SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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) March 25, 1998
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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 of (I.R.S. Employer
incorporation or organization) Identification No.)
SELDEN STREET, BERLIN, CONNECTICUT 06037-1616
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(Address of principal executive offices) (Zip Code)
(860) 665-5000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
Item 3. Legal Proceeding
On April 3, 1998, in connection with litigation commenced against
Northeast Utilities (NU) and certain of its officers and trustees in August
1997, Massachusetts Municipal Wholesale Electric Company (MMWEC), a joint
owner of the Millstone 3 nuclear unit in Waterford, Connecticut, filed a
motion seeking a lien on NU's common ownership interest in two of its
Massachusetts subsidiaries, Western Massachusetts Electric Company (WMECO)
and Holyoke Water and Power Company. A hearing on this motion is scheduled
for April 28, 1998, and a final decision could be issued by April 30, 1998.
If MMWEC's request for such a lien is granted, it could give rise to defaults
and/or cross defaults under the "negative pledge" clauses in numerous
financing agreements to which NU and certain of its subsidiaries are parties.
NU intends to oppose the motion vigorously.
For more information regarding this matter, see "Item 3. Legal
Proceedings" in NU's 1997 Form 10-K.
Item 5. Other Events
1. Connecticut Rate Matters - Millstone Restart Schedules
The Connecticut Department of Public Utility Control (DPUC) held a
hearing on April 1, 1998 to review the status of the restart schedules for
the Millstone 3 and Millstone 2 nuclear units. The hearing was held in
connection with the DPUC's ongoing proceeding to determine whether to remove
one or both of the units from the rate base of The Connecticut Light and
Power Company (CL&P) and the impact this would have on CL&P's financial
condition. Both of the units have been out of service since the first
quarter of 1996.
CL&P indicated at the hearing that several significant compliance
filings had recently been made with the Nuclear Regulatory Commission (NRC)
and that it anticipates that the NRC will begin an Operational Safety Team
Inspection of Millstone 3 in mid-April. CL&P also indicated that the NRC
Commissioners will meet in May to consider the readiness of Millstone 3 for
restart and that the NRC Commissioners' vote on restart of Millstone 3 would
likely take place within two weeks following the meeting. The restart effort
for Millstone 2 is approximately three to four months behind Millstone 3. The
hearing is scheduled to resume on April 9, 1998 and the DPUC is scheduled to
issue its draft decision and final decision on April 20, 1998 and April 29,
1998, respectively.
2. CL&P's Financial Condition
During the hearings in the DPUC proceeding discussed above, CL&P also
indicated that the removal of Millstone 2 and Millstone 3 from rate base
could result in a reduction of CL&P's revenues of approximately $4 million
and $14 million, respectively, per month and would create additional
pressures on CL&P's ability to meet certain financial covenants in its
existing credit agreements. CL&P indicated that, based on preliminary
results, CL&P was expected to meet such covenants for the first quarter of
1998 and was projected to meet them in the second quarter as well, assuming
normal weather conditions, forecasted maintenance expenditures and Millstone
3 and Millstone 2 remaining in rate base. If CL&P breached these covenants,
the creditors would have a number of options, including causing the
acceleration of the affected indebtedness, reducing CL&P's access to further
credit, seeking higher interest rates and fees, asking for additional
collateral and additional measures which CL&P cannot predict.
For more information regarding these matters, see "Item 1.
Business--Nuclear Plant Outages and Liquidity" and "--Rates," and "--Nuclear
Plant Performance and Regulatory Oversight" in NU's 1997 Form 10-K.
3. SEC Review of Financial Statements
In a March 25, 1998 letter, the Securities and Exchange Commission's
Division of Corporation Finance (SEC) questioned amounts recorded on NU's
balance sheets listed as "Nuclear compliance." These amounts are $63.2
million and $73.0 million in 1996 and 1997, respectively, and represent costs
associated with the current nuclear outages. The SEC's view is that
operating and personnel costs associated with nuclear outages and procedures
to be implemented at nuclear power facilities in response to regulatory
requirements should be expensed as incurred.
NU is responding to a request for information from the SEC to
demonstrate that the costs accrued do not represent these types of costs. NU
and its independent auditors, Arthur Andersen LLP, believe its present
accounting is required by and is in accordance with generally accepted
accounting principles.
Should the SEC disagree and require NU to eliminate the nuclear
compliance liability, NU would be required to restate its 1996 and 1997
financial statements. This would result in an increase to its consolidated
pre-tax net income in those years by approximately $63.2 million and $9.8
million, respectively.
At the subsidiary level:
CL&P reserved $50.5 million and $58.7 million in 1996 and 1997,
respectively, and the reversal of the reserve would increase its consolidated
pre-tax net income in those years by approximately $50.5 million and $8.2
million, respectively.
WMECO reserved $11.8 million and $13.8 million in 1996 and 1997,
respectively, and the reversal of the reserve would increase its consolidated
pre-tax net income in those years by approximately $11.8 million and $2.0
million, respectively.
As to NU, CL&P and WMECO, the amount of such reserves would not be
available to offset nuclear costs expected to be expended in 1998 and 1999.
Because certain covenants in their financing agreements are based
directly or indirectly on the amount of such companies' 1998 earnings,
restating financial statements in accordance with the SEC's letter would have
a negative effect on their respective abilities to meet these financial
covenants.
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 hereunto duly authorized.
THE CONNECTICUT LIGHT AND POWER COMPANY
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Registrant
Date April 6, 1998 By /s/John B. Keane
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John B. Keane
Vice President and Treasurer