SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-404
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THE CONNECTICUT LIGHT AND POWER COMPANY
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(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0303850
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
SELDEN STREET, BERLIN, CONNECTICUT 06037-1616
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(Address of principal executive offices) (Zip Code)
(203) 665-5000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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 July 29, 1994
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Common Shares, $10.00 par value 12,222,930 shares
THE CONNECTICUT LIGHT AND POWER COMPANY
TABLE OF CONTENTS
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Balance Sheets - June 30, 1994
and December 31, 1993 2
Statements of Income - Three and Six
Months Ended June 30, 1994 and 1993 4
Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
PART I. FINANCIAL INFORMATION
THE CONNECTICUT LIGHT AND POWER COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1994 1993
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(Thousands of Dollars)
ASSETS
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Utility Plant, at original cost:
Electric................................................ $ 6,002,962 $ 5,936,344
Less: Accumulated provision for depreciation......... 2,103,643 2,010,962
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3,899,319 3,925,382
Construction work in progress........................... 105,161 121,177
Nuclear fuel, net....................................... 161,097 156,878
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Total net utility plant............................. 4,165,577 4,203,437
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Other Property and Investments:
Nuclear decommissioning trusts, at market (Note 2)<F2>.. 164,038 147,657
Investments in regional nuclear generating
companies and subsidiary companies, at equity.......... 54,605 53,951
Other, at cost.......................................... 14,165 14,184
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232,808 215,792
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Current Assets:
Cash and special deposits............................... 604 2,283
Receivables, net........................................ 198,087 210,805
Accounts receivable from affiliated companies........... 4,101 29,687
Accrued utility revenues................................ 86,612 97,662
Fuel, materials, and supplies, at average cost.......... 64,014 60,247
Recoverable energy costs, net--current portion.......... 1,972 9,985
Prepayments and other................................... 32,492 33,697
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387,882 444,366
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Deferred Charges:
Regulatory asset--income taxes, net..................... 990,087 1,026,046
Deferred costs--nuclear plants.......................... 144,297 185,909
Unrecovered contract obligation--YAEC................... 77,919 84,526
Deferred conservation and load-management costs......... 107,755 111,442
Deferred DOE assessment................................. 37,033 39,279
Recoverable energy costs, net........................... 28,678 26,311
Unamortized debt expense................................ 8,453 8,971
Amortizable property investment......................... 4,983 6,228
Other................................................... 63,892 45,073
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1,463,097 1,533,785
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Total Assets........................................ $ 6,249,364 $ 6,397,380
============= =============
See accompanying notes to financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
BALANCE SHEETS
(Unaudited)
June 30, December 31,
1994 1993
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(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
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Capitalization:
Common stock--$10 par value. Authorized
24,500,000 shares; outstanding 12,222,930
shares............................................... $ 122,229 $ 122,229
Capital surplus, paid in.............................. 631,213 630,271
Retained earnings..................................... 767,051 750,719
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Total common stockholder's equity............ 1,520,493 1,503,219
Preferred stock not subject to mandatory
redemption........................................... 166,200 166,200
Preferred stock subject to mandatory redemption....... 230,000 230,000
Long-term debt........................................ 1,676,083 1,743,260
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Total capitalization......................... 3,592,776 3,642,679
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Obligations Under Capital Leases........................ 129,293 121,892
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Current Liabilities:
Notes payable to banks................................ 144,500 95,000
Notes payable to affiliated company................... 27,500 1,250
Commercial paper...................................... 69,500 -
Long-term debt and preferred stock--current
portion.............................................. 177,546 314,020
Obligations under capital leases--current
portion.............................................. 55,037 55,526
Accounts payable...................................... 74,691 117,858
Accounts payable to affiliated companies.............. 28,755 52,179
Accrued taxes......................................... 23,705 36,114
Accrued interest...................................... 28,734 29,669
Other................................................. 29,335 32,287
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659,303 733,903
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Deferred Credits:
Accumulated deferred income taxes..................... 1,559,096 1,575,965
Accumulated deferred investment tax credits........... 151,131 154,701
Deferred contract obligation--YAEC.................... 77,919 84,526
Deferred DOE obligation............................... 28,702 31,523
Other................................................. 51,144 52,191
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1,867,992 1,898,906
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Commitments and Contingencies (Note 4)<F4>
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Total Capitalization and Liabilities......... $ 6,249,364 $ 6,397,380
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See accompanying notes to financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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1994 1993 1994 1993
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(Thousands of Dollars)
Operating Revenues................................. $551,135 $559,894 $1,170,950 $1,187,028
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Operating Expenses:
Operation --
Fuel, purchased and net interchange power..... 137,249 161,729 288,378 359,170
Other......................................... 143,232 151,329 283,435 302,261
Maintenance...................................... 48,024 46,011 91,920 89,973
Depreciation..................................... 55,695 54,527 112,591 109,708
Amortization of regulatory assets, net........... 30,012 27,125 59,822 54,576
Federal and state income taxes................... 37,601 27,195 99,404 65,614
Taxes other than income taxes.................... 41,132 44,203 88,414 90,750
--------- --------- ----------- -----------
Total operating expenses................... 492,945 512,119 1,023,964 1,072,052
--------- --------- ----------- -----------
Operating Income................................... 58,190 47,775 146,986 114,976
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Other Income:
Deferred nuclear plants return--other funds...... 3,376 6,661 6,938 13,206
Equity in earnings of regional nuclear
generating companies........................... 1,940 1,403 3,651 2,834
Other, net....................................... 3,562 (9,711) 5,451 (9,598)
Income taxes--credit............................. 1,531 1,018 3,315 2,935
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Other income, net.......................... 10,409 (629) 19,355 9,377
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Income before interest charges............. 68,599 47,146 166,341 124,353
--------- --------- ----------- -----------
Interest Charges:
Interest on long-term debt....................... 29,395 32,554 60,416 68,310
Other interest................................... 2,020 4,485 2,256 5,996
Deferred nuclear plants return--borrowed funds... (1,978) (3,668) (4,083) (7,577)
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Interest charges, net...................... 29,437 33,371 58,589 66,729
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Income before cumulative effect of
accounting change................................ 39,162 13,775 107,752 57,624
Cumulative effect of accounting change............. - - - 47,747
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Net Income......................................... $ 39,162 $ 13,775 $ 107,752 $ 105,371
========= ========= =========== ===========
See accompanying notes to financial statements.
THE CONNECTICUT LIGHT and POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
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1994 1993
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(Thousands of Dollars)
Cash Flows From Operations:
Net Income ................................................. $ 107,752 $ 105,371
Adjusted for the following:
Depreciation ............................................. 112,591 109,708
Deferred income taxes and investment tax credits, net..... 12,124 (38,239)
Deferred nuclear plants return, net of amortization....... 40,346 26,866
Deferred energy costs, net of amortization................ 5,646 104,060
Deferred conservation and load-management costs,
net of amortization..................................... 3,687 (2,401)
Other sources of cash..................................... 8,927 65,064
Other uses of cash........................................ (28,901) (1,880)
Changes in working capital:
Receivables and accrued utility revenues................ 49,354 (31,290)
Fuel, materials, and supplies........................... (3,767) 6,035
Accounts payable........................................ (66,591) (23,088)
Accrued taxes........................................... (12,409) (40,528)
Other working capital (excludes cash)................... (2,682) (4,318)
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Net cash flows from operations................................ 226,077 275,360
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Cash Flows Used For Financing Activities:
Long-term debt.............................................. 395,000 -
Net increase in short-term debt............................. 145,250 58,260
Reacquisitions and retirements of long-term debt
and preferred stock....................................... (600,213) (174,307)
Cash dividends on preferred stock........................... (11,970) (14,783)
Cash dividends on common stock.............................. (79,450) (80,183)
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Net cash flows used for financing activities.................. (151,383) (211,013)
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Investment Activities:
Investment in plant:
Electric utility plant.................................... (70,129) (62,347)
Nuclear fuel.............................................. 7,684 112
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Net cash flows used for investments in plant................ (62,445) (62,235)
Other investment activities, net............................ (13,928) (12,650)
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Net cash flows used for investments........................... (76,373) (74,885)
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Net Decrease In Cash for the Period........................... (1,679) (10,538)
Cash and special deposits-beginning of period................. 2,283 12,104
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Cash and special deposits-end of period....................... $ 604 $ 1,566
=========== ===========
See accompanying notes to financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
<F1>1. General
The accompanying unaudited financial statements should be read in conjunction
with the Annual Report of The Connecticut Light and Power Company (the
company or CL&P) on Form 10-K for the year ended December 31, 1993 (1993 Form
10-K). In the opinion of the company, the accompanying financial statements
contain all adjustments necessary to present fairly the financial position as
of June 30, 1994, the results of operations for the three and six months
ended June 30, 1994 and 1993, and the statements of cash flows for the six
months ended June 30, 1994 and 1993. The results of operations for the three
and six months ended June 30, 1994 and 1993 are not necessarily indicative of
the results expected for a full year.
Certain amounts in the accompanying financial statements of the company for
the period ended June 30, 1993 have been reclassified to conform with the
June 30, 1994 presentation.
<F2>2. Changes in Accounting Principles
Statement of Financial Accounting Standards No. 115 (SFAS 115): In May 1993,
the Financial Accounting Standards Board issued SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." SFAS 115 addresses the
accounting and reporting for certain investments in debt and equity
securities, and expands the use of fair value accounting for these
securities. SFAS 115 is applicable to CL&P with respect to its investments
in nuclear decommissioning trusts.
SFAS 115 requires investments in decommissioning trusts to be presented at
fair value and was adopted by CL&P on a prospective basis in the first
quarter of 1994.
As a result of the adoption of SFAS 115, CL&P increased its investment in
nuclear decommissioning trusts by approximately $2.4 million as of June 30,
1994, with a corresponding offset to the accumulated provision for
depreciation. The $2.4 million increase represents cumulative gross
unrealized holding gains of $6.5 million offset by cumulative unrealized
holding losses of $4.1 million. There was no increase in funding of the
trusts, nor any impact on earnings as a result of the adoption of SFAS 115.
<F3>3. Capitalization
On June 1, 1994, CL&P issued $115 million of First and Refunding Mortgage
Bonds, 1994 Series C. The 1994 Series C Bonds bear interest at an annual
rate of 8-1/2 percent, and will mature on June 1, 2024.
The net proceeds from the issuance and sale of 1994 Series C Bonds, together
with the proceeds from the issuance of short-term debt, were used to retire
$60.6 million principal amount of the 9-1/2 percent Series RR Bonds
(Series RR), reacquired in open market purchases, redeem $14.2 million at par
of Series RR through sinking- and improvement-fund requirements; and retire
$40.3 million principal amount of 9-3/8 percent Series SS Bonds (Series SS),
reacquired in open market purchases.
On June 13 and June 15, 1994, CL&P extinguished its obligations with respect
to approximately $35 million principal amount of remaining obligations on
Series SS. CL&P extinguished its remaining obligations on Series SS by
depositing funds into an irrevocable trust. Therefore, under the terms of
the CL&P Bond Indenture, Series SS is no longer considered an outstanding
obligation of CL&P.
<F4>4. Commitments and Contingencies
Construction Program: For information regarding CL&P's construction program,
see the Notes to Financial Statements in CL&P's 1993 Form 10-K.
Nuclear Performance: On July 6, 1994, the Connecticut Department of Public
Utility Control (DPUC) terminated its investigation of the Millstone 2 steam
generator replacement project. The DPUC ruled that CL&P had acted prudently
with respect to costs associated with the project. For further information
related to Nuclear Performance, refer to Management's Discussion and Analysis
of Financial Condition and Results of Operations in this Form 10-Q, CL&P's
March 31, 1994 Form 10-Q, and the Notes to Financial Statements in CL&P's
1993 Form 10-K.
Environmental Matters: For information regarding Environmental Matters, see
Part II, Item 5-Other Information in this Form 10-Q and the Notes to
Financial Statements in CL&P's 1993 Form 10-K.
Nuclear Insurance Contingencies: For information regarding Nuclear Insurance
Contingencies, see the Notes to Financial Statements in CL&P's 1993 Form 10-
K.
Financing Arrangements for the Regional Nuclear Generating Companies: For
information regarding Financing Arrangements for the Regional Nuclear
Generating Companies, see the Notes to Financial Statements in CL&P's 1993
Form 10-K.
Purchased Power Arrangements: For information regarding Purchased Power
Arrangements, see the Notes to Financial Statements in CL&P's 1993 Form 10-K.
Hydro-Quebec: For information regarding Hydro-Quebec, see the Notes to
Financial Statements in CL&P's 1993 Form 10-K.
Great Bay Power Corporation (GBPC): For information regarding GBPC, see
Part II, Item 1 - Legal Proceedings in this Form 10-Q and the Notes to
Financial Statements in CL&P's 1993 Form 10-K.
Property Taxes: For information regarding Property Taxes, see the Notes to
Financial Statements in CL&P's 1993 Form 10-K.
<F5>5. Subsequent Event
On August 2, 1994, the Federal Energy Regulatory Commission (FERC) approved a
Bulk Power Supply Service Contract (the contract) between CL&P and Western
Massachusetts Electric Company (WMECO), a wholly- owned subsidiary of NU, and
the Town of Madison Department of Electric Works (MEW), a former wholesale
customer of Central Maine Power Company (CMP). This contract will commence
on September 1, 1994 and is expected to generate revenues aggregating
approximately $140 million to CL&P and WMECO over the nine year and four
month contract term.
The FERC has also concurrently approved a settlement agreement between CL&P
and WMECO, MEW, and CMP. This settlement agreement resolves all outstanding
issues between the parties related to the contract. As part of the
settlement agreement, CL&P will make settlement payments to CMP of
approximately $6.97 million over a seven year period.
THE CONNECTICUT LIGHT AND POWER COMPANY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This section contains management's assessment of The Connecticut Light and
Power Company's (CL&P or the company) financial condition and the principal
factors having an impact on the results of operations. The company is a
wholly-owned subsidiary of Northeast Utilities (NU). This discussion should
be read in conjunction with the company's financial statements and footnotes
and the 1993 Form 10-K and the First Quarter 1994 Form 10-Q.
FINANCIAL CONDITION
Overview
The company's net income increased to approximately $108 million for the six
months ended June 30, 1994, from approximately $105 million for the same
period in 1993. The 1993 earnings reflect the cumulative effect of a change
in the method of accounting for Connecticut municipal property tax expense
adopted by the company in the first quarter of 1993. This change resulted in
a one-time contribution to 1993 net income of approximately $48 million. Net
income increased to approximately $39 million for three months ended June 30,
1994, from approximately $14 million for the same period in 1993 .
The increases in net income from 1993 for the three- and six-month periods,
before the effect of the one-time accounting change, are primarily
attributable to higher retail sales resulting from a colder winter and an
unusually hot June in 1994 and an improvement in the Connecticut economy,
increased revenues from the July 1993 retail rate increase, lower operation
expenses, lower interest costs and disallowances in 1993 resulting from the
company's rate decision. These increases were partially offset by lower 1994
revenues from sales to other utilities.
Regulatory Matters
The ability of a retail customer to select an electricity supplier other than
a local electric company and then use the local electric utility to transmit
the power to the customer's site is known as "retail wheeling." While
wholesale wheeling is mandated by the Energy Policy Act of 1992 under certain
circumstances, retail wheeling is generally not required.
On August 5, 1994, The Connecticut Department of Public Utility Control
(DPUC) issued a draft decision in its investigation into whether retail
wheeling should be permitted in the state. The DPUC concluded that retail
wheeling is not now in the best interest of Connecticut and should not begin
at least until the state's utilities need more generating capacity, which for
the company is in 2007. The draft decision also recognizes that
Connecticut's utilities must aggressively plan for increasing competition
through continued cost containment and creative rate offerings. The DPUC is
scheduled to issue a final decision on September 9, 1994.
The company has a mechanism that has been in operation since 1979 that was
designed to recover or to refund certain fuel costs if the nuclear units do
not operate at a predetermined capacity factor (the Generation Utilization
Adjustment Clause (GUAC)). In January 1994, the DPUC issued a decision
ordering the company not to include a GUAC amount in customers' bills through
August 1994. The DPUC found that the company overrecovered its fuel costs
during the 1992-1993 GUAC period and offset a portion of the amount of the
overrecovery against the unrecovered GUAC balance. The effect of the order
was a disallowance of approximately $8 million which was recognized in 1993.
The DPUC further ordered that any GUAC deferred charges subsequent to July
1993 will be offset by any fuel overrecoveries. The DPUC's decision creates
some uncertainty about the future operation of the GUAC. The company has
appealed the decision in court. For the subsequent GUAC period (August 1993-
July 1994), there was a balance of approximately $28 million for replacement
power costs deferred under the GUAC as of June 30, 1994. The company has
established a reserve for $8 million in expectation of a similar DPUC
decision for the 1993-1994 GUAC period.
In July 1994 the DPUC terminated its investigation of the 1992 Millstone 2
generator replacement project and ruled that there was no evidence of
imprudence on the part of the company in the failure of the original
generators or in the replacement of these generators.
In June 1994, the DPUC approved the company conservation adjustment mechanism
settlement which was proposed in December 1993. The settlement approved 1994
conservation and load management (C&LM) expenditures of $39 million,
reduction in the recovery period for new expenditures from 8 to 3.85 years
and other changes in program design, performance incentives, and cost
recovery. An additional 1994 C&LM expenditure of $1 million for state-
mandated programs for state buildings was also approved. Unrecovered C&LM
costs at June 30, 1994 were approximately $108 million. These costs are
being recovered over periods ranging from 3.85 to 8 years.
Nuclear Performance
The composite capacity factor of the five nuclear generating units that the
NU system operates (including the Connecticut Yankee nuclear unit (CY)) was
61.0 percent for the six months ended June 30, 1994, as compared with 86.6
percent for 1993. The lower 1994 capacity factor was primarily the result of
extended refueling and maintenance outages for Millstone 1 and Seabrook. CY,
Seabrook and Millstone 2 were also out of service for varying lenghts of time
in the first six months of 1994 because of some unexpected technical and
operating difficulties.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations decreased approximately $49 million for the
first six months of 1994, as compared with the same period in 1993, primarily
due to decreased revenues from replacement power costs under the GUAC. Cash
used for financing activities was approximately $60 million lower in 1994, as
compared with 1993, primarily due to an increase in short-term debt,
partially offset by higher reacquisitions and retirements of long-term debt
due to refinancing activities. Cash used for investments was approximately
$1 million higher in 1994.
On June 1, 1994, the company issued $115 million of First Mortgage 1994
Series C Bonds at an annual interest rate of 8-1/2 percent. The Bonds will
mature on June 1, 2024. Proceeds from this issue, together with proceeds
from short-term debt, provided for the retirement of $150 million of
outstanding First Mortgage Bonds with interest rates of 9-3/8 and 9-1/2
percent. Savings from the refinancings are estimated to be approximately $2
million per year in reduced interest costs.
The company's construction program expenditures amounted to approximately $70
million for the first six months of 1994, as compared to approximately $62
million during the same period in 1993. The higher construction expenditures
resulted primarily from the replacement of the condenser and turbine rotor
and other improvements during the Millstone I outage.
RESULTS OF OPERATIONS
Comparison of the Second Quarter of 1994 with the Second Quarter of
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1993
- ----
Operating revenues decreased approximately $9 million in the second quarter
of 1994, as compared with 1993. The components of the change in operating
revenues are as follows:
Changes in Operating Revenues Increase/(Decrease)
- ----------------------------- -------------------
(Millions of Dollars)
Regulatory decisions $ 8
Fuel and purchased power cost recoveries (23)
Sales volume 19
Other revenues (13)
----
Total revenue change $ (9)
====
Revenues related to regulatory decisions increased primarily because of a
retail rate increase in July 1993, partially offset by lower 1994
conservation revenues. Fuel and purchased power cost recoveries decreased
primarily due to lower GUAC recoveries. Sales volume increased primarily as
a result of higher retail sales due to an unusually hot June in 1994. Other
revenues decreased primarily because of lower 1994 capacity sales to other
utilities.
Fuel, purchased, and net interchange power expense decreased approximately
$25 million in the second quarter of 1994, as compared with 1993 primarily
because of the timing in the recognition of fuel expenses under the
provisions of the company's GUAC mechanism, partially offset by a higher
level of energy purchases from other utilities.
Other operation expenses and maintenance expenses decreased approximately $6
million in the second quarter of 1994, as compared with 1993, primarily due
to lower 1994 payroll and benefits costs and lower Yankee capacity costs,
partially offset by higher 1994 costs associated with the operation and
maintenance activities of the nuclear units.
Amortization of regulatory assets, net increased approximately $3 million in
the second quarter of 1994, as compared with 1993 primarily because of the
amortization in 1994 of costs paid by the company to the developers of two
wood-to-energy plants beginning in July 1993 and higher 1994 amortization of
Millstone 3 and Seabrook 1 phase-in costs, partially offset by lower 1994
expenses associated with the recovery of Hydro-Quebec support payments.
Deferred nuclear plants return decreased $5 million in the second quarter of
1994, as compared with 1993, primarily because additional Millstone 3
investment was phased into rates on January 1, 1994.
Other, net income increased approximately $13 million in the second quarter
of 1994, as compared with 1993, primarily because of the allocation in 1993
to customers of approximately $10 million of the property tax accounting
change as a result of the CL&P rate decision.
Interest charges decreased approximately $6 million in the second quarter of
1994, as compared with 1993, primarily because of lower average interest
rates as a result of the company's refinancing activities and interest
accrued in 1993 associated with a potential Connecticut sales tax assessment.
Federal and state income taxes increased approximately $10 million in the
second quarter of 1994, as compared with 1993, primarily because of higher
book taxable income.
Comparison of the First Six Months of 1994 with the First Six Months
- --------------------------------------------------------------------
of 1993
- -------
Operating revenues decreased approximately $16 million in the first six
months of 1994, as compared with 1993. The components of the change in
operating revenues are as follows:
Changes in Operating Revenues Increase/(Decrease)
- ----------------------------- -------------------
(Millions of Dollars)
Regulatory decisions $ 18
Fuel and purchased power cost recoveries (39)
Sales volume 37
Other revenues (32)
----
Total revenue change $(16)
====
Revenues related to regulatory decisions increased primarily because of a
retail rate increase in July 1993, partially offset by lower 1994
conservation revenues. Fuel and purchased power cost recoveries decreased
primarily due to lower GUAC recoveries. Sales volume increased primarily as
a result of higher retail sales from a colder winter and an unusually hot
June in 1994 and an improvement in the Connecticut economy. Retail sales
increased 5.1 percent for the first six months of 1994, as compared with
1993. Other revenues decreased primarily because of lower 1994 capacity
sales to other utilities.
Fuel, purchased, and net interchange power expense decreased approximately
$71 million in the first six months of 1994, as compared with 1993, primarily
because of previously deferred replacement power costs that were determined
to be not recoverable in 1993 as a result of regulatory reviews in
Connecticut, and the timing in the recognition of fuel expenses under the
provisions of the company's GUAC mechanism, partially offset by a higher
level of energy purchases from other utilities.
Other operation expenses and maintenance expenses decreased approximately $17
million in the first six months of 1994, as compared with 1993, primarily due
to lower fossil costs, lower 1994 payroll and benefit costs, the expensing of
obsolete inventory in 1993 and lower capacity charges, partially offset by
higher 1994 costs associated with the operation and maintenance activities of
the nuclear units.
Amortization of regulatory assets, net increased approximately $5 million in
the first six months of 1994, as compared with 1993, primarily because of the
amortization in 1994 of costs paid by the company to the developers of two
wood-to-energy plants beginning in July 1993 and higher 1994 amortization of
Millstone 3 and Seabrook 1 phase-in costs, partially offset by lower 1994
expenses associated with the recovery of Hydro-Quebec support payments.
Deferred nuclear plants return decreased approximately $10 million in the
first six months of 1994, as compared with 1993, primarily because additional
Millstone 3 investment was phased into rates on January 1, 1994.
Other, net income increased $15 million in the first six months of 1994, as
compared with 1993, primarily because of the allocation in 1993 to customers
of approximately $10 million of the property tax accounting change as a
result of the CL&P rate decision and the amortization of this amount over the
period July 1993 through June 1994.
Interest charges decreased approximately $12 million in the first six months
of 1994, as compared with 1993, primarily because of lower average interest
rates as a result of the company's refinancing activities and interest
accrued in 1993 associated with a potential Connecticut sales tax assessment.
Federal and state income taxes increased approximately $33 million in the
first six months of 1994, as compared with 1993, primarily because of higher
book taxable income.
The cumulative effect of the accounting change of approximately $48 million
in 1993 represents the one-time change in the method of accounting for
Connecticut municipal property tax expense recognized in the first quarter of
1993.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
1. On June 16, 1993, the DPUC issued a decision (Decision) in CL&P's
application for rate relief, approving a multi-year plan of annual rate
increases in varying amounts over the years 1993 to 1995.
On May 9, 1994, the City of Hartford's (City) appeal from the Decision was
dismissed by the Hartford Superior Court on jurisdictional grounds, and the
City appealed that dismissal to the Connecticut Appellate Court. The Supreme
Court of Connecticut transferred the jurisdictional issue to itself on
August 2, 1994. The increase scheduled for July 1, 1994 was implemented by
CL&P on that date.
For additional information on this matter, see CL&P's Annual Report on Form
10-K for the year ended December 31, 1993 (1993 Form 10-K), under the caption
"Item 1. Business - Rates - Connecticut Retail Rates - 1992-1993 CL&P Retail
Rate Case."
2. CL&P has a mechanism that has been in operation since 1979 designed to
recover or to refund certain fuel costs if the nuclear units do not operate
at a predetermined capacity factor (the Generation Utilization Adjustment
Clause or GUAC). In January 1994, the DPUC issued a decision ordering CL&P
not to include a GUAC amount in customers' bills through August 1994. The
DPUC found that CL&P overrecovered its fuel costs during the 1992-1993 GUAC
period and offset the amount of the overrecovery against the unrecovered GUAC
balance. The effect of the order was a disallowance of $7.9 million. The
DPUC further ordered that any GUAC deferred charges subsequent to July 1993
will be offset by any fuel overrecoveries. On March 4, 1994, CL&P appealed
this decision to Hartford Superior Court. Because the DPUC's decision
creates some uncertainty about the future operation of the GUAC, CL&P also
requested further clarification of the decision from the DPUC, which was
denied because of the pending court appeal.
For additional information on this matter, see the 1993 Form 10-K, under the
caption "Item 1. Business - CL&P Adjustment Clauses."
3. CL&P's 1993 Form 10-K incorrectly reported that Northeast Nuclear Energy
Company (NNECO), a wholly owned subsidiary of NU that acts as agent for the
NU System and other utilities in operating the Millstone generating units,
had been informed by the Nuclear Regulatory Commission (NRC) that the agency
did not plan to take enforcement action against NNECO with respect to
apparent violations of NRC requirements arising from 1989 events involving
the operability of a safety related system at Millstone Unit 1. This
information, contained in correspondence from the NRC dated March 17, 1994,
pertained to another matter involving two employees who raised safety
concerns and was incorrectly reported in the 1993 Form 10-K as relating to
the 1989 Millstone Unit 1 operability event. On July 13, 1994, NNECO was
notified that the NRC had issued a Notice of Violation (NOV) and proposed to
assess civil penalties in the amount of $220,000 for this matter. The first
violation, for which a civil penalty of $120,000 was assessed, concerned the
apparent untimeliness of the operability assessment. The second violation,
and its associated civil penalty of $100,000, concerned discriminatory
treatment of an employee involved in the operability determination by a
manager at the plant. In addition, the NRC also requested that NNECO provide
information which will be used to determine whether the manager should be
involved in NRC licensed activities. Unless the response time is extended by
the NRC, NNECO has 30 days to respond to the NOV and information request.
4. Great Bay Power Corporation (GBPC), a joint owner of Seabrook along with
CL&P and North Atlantic Energy Corporation (NAEC), a wholly owned subsidiary
of NU, and various other, non-System entities, had expected to consummate its
reorganization plan, emerge from bankruptcy and repay CL&P for all advances
by June 30, 1994. As of July 29, 1994, $6.9 million of advances were
outstanding from CL&P. A financing agreement was entered into on April 7,
1994, under which various investors would invest $35 million in the
reorganized GBPC in exchange for 60% of GBPC's common stock. Closing of the
financing agreement was scheduled to occur on June 15, 1994; however, delays
in the completion of Seabrook's refueling outage postponed the closing date,
and the investors engaged a consultant to determine if the events that
extended the outage discharged the investors from their commitment. The NRC
has extended to August 31, 1994 the deadline for the transfer of control of
GBPC's ownership share of Seabrook. The prospective investors and GBPC are
currently negotiating a modification of the April 7, 1994 financing agreement
which will require further Bankruptcy Court and regulatory approvals, if
agreed upon by the investors and GBPC. If the Bankruptcy Court approves the
modifications and the necessary regulatory approvals are obtained, the
company believes that the financing can be completed by October 31, 1994, if
other events do not adversely affect GBPC's financial condition prior to
closing.
For additional information on this matter, see the 1993 Form 10-K, under the
caption "Item 1. Business - Electric Operations - Nuclear Generation -
Seabrook."
5. On September 30, 1993, 29 participants in the New England Power Pool
(NEPOOL) (including the NU system operating companies) filed the 30th
Amendment to the NEPOOL Agreement (Amendment) at the Federal Energy
Regulatory Commission (FERC). Massachusetts Municipal Wholesale Electric
Company and several other electric utilities moved to intervene and protest
the Amendment, claiming that it discriminates against transmission dependent
utilities.
On April 11, 1994, the FERC issued an order setting the Amendment for a
"paper hearing" in May 1994, which date was subsequently extended to August
9, 1994. The order stated that FERC intends to address whether the Amendment
eliminates transmission access and the discounted rates for pool-planned
units. FERC also broadened the proceeding to consider whether NEPOOL's
activities in this are consistent with the
standards of the Federal Power Act. On July 25, 1994 the sponsors of the
Amendment and the protesting municipal utilities jointly filed a motion
requesting that FERC suspend the procedural schedule because they had reached
an understanding on the terms of a settlement that would resolve the FERC
proceeding, including the withdrawal of the Amendment. On August 3, 1994,
FERC granted this motion and suspended the procedural schedule for a period
of 45 days.
For additional information on this matter, see CL&P's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994 under the caption "Part II.
Other Information - Item 1 - Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of CL&P held on June 13, 1994,
stockholders voted to fix the number of directors for the ensuing year at
ten. The vote fixing the number of directors at ten was 12,222,930 shares in
favor, representing 100 percent of the issued and outstanding shares of
common stock of CL&P.
At the Annual Meeting, the following ten directors were elected, each by a
vote of 12,222,930 shares in favor, to serve on the Board of Directors for
the ensuing year: Robert G. Abair, Robert E. Busch, John P. Cagnetta,
William B. Ellis, Bernard M. Fox, William T. Frain, Jr., Cheryl W. Grise,
John B. Keane, Frank R. Locke, Hugh C. MacKenzie, and John F. Opeka.
Item 5. Other Information
1. The DPUC and DPU has joined with the Connecticut and Massachusetts
Attorneys General and eighteen other states in a lawsuit filed in federal
court against the Department of Energy (DOE) seeking a declaratory judgment
that DOE has a statutory obligation to take high-level nuclear waste from
utilities in 1998 and to establish judicially administered milestones to
enforce that obligation. NU and its affiliates have not joined a companion
lawsuit filed by fourteen utilities seeking similar relief.
2. As of July 1, 1994, the Barnwell, South Carolina low-level radioactive
waste (LLRW) facility is no longer available for the disposal of LLRW from
states situated outside its compact region. The NU System is currently
implementing plans for the temporary on-site storage of LLRW generated at its
nuclear facilities. The costs associated with the temporary on-site storage
of LLRW are not material. The NU System has plans that will allow for the
storage of LLRW until permanent storage becomes available.
For additional information on this matter, see the 1993 Form 10-K, under the
caption "Item 1. Business - Electric Operations - Nuclear Generation - Low-
Level Radioactive Wastes."
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during this reporting period.
SIGNATURES
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 hereunto duly authorized.
THE CONNECTICUT LIGHT AND POWER COMPANY
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Registrant
Date August 10, 1994 By /s/ Bernard M. Fox
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Bernard M. Fox
Vice Chairman and Director
Date August 10, 1994 By /s/ John W. Noyes
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John W. Noyes
Vice President and
Controller