility subsidiaries will reconcile the ultimate costs to
achieve with that estimate, and any difference is expected to be
recovered over the remainder of the amortization period. As a
result of the merger, cost savings have been realized due to
reduced staffing levels and operating efficiencies. Future cost
savings are expected to result from the avoidance of costs that
would have otherwise been incurred by BEC and COM/Energy.
D) Contingencies
1. Environmental Matters
Boston Edison is involved in approximately 16 state-regulated
properties where oil or other hazardous materials were previously
spilled or released. Boston Edison is required to clean up these
properties in accordance with specific state regulations. There
are uncertainties associated with these costs due to the
complexities of cleanup technology, regulatory requirements and
the particular characteristics of the different sites. Boston
Edison also continues to have potential liability as a
potentially responsible party in the cleanup of five multi-party
hazardous waste sites in Massachusetts and other states where it
is alleged to have generated, transported or disposed of
hazardous waste at the sites. Boston Edison generally expects to
have only a small percentage of the total potential liability for
these sites. Approximately $4.8 million and $5 million is
included as a liability in the accompanying Condensed
Consolidated Balance Sheets at March 31, 2001 and December 31,
2000, respectively, related to the non-recoverable portion of
these cleanup liabilities. Management is unable to fully
determine a range of reasonably possible cleanup costs in excess
of the accrued amount. Based on its assessments of the specific
site circumstances, management does not believe that it is
probable that any such additional costs will have a material
impact on the Company's consolidated financial position. However,
it is reasonably possible that additional provisions for cleanup
costs that may result from a change in estimates could have a
material impact on the results of operations for a reporting
period in the near term.
Estimates related to environmental remediation costs are reviewed
and adjusted periodically as further investigation and assignment
of responsibility occurs. Boston Edison is unable to estimate its
ultimate liability for future environmental remediation costs.
However, in view of Boston Edison's current assessment of its
environmental responsibilities, existing legal requirements and
regulatory policies, management does not believe that these
matters will have a material adverse effect on Boston Edison's
financial position or results of operations for a reporting
period.
2. Industry and Corporate Restructuring Legal Proceedings
The MDTE order approving Boston Edison's electric restructuring
settlement agreement was appealed by certain parties to the
Massachusetts Supreme Judicial Court. One appeal remains pending.
However, there has to date been no briefing, hearing or other
action taken with respect to this proceeding. Management is
currently unable to determine the outcome of this proceeding.
However, if an unfavorable outcome were to occur, there could be
a material adverse impact on business operations, the
consolidated financial position, cash flows or results of
operations for a reporting period.
3. Regulatory proceedings
In the Boston Edison 1999 reconciliation filing with the MDTE,
the Massachusetts Attorney General contested cost allocations
related to Boston Edison's wholesale customers since 1998.
Management is unable to determine the outcome of this proceeding.
However, if an unfavorable outcome were to occur, there could be
a material adverse impact on Boston Edison's consolidated
financial position, results of operations and cash flows in the
near term.
In October 1997, the MDTE opened a proceeding to investigate
Boston Edison's compliance with the 1993 order that permitted the
formation of Boston Energy Technology Group and authorized Boston
Edison to invest up to $45 million in non-utility activities.
Hearings were completed during 1999 and no further developments
have occurred as of this time. Management is currently unable to
determine the timing and outcome of this proceeding. However, if
an unfavorable outcome were to occur, there could be a material
adverse impact on business operations, the consolidated financial
position, cash flows and results of operations for a reporting
period.
4. Other litigation
In the normal course of its business Boston Edison is also
involved in certain other legal matters. Management is unable to
fully determine a range of reasonably possible legal costs in
excess of amounts accrued. Based on the information currently
available, it does not believe that it is probable that any such
additional costs will have a material impact on its consolidated
financial position. However, it is reasonably possible that
additional legal costs that may result from a change in estimates
could have a material impact on the results of a reporting period
in the near term.
E) Income Taxes
The following table reconciles the statutory federal income tax
rate to the annual estimated effective income tax rate for 2001
and the actual effective income tax rate for the year ended
December 31, 2000:
2001 2000
Statutory tax rate 35.0% 35.0%
State income tax, net of federal income tax
benefit 4.4 4.4
Investment tax credit amortization (0.6) (0.4)
Other 2.7 1.8
Effective tax rate 41.5% 40.8%
===== =====
Item 2. Management's Discussion and Analysis
Boston Edison Company ("Boston Edison" or "the Company") is a
regulated public utility incorporated in 1886 under
Massachusetts' law and is a wholly owned subsidiary of NSTAR.
NSTAR is Massachusetts' largest investor-owned combined electric
and gas utility. NSTAR is an energy delivery company serving
approximately 1.3 million customers in Massachusetts including
more than one million electric customers in 81 communities and
244,000 gas customers in 51 communities. Boston Edison serves
approximately 681,000 electric customers in the city of Boston
and 39 surrounding communities. NSTAR's retail utility
subsidiaries are Boston Edison, Commonwealth Electric Company
(ComElectric), Cambridge Electric Light Company (Cambridge
Electric) and NSTAR Gas Company (NSTAR Gas) and its wholesale
electric subsidiary is Canal Electric Company (Canal Electric).
Effective November 1, 2000, NSTAR's three retail electric
companies began to operate under the brand name "NSTAR Electric."
Reference in this report to "NSTAR Electric" shall mean each of
Boston Edison, ComElectric and Cambridge Electric.
The electric industry has continued to change in response to
legislative, regulatory and marketplace demands for improved
customer service at lower prices. These demands have resulted in
an increasing trend in the industry to seek competitive
advantages and other benefits through business combinations.
NSTAR was created to operate in this new marketplace by combining
the resources of its utility subsidiaries and concentrating its
activities in the transmission and distribution of energy.
Goodwill and Costs to Achieve Amortization
Recorded goodwill is associated with the merger of BEC Energy
(BEC) and Commonwealth Energy System (COM/Energy), effective
August 25, 1999. The merger was accounted for by NSTAR as an
acquisition of COM/Energy by BEC under the purchase method of
accounting. An integral part of the merger is the rate plan of
the retail utility subsidiaries of BEC and COM/Energy that was
approved by the Massachusetts Department of Telecommunications
and Energy (MDTE) in July 1999. Significant elements of the rate
plan include a four-year distribution rate freeze, recovery of
the acquisition premium (goodwill) of approximately $490 million
over 40 years resulting in annual amortization of approximately
$12.2 million, and recovery of filed transaction and integration
costs (costs to achieve) of $111 million over 10 years. NSTAR's
retail utility subsidiaries will reconcile the ultimate costs to
achieve with that estimate, and any difference is expected to be
recovered over the remainder of the amortization period. As a
result of the merger, cost savings have been realized due to
reduced staffing levels and operating efficiencies. Future cost
savings are expected to result from the avoidance of costs that
would have otherwise been incurred by BEC and COM/Energy.
Retail Electric Rates
The 1997 Massachusetts Electric Restructuring Act (Restructuring
Act) requires electric distribution companies to obtain and
resell power to retail customers that choose not to buy energy
from a competitive energy supplier. This is through either
standard offer service or default service. As a result of the
Restructuring Act, standard offer customers of Boston Edison
currently pay rates that are 15% lower, on an inflation-adjusted
basis, than rates in effect prior to March 1, 1998, the retail
access date. All distribution customers must pay a transition
charge as a component of their rate.
From March 1, 1998, Boston Edison's accumulated cost to provide
default and standard offer service was in excess of the revenues
it was allowed to bill. As a result, Boston Edison recorded a
regulatory asset of approximately $193.6 million at December 31,
2000 that is reflected as a component of Current assets on the
accompanying Condensed Consolidated Balance Sheets. As a result
of new rates for standard offer and default service that became
effective January 1, 2001, the regulatory asset has declined to
$154.8 million as of March 31, 2001.
Under applicable restructuring plans or settlements approved by
the MDTE, Boston Edison must, on an annual basis, file proposed
adjustments to its rates for the upcoming year along with a
proposed reconciliation of prior year revenues and costs for its
standard offer, default service, transmission and transition
charges. Boston Edison made such a filing with the MDTE in late
1999. The MDTE subsequently approved proposed rate adjustments
effective January 1, 2000, and conducted further hearings for the
purpose of reconciling prior year's costs and revenues related to
Boston Edison's transition and transmission charges and the
charges for standard offer and default service. In each such
proceeding, certain cost allocations and other related issues
have been contested; however, the MDTE has not yet rendered a
final decision. In November 2000, Boston Edison made a similar
filing containing proposed rate adjustments for 2001, including a
reconciliation of costs and revenues through 1999. The MDTE has
approved rate adjustments effective January 1, 2001, but it has
not yet ruled on the reconciliation component of the filings.
Management is unable to determine the outcome of the MDTE
proceedings. However, if an unfavorable outcome were to occur,
there could be a material adverse impact on Boston Edison's
consolidated financial position, results of operations and cash
flows in the near term.
In addition to the annual rate filings referenced above, Boston
Edison also made separate filings with the MDTE concerning
charges for standard offer and default service. In December
2000, the MDTE approved an increase of 1.321 cents per kWh in
Boston Edison's standard offer service rates for 2001 based on a
fuel adjustment formula contained in its standard offer tariffs
that reflects the prices of natural gas and oil. The MDTE has
ruled that these fuel adjustments are not required to meet the
15% rate reduction requirement under the Restructuring Act. The
MDTE will re-examine these rates in July 2001.
In December 2000, the MDTE approved market-based default service
rates for the period January 1, 2001 through June 30, 2001.
These and future prices for default service are based upon market
solicitations for power supply for default service consistent
with provisions of the Restructuring Act and MDTE orders.
Long-Term Power Purchase Contracts
NSTAR Electric has existing long-term power purchase contracts.
These long-term contracts are expected to supply approximately
90%-95% of its standard offer service obligations. NSTAR
Electric has entered into six-month and shorter-term agreements
to meet the remaining standard offer service obligation and
continues to evaluate further proposals. In November 2000, NSTAR
Electric entered into power purchase agreements to meet its
entire default service supply obligation for the period January
through June of 2001. In addition, in May 2001, NSTAR Electric
entered into purchased power agreements to meet the default
service obligation for the remainder of 2001. NSTAR Electric
expects to continue to make periodic market solicitations for
default service power supply consistent with provisions of the
Restructuring Act and MDTE orders. The cost of providing
standard offer and default service, which includes purchased
power costs, is recovered from customers on a fully reconciling
basis.
Results of Operations - Three Months Ended March 31, 2001 vs.
Three Months Ended March 31, 2000
Net income was $23.7 million for the three months ended March 31,
2001 compared to $16.5 million for the same period in 2000, a
43.6% increase.
The results of operations for the quarter are not indicative of
the results which may be expected for the entire year due to the
seasonality of kilowatt-hour (kWh) sales and revenues. Refer to
Note B to the Condensed Consolidated Financial Statements.
Operating revenues
Operating revenues increased 23.8% during the first quarter of
2001 as follows:
(in thousands)
Retail electric revenues $ 82,051
Wholesale revenues 5,349
Other revenues 2,319
Increase in operating revenues $ 89,719
=========
Retail revenues were $424.7 million in 2001 compared to $342.6
million in 2000, an increase of $82.1 million, or 24%. The
change in retail revenues includes higher rates implemented in
January 2001 for standard offer and default services ($76.6
million), a 0.6% increase in retail kilowatt-hour (kWh) electric
sales, higher transmission revenues ($5.6 million), the absence
in the current quarter of a $23.4 million refund to customers and
the recognition of incentive revenue entitlements for
successfully lowering transition charges ($5.5 million). These
increases in revenue were partially offset by a $23.5 million
decline in transition recovery. Boston Edison recognized revenue
for earned mitigation incentives for the years 1998 through
September 2000 per the transition charge true-up filed with the
MDTE in November 2000. Boston Edison will continue to earn
mitigation incentive revenue as it lowers its transition charge
through 2009. The revenues related to standard offer and default
services are fully reconciled to the costs incurred and have no
impact on net income.
Wholesale electric revenues were $23.5 million in 2001 compared
to $18.2 million in 2000, an increase of $5.3 million, or 29.1%.
This increase in wholesale revenues primarily reflects increased
kWh sales of 8.7% and the recovery of higher purchased power
costs.
Other revenues were $17.9 million in 2001 compared to $15.6
million in 2000, an increase of $2.3 million, or 14.7%. This
change reflects higher transmission revenues due to a
transmission rate increase effective January 2001.
Operating expenses
Purchased power costs was $276.8 million in 2001 compared to
$194.6 million in 2000, an increase of $82.2 million, or 42%.
The increase reflects higher purchased power requirements due to
an 8.7% increase in wholesale sales and higher purchased power
costs that reflect the prices of natural gas and oil. Boston
Edison adjusts its electric rates to collect the costs related to
energy supply from customers on a fully reconciling basis. Due
to the rate adjustment mechanisms, changes in the amount of
energy supply expense have no impact on earnings.
Operations and maintenance expense was $51.5 million in 2001
compared to $56.4 million in 2000, a decrease of $4.9 million, or
8.7%. This decrease reflects lower expenses primarily resulting
from merger-related operating efficiencies, offset partially by
the impact of storm-related expenses incurred in the current
period.
Depreciation and amortization expense was $42.3 million in 2001
compared to $41.5 million in 2000, an increase of $0.8 million,
or 1.9%. The increase reflects a slightly higher level of
depreciable plant in service.
Demand side management (DSM) and renewable energy programs
expense was $13.8 million in 2001 compared to $13.7 million in
2000, an increase of $0.1 million, or 1%. This increase is
primarily due to increased spending levels for programs. In
accordance with legislative and regulatory directives, these
costs are collected from customers on a fully reconciling basis.
Therefore, the increase has no impact on earnings.
Property and other taxes were $18.1 million in 2001 compared to
$16.8 million in 2000, an increase of $1.3 million, or 7.7%. The
increase is due to the inclusion of Plymouth property taxes of
$2.4 million that, in prior periods, was included in purchased
power expenses (related to the previously-owned Pilgrim
generating unit), pursuant to an agreement with the purchaser
that provides Boston Edison with purchased power from the Pilgrim
unit. This increase was partially offset by lower property taxes
paid to the City of Boston of $1.4 million.
Income taxes from operations were $16.4 million in 2001 compared
to $11.5 million in 2000, an increase of $4.9 million, or 42.6%.
This increase reflects higher pretax operating income in 2001.
Interest charges
Interest on long-term debt and transition property securitization
certificates was $22.6 million in 2001 compared to $26.3 million
in 2000, a decrease of $3.7 million, or 14.1%. Approximately
$1.1 million of the decrease is related to securitization
certificate interest reflecting the scheduled retirement of this
debt. The decrease in interest on long-term debt is primarily
the result of a reduction of approximately $2.7 million due to
the following retirements: $65 million of 6.8% debentures, $34
million of 9.875% debentures and $100 million of 6.05% debentures
during the third quarter of 2000.
Other interest charges were $2.4 million in 2001 compared to $0.7
million in 2000, an increase of $1.7 million. The increase
reflects interest associated with the reconciliation to the 1998
and 1999 transition charge true-up filings with the MDTE in
November 2000.
New Accounting Principles
As of January 1, 2001, Boston Edison adopted the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133), as amended by Statements of
Financial Accounting Standards No. 137 and 138, and collectively
referred to as SFAS 133. SFAS 133 established accounting and
reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in contracts
possibly including fixed-price fuel supply and power contracts)
be recorded on the Consolidated Balance Sheets as either an asset
or liability measured at its fair value.
The impact of this adoption has been assessed by the management
of the Company. As part of this assessment, the Company formed
an implementation team in 2000 consisting of key individuals from
various operational and financial areas of the organization. The
primary role of this team was to inventory and determine the
impact of potential contractual arrangements for SFAS 133
application. The implementation team has performed extensive
reviews of critical operating areas of the Company and has
documented its procedures in applying the requirements of SFAS
133 to Boston Edison's contractual arrangements in effect on
January 1, 2001. Based on Boston Edison's assessment to date,
the adoption of SFAS 133 has not had a material adverse effect on
its results of operations, cash flows, or financial position.
Safe harbor cautionary statement
Management occasionally makes forward-looking statements such as
forecasts and projections of expected future performance or
statements of its plans and objectives. These forward-looking
statements may be contained in filings with the Securities and
Exchange Commission (SEC), press releases and oral statements.
Actual results could potentially differ materially from these
statements. Therefore, no assurances can be given that the
outcomes stated in such forward-looking statements and estimates
will be achieved.
The preceding sections include certain forward-looking statements
about operating results and environmental and legal issues.
The impact of continued cost control procedures on operating
results could differ from current expectations. The effects of
changes in economic conditions, tax rates, interest rates,
technology and the prices and availability of operating supplies
could materially affect the projected operating results.
The impacts of various environmental, legal issues, and
regulatory matters could differ from current expectations. New
regulations or changes to existing regulations could impose
additional operating requirements or liabilities other than
expected. The effects of changes in specific hazardous waste
site conditions and cleanup technology could affect estimated
cleanup liabilities. The impacts of changes in available
information and circumstances regarding legal issues could affect
estimated litigation costs.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
There have been no material changes since year-end.
Part II - Other Information
Item 5. Other Information
The following additional information is furnished in connection
with the Registration Statements on Form S-3 of the Registrant
(File Nos. 33-57840 and 333-55890), filed with the Securities and
Exchange Commission on February 3, 1993 and February 20, 2001,
respectively.
Ratio of earnings to fixed charges and ratio of earnings to fixed
charges and preferred stock dividend requirements:
Twelve months ended March 31, 2001:
Ratio of earnings to fixed charges 3.03
Ratio of earnings to fixed charges and
preferred stock dividend requirements 2.81
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits filed herewith
Exhibit 4 - Instruments defining the rights of security
holders, including indentures
Management agrees to furnish to the
Securities and Exchange Commission, upon
request, a copy of any agreements or
instruments defining the rights of holders of
any long-term debt whose authorization does
not exceed 10% of total assets
Exhibit 12 - Computation of ratio of earnings to fixed
charges
12.1 - Computation of ratio of earnings to fixed
charges for the twelve months ended March 31,
2001
12.2 - Computation of ratio of earnings to fixed
charges and preferred stock dividend
requirements for the twelve months ended
March 31, 2001
Exhibit 15 - Letter re unaudited interim financial
information
15.1 - Report of Independent Accountants
Exhibit 99 - Additional exhibits
99.1 - Letter of Independent Accountants
Form S-3 Registration Statements filed by
Boston Edison Company on February 3, 1993
(File No. 33-57840) and February 20, 2001
(File No. 333-55890).
b) No Form 8-K was filed during the first quarter of 2001.
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned there unto duly authorized.
BOSTON EDISON COMPANY
(Registrant)
Date: May 15, 2001 /s/ Robert J. Weafer,Jr.
Robert J. Weafer, Jr.
Vice President,
Controller and Chief
Accounting Officer