SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission Registrants, State of Incorporation I.R.S. Employer
File Number Address; and Telephone Number Identification
No.
1-5366 EASTERN UTILITIES ASSOCIATES 04-1271872
(A Massachusetts voluntary association)
One Liberty Square
Boston, Massachusetts 02109
Telephone (617) 357-9590
0-2602 Blackstone Valley Electric Company 05-0108587
(A Rhode Island Corporation)
Washington Highway
Lincoln, Rhode Island 02865
Telephone (401) 333-1400
0-8480 Eastern Edison Company 04-1123095
(A Massachusetts Corporation)
110 Mulberry Street
Brockton, Massachusetts 02403
Telephone (508) 580-1213
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Registrant Title of Each Class on which registered
Eastern Utilities Common Shares, New York Stock Exchange
Associates par value $5 per share Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Each Class
Blackstone Valley 4.25% Non-Redeemable Preferred Stock,
Electric Company $100 Par Value
5.60% Non-Redeemable Preferred Stock,
$100 Par Value
Eastern Edison 6.625% Redeemable Preferred Stock,
Company $100 Par Value
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrants. As of March 17, 1997:
Eastern Utilities Associates Common Shares, $5 par value - $370,402,446
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Eastern Utilities Associates Common Shares
Outstanding at March 17, 1997: 20,435,997
Blackstone Valley Electric Company Common Shares
Outstanding at March 17, 1997: 184,062
Eastern Edison Company Common Shares
Outstanding at March 17, 1997: 2,891,357
Portions of the Annual Reports to Shareholders of Eastern Utilities
Associates, Blackstone Valley Electric Company, and Eastern Edison Company for
the year ended December 31, 1996, are incorporated by reference into Part II.
Portions of the Eastern Utilities Associates Proxy Statement dated March 26,
1997 are incorporated by reference into Part III.
EASTERN UTILITIES ASSOCIATES
BLACKSTONE VALLEY ELECTRIC COMPANY
EASTERN EDISON COMPANY
1996 Annual Report on Form 10-K
Table of Contents
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . .I
GLOSSARY OF DEFINED TERMS. . . . . . . . . . . . . . . . . . . IV
PART I
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . .1
System Overview . . . . . . . . . . . . . . . . . . . . . .1
General - Core Electric Business. . . . . . . . . . . . . .1
Electric Utility Industry Restructuring . . . . . . . . . .5
Unbundled Services . . . . . . . . . . . . . . . . . .5
Stranded Costs . . . . . . . . . . . . . . . . . . . .5
Rhode Island Utility Restructuring Act of 1996 . . . .5
Massachusetts Restructuring Settlement . . . . . . . .6
Other. . . . . . . . . . . . . . . . . . . . . . . . .8
General - EUA Cogenex . . . . . . . . . . . . . . . . . . .8
Construction . . . . . . . . . . . . . . . . . . . . . . 11
Construction Program - EUA:. . . . . . . . . . . . . 11
Construction Program - Blackstone. . . . . . . . . . 11
Construction Program - Eastern Edison. . . . . . . . 12
Fuel for Generation . . . . . . . . . . . . . . . . . . . 12
Nuclear Power Issues . . . . . . . . . . . . . . . . . . 14
General . . . . . . . . . . . . . . . . . . . . . . 14
Decommissioning. . . . . . . . . . . . . . . . . . . 15
Yankee Atomic. . . . . . . . . . . . . . . . . . . . 16
Connecticut Yankee . . . . . . . . . . . . . . . . . 16
Recent NRC Actions . . . . . . . . . . . . . . . . . 16
Millstone III . . . . . . . . . . . . . . . . . 16
Maine Yankee. . . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . . . 18
Public Utility Regulation . . . . . . . . . . . . . . . . 18
Rates . . . . . . . . . . . . . . . . . . . . . . . . . 20
FERC Proceedings . . . . . . . . . . . . . . . . . . 22
Massachusetts Proceedings. . . . . . . . . . . . . . 22
Rhode Island Proceedings . . . . . . . . . . . . . . 24
Environmental Regulation . . . . . . . . . . . . . . . . 27
General. . . . . . . . . . . . . . . . . . . . . . . 27
Electric and Magnetic Fields . . . . . . . . . . . . 28
Water Regulation . . . . . . . . . . . . . . . . . . 28
Air Regulation . . . . . . . . . . . . . . . . . . . 29
Environmental Regulation of Nuclear Power . . . . . . . . 31
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . 32
Power Supply . . . . . . . . . . . . . . . . . . . . . . 32
Other Property. . . . . . . . . . . . . . . . . . . . . . 34
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . 34
Rate Proceeding . . . . . . . . . . . . . . . . . . . . . 34
Environmental Proceedings . . . . . . . . . . . . . . . . 35
EUA WestCoast L.P.. . . . . . . . . . . . . . . . . . . . 38
Ridgewood . . . . . . . . . . . . . . . . . . . . . . . . 39
Other Proceedings . . . . . . . . . . . . . . . . . . . . 39
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. 40
Executive Officers of Eastern Utilities Associates . . . 40
PART II
Item 5. MARKET FOR EUA'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS. . . . . . . . . . . . . . . . . . . . . . . 41
Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . 42
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . .42
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . 42
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES . . . . . . . .42
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Eastern Utilities Associates . . . . . . . . . . . . . . .42
Blackstone and Eastern Edison. . . . . . . . . . . . . . .43
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 44
Eastern Utilities Associates . . . . . . . . . . . . . . .44
Blackstone and Eastern Edison. . . . . . . . . . . . . . .45
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 45
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 45
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . .46
(a)(1) Financial Statements . . . . . . . . . . . . . . .46
(a)(2) Financial Statement Schedules . . . . . . . . . . .46
(a)(3) Exhibits (*denotes filed herewith). . . . . . . . .46
(b) Reports on Form 8-K. . . . . . . . . . . . . . . . .60
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Report of Independent Accountants . . . . . . . . . . . . . . 70
Consent of Independent Accountants . . . . . . . . . . . . . . 72
GLOSSARY OF DEFINED TERMS
The following is a glossary of frequently used abbreviations and/or acronyms
found throughout this report:
The EUA System Companies
Blackstone Blackstone Valley Electric Company
Eastern Edison Eastern Edison Company
EUA Eastern Utilities Associates
EUA Cogenex EUA Cogenex Corporation
EUA Day EUA Day Company, a division of EUA Cogenex
EUA Nova EUA Nova, a division of EUA Cogenex
EUA Energy EUA Energy Investment Corporation
EUA Ocean State EUA Ocean State Corporation
EUA Service EUA Service Corporation
EUA Energy Services EUA Energy Services Corporation
Montaup Montaup Electric Company
Newport Newport Electric Corporation
Registrants EUA, Blackstone and Eastern Edison
Retail Subsidiaries Blackstone, Eastern Edison and Newport
Non-Affiliated Companies
Great Bay Power Great Bay Power Corporation (formerly EUA
Power Corporation)
Maine Yankee Maine Yankee Atomic Power Company
OSP Ocean State Power Project Units 1 and 2
Yankee Atomic Yankee Atomic Electric Company
Regulators/Regulations
1935 Act Public Utility Holding Company Act of 1935
CERCLA Federal Comprehensive Environmental
Response, Compensation and Liability
Act of 1980
Chapter 21E Massachusetts Oil and Hazardous Material
Release Prevention and Response Act
Clean Air Act Amendments Clean Air Act Amendments of 1990
DEQE Massachusetts Department of Environmental
Quality Engineering
GLOSSARY OF DEFINED TERMS (Cont'd)
Regulators/Regulations (continued)
DOE Department of Energy
Energy Policy Act Energy Policy Act of 1992
EPA Federal Environmental Protection Agency
FAS106 Statement No. 106 "Employer's Accounting for
Post-Retirement Benefits Other Than
Pensions"
FERC Federal Energy Regulatory Commission
IRS Internal Revenue Service
MADEP Massachusetts Department of Environmental
Protection
MDPU Massachusetts Department of Public
Utilities
NESCAUM Northeast States for Coordinated Air Use
Management
NRC Nuclear Regulatory Commission
NWPA Nuclear Waste Policy Act
Price-Anderson Act The Price-Anderson Act, as amended by the
Price-Anderson Amendments of 1988
PURPA Public Utility Regulatory Policies Act
of 1978
RCRA Resource Conservation and Recovery Act of
1976
RIDEM Rhode Island Department of Environmental
Management
RIDPUC Rhode Island Division of Public Utilities
and Carriers
RIPUC Rhode Island Public Utilities Commission
SEC Securities and Exchange Commission
TEC-RI The Energy Counsel of Rhode Island
TSCA Toxic Substances Control Act
Other
AFUDC Allowance for Funds Used During
Construction
BTU British Thermal Unit
C&LM Conservation and Load Management
DSM Demand Side Management
EMF Electric and Magnetic Fields
EWG Exempt Wholesale Generator
IPP Independent Power Producer
GLOSSARY OF DEFINED TERMS (Cont'd)
Other (continued)
kWh Kilowatthour
MBTU Millions of British Thermal Units
MOU Memorandum of Understanding
mw Megawatt
NEPOOL New England Power Pool
PCB Polychlorinated Biphenyls
PRP Potentially Responsible Party
QF Qualifying cogeneration and small power
production facilities pursuant to PURPA
Seabrook Project Seabrook Nuclear Power Project located in
Seabrook, New Hampshire
PART I
Item 1. BUSINESS
System Overview
Eastern Utilities Associates is a Massachusetts voluntary association
organized and existing under a Declaration of Trust dated April 2, 1928, as
amended, and is a registered holding company under the 1935 Act. Blackstone, a
registered retail electric utility organized under the laws of the State of
Rhode Island in 1912 operates in northern Rhode Island. Eastern Edison, a
registered retail electric utility company, was organized under the laws of the
Commonwealth of Massachusetts in 1883 and operates in southeastern
Massachusetts. EUA owns directly all of the shares of common stock of
Blackstone, Eastern Edison, and Newport, a retail electric utility which
operates in south coastal Rhode Island. These subsidiaries are collectively
referred to as the Retail Subsidiaries. Eastern Edison owns all of the
permanent securities of Montaup, a generation and transmission company, which
supplies electricity to Eastern Edison, Blackstone, Newport and two
unaffiliated utilities for resale. EUA also owns directly all of the shares of
common stock of EUA Cogenex, EUA Energy, EUA Ocean State, EUA Energy Services
and EUA Service. EUA Service provides various accounting, financial,
engineering, planning, data processing and other services to all EUA System
companies. EUA Cogenex is an energy services company. EUA Energy invests in
energy-related projects. EUA Ocean State owns a 29.9% interest in OSP's two
gas-fired generating units. (See Item 2. PROPERTIES -- Power Supply.) EUA
Energy Services owns an interest in a limited liability company which markets
energy and energy related services. The holding company system of EUA,
the Retail Subsidiaries, Montaup, EUA Service, EUA Cogenex, EUA Energy, EUA
Ocean State and EUA Energy Services is referred to as the EUA System. The EUA
System is organized into a business unit structure. The Core Electric Business
consists of the Retail Subsidiaries and Montaup. The Energy Related Business
includes EUA Cogenex, EUA Energy, EUA Ocean State and EUA Energy Services. The
Corporate Business is made up of EUA and EUA Service.
General - Core Electric Business
As of December 31, 1996, the number of regular employees in the core
electric and corporate business units was 1,032. Blackstone had 106 regular
non-union employees. Eastern Edison and Montaup had 303 regular employees.
Newport and EUA Service employed 59 and 564, respectively, at December 31,
1996. Labor bargaining unit contracts covering approximately 142 employees of
Eastern Edison in the Fall River area and of Montaup, and 55 employees of
Newport expire in June 1997, March 1998 and September 1998, respectively.
Relations with employees are considered to be satisfactory.
The Core Electric Business supplies retail electric service in 33 cities
and towns in southeastern Massachusetts and Rhode Island. The largest
communities served are the cities of Brockton and Fall River, Massachusetts.
The retail electric service territory covers approximately 595 square miles and
has an estimated population of approximately 734,000. At December 31, 1996,
Core Electric Business served approximately 299,000 retail customers.
Blackstone serves a territory of about 150 square miles in portions of
northern Rhode Island with a population of approximately 207,000. At December
31, 1996, Blackstone furnished retail electric service to approximately 85,000
customers in the cities of Central Falls, Pawtucket and Woonsocket, and four
surrounding towns.
Eastern Edison supplies retail electric service in 22 cities and towns in
southeastern Massachusetts. The largest communities served are the cities of
Brockton and Fall River, Massachusetts. The retail electric service territory
covers approximately 390 square miles and has an estimated population of
approximately 459,000. At December 31, 1996, Eastern Edison served
approximately 182,000 retail customers.
Newport supplies retail electric service to approximately 33,000 customers
in the cities of Jamestown, Middletown, Newport, and Portsmouth, Rhode Island.
The retail electric service territory covers approximately 55 square miles and
has an estimated population of approximately 69,000.
For 1996, 1995 and 1994, the Core Electric Business accounted for
approximately 89%, 86% and 87%, respectively, of total operating revenues of
the EUA System. The remaining balance of operating revenues during these
periods were primarily attributable to EUA Cogenex.
Montaup currently supplies the Retail Subsidiaries with nearly 100% of
each company's electric requirement under FERC approved all-requirements
contracts. It is anticipated, subject to regulatory approval, that Montaup
will replace the all-requirements contract with a contract termination
agreement that would provide Montaup recovery of its stranded costs (see
Electric Utility Industry Restructuring below). About 48% of the net
generating capacity of the EUA System comes from a combination of the following
sources: (i) wholly owned EUA System generating plants, primarily Montaup's
154 mw Somerset facility located in Somerset, Massachusetts; (ii) Montaup's
net entitlement of 243 mw from the 586 mw Canal No. 2 unit, which is located in
Sandwich, Massachusetts and is 50% owned by Montaup; and, (iii) entitlements
from units in which Montaup has partial ownership interests (by joint ownership
through tenancy-in-common or by stock ownership) that are 4.5% or less. The
remaining 52% of the net generating capacity of the EUA System comes from
units in which Montaup has long-term or short-term power contracts for shares
ranging from 5.1% to 41.7% of the unit's capacity, including 28% of the OSP
Units 1 and 2 in which EUA Ocean State has a 29.9% partnership interest, or
entitlements from the Hydro-Quebec Project through NEPOOL. (See Item 2.
PROPERTIES -- Power Supply for further details of the EUA System's sources of
power supply).
The Retail Subsidiaries and Montaup hold valid franchises, permits and
other rights which are necessary to allow these companies to conduct electric
business within the territories which they serve. Such franchises, permits and
other rights contain no unduly burdensome restrictions or limitations upon
duration.
The EUA System's electric sales are seasonal to some extent due to
electricity usage for heating and lighting in the winter and air conditioning
in the summer. The EUA System is not dependent on a single customer or a few
customers for its electric sales.
There is no competition from other electric distribution utilities within
the retail territories served by the Retail Subsidiaries at this time. See
Electric Utility Industry Restructuring below for a discussion of emerging
competition and unbundling issues.
At the wholesale, or supply level, Montaup faces new sources of
competition in part as a result of PURPA, the Energy Policy Act and other
policies being implemented by the MDPU and considered by the RIPUC relating to
the solicitation of competitive proposals for new generation sources. Non-
utility wholesale generators, generally known as independent power producers or
IPPs, are subject to FERC regulations under the Federal Power Act as well as
various other federal, state, and local regulations. PURPA was intended, among
other things, to promote national energy independence and diversification of
energy supply and to improve the overall efficiency of energy usage. PURPA
created a class of non-utility power generation facilities called qualifying
facilities or QFs. PURPA allows QFs to sell power generated by the QFs to
local utilities at specified rates based on each utility's avoided cost. In
order to further promote competition in energy supply, the Energy Policy Act
established another class of non-utility generators, generally referred to as
EWGs, which are exempt from the 1935 Act. The Energy Policy Act also increased
FERC's power to order transmission access, resulting in FERC's open access
transmission order and Regional Transmission Group Policy. As a complement to
the federal initiatives, the MDPU and the RIPUC have implemented regulations
which require utilities to integrate least-cost planning with competitive
proposals to meet requirements for new generation. Both states have also
approved a Memorandum of Understanding among Montaup and the Retail
Subsidiaries that establishes a framework which makes possible a coordinated,
regional review of the resource planning and procurement process of the EUA
System Companies. (see Public Utility Regulation below).
On April 24, 1996, FERC issued orders on its March 24, 1995 Notice of
Proposed Rulemaking (NOPR). FERC's purpose in proposing the new rules was to
encourage competition in the bulk power market. FERC's April 24th actions
include:
- order No. 888, a final rule requiring open access transmission and
requiring all public utilities that own, operate or control interstate
transmission to file tariffs that offer others the same transmission
services they provide themselves, under comparable terms and conditions.
Utilities must take transmission service for their own wholesale
transactions under the terms and conditions of the tariff;
- establishing the right and a mechanism for recovery of prudently
incurred stranded costs by public utilities and transmitting utilities;
which arise as a result of wholesale open access;
- order No. 889, a final rule requiring public utilities to implement
standards of conduct and an Open Access Same-time Information System
(OASIS). Utilities must obtain information about their transmission the
same way as their competitors through the OASIS;
- a Notice of Proposed Rulemaking (NOPR) requesting comment on replacing
the single tariff contained in the final open access rule with a
capacity reservation tariff that would reveal how much transmission is
available at any given time.
Open-access transmission tariffs for point-to-point and network service
were filed with FERC by Montaup in February 1996 and became effective April 21,
1996, subject to refund, for a period of at least one year. The rates in the
tariffs were the subject of a settlement agreement which was filed on June 14,
1996 and remains pending before the Commission. Montaup amended its filing in
July 1996 to modify its terms and conditions in conformance with FERC's order.
FERC has taken no action on these filings. These tariffs are in compliance
with FERC's April 24th rulings.
EUA remains committed to achieving a fair and equitable transition to a
competitive electric utility marketplace. Montaup will face increased
competition in the wholesale generating, or supply market, primarily based on
price, from QFs and EWGs and in the future could be affected by such
competition supplying generation to its customers. More recently, non-utility
power marketers have become active, engaging in new and creative power
transactions. Power marketers are likely to become more prevalent in the
market as transmission access opens up and opportunities arise, due to price
differentials, to move power inter-regionally. See Electric Utility Industry
Restructuring, "Rhode Island Utility Restructuring Act of 1996" and
"Massachusetts Restructuring Settlement" for a discussion of divestiture plans
of Montaup.
The EUA System companies are members of NEPOOL, which is open to any
person or organization engaged in the electric utility business such as
investor-owned, municipal, and cooperative utilities as well as non-utilities
and others such as brokers and marketers. The systems making up NEPOOL own or
purchase the output from virtually all the generation in New England. Since
the EUA System operates an integrated transmission system which, in turn, is
connected to the New England 345 kv grid at three locations, NEPOOL treats the
EUA System as one consolidated participant. This is consistent with the EUA
System's planning and resource management perspective. The objectives of
NEPOOL are: (a) to assure that the bulk power supply of New England and any
adjoining areas served by participants conforms to proper standards of
reliability, and (b) to attain maximum practicable economy in the bulk power
supply consistent with all proper standards of reliability and to provide for
equitable sharing of the resulting benefits and costs. These objectives
are accomplished through joint planning, central dispatching, coordinated
construction, operation, and maintenance of electric generation and
transmission facilities, cooperation in environmental matters, and through
effective coordination with other power pools and utilities situated in the
United States and Canada.
The NEPOOL agreement imposes obligations concerning generating capacity
reserve and the right to use major transmission lines, and provides for central
dispatch of the generating capacity of NEPOOL's members with the objective of
achieving reliable and economical use of the region's facilities. Pursuant to
the NEPOOL agreement, interchange sales to NEPOOL are made at a price
approximately equal to the fuel cost for generation without contribution to the
support of fixed charges. The capacity responsibilities of Montaup and the
Retail Subsidiaries under the NEPOOL agreement are based on an allocated share
of a New England capacity requirement which is determined for each period on
the basis of certain regional reliability criteria. Because of its
participation in NEPOOL, the EUA System's operating revenues and costs are
affected to some extent by the operations of other members. A comprehensive
review of the NEPOOL agreement was initiated in 1994 and continued until late
1996. On December 31, 1996 a restated NEPOOL agreement was filed with the
FERC. The new agreement implements key changes in the operation of NEPOOL.
The major areas of change are in the formation of an Independent System
Operator (ISO) and in the shifting from cost-based pricing to market-based
pricing. As proposed in the new agreement, NEPOOL participants will be able to
compete for sale and purchase of seven products: (1) installed capability, (2)
operable capability, (3) energy, (4) 10-minute spinning reserve, (5) 10-minute
non-spinning reserve, (6) 30-minute operating reserve, and (7) automatic
generation control. If approved by the FERC, competition for all seven
products could begin by July 1, 1997.
Electric Utility Industry Restructuring:
Unbundled Services:
The electric industry is in a period of transition from a traditional rate
regulated environment to a competitive marketplace. Initiatives supported by
EUA in both Massachusetts and Rhode Island provide for the functional and
corporate unbundling of traditional electric utility services - generation,
transmission and distribution - into separate and distinct services. The
generation, or supply function will be truly competitive with customers
choosing their own electricity supplier at open market prices. The
transmission and distribution functions will remain regulated services. The
local distribution company will retain the responsibility of providing
distribution services to the ultimate electricity consumer within its
franchised service territory and the transmission company will be required to
provide open access, non-discriminatory transmission services to generation or
supply companies. For customers who choose not to choose, the local
distribution company will arrange for supply at a non-discriminatory, "standard
offer" price. Distribution companies will also be providers of last resort,
required to arrange for supply, at prevailing market prices, for customers who
are unable to obtain a supplier of electricity.
Stranded Costs:
"Stranded costs" represent historic costs of generation above their
current economic value. In both Massachusetts and Rhode Island (see
discussions below) "stranded costs" have been defined to include items such as
above market net investments in generation assets, generation related
regulatory assets, nuclear decommissioning and above market commitments under
current power purchase contracts. It is anticipated that Montaup, the EUA
System's generation company, will fully recover its "stranded costs" via a
contract termination charge under a contract termination agreement which will
replace the all-requirements contracts currently in force.
Rhode Island Utility Restructuring Act of 1996:
On August 7, 1996 the Governor of Rhode Island signed into law the Utility
Restructuring Act of 1996 (URA). The URA provides for customer choice of
electricity supplier commencing July 1, 1997 for large manufacturing customers,
certain new commercial and industrial customers, and State of Rhode Island
accounts. Load accounting for no more than 10% of an electric distribution
company's total kWh sales is to be released to retail access under this
provision. An additional 10% of kWh sales is to be released to retail access
by permitting municipal and smaller manufacturers to choose an electricity
supplier commencing January 1, 1998. By July 1, 1998 or sooner, all customers
will have retail access. This legislation provides for full recovery of
"stranded costs" billed to distribution companies - Blackstone and Newport in
the case of EUA - via a non-bypassable transition charge to ultimate
electricity consumers, initially set at 2.8 cents per kWh through December 31,
2000 and divestiture of at least 15% of owned non-nuclear generating units as a
valuation basis for mitigation of stranded cost recovery. The net costs of
above-market generation assets and regulatory assets will be recovered, with a
return, through the fixed component of the transition charge from July 1, 1997
through December 31, 2009. The initial return on equity will be set at one
percentage point plus the average return on BBB rated long term utility bonds
issued during the six month period ended December 31, 1996. Upon completion of
required divestiture, the return on equity will be that allowed to the
wholesale power supplier's affiliated distribution company as of December 31,
1995, which is approximately 11.4% for both Blackstone and Newport. The
variable component of the transition charge will recover, on a reconciling
basis, among other things, nuclear decommissioning and above market purchased
power commitments from July 1, 1997 through the life of the respective unit or
contract.
The URA also provides for, among other things, commitments to demand side
management initiatives and renewables, low income customer protections and
performance based regulation for electric distribution companies. Under
performance based regulation, rates are set for a specified period - two years,
under the URA - during which the utility is encouraged to manage its costs
prudently to earn a premium profit while being penalized for not achieving
specific agreed-upon regulated performance objectives. Utility returns, or
earnings, would be subject to a guaranteed floor of 6% and a ceiling of
approximately 12% for Blackstone and Newport. Utilities which manage well
can keep some of their savings; those that manage poorly are penalized by lower
earnings and/or pre-determined penalty charges.
The implementation of the URA will require approvals from applicable
regulatory agencies, including FERC, the RIPUC, and the SEC. EUA believes that
the URA settles much of the uncertainty regarding "stranded cost" recovery
related to serving the customers of Blackstone and Newport.
In February 1997, Blackstone , Newport and Montaup reached a settlement
with the RIDPUC and the Rhode Island Attorney General. The settlement, to be
formally submitted to the RIPUC in March 1997, complies with the URA and is
similar in many respects to the settlement negotiated in Massachusetts,
described below, including an immediate 10% rate reduction and the filing of a
plan to divest all of Montaup's generating assets.
Massachusetts Restructuring Settlement:
On December 23, 1996, Eastern Edison and Montaup Electric reached an
agreement in principle with the Attorney General of Massachusetts and the
Massachusetts Division of Energy Resources on a plan which would allow retail
customers to choose their supplier of electricity in 1998 and provide Eastern
Edison and Montaup full recovery of "stranded costs," which are prudently
incurred embedded costs they would have been entitled to recover but cannot
because of competitive market pressures. A formal plan is expected to be filed
for approval with the MDPU in March of 1997.
The agreement envisions that all of Eastern Edison's customers will have
the ability to choose an alternative supplier of electricity beginning on
January 1, 1998. Until a customer chooses an alternative supplier, that
customer would receive "Standard Offer" service which would be priced to
guarantee that customer at least a ten percent savings from today's electricity
prices. Eastern Edison would be required to arrange for "Standard Offer"
service and would purchase power for "Standard Offer" service from suppliers
through a competitive bidding process. The agreement is also designed
to achieve full divestiture of Montaup's generating assets via implementation
of a plan, to be submitted to the MDPU by July 1, 1997, that would require (1)
separation by Montaup of its generating and transmission businesses and (2)
full market valuation and sale of all generating assets through an auction or
equivalent process, to be conducted by an independent third party.
Upon the commencement of retail choice in Massachusetts, Montaup's
wholesale contract with Eastern Edison would be terminated. In return, the
cost of Montaup's above market, embedded generation commitments to serve
Eastern Edison's customers would be recovered, with a return, through a non-
bypassable transition access charge to all Eastern Edison customers. The
transition access charge would be reduced by the fair market value of Montaup's
generating assets as determined by selling, spinning off, or otherwise
disposing of such generating facilities.
Embedded costs associated with generating plants and regulatory assets
would be recovered, with a return, over a period of 12 years, with an initial
return on equity of 8.92 percent. Purchased power contracts and nuclear
decommissioning costs would be recovered as incurred over the life of
those obligations, a period expected to extend beyond 12 years. The initial
transition access charge would be set at 3.04 cents per kWh through December
31, 2000, and is expected to decline thereafter. As the transition access
charge declines during the twelve-year transition period, Montaup would earn
mitigation incentives in the form of additional cash revenues which would
effectively increase its return on equity above the initial 8.92 percent.
The agreement also establishes performance-based regulation for Eastern
Edison. Under the agreement, Eastern Edison's distribution rates would be
frozen until December 31, 2000. Subsequent to the commencement of retail
choice, Eastern Edison's annual return on equity would be subject to a floor of
6 percent and a ceiling of 11.75 percent. If Eastern Edison's return on equity
so calculated is below 6 percent, it would be authorized to increase its rates
to provide sufficient revenues to increase Eastern Edison's return on equity to
6 percent. If Eastern Edison's calculated return is above 11 percent, it would
be required to reduce its rates by an amount necessary to reduce its calculated
return on equity between 11 and 12.5 percent by 50 percent and the earnings
above 12.5 percent by 100 percent. No adjustment would be made if the
calculated return on equity falls between 6 percent and 11 percent.
In addition to MDPU approval of the formal plan, implementation of the
plan is also subject to the approval of FERC. Any disposition of generation
assets would also require the approval of the SEC under the 1935 Act.
While removing much of the uncertainty about how EUA will be impacted by
Electric Utility Restructuring, the agreements, if approved, are expected to
have an estimated negative impact on EUA System earnings in 1998 of between 10%
to 12%.
Other:
Historically, electric rates have been designed to recover a utility's
full costs of providing electric service including recovery of investment in
plant assets, known as cost-of-service rate making. Also, in a regulated
environment, electric utilities are subject to certain accounting rules that
are not applicable to other industries. These accounting rules allow regulated
companies, in appropriate circumstances, to establish regulatory assets and
liabilities, which defer the current financial impact of certain costs that are
expected to be recovered in future rates. The SEC has raised issues concerning
the continued applicability of these standards with certain other electric
utilities in other states facing restructuring. EUA believes that its Core
Electric operations continue to meet the criteria established in these
accounting standards.
However, the potential exists that the final outcome of state and federal
agency determinations could result in EUA no longer meeting the criteria of
certain accounting standards which could trigger the discontinuance of
Statement of Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation" (FAS71). Should it be required to
discontinue the application of FAS71, EUA would be required to take an
immediate write down of the affected assets in accordance with FAS101,
"Accounting for the Discontinuation of Application of FAS71."
In addition, if legislative or regulatory changes and/or competition
result in electric rates which do not fully recover the company's costs, a
write-down of plant assets could be required pursuant to Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (FAS121) issued in March 1995.
EUA occasionally makes forward-looking projections of expected future
performance or statements of our plans and objectives. These forward-looking
statements may be contained in filings with the SEC, press releases and oral
statements. Actual results could differ materially from these statements.
Therefore, no assurances can be given that such forward-looking statements and
estimates will be achieved.
General - EUA Cogenex
EUA Cogenex is a wholly owned subsidiary of EUA. EUA Cogenex is an
energy services company that employs energy efficient technology and equipment
intended to reduce the energy consumption and costs of its customers. Such
technology and equipment include building automation systems, lighting
modifications, boiler and chiller replacements and other mechanical measures
such as motors and drives. EUA Cogenex may design, install, own, operate,
maintain, and finance specific energy efficient applications for its customers.
EUA Cogenex is compensated for these services primarily through energy
services agreements in which EUA Cogenex and the customer who occupies or owns
a facility agree upon a prescribed base year and a set of savings calculations.
EUA Cogenex then receives payments based on a portion of the savings that
result from the installation and maintenance of the energy efficient equipment
in the facility. Some of EUA Cogenex revenues under these agreements are
dependent upon the actual achievement of energy savings. In addition, EUA
Cogenex participates in demand side management (DSM) programs sponsored by
electric utilities as a means to decrease both base load and peak demand on the
utilities' systems. In utility DSM programs, EUA Cogenex contracts with the
utility and its commercial and industrial customers in order to decrease the
overall demand on the utility system or to reduce peak demand, curtailing the
need for costly capacity additions. EUA Cogenex contracts for utility DSM
programs through a bidding process or participates in the utility's "Standard
Offer Program." EUA Cogenex also may, from time to time, acquire existing DSM
contracts or energy services agreements, or the benefits from those contracts
from other energy services companies.
EUA Cogenex's principal markets include institutional, commercial,
industrial and government entities, and through its EUA Citizens Conservation
Services subsidiary, public and private multi-family housing.
In September 1995, EUA announced that EUA Cogenex was discontinuing its
cogeneration operations because overall, the cogeneration portfolio had not
performed up to expectations. EUA Cogenex's total net investment in its
cogeneration portfolio was $29.2 million. The decision to discontinue its
cogeneration operations resulted in a one-time, after-tax charge of
approximately $10.5 million, or 52 cents per share, to 1995 earnings.
Difficulties in turning project proposals into signed contracts, the
virtual elimination of utility sponsored DSM programs and the termination of
the AYP Capital and Westar joint ventures hampered EUA Cogenex's 1996 earnings.
As a result, a write-off of certain start-up costs of abandoned joint ventures,
and expenses related to certain project proposals along with a reduction
in carrying value of certain on-going projects necessitated by current market
conditions resulted in a $5.9 million pre-tax ($3.7 million after-tax or 18
cents per share) charge to earnings in the second quarter of 1996.
In an effort to revitalize its sales activity, EUA Cogenex has replaced
virtually all of its sales staff with individuals possessing more experience
and proven sales capability in the energy efficiency market. EUA Cogenex also
reduced its year-end 1995 employee level by 22% through a combination of
attrition and a 1996 year-end workforce reduction. While EUA believes that the
energy efficiency market still provides a viable business opportunity for EUA
Cogenex, it will be important for EUA Cogenex to improve the performance of its
sales activity.
EUA Cogenex also operates a lighting services division, EUA Nova, and a
controls division, EUA Day. EUA Cogenex restructured its Nova Division in 1996
because of changing market conditions. EUA Nova provides lighting products
designed to achieve an efficiency gain through the integration of various lamp,
ballast and light reflector products. EUA Day, is primarily engaged in the
business of customization, installation and servicing of building temperature
control systems, monitoring and verification systems and process control
systems for the purpose of energy conservation. These systems are primarily
designed for regulating lighting and heating, ventilation and air-conditioning,
but can also simultaneously be used for security surveillance, building entry
and exit, equipment monitoring and air quality monitoring.
EUA Cogenex also provides consulting services to its customers in the form
of training in the proper use and maintenance of the energy equipment. This
service includes instruction in the use of existing equipment as well as newly
installed equipment so that further energy savings can be realized. In
addition, EUA Cogenex monitors installed projects on a 24-hour basis and
dispatches third party contractors to make repairs and/or adjustments.
In 1995, EUA Cogenex acquired certain energy services assets of Citizens
Conservation Corporation with headquarters in Boston, Massachusetts in exchange
for preferred stock of a newly formed subsidiary of EUA Cogenex, EUA Citizens
Conservation Services, which will utilize those assets. EUA Citizens
Conservation provides energy conservation services to the public and private
multi-family housing sector. EUA Cogenex also acquired the Highland Energy
Group, an energy services company in Boulder, Colorado in exchange for common
shares of EUA. Highland provides energy conservation services in Colorado,
Texas, Ohio, North Carolina and certain mid-western states. In early 1996, EUA
Cogenex announced a proposed joint venture with Monenco-Agra of Canada to
provide similar services in Canada.
At December 31, 1996, EUA Cogenex employed 213 persons in its operations.
EUA Cogenex's competition is comprised primarily of the manufacturers and
distributors of the energy efficiency equipment which it installs, other
utility-owned energy services companies, engineering consulting firms and from
financial institutions who provide capital to finance energy efficiency
projects.
The potential deregulation of the electric utility industry may have an
effect on EUA Cogenex. Electric industry deregulation may present new markets
and opportunities in which EUA Cogenex may participate. However, some electric
utilities have, or announced plans to establish, subsidiaries that will
compete directly with EUA Cogenex. In addition, the move toward electric
industry deregulation has also resulted in a reduction of electric utility
sponsored DSM programs which has resulted in a reduction of EUA Cogenex's
revenues.
As of December 31, 1996, EUA Cogenex participated in five partnerships.
It is the managing general partner in all of the partnerships and has limited
partnership interest in certain of the partnerships. EUA Cogenex has provided
virtually all of the capital to the partnerships and is generally entitled to a
return of, and on, this capital before any significant partnership distribution
is made to the other general partners. All partnerships and their customers
are subject to the same selection and screening process to establish acceptable
credit quality.
The rates charged by EUA Cogenex to customers through its energy service
agreements are not subject to the jurisdiction of any regulatory agency.
The following table sets forth the amounts of revenues, pre-tax income,
net earnings and identifiable assets attributable to the consolidated
operations of EUA Cogenex:
Year Ended December 31,
1996 1995 1994
(In Thousands)
Operating Revenues $ 56,317 $ 79,499 $ 74,480
Pre-tax (Loss) Income $(10,186)(1) $(13,885)(2) $ 7,266
Net (Loss) Earnings $ (6,522)(1) $ (7,904)(2) $ 4,171
Total Assets $195,161 $199,115 $ 211,310
(1) Includes pre-tax charge of $5.9 million $3.7 million after-tax, related to
the June 1996 write down of certain project costs.
(2) Includes pre-tax charge of $18.1 million, $10.5 million after-tax, related
to discontinuance of cogeneration operations.
See Note I - Financial Information by Business Segment, of Consolidated
Financial Statements contained in the EUA's Annual Report to Shareholders for
the year ended December 31, 1996 (Exhibit 13-1.03 filed herewith).
Construction
Construction Program - EUA:
The EUA System's cash construction expenditures for the year ended
December 31, 1996 were approximately $62.7 million.
Planned cash construction expenditures for 1997, 1998 and 1999 as set
forth below, are estimated to total $207.6 million.
EUA SYSTEM CONSTRUCTION PROGRAM
(In Thousands)
1997 1998 1999 3-Yr. Total
Generation $ 7,290 $ (a) $ (a) $ 7,290
Transmission 2,002 996 791 3,789
Distribution 14,362 15,143 15,598 45,103
General (177) 445 459 727
Total Utility Construction
Requirements 23,477 16,584 16,848 56,909
EUA Cogenex Capital
Requirements 34,637 41,500 49,800 125,937
EUA Energy Investment
Capital Requirements 15,257 5,219 4,287 24,763
Total $ 73,371 $ 63,303 $ 70,935 $207,609
(a) As discussed under Electric Utility Industry Restructuring "Rhode Island
Utility Restructuring Act of 1996" and "Massachusetts Restructuring
Settlement," to the extent that Montaup disposes all its generation assets,
no capital additions would be required.
Construction Program - Blackstone:
Blackstone's cash construction expenditures for the year ended December
31, 1996 were approximately $4.2 million, related primarily to its electric
distribution system.
Planned cash construction expenditures for 1997, 1998 and 1999, as set
forth below, are estimated to total $13.1 million.
BLACKSTONE CONSTRUCTION PROGRAM
(In Thousands)
1997 1998 1999 3-Yr. Total
Transmission $ 437 $ 230 $ 237 $ 904
Distribution 3,673 4,098 4,221 11,992
General 48 63 65 176
Total $ 4,158 $4,391 $4,523 $13,072
Construction Program - Eastern Edison:
Eastern Edison's cash construction expenditures for the year ended
December 31, 1996 were approximately $26.0 million.
Cash construction expenditures of Eastern Edison and Montaup for 1997,
1998 and 1999 as set forth below, are estimated to total $36.0 million.
EASTERN EDISON CONSTRUCTION PROGRAM
(In Thousands)
1997 1998 1999 3-Yr. Total
Eastern Eastern Eastern Eastern
Edison Montaup Edison Montaup Edison Montaup Edison Montaup Combined
Generation $ $7,284 $ $ <F1> $ $ <F1> $ $7,284 $7,284
Transmission 879 566 408 350 420 125 1,707 1,041 2,748
Distribution 8,792 9,070 9,343 27,205 27,205
General (687) (650) 58 60 (569) (650) (1,219)
Total $8,984 $7,200 $ 9,536 $ 350 $ 9,823 $ 125 $28,343 $7,675 $36,018
<FN>
<F1> As discussed under Electric Utility Industry Restructuring "Rhode Island
Utility Restructuring Act of 1996" and "Massachusetts Restructuring
Settlement," to the extent that Montaup disposes all its generation
assets, no capital additions would be required.
</FN>
Fuel for Generation
The Retail Subsidiaries currently rely primarily on power purchased from
Montaup to meet their electric energy requirements (See Electric Utility
Industry Restructuring above). Power purchases are arranged on a system basis,
by Montaup, under which power is made available to the EUA System and allocated
to the Retail Subsidiaries in accordance with their peak requirements.
The rates charged by Montaup for power sold to the Retail Subsidiaries are
those on file with FERC and are substantially the same as those charged by
Montaup for power sold to its unaffiliated customers. Changes in the cost to
Montaup of power from units in which it has interests are reflected in the cost
of power purchased by the Retail Subsidiaries. The Retail Subsidiaries recover
their cost of fuel and purchased power through the operation of revenue
adjustment clauses which are designed to provide timely recovery of such costs.
For 1996, the EUA System's sources of energy, by fuel type, were as
follows: 31% gas, 29% nuclear, 20% oil, 15% coal and 5% other. During 1996,
Montaup had an average inventory of 56,944 tons of coal for its steam
generating unit at the Somerset Station, the equivalent of 68 days' supply
(based on average daily output at 80% capacity factor for the coal unit (see
Item 2. PROPERTIES -- Power Supply)). The cost of coal averaged about $49.90
per ton in 1996 which is equivalent to oil at $12.16 per barrel. This was the
same as 1995. Montaup coal is under contract, and coal prices have
historically been very stable. Montaup also maintained an average inventory of
Nos. 2 and 6 oil of 2,102 barrels and 45,070 barrels, respectively. These
fuels are used for start-up and flame stabilization for Montaup's steam
generating unit. The cost of Nos. 2 and 6 oil averaged $22.27 per barrel and
$17.19 per barrel in 1996, respectively. Montaup also maintained an average
inventory of jet oil of 3,573 barrels at an average cost per barrel of $25.83
during 1996 for its two peaking units at the Somerset Station.
Montaup has a two year purchase order effective through December 1998 with
a coal producer. Barge and rail agreements for coal transportation are also in
place through 1998. The 1996 year-end coal inventory of approximately 82,000
tons is all 0.6% to 0.7% sulfur coal which is compliant with Clean Air Act
requirements.
Canal Electric Company (Canal), on behalf of itself, Montaup and others
has contracts with a supplier for up to 100% of the fuel-oil requirements of
Canal Unit Nos. 1 and 2 for the period ending December 31, 1997 with an option
of extending the contracts through March 31, 1998. The current contracts
permit up to 35% of fuel oil purchases in the spot market. Fuel prices are
based on oil market posting at the time of delivery. For 1996, the cost of oil
per barrel at Canal averaged $18.67. Additionally, Canal has a contract with a
gas supplier for approximately 70% of Canal 2's daily gas requirements. Canal
2 completed its gas conversion and testing in September 1996. The unit is now
able to burn gas, oil, or a blend of the two fuels. Economics, generation and
supply will determine actual fuel type usage.
Montaup's costs of fossil and nuclear fuels for the years 1994 through
1996, together with the weighted average cost of all fuels, are set forth
below:
Mills* per kWh
1996 1995 1994
Nuclear . . . . . . . . . 5.0 6.3 6.1
Gas . . . . . . . . . 14.4 14.3 14.1
Coal . . . . . . . . . 19.6 20.3 20.9
Oil . . . . . . . . . 37.7 30.2 27.1
All fuels . . . . . . . . . 16.7 16.7 14.5
*One Mill is 1/10 of one cent
The rate schedules of Montaup and the Retail Subsidiaries are designed to
pass on to customers the increases and decreases in fuel costs and the cost of
purchased power, subject to review and approval by appropriate regulatory
authorities (see Rates below).
OSP has two gas supply contracts which expire December 14, 2009 and
September 29, 2010, respectively, for its two 250 mw generators. The cost of
gas for 1996 averaged $1.20 per MBTU or approximately 10.0 mills per kWh
generated.
The owners (or lead participants) of the nuclear units in which Montaup
has an interest have made, or expect to make, various arrangements for the
acquisition of uranium concentrate, the conversion, enrichment, fabrication and
utilization of nuclear fuel and the disposition of that fuel after use. The
owners (or lead participants) of United States nuclear units have entered into
contracts with the DOE for disposal of spent nuclear fuel in accordance with
the NWPA. The NWPA requires (subject to various contingencies) that the
federal government design, license, construct and operate a permanent
repository for high level radioactive wastes and spent nuclear fuel and
establish a prescribed fee for the disposal of such wastes and nuclear fuel.
The NWPA specifies that the DOE provide for the disposal of such waste and
spent nuclear fuel starting in 1998. Objections on environmental and other
grounds have been asserted against proposals for storage as well as disposal
of spent nuclear fuel. The DOE now estimates that a permanent disposal site
for spent fuel will not be ready to accept fuel for storage or disposal until
as late as the year 2010. Montaup owns a 4.01% interest in Millstone III and a
2.9% interest in Seabrook I. Northeast Utilities, the operator of the units,
indicates that Millstone III has sufficient on-site storage facilities which,
with rack additions, can accommodate its spent fuel for the projected life of
the unit. At the Seabrook Project, there is on-site storage capacity which,
with rack additions, will be sufficient to at least the year 2011.
The Energy Policy Act of 1992 requires that a fund be created for the
decommissioning and decontamination of the DOE uranium enrichment facilities.
The fund will be financed in part by special assessments on nuclear power
plants in which Montaup has an interest. These assessments are calculated
based on the utilities' prior use of the government facilities and have been
levied by the DOE, starting in September 1993, and will continue over 15 years.
This cost is passed on to the joint owners or power buyers as an additional
fuel charge on a monthly basis and is currently being recovered by Montaup
through fuel rates and will be collected through the contract termination
charge.
Nuclear Power Issues
General:
Nuclear generating facilities, including those in service in which Montaup
participates, as shown in the table under Item 2. PROPERTIES -- Power Supply,
are subject to extensive regulation by the NRC. The NRC is empowered to
authorize the siting, construction and operation of nuclear reactors after
consideration of public health, safety, environmental and anti-trust matters.
The NRC has promulgated numerous requirements affecting safety systems,
fire protection, emergency response planning and notification systems, and
other aspects of nuclear plant construction, equipment and operation. These
requirements have caused modifications to be made at some of the nuclear units
in which Montaup has an interest. Montaup has been affected, to the extent of
its proportionate share, by the costs of such modifications.
Nuclear units in the United States have been subject to widespread
criticism and opposition. Some nuclear projects have been cancelled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction defects and other difficulties. Various
groups have by litigation, legislation and participation in administrative
proceedings sought to prohibit the completion and operation of nuclear units
and the disposal of nuclear waste. In the event of cancellation or shutdown of
any unit, NRC regulations require that it be decontaminated of any residual
radioactivity sufficiently so that the property may be released for
unrestricted use. The cost of such decommissioning, depending on the
circumstances, could substantially exceed the owners' investment at the time of
cancellation.
Joint owners of nuclear projects are subject to the risk that one of their
number may be unable or unwilling to finance its share of the project's costs,
thus jeopardizing continuation of the project. Also, the continuing public
controversy concerning nuclear power could affect the operating units in which
Montaup has an interest. While management cannot predict the ultimate effect
of such controversy, it is possible that it could result in the premature
shutdown of one or more of the units.
The Price-Anderson Act provides, among other things, that the liability
for damages resulting from a nuclear incident would not exceed an amount which
at present is about $8.7 billion. Under the Price-Anderson Act, prior to
operation of a nuclear reactor, the licensee is required to insure against this
exposure by purchasing the maximum amount of liability insurance available from
private sources (currently $200 million) and to maintain the insurance
available under a mandatory industry-wide retrospective rating program. Should
an individual licensee's liability for an incident exceed $200 million, the
difference between such liability and the overall maximum liability, currently
about $8.7 billion, will be made up by the retrospective rating program. Under
such a program, each owner of an operating nuclear facility may be assessed a
retrospective premium of up to a limit of $79.3 million (which shall be
adjusted for inflation at least every five years) for each reactor owned in the
event of any one nuclear incident occurring at any reactor in the United
States, with provision for payment of such assessment to be made over time as
necessary to limit the payment in any one year to no more than $10 million per
reactor owned. With respect to operating nuclear facilities of which it is a
part owner or from which it contracts (on terms reflecting such liability) to
purchase power, Montaup would be obligated to pay its proportionate share of
any such assessment.
Decommissioning:
Both of the operating nuclear generating companies in which Montaup has an
equity ownership interest (see Item 2. PROPERTIES -- Power Supply) have
developed their estimates of the cost of decommissioning its unit and have
received the approval of FERC to include charges for the estimated costs of
decommissioning its unit in the cost of energy which it sells. From time to
time, these companies re-estimate the cost of decommissioning and apply to FERC
for increased rates in response to increased decommissioning costs. Maine
Yankee has filed a decommissioning financing plan under a Maine statute which
requires the establishment of a decommissioning trust fund. That statute also
provides that if the trust has insufficient funds to decommission the plant,
the licensee (Maine Yankee) is responsible for the deficiency and, if the
licensee is unable to provide the entire amount, the "owners" of the licensee
are jointly and severally responsible for the remainder. The definition of
"owner" under the statute includes Montaup and may include companies affiliated
with Montaup. The applicability and effect of this statute cannot be
determined at this time. Montaup would seek to recover through its rates any
payments that might be required (see "Yankee Atomic", and "Connecticut Yankee"
below).
Montaup is recovering through rates its share of estimated decommissioning
costs for Millstone III and Seabrook I. Montaup's share of the current
estimate of total costs to decommission Millstone III is $18.6 million in 1996
dollars, and Seabrook I is $13.1 million in 1996 dollars. These figures are
based on studies performed for the lead owners of the plants. In addition,
pursuant to contractual arrangements with other nuclear generating facilities
in which Montaup has an equity ownership interest or life of the unit
entitlement, Montaup pays into decommissioning reserves. Such expenses are
currently recoverable through rates.
Yankee Atomic:
On February 26, 1992, Yankee Atomic announced that it would permanently
cease power operation of Yankee Rowe and began preparing for an orderly
decommissioning of the facility. Montaup has a 4.5% equity ownership in Yankee
Atomic with a book value of approximately $1.1 million at December 31, 1996.
Under the terms of its purchased power contract with the facility, Montaup must
pay its proportionate share of unrecovered costs and expenses incurred after
the plant is retired. In December 1992, Yankee Atomic received FERC
authorization to recover essentially all unrecovered assets and all costs
incurred after the February 26, 1992 shutdown decision until the plant is
decommissioned. Montaup's share of all unrecovered assets and the total
estimated costs to decommission the unit aggregated approximately $7.8 million
at December 31, 1996.
Connecticut Yankee:
Connecticut Yankee, a 582-mw nuclear unit, was taken off-line in July 1996
because of issues related to certain containment air recirculation and service
water systems. Montaup has a 4.5% equity ownership in Connecticut Yankee with
a book value of $4.8 million at December 31, 1996.
In October 1996, Montaup, as one of the joint owners, participated in an
economic evaluation of Connecticut Yankee which recommended permanently closing
the unit and replacing its output with less expensive energy sources. As a
result of the analysis, work at the plant had slowed pending a final board
decision. In December 1996, the Board of Directors voted to retire the
generating station. Connecticut Yankee certified to the NRC that it had
permanently closed power generation operations and removed fuel from the
reactor. Connecticut Yankee has two years to submit its decommissioning plan
to the NRC. The preliminary estimate of the sum of future payments for the
permanent shutdown, decommissioning, and recovery of the remaining investment
in Connecticut Yankee, is approximately $758 million. Montaup's share of the
total estimated costs is $34.1 million.
Recent NRC Actions:
Millstone III
Montaup has a 4.01% ownership interest in Millstone III, an 1154-mw
nuclear unit that is jointly owned by a number of New England utilities,
including subsidiaries of Northeast Utilities (Northeast). Northeast is the
lead participant in Millstone III, and on March 30, 1996, Northeast determined
it was necessary to shut down the unit following an engineering evaluation
which determined that four safety-related valves would not be able to perform
their design function during certain postulated events.
The NRC has raised numerous issues with respect to Millstone III and
certain of the other nuclear units in which Northeast and its subsidiaries,
either individually or collectively, have the largest ownership shares,
including Connecticut Yankee (see "Connecticut Yankee" above).
In July 1996 Northeast reported that it has been responding to a series of
requests from the NRC seeking assurance that the Millstone III unit will be
operated in accordance with the terms of its operating license and other NRC
requirements and regulations and dealing with a series of issues that Northeast
has identified in the course of these reviews. Providing these assurances and
addressing these issues will be components of an Operational Readiness Plan
(ORP) to be developed for the Millstone III unit. The ORP for Millstone III
was submitted to the NRC on July 2, 1996 and is presently being implemented.
On October 18 1996, the NRC informed Northeast that it will establish a
Special Projects Office to oversee inspection and licensing activities at
Millstone. The Special Projects Office will be responsible for (1) licensing
and inspection activities at Northeast's Connecticut plants, (2) oversight
of an independent corrective action verification program; (3) oversight of
Northeast's corrective actions related to safety issues involving employee
concerns, and (4) inspections necessary to implement NRC oversight of the
plants' restart activities.
On October 24, 1996 the NRC issued another order directing that prior to
restart of Millstone III, Northeast submit a plan for disposition of safety
issues raised by employees and retain an independent third-party to oversee
implementation of this plan. This third-party oversight will continue until
the situation is corrected. There is no estimate of how long this will take.
Northeast Management has indicated it cannot presently estimate the effect
these efforts will have on the timing of restarts or what additional costs, if
any, these developments may cause.
While Millstone III is out of service, Montaup will incur incremental
replacement power costs estimated at $0.4 million to $0.8 million per month.
Montaup bills its replacement power costs through its fuel adjustment clause, a
wholesale tariff jurisdictional to the FERC. However, there is no comparable
clause in Montaup's FERC-approved rates which at this time would permit Montaup
to recover its share of the incremental operation and maintenance costs
incurred by Northeast.
EUA cannot predict the ultimate outcome of the NRC inquiries or the impact
which they may have on Montaup and the EUA system. Montaup is also evaluating
its rights and obligations under the various agreements relating to the
ownership and operation of Millstone III.
Maine Yankee
On June 7, 1996, the NRC commissioned an independent Safety Assessment
Team to assess the conformance of the Maine Yankee Atomic Power Station to its
design and licensing basis. Montaup holds a 4.0% ownership interest in the
Maine Yankee Unit.
On October 7, 1996, the NRC released an Independent Safety Assessment
(ISA) report. In evaluating the Plant's conformance to its licensing basis,
the report concluded that Maine Yankee was in general conformance with its
licensing basis although significant items of nonconformance were identified
stemming from two closely related root causes: (1) economic pressure to be a
low-cost energy provider had limited available resources to address corrective
actions and some improvements and (2) a questioning culture was lacking, which
had resulted in a failure to identify or promptly correct significant problems
in areas perceived by Maine Yankee to be of low safety significance.
A letter to Maine Yankee from the Chair of the NRC, accompanying the ISA
report directed Maine Yankee to provide to the NRC its plans for addressing the
root causes of the deficiencies identified by the ISA.
In December, 1996 the unit was shut down for inspections and repairs to
resolve cable-separation and associated issues. While the plant has been out
of service, Maine Yankee, having previously detected indications of minor
leakage in a small number of the plant's 38,000 fuel rods, used the opportunity
to inspect the Plant's 217 fuel assemblies. As a result of the inspection,
Maine Yankee determined that several fuel assemblies that contained leaking
rods should be replaced and has commenced that process. On January 29, 1997
the NRC announced that it had placed the unit on its "watch list." The
operator expects the Plant to remain out of service until the fuel-assembly
replacement and a thorough inspection of the Plant's electrical cabling are
completed and associated issues resolved, and restarting the Plant is approved
by the NRC. The operator cannot now predict how long it will take to complete
those processes.
In February 1997, Maine Yankee and Entergy Nuclear, Inc. signed a contract
for Entergy to provide management services including plant operations at the
Maine Yankee plant through September 1997. Maine Yankee and Entergy have been
discussing the possibilities of a longer term contract.
General
Recent actions by the NRC, some of which are cited above, indicate that
the NRC has become more critical and active in its oversight of nuclear power
plants.
EUA is unable to predict at this time, what, if any, ramifications these
NRC actions will have on any of the other nuclear power plants in which Montaup
has an ownership interest or power contract.
Public Utility Regulation
Eastern Edison and Montaup are subject to regulation by the MDPU with
respect to the issuance of securities, the form of accounts, and in the case of
Eastern Edison, rates to be charged, services to be provided, and other
matters. Blackstone and Newport are subject to regulation in numerous respects
by the RIPUC and the RIDPUC, including matters pertaining to financing, sales
and transfers of utility properties, accounting, rates and service. In
addition, by reason of its ownership of fractional interests in certain
facilities located in other states, Montaup is subject to limited regulation in
those states. See Electric Utility Industry Restructuring.
IPPs, including OSP in which EUA Ocean State has a 29.9% ownership
interest, do not benefit from the PURPA exemptions and are subject to FERC
regulation under the Federal Power Act as well as various other federal, state
and local regulations.
The EUA System is subject to the jurisdiction of the SEC under the 1935
Act by virtue of which the SEC has certain powers of regulation, including
jurisdiction over the issuance of securities, changes in the terms of
outstanding securities, acquisition or sale of securities or utility assets or
other interests in any business, intercompany loans and other intercompany
transactions, payment of dividends under certain circumstances, and related
matters. Eastern Edison is a holding company under the 1935 Act by reason of
its ownership of securities of Montaup. As a subsidiary of EUA, a registered
holding Company, Eastern Edison is exempted from registering as a holding
company by complying with the applicable rules thereunder.
The Retail Subsidiaries and Montaup are also subject to the jurisdiction
of FERC under Parts II and III of the Federal Power Act. That jurisdiction
includes, among other things, rates for sales for resale, interconnection of
certain facilities, accounts, service, and property records.
The MDPU and RIPUC have approved a Memorandum of Understanding (MOU)
between Eastern Edison, Blackstone, Newport and Montaup. The MOU establishes a
framework for a coordinated, regional review of the resource planning and
procurement process of those companies. It is based on the assumption that
resource planning and procurement by a regional electric company may be
implemented more effectively under a coordinated, consensual review process
involving the EUA retail companies and the state public utility commissions to
which the EUA retail companies are subject. Pursuant to the terms of the MOU,
at least every two years Montaup and Eastern Edison will file with the MDPU and
Blackstone and Newport will file with the RIPUC an integrated resource plan
concurrently. The MOU outlines a mechanism and a timetable by which the reviews
by the two commissions will be coordinated and any inconsistencies among the
decisions by the state commissions will be resolved.
In conjunction with its approval of the MOU, the MDPU granted Eastern
Edison and Montaup an exemption from the MDPU's Integrated Resource Management
regulations, but required them to plan, solicit and procure additional
resources according to newly promulgated regional Integrated Regional Planning
procedures consistent with the MOU. The Integrated Resource Management Plan of
Blackstone and Newport meet the criteria of the RIPUC.
Implementation of the MOU is not expected to have a material effect on the
EUA System. The move to restructure the industry to a more competitive model
may, however, impact the role of the states in reviewing utilities' resource
planning and procurement activities. Massachusetts is currently reviewing the
need for its review of load forecasting and resource planning, recognizing that
resource procurement is now a competitive function. As competition becomes
more prevalent in the electric industry, it is anticipated that regulatory
review will decrease accordingly.
See Rates with respect to regulation of rates charged to customers. See
Environmental Regulation. See Fuel for Generation with respect to the disposal
of spent nuclear fuel. See Environmental Regulation of Nuclear Power and see
Nuclear Power Issues with respect to regulation of nuclear facilities by the
NRC. See also Electric Utility Industry Restructuring.
Rates
Rates charged by Montaup (which sells power only for resale) are subject
to the jurisdiction of FERC. The rates for services rendered by the Retail
Subsidiaries for the most part are subject to approval by and are on file with
the MDPU in the case of Eastern Edison and with the RIPUC in the case of
Blackstone and Newport. For the 12 months ended December 31, 1996, 62% of
EUA's consolidated revenues were subject to the jurisdiction of FERC, 15% to
that of the MDPU and 12% to that of the RIPUC. The remaining 11% of
consolidated revenues are not subject to jurisdiction of utility commissions.
For the twelve months ended December 31, 1996, 80.6% of Eastern Edison's
consolidated revenues were subject to the jurisdiction of the FERC and 19.4% to
MDPU. Additionally, rates charged by OSP are subject to the jurisdiction of
FERC. All OSP (Unit 1 and Unit 2) power contracts have been approved by FERC.
However, pursuant to the OSP unit power agreements, rate supplements are
required to be filed annually subject to FERC approval. This process may
result in rate increases or decreases to OSP power purchasers.
Recent general rate increases (reduction) for Montaup and the Retail
Subsidiaries are as follows
(In Thousands):
Applied For Effective<F1> Return on
Annual Annual Common
Revenue Date Revenue Date Equity %
Federal
- Montaup
M-14 $ (10,133) 3/21/94 $(13,992) 8/9/94<F2> 11.10 <F3>
Massachusetts
None
Rhode Island
- Blackstone
RIPUC - 2045
- Phase III 353 11/1/94<F4> 353 1/1/95
- Phase IV 152 10/23/95<F5> 152 1/1/96
RIPUC - 2498 3,094 11/15/96<F6> 2,821 1/1/97
- Newport
RIPUC - 2045
- Phase III 417 11/1/94<F4> 417 1/1/95
- Phase IV 179 10/23/95<F5> 179 1/1/96
RIPUC - 2498 1,437 11/15/96<F6> 1,425 1/1/97
____________________
<FN>
Notes:
<F1> Per final order or settlement agreement.
<F2> Settlement Agreement with all parties with an annual reduction of
$13,992,000 with billing credits to Middleboro over the period January
1995 through October 1999 totaling $496,000.
<F3> Rate used for AFUDC calculation purposes. Settlement contains no specific
finding on allowed common equity return.
<F4> RIPUC Docket No. 2045 was a generic docket for all Rhode Island utilities
reviewing FAS106 expenses. The effective amount represents the revenue
requirement for one-third of the tax deductible amount of the FAS106
expenses (see Rhode Island Proceedings below). As this was a single issue
proceeding, the RIPUC made no revisions to the allowed return on common
equity.
<F5> The revenue requirement represents 14.3% of the total FAS106 incremental
tax deductible amount to be recovered in each of the next seven years.
This annual revenue requirement recovers, over seven years, the FAS106
incremental tax deductible costs which were deferred by the companies in
Phases I&II and will be eliminated after the seven-year recovery.
<F6> The revenue requirement represents the compliance with R.I.G.L., 39-1-27.4
to file performance based rates reflecting the change in the Consumer Price
Index for the most recent 12 months ended September 30, 1996.
</FN>
FERC Proceedings:
On May 21, 1994 Montaup filed a rate application with FERC to reduce
annual revenues by $10.1 million. This request was intended to match more
closely Montaup's revenues with its decreasing cost of doing business resulting
from, among other things, a reduced rate base, lower capital costs and
successful cost control efforts. The application also included a request for
recovery of all of Montaup's FAS106 expenses as provided in FERC's generic
order of December 1992, including a five-year amortization of previously
deferred FAS106 costs. Also incorporated in this filing was a request to make
Newport an all requirements customer of Montaup. Settlement agreements were
certified by FERC with all intervenors with an annual base rate reduction of
approximately $14 million annually, (inclusive of the filed $10.1 million
reduction) effective as of August 1994.
On February 20, 1996, Montaup filed an application with FERC for network
and point-to-point transmission service tariffs. FERC required this tariff
application before granting a concurrent application of Duke/Louis Dreyfus
Energy Services (New England) L.L.C. for permission to charge market based
rates.
On July 9, 1996 Montaup refiled the application to conform with FERC open
access terms and conditions. On January 21, 1997 the application was refiled
to conform with the NEPOOL open access tariff. FERC has not yet acted upon the
filings.
Massachusetts Proceedings:
The MDPU has put all companies on notice that it expects them..."to
consider mergers or acquisitions in order to further optimize least-cost
planning efforts and better fulfill their obligations to serve." Thereafter,
the MDPU instituted an investigation, which was concluded on August 3, 1994,
for the purpose of establishing, among other things, guidelines and standards
for acquisitions and mergers of utilities and evaluating proposals regarding
the recovery of costs associated with such activities. It is not possible to
predict what effects, if any, the MDPU proceeding will have on the EUA System.
In December 1994, the MDPU approved a request made by Eastern Edison to
recover through a reconciling adjustment factor a portion of "lost base
revenues." Lost base revenue represents amounts the company would have
collected if it had not offered demand-side management and conservation and
load management programs to its customers.
On September 20, 1994, the MDPU issued a notice of inquiry and order
seeking comments on incentive regulation (MDPU 94-58). The inquiry was to
focus on incentive regulation, sometimes referred to as performanced-based
regulation, to replace in whole or in part its existing cost-of-service/rate-
of-return regulatory framework. Comments were filed by Eastern Edison and
other interested persons. On February 24, 1995, the MDPU issued an order
relating to implementation of incentive regulation. In the order, the MDPU
strongly encouraged all jurisdictional electric utilities to devise and propose
incentive plans. The objective of incentive regulation is to "provide market-
place benefits to consumers through (1) more efficient utility operations, (2)
stronger utility incentives for better cost control, and (3) enhanced
opportunities for lower rates." While no timetable was specified, the MDPU
stated the largest utilities should commence the incentive plan design process
as soon as possible. EUA cannot predict what effect, if any, the MDPU's order
will have on the EUA System. However, Eastern Edison's December 23, 1996
settlement agreement with Massachusetts Department of Energy Resources and that
State's Attorney General, expected to be formally submitted to the MDPU in
March 1997, contains performance based regulation standards. (See Electric
Utility Industry Restructuring under "Massachusetts Restructuring Settlement"
above).
On February 10, 1995, the MDPU issued a notice of inquiry and order on
electric industry restructuring (MDPU 95-30). The investigation was
established to determine: (1) how a restructuring of the Massachusetts electric
industry would promote competition and economic efficiency while expanding
opportunities that would benefit consumers, (2) whether and how to extend to
customers the option of choosing their own electric suppliers; (3) how such a
restructuring could be implemented; and (4) the appropriate regulatory
mechanisms to apply to a restructured electric industry.
After initial and second round comments were received, the MDPU held
hearings and issued its order on August 16, 1995. The order facilitates
increased competition by requiring investor-owned electric utilities to
unbundle their rates, provide consumers with accurate price signals, and enable
customer choice that allows consumers to purchase generation services
separately from transmission and distribution services. The order provides for
the recovery of net, non-mitigatable stranded costs that will result from the
transition from a regulated to a competitive industry structure.
The order sets forth the MDPU's overall goals for a restructured industry,
the essential characteristics of a restructured industry, as well as principles
to be considered in the transition to a restructured industry. Given the
complexity of the issues, the MDPU supported the multiple requests from
reviewers for a period during which participants can negotiate settlements.
The MDPU stated that consensus and settlements are more likely than litigation
to advance the restructuring process, and directed each company to undertake
negotiations with all interested participants to develop a plan for moving
toward competition in generation and retail customer choice, to decide the
amount and develop a mechanism for stranded cost recovery, and establish
unbundled rates. A collaborative group representing the full spectrum of MDPU
95-30 participants has been meeting in Massachusetts to discuss these issues.
The MDPU noted that while the concepts of competition and customer choice are
fundamental to restructuring, and the basic principles will apply to all
restructuring proposals, specific company corporate structures, service
territories, rate structures and stranded costs may require individual
consideration.
The MDPU established a specific schedule for restructuring proposals.
Massachusetts Electric Company, Boston Edison Company, and Western
Massachusetts Electric Company were required to file their settlements and
proposals by February 16, 1996. The remaining electric utilities are required
to file their settlements and proposals within three months of the issuance of
MDPU orders related to the restructuring proposals of the former three
companies. Companies are required to file the following information: (1) a
plan for moving from the current regulated industry structure to a competitive
generation market and to increased customer choice; (2) illustrative rates and
supporting information that indicate unbundled charges for generation,
distribution, transmission, and ancillary services; (3) an identifiable charge
reflective of the level of stranded costs to be recovered with all necessary
supporting information; and (4) a plan for incentive regulation in the
transmission and distribution systems. Eastern Edison filed its restructuring
plan on February 16, 1996 which was assigned MDPU Docket No. 96-24. A public
hearing was held on March 6, 1996. See Electric Utility Industry Restructuring
under "Massachusetts Restructuring Settlement" for a discussion of the December
23, 1996 settlement among Eastern Edison, Montaup, Massachusetts Department of
Energy Resources and the Massachusetts Attorney General. A formal settlement
plan under Docket No. 96-24 is expected to be filed with the MDPU in March
1997.
On December 30, 1996 the MDPU issued its Model Rules in Docket # 96-100,
the second phase of its investigation of the restructuring of the electric
utility industry in Massachusetts and proposed legislation for consideration by
the Massachusetts Legislature that would provide the MDPU with the mandate to
implement these rules. The MDPU has indicated that its overall goal is to
develop an efficient industry structure and regulatory framework that minimizes
costs to consumers while maintaining safe and reliable electric service with
minimum impact on the environment. Consistent with the overall goal, the Model
Rules provide for, among other things:
- customer choice of electricity supplier with local distribution
companies guaranteeing default service including continuation of low
income protections and discounts;
- independent central regional transmission system operator;
- non-discriminatory open access transmission;
- functional separation of distribution, generation and transmission;
- distribution services remain a regulated monopoly;
- commitment to significant environmental improvement;
- funding mechanism to provide financial support for renewable and
emerging technologies and continuation of demand-side management
programs;
- reasonable opportunity for recovery of stranded costs; and
- standards of conduct for distribution companies and their competitive
affiliates.
While Eastern Edison believes that its December 23, 1996 agreement with
the Attorney General and the Division of Energy Resources is consistent with
the requirements of these Model Rules, it is of the opinion that the MDPU has
the authority to approve the agreement without the need of additional
legislation or officially promulgating these Model Rules. See Electric Utility
Industry Restructuring, under "Massachusetts Restructuring Settlement," with
respect to settlement negotiations.
Rhode Island Proceedings:
On April 7, 1992, the RIPUC initiated generic Docket No. 2045 pertaining
to the FAS106 issue for all Rhode Island utility companies. On June 26, 1992,
Newport and Blackstone filed proposed rate increases to reflect the impact of
FAS106 of approximately $1.3 million and $2.7 million, respectively. An order
was issued on December 11, 1992 granting recovery of a tax deductible amount of
FAS106 phased into rates over a three-year period with the initial one-third to
be recovered no earlier than the first fiscal year beginning after December 15,
1992, and the deferrals of the first two years recovered in rates over the
seven-year period following the three-year phase-in. On December 21, 1992,
Newport and Blackstone filed compliance rates representing phase one of the
three-year phase-in. The Phase I revenue requirement, representing one third
of the incremental FAS106 tax deductible amount for Blackstone and Newport was
calculated to be $353,000 and $417,000, respectively. Phase II compliance was
filed November 1, 1993. The revenue requirement, representing two thirds of
the incremental FAS106 tax deductible expense for Blackstone and Newport was
calculated to be $706,000 and $834,000, respectively. Phase III compliance was
filed November 1, 1994. The revenue requirement, representing the full phase-
in of the incremental FAS106 tax deductible expense for Blackstone and Newport
were calculated to be $1,059,000 and $1,251,000, respectively. Phase IV
compliance was filed on October 23, 1995, recovering deferred amounts over 7
years, 14.3% each year starting January 1, 1996. The RIPUC also ordered that
all amounts recovered be placed in trusts permitted by the IRS which will
maximize tax deductibility.
Also, on January 14, 1994, the RIPUC issued a written order establishing
Docket No. 2167 for a Comprehensive Review of Newport's rate design. A
prehearing conference was held on February 8, 1994 at which time a schedule for
pre-filing testimony was established.
On May 20, 1994, Newport filed its Cost of Service Study (COSS) analysis
of the rates of return by customer class and an alternative rate design
proposal. The RIDPUC filed its recommendations with regard to cost allocation
and rate design on June 23, 1994. The United States Navy, Newport's largest
customer, filed its recommendations on June 24, 1994. On July 29, 1994 the
Company filed a Stipulation and Settlement Agreement (SSA) which had been
executed by the RIDPUC and TEC-RI. The parties signing the SSA agreed on
certain rate class revenue changes. While the settling parties did not agree
with the COSS techniques utilized by Newport, they agreed to accept the SSA
rather than litigating with respect to what might be deemed appropriate study
allocators and techniques. The rate class revenue changes generally reduce,
although they do not eliminate, inequities in the class rate of return.
Newport agreed to perform a new COSS to be submitted no later than July 1,
1996. At an open meeting on October 28, 1994, the RIPUC found that the SSA is
reasonable and in the best interests of the ratepayers. Rates established in
compliance with the RIPUC's October 28, 1994 finding, were effective January 1,
1995.
In December 1994, the United States Navy, filed a petition for a writ of
certiorari with the Rhode Island Supreme Court to review the RIPUC's decision.
A second motion to stay was filed by the Navy on December 21, 1995. On June
28, 1996 Newport filed its 1995 COSS and on July 8, 1996 the U.S. Navy filed a
Motion for Expedited Hearing. The RIDPUC took the position that the RIPUC's
order in Docket No. 2167 neither required nor set any timetable for additional
rate changes. The RIDPUC also indicated that it took no position regarding
either the merits of the COSS or the Navy's request for an expedited hearing.
The RIDPUC, at the RIPUC's request reviewed the results of the COSS as well as
the allocation methodologies employed. Additionally, the RIDPUC explored the
propriety of the Navy's request in light of the filing of unbundled rates
required to be made effective by the Restructuring Act of 1996. On February 3,
1997 the Navy filed a stipulation to withdraw the writ of certiori it had filed
in December 1994.
On June 27, 1994 TEC-RI petitioned the RIDPUC to investigate the propriety
of "the current bundled electric rates," and what might be required to
transition "... from a fully regulated to a more competitive retail electric
industry". A RIDPUC hearing officer was appointed on July 24, 1994 and Docket
No. D-94-9 was established. Blackstone and Newport were parties to the
proceeding.
Initial and reply comments were submitted to a comprehensive list of
issues. Many of the comments addressed a broad restructuring of the electric
utility industry. When the parties met on January 9, 1995, they decided that
TEC-RI's proposal for a "cooperative collaborative process," including the
RIDPUC as a party, rather than a litigated proceeding before the RIDPUC hearing
officer, was appropriate. Hence, the Rhode Island Collaborative
(Collaborative) was formed.
On May 12, 1995, the Collaborative submitted a Report and Set of
Interdependent Principles to the RIPUC. The 17 Interdependent Principles
represented the Collaborative's underpinnings for any restructuring proposal.
The Collaborative requested that the RIPUC establish a docket and conduct a
hearing to explore the settlement principles with a view to issuing an order
indicating whether the principles "provide a suitable basis for further
detailed negotiation by the parties, or in what respects they require
modification" and setting a deadline for the submission of a more detailed
proposal for restructuring.
The RIPUC responded to the Collaborative's request by creating Docket No.
2320, taking administrative notice of Docket No. D-94-9, and declaring that all
parties to the Division docket would be treated as intervenors in this docket.
The RIPUC conducted a technical conference on July 6, 1995 and a Public hearing
on July 11, 1995. On July 19, 1995 three of the principles were modified to
address concerns expressed by the RIPUC at the technical conference. On July
25, 1995, the Collaborative provided additional information on the principle
concerning renewables, and requested that the RIPUC approve the principles in
full.
On August 16, 1995, the RIPUC accepted the principles as modified,
deleting the principle concerning renewables and adding a principle concerning
negotiation. The Collaborative was directed to proceed with negotiations to
quantify specific issues involving competition and open access as well as the
other issues presented in the principles. A Collaborative Progress Report was
filed in February, 1996. Blackstone and Newport have been active participants
in the ongoing collaborative meetings. As a result of legislative actions and
the passing of the URA, Docket No. 2320 was formally closed and the
collaborative was disbanded.
In February 1997 the RIPUC initiated Docket No. 2509 to investigate
utility company storm contingency funds. Both Blackstone and Newport are
recovering through rates amounts for storm contingencies. A hearing was held
on February 28, 1997. Management cannot predict the ultimate outcome of this
investigation.
The RIPUC opened Docket No. 2514 to investigate the restructuring plan
filed by Blackstone and Newport on December 27, 1996 in compliance with the
URA. Hearings are scheduled to be held during April 1997. On February 28,
1997, Blackstone, Newport and Montaup reached settlement with the RIDPUC and
the Rhode Island Attorney General with regard to implementation of a
restructuring plan for Blackstone, Newport and Montaup. In addition to
complying with the URA, the settlement provides for an immediate 10% rate
reduction and a commitment by Montaup to file a plan by July 1, 1997 to divest
all of its generating assets. Management cannot predict the ultimate outcome
of this investigation. See Electric utility Industry Restructuring under
"Rhode Island Utility Restructuring Act of 1996" for a discussion of the URA
and settlement agreement.
Environmental Regulation
General:
The Retail Subsidiaries and Montaup and other companies owning generating
units from which power is obtained are subject, like other electric utilities,
to environmental and land use regulations at the federal, state and local
levels. The EPA, and certain state and local authorities, have jurisdiction
over releases of pollutants, contaminants and hazardous substances into the
environment and have broad authority in connection therewith, including the
ability to require installation of pollution control devices and remedial
actions. In 1994, an environmental audit program designed to ensure compliance
with environmental laws and regulations and to identify and reduce liability
was instituted for Montaup and the Retail Subsidiaries.
Federal, Massachusetts and Rhode Island legislation requires consideration
of reports evaluating environmental impact of large projects as a prerequisite
to the granting of various permits and licenses with a view of limiting such
impact. Federal, Massachusetts and Rhode Island air quality regulations also
require that plans for construction or modification of fossil fuel generating
facilities (including procedures for operation and maintenance) receive prior
approval from the MADEP or RIDEM. In addition, in Massachusetts, certain
electric generation and transmission facilities will be permitted to be built
only if they are consistent with a long-range forecast filed by the utility
concerned and approved by the Massachusetts Energy Facilities Siting Council.
In Rhode Island, siting, construction and modification of major electric
generating and transmission facilities must be approved by the Rhode Island
Energy Facility Siting Board.
Generating facilities in which Montaup and Newport have an interest, and
are required to pay a share of the costs, are also subject, like other electric
utilities, to regulation with regard to zoning, land use, and similar controls
by various state and local authorities.
The EPA and state and local authorities may, after appropriate
proceedings, require modification of generating facilities for which
construction permits or operating licenses have already been issued, or
impose new conditions on such permits or licenses, and may require that the
operation of a generating unit cease or that its level of operation be
temporarily or permanently reduced. Such action may result in increases in
capital costs and operating costs which may be substantial, in delays or
cancellation of construction of planned facilities, or in modification or
termination of operations of existing facilities.
Other activities of the EUA System from time to time are subject to the
jurisdiction of various other local, state and federal regulatory agencies. It
is not possible to predict with certainty what effects the above described
statutes and regulations will have on the EUA System.
The EPA has issued regulations relating to the generation, transportation,
storage and disposal of certain wastes under RCRA; in Massachusetts, the
requirements are implemented and enforced by the MADEP, whereas in Rhode
Island, RIDEM implements and enforces its own regulations under a state statute
comparable to RCRA as well as pursuant to EPA authorization.
There is an extensive body of federal and state statutes governing
environmental matters, including CERCLA, as amended by the Superfund Amendments
and Reauthorization Act of 1986; in Massachusetts, Chapter 21E, and, in Rhode
Island, the "Industrial Property Site Remediation and Reuse Act" (Brownfields
Legislation) which permit, among other things, federal and state authorities to
initiate legal action providing for liability, compensation, cleanup, and
emergency response to the release or threatened release of hazardous substances
into the environment and for the cleanup of inactive hazardous waste disposal
sites which constitute substantial hazards. Under CERCLA, Chapter 21E, and the
Rhode Island Brownfields Legislation, joint and several liability for cleanup
costs may be imposed on, among others, the owners or operators of a facility
where hazardous substances were disposed, the party who generated the
substances, or any party who arranged for the disposition or transport of the
substances. Due to the nature of the business of EUA's utility subsidiaries,
certain materials are generated that may be classified as hazardous under
CERCLA, Chapter 21E and Brownfields Legislation. As a rule, the subsidiaries
employ licensed contractors to dispose of such materials. See Item 3. LEGAL
PROCEEDINGS -- Environmental Proceedings.
The EPA, pursuant to TSCA, regulates the use, storage, and disposal of
PCBs and other dielectric fluids. Because the EUA System had owned and used
some electrical transformers containing PCBs, it is subject to EPA regulation
under TSCA. These PCB transformers have been either declassified or disposed
of in accordance with TSCA requirements. EUA currently uses mineral oil
transformers which may contain traces of PCB and which may be subject to
regulations pursuant to TSCA.
Electric and Magnetic Fields:
A number of scientific studies in the past several years have examined the
possibility of health effects from EMF that are found wherever there is
electricity. While some of the studies have indicated some association between
exposure to EMF and health effects, many others have indicated no direct
association. The research to date has not conclusively established a direct
causal relationship between EMF exposure and human health. Additional studies,
which are intended to provide a better understanding of EMF, are continuing.
On October 31, 1996, the National Academy of Sciences issued a literature
review of all research to date, "Possible Health Effects of Exposure to
Residential Electric and Magnetic Fields." Its most widely reported conclusion
stated, "No clear, convincing evidence exists to show that residential
exposures to EMF are a threat to human health."
Some states have enacted regulations to limit the strength of EMF at the
edge of transmission line rights-of-way. Rhode Island has enacted a statute
which authorizes and directs the Rhode Island Energy Facility Siting Board to
establish rules and/or regulations governing construction of high voltage
transmission lines of 69 kv or more. In addition, Rhode Island requires that,
in the context of reviewing an energy facility siting application, the
applicant submit for review by the Board, when applicable, any current
independent, scientific research pertaining to EMF exposure. Management cannot
predict the impact if any, which legislation(s) or other developments
concerning EMF may have on the EUA System.
Water Regulation:
The objective of the Federal Water Pollution Control Act is to restore and
maintain the chemical, physical, and biological integrity of the nation's
navigable waters. The elimination of pollutant discharges (including heat)
into navigable waters is one goal aimed at achieving this objective. Another
step mandated by the Federal Water Pollution Control Act was the creation of a
rigorous permit program. All water discharge permits for plants in
Massachusetts, including those for the Somerset and Canal plants, are issued
jointly by the EPA and MADEP. These same agencies also regulate certain
industrial stormwater discharges.
Standards have been established to control the dredging and filling of
wetlands under the Federal Water Pollution Control Act, the Massachusetts
Wetland Protection Act, Massachusetts Rivers Protection Act and the Rhode
Island Wetland Act. The EPA, the Army Corps of Engineers, RIDEM, the Rhode
Island Coastal Resources Management Council and the MADEP are pursuing a non-
degradation (no loss) policy for wetlands.
Under the Massachusetts Water Management Act, the MADEP is responsible for
promulgating regulations relating to water usage and conservation.
Most of the generating units from which Montaup obtains power operate
under permits which limit their effluent discharges into water and which
require monitoring and, in some instances, biological studies and toxicity
testing of the impact of the discharges. Such permits are issued for a period
of not more than five years, at the expiration of which renewal must be sought.
The permit for the Somerset plant was renewed on September 30, 1994 and expires
on September 30, 1998.
The Oil Pollution Act of 1990 was passed after several major oil spills
occurred in waters of the United States. The primary intent of this
legislation is to mandate strong contingency plans to prevent releases of oil
and to require that sufficient resources are in place and ready to respond to
any release. The Somerset plant has an approved plan which is in place and
operational. EPA, United States Coast Guard, RIDEM, and MADEP have a number of
other rules in place, such as EPA's Spill Prevention, Countermeasures and
Control Plan regulations, which are designed to minimize the release of oil and
other substances into navigable waters and the environment.
Air Regulation:
All fossil fuel plants from which Montaup obtains power operate under
permits which limit their emissions into the air and require monitoring of the
emissions. Air quality requirements adopted by state authorities in
Massachusetts pursuant to the Clean Air Act impose limitations with respect to
pollutants such as sulfur dioxide (SO2), oxides of nitrogen (NOx) and
particulate matter. Montaup's Somerset Station is permitted to burn coal which
results in SO2 emissions not in excess of 1.2 pounds per million BTU heat
release potential (approximately 0.75% sulfur content coal). The Canal Station
Unit 2 is permitted to burn fuel oil which results in SO2 emissions not in
excess of 1.2 pounds per million BTU heat release potential (approximately 1%
sulfur content fuel oil).
The EPA has established clean air standards for certain pollutants,
including standards limiting emissions from coal-fired and oil-fired
generators. Congress passed amendments to the Clean Air Act in 1990 which
created additional regulatory programs and generally updated and strengthened
air pollution control laws. These amendments expand the regulatory role of the
EPA regarding emissions from electric generating facilities. Title IV of the
Clean Air Act Amendments addresses acid deposition abatement and establishes a
two-phase utility power plant pollution control program to reduce emissions
of SO2 and NOx. The first phase began in 1995 and affected approximately 261
large units in 21 eastern and midwestern states. Phase II, which begins in the
year 2000, tightens the emission limits imposed on these larger plants and also
sets restrictions on smaller, cleaner plants fired by coal, oil and gas.
Montaup's Somerset Station is classified as a Phase II facility with a
compliance deadline by the end of 1999. The control program establishes a
national cap of 8.90 million tons per year for SO2 emissions. Beginning in the
year 2000, the EPA will issue 8.90 million SO2 allowances to utilities
annually. The SO2 allowance program will not affect Montaup's Somerset Station
or Canal Unit 2 until January 1, 2000.
Massachusetts MADEP regulations establish a statewide cap on SO2 emissions
and required Montaup's facilities to meet an average emission rate of 1.2
pounds of SO2 per million BTU of fuel input by the end of 1994. Under federal
standards, Montaup would not be required to meet this SO2 emission level until
the year 2000 as a result of Title IV of the Clean Air Act. However,
Massachusetts MADEP regulations require compliance five years earlier. As
required by state regulations, Montaup submitted and received approval of a
plan detailing how it would meet the 1995 SO2 standard. Montaup is now
achieving compliance by substituting lower sulfur content fuels.
Other provisions of the Clean Air Act Amendments will likely impact
Montaup. Title I of the Act sets a strategy for states to move toward
attaining national air quality standards, with the emphasis on meeting the
ozone standard. Ozone relates directly to the nation's smog problem. NOx is
one of the precursors of ozone formation. Title I requires additional controls
on industrial sources of NOx including utility power plants. The Act creates
the Northeast Ozone Transport Region, covering the area from Virginia to Maine,
including Massachusetts and Rhode Island. Areas within the transport region
will become subject to enhanced controls on NOx emissions.
In April 1992, NESCAUM, an environmental advisory group for eight
Northeast states including Massachusetts and Rhode Island issued
recommendations for nitrogen oxide controls for existing utility boilers
required to meet the ozone non-attainment requirements of the Clean Air Act
Amendments. The NESCAUM recommendations are more restrictive than EPA's
requirements. The MADEP and RIDEM have amended their regulations in accordance
with the NESCAUM recommendations and require that Reasonably Available Control
Technology (RACT) be implemented at all stationary sources potentially emitting
50 tons per year or more of NOx. Montaup has initiated compliance through,
among other things, selective, noncatalytic reduction processes. MADEP has
proposed regulations which would require additional NOx emission reductions
beginning on May 1, 1999. Montaup is evaluating its compliance options under
this proposed regulation.
Title V of the Clean Air Act Amendments provides EPA with broad new
permitting authority, with the goal of having states begin to issue federally
enforceable operating permits in 1995 which will outline limits and conditions
necessary to comply with all applicable air requirements. The Clean Air Act
Amendments' permitting program will be phased in over a couple of years.
Montaup submitted its initial Operating Permit Application under this program
on May 5, 1995. On September 20, 1995, MADEP issued Montaup an Administrative
Completeness Determination and Application Shield for its Operating Permit
Application. This application is still under DEP review. Although individual
sources will be required to pay fees to the various states which will
administer the program, the impact of these requirements is not expected to
have a material financial impact on the EUA System.
On November 27, 1996, the EPA announced that, under the Clean Air Act, it
was proposing to toughen the nation's ozone standards as well as the
particulate matter standards. The states will be responsible for writing plans
to bring themselves into compliance. States would have until the year 2000
to submit ozone plans and until the year 2002 to submit particulate plans.
After that, the states will have a few more years to meet the established
goals. At this time, management is unable to predict the financial impact this
rule might have on the EUA system, once it is issued in its final form. Once
the public comment period is completed, the EPA plans to promulgate final rules
in June 1997.
On December 23, 1996, Eastern Edison, Montaup, the Massachusetts Attorney
General and Division of Energy Resources reached a settlement in principle
regarding electric utility restructuring in the State of Massachusetts. The
proposed settlement includes a plan for emissions reductions related to
Montaup's Somerset Station Units 5 and 6, and to Montaup's 50% ownership share
of Canal Electric's Unit #2. The basis for SO2 and NOx emission reductions in
the proposed settlement is an allowance cap calculation. Within this allowance
cap, the following commitments were made:
- Montaup may meet its allowance caps by any combination of control
technologies, fuel switching, operational changes, and/or the use of
purchased or surplus allowances;
- On January 1, 2000, Somerset Units 5 & 6 will comply with an annual SO2
emission rate of 0.30 lbs/mmBtu;
- On January 1, 2000, Units 5 & 6 will comply with a NOx emission rate of
0.21 lbs/mmBtu for the seven months outside the ozone season, and 0.15
lbs/mmBtu during the five month ozone season (May through September).
The cost Unit 6 must incur to comply with this NOx limit is capped at
$405,000 per year until January 1, 2003. Unit 5, if reactivated, will
comply with the above NOx limit with no cost cap; and
- On January 1, 2010, Canal Electric's Unit #2 will comply with an SO2
emission rate of 0.30 lbs/mmBtu, and a NOx emission rate of 0.15
lbs/mmBtu, on an annual basis; this commitment was made only for
Montaup's 50% ownership share of Canal 2.
The formal settlement is expected to be submitted to the MDPU in March
1997.
Environmental Regulation of Nuclear Power
The NRC has promulgated a variety of standards to protect the public from
radiological pollution caused by the normal operation of nuclear generating
facilities. For example, the NRC requires licensed facilities to develop plans
to respond to unexpected developments.
In some environmental areas the NRC and the EPA have overlapping
jurisdiction. Thus, NRC regulations are subject to all conditions imposed by
the EPA and a variety of federal environmental statutes, including obtaining
permits for the discharge of pollutants (including heat) into the nation's
navigable waters. In addition, the EPA has established standards, and is in
the process of reviewing existing standards, for certain toxic air pollutants,
including radionuclides, under the Clean Air Act Amendments which apply to NRC-
licensed facilities. In fact, in December of 1996, the EPA issued a final
rule rescinding previously published limitations on radionuclide emissions to
ambient air, as applied to NRC or NRC Agreement state licensed facilities other
than commercial nuclear power reactors. The EPA has also promulgated
environmental radiation protection standards for nuclear power plants. These
standards regulate the doses of radiation received by the general public.
The NWPA provides for development by the federal government of facilities
for the disposal or permanent storage of civilian nuclear waste. For further
details about NWPA, see Fuel for Generation above. The NRC has also
promulgated regulations regarding the disposal of nuclear waste materials
designed to protect the public from radiological dangers.
Environmental regulation of nuclear facilities in which the EUA System has
an interest or from which they purchase power may result in significant
increases in capital and operating costs, in delays or cancellation of
construction of planned improvements, or in modification or termination of
existing facilities.
Item 2. PROPERTIES
Power Supply
Montaup currently supplies the EUA System with nearly 100% of its electric
requirements. Newport became an all-requirements customer of Montaup on May
21, 1994. At the same time, Montaup assumed all of Newport's power contracts
and began leasing all of Newport's generation facilities and a portion of
Newport's transmission facilities. In 1996, the EUA System's wholly owned
generating units referred to in the following table consisted of Montaup's jet-
fueled peaking units (Somerset Jet 1 and Jet 2) and Somerset 6 which was
converted from oil to coal burning in 1983, Blackstone's Pawtucket Hydro, which
was repowered in 1985 and Newport's diesel peaking units (Eldred in Jamestown
and Jepson in Portsmouth) which supply the EUA System with 8 mw and 8.25 mw,
respectively. With the exception of Somerset's Jet 1 and Jet 2, Montaup has
not significantly increased its wholly owned generating units since 1959. The
EUA System has found it more economically beneficial to join with other
utilities in the joint ownership of large generating units and in long-term
purchase contracts, and to supplement these sources with short-term purchases
as required. EUA believes that spreading the EUA System's sources of
electricity among a number of plants should improve the reliability of its
power supply and limit the financial exposure relating to construction and
potentially prolonged outages of a generating unit. Current forecasts
indicate that the combination of company owned generation, current long-term
purchased power contracts, expected short-term power opportunities, and the
System's C&LM programs, should meet EUA System capacity requirements. See
Electric Utility Industry Restructuring under "Rhode Island Utility
Restructuring Act of 1996" and "Massachusetts Restructuring Settlement" for a
discussion of plans to divest all of Montaup's generating assets.
The 1996 peak EUA System demand was approximately 854 mw experienced on
August 6, 1996.
EUA SYSTEM CAPABILITY
GENERATING UNITS IN SERVICE AS OF DECEMBER 31, 1996
GROSS WINTER MAX GROSS NET
IN SYSTEM CLAIMED SYSTEM UNIT SYSTEM
SERVICE SHARE CAPABILITY SHARE SALES SHARE
DATE UNIT NAME FUEL TYPE OWNER/OPERATOR % MW MW MW MW
100% OWNERSHIP:
1959 SOMERSET 6 COAL MONTAUP ELECTRIC CO. 100.00 110.00 110.00 0.00 110.00
1970 SOMERSET J1 JET OIL MONTAUP ELECTRIC CO. 100.00 22.00 22.00 0.00 22.00
1971 SOMERSET J2 JET OIL MONTAUP ELECTRIC CO. 100.00 21.20 21.20 0.00 21.20
1985 PAWTUCKET HYDRO HYDRO BLACKSTONE VALLEY ELEC. 100.00 1.24 1.24 0.00 1.24
1961 JEPSON DIESEL NEWPORT ELECTRIC CORP. 100.00 8.80 8.80 0.00 8.80
1978 ELDRED DIESEL NEWPORT ELECTRIC CORP. 100.00 8.25 8.25 0.00 8.25
SUBTOTAL: 171.49 0.00 171.49
JOINT OWNERSHIP:
1976 CANAL 2 NO. 6 OIL CANAL ELECTRIC COMPANY 50.00 586.00 293.00 60.03 232.97
1978 WYMAN 4 (YAR 4) NO. 6 OIL CENTRAL MAINE POWER CO. 2.63 620.00 16.30 0.00 16.30
1986 MILLSTONE 3 NUCLEAR NORTHEAST UTILITIES 4.01 1145.70 45.93 0.00 45.93
1990 SEABROOK NUCLEAR NORTH ATLANTIC ENERGY CORP 2.90 1162.00 33.70 0.00 33.70
SUBTOTAL: 388.93 60.03 328.90
EQUITY OWNERSHIP:
1972 MAINE YANKEE NUCLEAR MAINE YANKEE ATOMIC POWER 3.59 879.00 31.57 0.00 31.57
1972 VERMONT YANKEE NUCLEAR VT. YANKEE NUCLEAR POWER 2.25 531.00 11.95 0.00 11.95
SUBTOTAL: 43.52 0.00 43.52
PURCHASED POWER:
1968 CANAL 1 NO. 6 OIL CANAL ELECTRIC COMPANY 25.00 562.00 140.50 0.00 140.50
1972 PILGRIM 1 NUCLEAR BOSTON EDISON COMPANY 11.00 670.11 73.71 0.00 73.71
1977 POTTER 2 GAS/OIL BRAINTREE ELEC. LIGHT DEPT 41.67 96.00 40.00 0.00 40.00
1975 CLEARY 9 GAS/OIL TAUNTON MUNIC. LIGHTING 22.73 110.00 25.00 0.00 25.00
1984 MCNEIL WOOD VERMONT ELECTRIC POWER 15.24 53.00 8.08 0.00 8.08
1972 BERLIN A&B JET OIL GREEN MOUNTAIN POWER 22.77 57.10 13.00 0.00 13.00
1974 BEAR SWAMP GT1 HYDRO NEW ENGLAND POWER 5.09 294.50 15.00 0.00 15.00
1974 BEAR SWAMP GT2 HYDRO NEW ENGLAND POWER 5.10 294.00 15.00 0.00 15.00
1990 OSP 1 GAS OCEAN STATE POWER 28.00 287.00 80.36 0.00 80.36
1991 OSP 2 GAS OCEAN STATE POWER 28.00 287.00 80.36 0.00 80.36
1991 NEA GAS NORTHEAST ENERGY ASSOC. 8.62 333.43 28.74 0.00 28.74
1982/1986 STONY BROOK 2A&2B NO. 2 OIL MA MUNIC. WHOLESALE ELEC. 5.88 170.00 10.00 0.00 10.00
1970 NU JETS JET OIL NORTHEAST UTILITIES 25.61 97.60 25.00 0.00 25.00
SUBTOTAL: 554.75 0.00 554.75
HYDRO QUEBEC ENTITLEMENT:
1991 HYDRO QUEBEC I&II HYDRO HQ / NEPOOL 4.06 1215.00 49.31 0.00 49.31
SUBTOTAL: 49.31 0.00 49.31
TOTAL GROSS SYSTEM CAPABILITY (MW) -------------------- 1,208.00
LESS: UNIT CONTRACT SALES (MW) --------------- 60.03
TOTAL NET SYSTEM CAPABILITY (MW) ------------- 1,147.97
Montaup's participation in generating units of which it is not the sole
owner takes various forms including stock (equity) ownership, joint ownership
and purchase contracts. In most cases (other than short-term purchased power
contracts) the purchaser is required to pay its share (i.e., the same
percentage as the percentage of its entitlement to the output) of all of the
costs of the generating unit (whether or not the unit is operating) including
fixed costs, operating costs, costs of additional construction or modification,
costs associated with condemnation, shutdown, retirement, or decommissioning of
the unit, and certain transmission charges. Under its contracts with Maine
Yankee, Connecticut Yankee Atomic Power Company, Vermont Yankee Nuclear Power
Corporation and Yankee Atomic and, under its agreements relating to Phase II of
the interconnection with Hydro-Quebec, Montaup may be called upon to provide
additional capital and/or other types of direct or indirect financial support.
(See Item 1. BUSINESS -- Nuclear Power Issues.)
Other Property
The EUA System owns approximately 4,600 miles of transmission and
distribution lines and approximately 85 substations located in the cities and
towns served.
Blackstone owns approximately 1,000 miles of transmission and distribution
lines and approximately 23 substations located in the cities and towns served.
Blackstone also owns 100% of a 1.2-mw hydroelectric generating plant located in
Pawtucket, Rhode Island. See Note E of Notes to Financial Statements in
Blackstone's 1996 Annual Report (Exhibit 13-1.01 filed herewith) regarding
encumbrances.
Eastern Edison and Montaup own approximately 3,200 miles of transmission
and distribution lines and approximately 48 substations located in the cities
and towns served. See Note F of Notes to Consolidated Financial Statements in
Eastern Edison's 1996 Annual Report (Exhibit 13-1.08 filed herewith) regarding
encumbrances.
Newport owns approximately 400 miles of transmission and distribution
lines and approximately 14 substations located in the cities and towns served.
See Note E to Notes to Consolidated Financial Statements contained in EUA's
Annual Report to Shareholders for the year ended December 31, 1996, (Exhibit
13-1.03 filed herewith) regarding encumbrances.
In addition to the above, the Retail Subsidiaries, Montaup, and EUA
Service also own several buildings which house distribution, maintenance or
general office personnel. See Note E of Notes to Consolidated Financial
Statements contained in EUA's Annual Report to Shareholders for the year ended
December 31, 1996, (Exhibit 13-1.03 filed herewith) regarding encumbrances.
Item 3.
LEGAL PROCEEDINGS
Rate Proceeding
See descriptions of proceedings under Item 1, BUSINESS -- Rates.
Environmental Proceedings
1. In March 1985, Blackstone was notified by the DEQE, which is now the
MADEP, that it had been identified, along with other parties, as a potentially
responsible party under Massachusetts law for a condition of soil and ground
water contamination in Lowell, Massachusetts. The site in question was
occupied by a scrap metal reclamation facility which received transformers and
other electrical equipment from utility companies and others from the early
1960s until 1984. Among the contaminants apparently released at the site were
PCBs. The potentially responsible parties (PRPs), including Blackstone,
performed site studies and proposed a remedial action plan, which was approved
by the DEQE several years ago. Since that time, the PRPs have negotiated over
access, taxes and similar issues with the site owner and other parties. The
remedial option selected but not yet completed is a process of solidification;
however, a risk assessment that may now be required could lead the PRPs to
choose capping as the remedial option. The cost of implementing either remedy
could vary from $250,000 for capping to $600,000 for solidification.
Blackstone is alleged to be the fifth ranked generator out of approximately
twenty potentially responsible parties. However, Blackstone's estimated 2%
share allocation is considerably less than the shares of the four largest
contributors at the site. As a result, Blackstone expects to be offered a de
minimis party buyout settlement from the major members of the site PRPs.
2. On July 14, 1987, the Commonwealth of Massachusetts (the Commonwealth)
on behalf of the MADEP filed a cost recovery action pursuant to CERCLA and
Mass. Gen. Laws Chapter 21E against Blackstone in the United States District
Court for the District of Massachusetts (District Court). The Complaint seeks
$2.2 million in costs incurred by MADEP in the cleanup of an alleged coal
gasification waste site at Mendon Road in Attleboro, Massachusetts. In October
1987, without admitting liability, Blackstone entered into an administrative
Consent Order with MADEP regarding the Mendon Road site and another alleged
coal gasification site discovered by the MADEP approximately 1/4 mile away
known as the Lawn/Knoll site in Attleboro. Blackstone agreed to perform
preliminary assessments at both sites in order to determine what remediation,
if any, was necessary at the site. In 1988, Blackstone submitted Phase II
testing results for the Lawn/Knoll site to the MADEP for review and approval.
On April 24, 1996, MADEP ordered Blackstone to conduct additional site
assessment work at the Lawn Street site. Blackstone retained the services of
Atlantic Environmental Services to conduct the site assessment pursuant to the
Massachusetts Contingency Plan and on August 15, 1996 Blackstone signed an
amended Administrative Consent Order Tier IB permit. It is expected that
Atlantic will begin the site assessment work in the Spring of 1997. On May
26, 1993, the MADEP requested Blackstone to submit additional Phase I testing
for the Mendon Road site which was completed and sent to the MADEP on December
20, 1993. Meanwhile, Blackstone has contested the MADEP's cost recovery
action, arguing, inter alia, that the waste removed from the Mendon Road site,
ferric ferrocyanide (FFC), was not "hazardous" within the meaning of CERCLA or
Mass. Gen. Laws Chapter 21E and the MADEP's cleanup actions were inconsistent
with the National Contingency Plan (NCP). On November 25, 1991, the District
Court held that the waste was "hazardous" within the meaning of both statutes
and on December 20, 1992, the District Court held Blackstone and a co-
defendant, the Courtois Sand & Gravel Co. (Courtois) liable for an undetermined
amount of cleanup costs. The District Court remanded the case to the MADEP to
supplement the administrative record with Blackstone's oral and written
comments concerning the cleanup. On March 19, 1993, Blackstone made an oral
presentation to the MADEP and on April 19, 1993, Blackstone submitted written
comments. On December 13, 1994, the District Court issued a judgment against
Blackstone finding Blackstone liable to the Commonwealth for the full amount of
response costs incurred by the Commonwealth in the cleanup of the Mendon Road
site. The judgment also found Blackstone liable for interest and litigation
expenses calculated to the date of judgment. The total liability at December
31, 1994 was approximately $5.9 million, including approximately $3.6 million
in interest which has accumulated since 1985.
On January 20, 1995, Blackstone entered into an escrow agreement with the
Commonwealth whereby Blackstone deposited $5.9 million with an escrow agent who
transferred the funds into an interest bearing money market account. The
distribution of the proceeds of the escrow account will be determined upon the
final resolution of the judgment. No additional interest expense will accrue
on the judgment amount.
Blackstone filed a Notice of Appeal of the District Court's judgment and
filed its brief with the United States Court of Appeals for the First Circuit
(Circuit Court) on February 24, 1995. On October 6, 1995, the Circuit Court
vacated the District Court's $5.9 million judgement. Rather than remand the
case to the District Court for a trial on the issue of whether ferric
ferrocyanide (FFC) is a hazardous substance, the Circuit Court exercised its
primary jurisdictional powers to send the matter to the EPA for an
administrative determination on the issue. If the EPA determines that FFC is
not a hazardous substance, given the present posture of the case, Blackstone
may not be liable to reimburse the Commonwealth for the Mendon Road cleanup
costs. On January 9, 1997, Blackstone met with representatives of EPA and the
Commonwealth to discuss the procedure EPA would follow in resolving the FFC
issue. In January 1997, Blackstone submitted written comments to be followed
by the Commonwealth's written reply. EPA will then determine whether FFC is
hazardous substance. Further court proceedings are likely.
On January 28, 1994, Blackstone filed a Complaint in the Massachusetts
District Court seeking, among other relief, contribution and reimbursement from
Stone & Webster Inc., of New York City and several of its affiliated companies
(Stone & Webster), and Valley Gas Company of Cumberland, Rhode Island (Valley)
for any damages incurred by Blackstone regarding the Mendon Road site.
Blackstone's Complaint also seeks a declaratory judgment that Stone & Webster
and Valley owned and/or operated a coal gasification plant on Tidewater Street
in Pawtucket (the Tidewater Plant) where the coal gasification waste allegedly
was generated, and that they individually or collectively arranged for the
disposal of such waste at Mendon Road. The District Court has denied motions
to dismiss the complaint filed by Stone & Webster and Valley in 1994. This
proceeding was stayed in December 1995 pending final EPA determination as to
whether FFC is a hazardous substance. On March 22, 1996, Blackstone and Valley
filed a Complaint in the Rhode Island District Court seeking contribution from
Stone & Webster for the cleanup of the Tidewater site mentioned below.
Blackstone has notified certain liability insurers and has filed claims
with respect to the Mendon Road site. Blackstone is actively pursuing coverage
from other carriers for the Mendon Road, Tidewater, Lawn/Knoll, Cumberland, and
Woonsocket Sites.
3. On October 28, 1986, RIDEM notified Blackstone that there may have been
a release of hazardous material at the Tidewater Plant site in Pawtucket, Rhode
Island. The site was placed on EPA's CERCLA list in 1987. The site includes
the Tidewater Plant owned by Valley Gas Company (approximately 10 acres), the
No. 1 Station owned by Blackstone (approximately 10 acres), and land formerly
owned by Blackstone that was sold in 1968 to the City of Pawtucket
(approximately 10 acres). RIDEM told Blackstone that the site contained
hazardous wastes and petroleum-contaminated soils due to tanks formerly located
at the site. In December, 1990, after obtaining approval from RIDEM,
Blackstone removed approximately 1,000 tons of soil from the site. On
September 3, 1991, RIDEM initiated a site investigation which constitutes the
second step in a site screening and assessment process established by the EPA
to determine whether the site should be listed as a Superfund site. On
February 3, 1993, RIDEM notified Blackstone that it required further assessment
and evaluation of site conditions to determine if the site qualifies for review
pursuant to the Hazardous Ranking System. On September 12, 1995, RIDEM
notified Blackstone and Valley of their responsibility regarding the release of
hazardous substances at the Tidewater Plant site. RIDEM ordered Blackstone
and Valley to conduct an environmental study of the Tidewater Plant site and
adjoining lots. On the adjacent lots are the Francis J. Varieur Elementary
School and the Max Read Field athletic facility and ball fields. Blackstone
and Valley have entered into an agreement to share the expenses of conducting
the study and/or retaining an environmental consulting firm to conduct a
Remedial Investigation. A work plan was submitted to RIDEM in April 1996 and
it was approved on June 14, 1996. Field work was completed in September 1996.
RIDEM is currently reviewing the draft Remedial Investigation Report. It is
expected that RIDEM will order further investigation and remedial clean up.
On September 12, 1995, RIDEM demanded payment of $296,000 which represents
the amount of money plus interest RIDEM expended to clean up oxide box waste at
the Cumberland, Rhode Island site. Following extended discussions and
negotiations with legal counsel on behalf of RIDEM, Blackstone was able to
reach an agreement with RIDEM to escrow approximately $296,000 in an interest-
bearing account pending the outcome of EPA's remand proceedings to determine
whether FFC is a hazardous substance. This money has been placed in an
interest-bearing escrow account by Blackstone pending the outcome of EPA's
proceedings. If Blackstone convinces EPA that FFC is not a hazardous
substance, Blackstone will be able to recover the escrowed funds on the basis
that RIDEM's clean up of the site in 1986 was not required by law. If EPA
determines that FFC is a hazardous substance, Blackstone will pursue its legal
remedies in district court in Massachusetts to convince the court that FFC is
not a hazardous substance.
On January 10, 1997, Blackstone, Valley, and a representative of RIDEM met
at Valley's Woonsocket property, which is the site of a former manufactured gas
plant owned by Blackstone's and Valley's predecessor, Blackstone Valley Gas &
Electric company and its predecessor, the Woonsocket Gas Company. It is
anticipated the RIDEM will order Blackstone and Valley to conduct a site
assessment of the site in 1997.
4. Montaup and EUA Service received a Notice of Responsibility on July 27,
1987, from the MADEP for suspected hazardous material at a site owned by
Montaup on Hortonville Road in Swansea, Massachusetts. Montaup has completed
investigative and remedial actions in accordance with new Massachusetts
Contingency Plan regulations. The total cost of the cleanup was less than
$150,000.
5. During March-April 1990, Eastern Edison conducted a limited
environmental investigation (Phase I study) of a portion of its Dupont
Substation in Brockton, Massachusetts. During the investigation, Eastern
Edison notified the MADEP that it had encountered oils and PCBs. On May 3,
1990, the MADEP notified Eastern Edison of its liability for releases of oil
and/or hazardous materials at the site, and requested a copy of the Phase I
study. Following its review of the Phase I study on January 23, 1991, the
MADEP issued a Notice of Responsibility to Eastern Edison requiring a Phase II
- - - Comprehensive Site Investigation. A scope of work for the Phase II study was
submitted on April 12, 1991. In August 1994 a transition statement issued by
MADEP reclassifying the site from a Tier IA site to a Tier IB site was signed
by Eastern Edison and submitted to MADEP. That reclassification enabled
the site to be investigated and cleaned up under the guidance of a licensed
site professional without MADEP approval for each action taken. Cleanup
activities were completed in 1996 in accordance with DEP regulations and an
Activity and Use Limitation was filed for the site. The total cost of the
cleanup was approximately $550,000.
6. In November 1996, oily deposits containing PCB were found in the Canal
Electric gas pipeline lateral and certain in-plant equipment. This
contamination was a result of a malfunction of a shut-off valve in the meter
station outside of Canal plant's jurisdiction. Cleanup and improvement costs
are estimated to be between $500,000 and $1 million. Pending final cost
allocation and reimbursement, Montaup's share of the costs is expected to be
minimal. The cleanup is scheduled for completion in the first quarter of
1997.
Blackstone, Eastern Edison, Montaup and EUA Service are unable to predict
the outcome of any of the foregoing environmental matters or to estimate the
potential costs which may ultimately result. It is the policy of these
companies in such cases to provide notice to liability insurers and to make
claims. However, it is not possible at this time to predict whether liability,
if any, will be assumed by, or can be enforced against, the insurance carriers
in these matters. Under CERCLA, each responsible party can be held "jointly
and severally" liable for clean-up costs. EUA or a subsidiary could thus be
held fully liable for environmental damages for which they were only partially
responsible. However, EUA might then be entitled to recover costs from other
PRPs.
As of December 31, 1996, the EUA System has incurred costs of
approximately $5.7 million (excluding the Mendon Road judgment) in connection
with the foregoing environmental matters. EUA estimates that additional
expenditures (excluding the Mendon Road judgment) may be incurred through
1998 of up to $2.8 million, substantially all of which relate to Blackstone.
As a general matter, the EUA System will seek to recover costs relating to
environmental proceedings in their rates. Blackstone is recovering in rates
certain of its incurred costs over a five-year period. Montaup is currently
recovering certain of its incurred costs in its rates. Estimated amounts after
1998 are not now determinable since site studies which are the basis of these
estimates have not been completed. As a result of the recoverability in
current rates and the uncertainty regarding both its estimated liability, as
well as potential contributions from insurance carriers and other responsible
parties, EUA does not believe that the ultimate impact of the environmental
costs will be material to the financial position of the EUA System or to any
individual subsidiary and thus, no loss provision is required at this time.
EUA WestCoast L.P.
In June 1993, EUA WestCoast L.P., a partnership in which EUA Cogenex is
the managing partner, filed a lawsuit against the contractors responsible for
the design and construction of a 1.5 mw cogeneration facility, as well as the
surety which issued a performance bond guaranteeing construction. Certain
defendants in that action have filed cross-complaints against EUA WestCoast and
EUA Cogenex, seeking, among other things, approximately $300,000 for payments
withheld by EUA WestCoast due to the contractor's deficient performance,
contribution and indemnity. A contractor has also filed a cross-complaint
against the host. Additionally, the host has filed a cross-complaint against
EUA Cogenex and the other parties in the litigation, seeking approximately $7
million in damages arising principally from lost economic advantage. EUA
WestCoast filed its own cross complaint against the host affirmatively
seeking damages. The above litigation was settled in the fourth quarter of
1996. The settlement called for, among other things, a payment to EUA Cogenex
of $2.8 million and a general release by all parties to the lawsuit. The
settlement was enforced by the courts and payment was received in December
1996.
Ridgewood
In September 1995, EUA FRC II Energy Associates, Micro Utility Partners of
America, L.P., and EUA Westcoast, L.P., each of which is a partnership of which
EUA Cogenex is the managing partner (the Partnerships) and EUA Cogenex entered
into an assignment agreement with Ridgewood/Mass. Corp. (f/k/a Ridgewood Cogen
Corporation) (Ridgewood) whereby Ridgewood acquired the benefits and obligation
to certain cogeneration projects from EUA Cogenex and the Partnerships. In
1996, the Partnerships and EUA Cogenex filed a suit in the United States
District Court for the district of Massachusetts against Ridgewood and others
seeking payment of approximately $518,000, resulting from Ridgewood's failure
and refusal to pay for services provided on their behalf under a certain
Transition Period Agreement between and among the parties. On December 2,
1996, Ridgewood filed a demand for arbitration in Boston, Massachusetts with
regard to such claim and with regard to an alleged breach of representations
and warranties by EUA Cogenex and the Partnerships under the assignment
agreement. Ridgewood seeks a total of approximately $4.3 million. The federal
court action has been dismissed without prejudice pending the arbitration. In
the arbitration, EUA Cogenex and the Partnerships have filed a counterclaim in
which they also seek a determination that certain provisions of the assignment
agreement are binding and enforceable according to their terms. The amount in
controversy with respect to the counterclaims has not yet been determined.
Management cannot determine at this time the ultimate outcome of these
proceedings.
Other Proceedings
On December 15, 1995, Eastern Edison exercised its right to terminate a
Power Purchase Agreement (PPA) entered into with the Meridian Middleboro
Limited Partnership (MMLP) and a related entity on September 20, 1993. In
February and May of 1996, MMLP made demands for over $25 million under the
termination provision of the PPA. On June 17, 1996, Eastern Edison responded
to MMLP's demand stating that only approximately $170,000 was due under the
termination provision. On July 18, 1996, Eastern Edison filed a declaratory
judgement action in Suffolk Superior Court in Boston, Massachusetts against
MMLP seeking a declaration of the rights of the parties under the PPA. MMLP's
response to the complaint, filed on August 8, 1996, included counter claims in
excess of $20 million and a request for treble damages. In response to the
counter claim, Eastern Edison paid MMLP approximately $192,000 as the amount
Eastern Edison considered to have been owed to MMLP. The Company is vigorously
defending itself from the counter claims. The Company cannot determine the
outcome of this proceeding at this time.
On January 10, 1997, the Internal Revenue Service (IRS) issued a report in
connection with its examination of the consolidated income tax returns of EUA
for 1992 and 1993. The report includes an adjustment to disallow EUA's
inclusion of its investment in EUA Power's Preferred Stock as a deduction in
determining Excess Loss Account (ELA) taxable income relating to the redemption
of EUA Power's Common and Preferred Stock in 1993. The IRS has taken the
position that the redemption of the Preferred Stock resulted in a capital loss
transaction and not a deduction in determining ELA. The Company disagrees with
the IRS's position and filed a protest in March 1997. EUA believes that it
will ultimately prevail in this matter. However, if the ultimate resolution of
this matter is a favorable decision for the IRS and EUA does not have
sufficient capital gain transactions to offset the capital loss then EUA could
be required to record a charge that could have a material impact on financial
results in the year of the charge but would not materially impact the financial
position of the company.
In early 1997, ten plaintiffs brought suit against numerous defendants,
including EUA, for injuries and illness allegedly caused by exposure to
asbestos over approximately a thirty-year period, at premises, including some
owned by EUA companies. The total damages claimed in all of these complaints
is $25 million in compensatory and punitive damages, plus exemplary damages and
interest and costs. Each complaint names between fifteen and twenty-eight
defendants, including EUA. These complaints have been referred to the
applicable insurance companies, and EUA is consulting with those insurers to
determine the availability and extent of coverage. EUA cannot predict the
ultimate outcome of this matter at this time.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
EXECUTIVE OFFICERS OF EASTERN UTILITIES ASSOCIATES
The names, ages and positions of all of the executive officers of EUA as
of March 17, 1997, are listed below along with their business experience during
the past five years. Officers are elected annually by the Trustees at the
following meeting of Trustees after the annual meeting of shareholders. The
1997 Annual Meeting of Shareholders is scheduled to be held on May 19, 1997.
There are no family relationships among these officers, nor any arrangement or
understanding between any officer and any other person pursuant to which the
officer was selected. The executive officers also serve as officers/or
directors of various subsidiary companies.
Name, Age and Position Business Experience During Past 5 Years
Richard M. Burns, 59 Comptroller since 1976; Assistant Secretary since
Comptroller 1978; and Assistant Treasurer since April 1986.
Chief Accounting Officer of EUA.
John D. Carney, 52 Executive Vice President since April 1995;
Executive Vice President President of Eastern Edison Company
since January 1990; President of Blackstone since
April 1995. Responsible for the day-to-day
activities of The EUA System's retail electric
operations.
Clifford J. Hebert, Jr., 49 Treasurer since April 1986; Secretary since May,
Treasurer and 1995. Responsible for financial, treasury and
Secretary corporate affairs of the EUA System .
Donald G. Pardus, 56 Chairman since July 1990; Chief Executive
Chairman of the Board, Officer since April 1989. Responsible for
Chief Executive Officer the overall management of the EUA System.
and Trustee
Robert G. Powderly, 49 Executive Vice President since April 1992;
Executive Vice President President of Newport Electric Corporation from
March 1990 to April 1992. Responsible for
purchasing, customer information services,
information systems, human resources, marketing
and rate activities of the EUA System.
John R. Stevens, 56 President since July 1990; Chief Operating
President, Chief Operating Officer since January 1990; Senior Executive Vice
Officer and Trustee President from January 1990 to July, 1990.
Responsible for retail operations and new
ventures of the EUA System.
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability and integrity of any director or executive officer during the past five
years.
PART II
Item 5. MARKET FOR EUA'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "QUARTERLY FINANCIAL AND
COMMON SHARE INFORMATION" included in EUA's Annual Report to Shareholders for
the year ended December 31, 1996 (Exhibit 13-1.03 filed herewith) is
incorporated herein by reference.
The information required by this item for Blackstone and Eastern Edison is
incorporated by reference to information contained under the like captioned
sections of Blackstone's and Eastern Edison's 1996 Annual Reports (Exhibit 13-
1.01 and 13-1.08, respectively, filed herewith).
As of February 1, 1997 there were 11,978 EUA common shareholders of
record.
The closing price of EUA's Common Shares as reported by the Wall Street
Journal on March 17, 1997 was $18.125.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the caption "SELECTED CONSOLIDATED
FINANCIAL DATA" included in EUA's Annual Report to Shareholders and Eastern
Edison's Annual Report for the year ended December 31, 1996, (Exhibit 13-1.03
and 13-1.08, respectively, filed herewith) and the information set forth under
the caption "SELECTED FINANCIAL DATA" included in the Annual Report for the
year ended December 31, 1996 for Blackstone (Exhibits 13-1.01 filed herewith)
are incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference
to pages 11 through 24 in the 1996 EUA Annual Report to Shareholders, pages 3
through 7 in the 1996 Blackstone Annual Report and pages 3 through 10 in the
1996 Eastern Edison Annual Report (Exhibits 13-1.03, 13-1.01 and 13-1.08 for
EUA, Blackstone and Eastern Edison , respectively, filed herewith).
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference
to pages 26 through 41 in the 1996 EUA Annual Report to Shareholders, page 2
and pages 10 through 27 in the 1996 Blackstone Annual Report and, page 2 and
pages 13 through 33 in the 1996 Eastern Edison Annual Report (Exhibits 13-1.03,
13-1.01 and 13-1.08 for EUA, Blackstone and Eastern Edison, respectively, filed
herewith).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
Eastern Utilities Associates
The information concerning trustees and executive officers set forth under
the caption "ELECTION OF TRUSTEES AND OWNERSHIP OF COMMON SHARES" in EUA's
definitive Proxy Statement to be mailed to shareholders in connection with the
shareholders' annual meeting to be held on May 19, 1997, and filed with the SEC
is incorporated herein by reference. See also "EXECUTIVE OFFICERS OF EASTERN
UTILITIES ASSOCIATES" following Item 4 herein.
Blackstone and Eastern Edison
The names, ages and positions of all of the directors and executive
officers of Blackstone and Eastern Edison as of March 17, 1997 are listed below
with their business experience during the past five years. The directors of
Blackstone and the directors, Treasurer and Clerk of Eastern Edison are each
elected to serve until the next annual stockholders' meeting. All other
officers are elected to serve until the next meeting of directors following the
annual stockholders' meeting. There is no family relationship between any of
the directors or officers of Blackstone and Eastern Edison. Messrs. Pardus and
Stevens are Trustees of EUA. Certain officers of Blackstone and Eastern Edison
are, or at various times in the past have been, officers and/or directors of
the System Companies with which Blackstone and Eastern Edison have entered into
contracts and had other business relations.
Name, Age and Position Business Experience During Past 5 Years
Richard M. Burns, 59* Vice President, Assistant Treasurer and Assistant
Vice President Clerk/Assistant Secretary of Blackstone and
Eastern Edison since April 1986.
John D. Carney, 52* President and Director of Blackstone since April
Director and President 1995; President and Director of Eastern Edison
since January 1990.
David H. Gulvin, 62 Senior Vice President of Blackstone and Eastern
Senior Vice President Edison since April 1995; President of Blackstone
and Director from November 1989 to April 1995; Director of
Blackstone since November 1989. Director of
Eastern Edison since July 1995. Responsible for
corporate communications, consumer services,
marketing and rate activities.
Barbara A. Hassan, 47 Vice President of Blackstone since April 1995;
Vice President Vice President of Eastern Edison since January
1990. Responsible for the operation and
maintenance of the transmission and distribution
facilities.
Clifford J. Hebert, Jr., 49* Treasurer since April 1986 and Secretary/Clerk
Treasurer since April 1995 of both Blackstone and Eastern
and Secretary/Clerk Edison.
Michael J. Hirsh, 42 Vice President of Blackstone since July 1991;
Vice President Vice President of Eastern Edison since April
1995; Prior to that he was either a Director or
Manager of the Engineering or Resource Planning
Departments of EUA Service for more than five
years. Responsible for all engineering and
technical services.
Kevin A. Kirby, 46 Vice President of Blackstone and Eastern Edison
Vice President since April, 1995; prior to that he was a
Director of the Integrated Resource Management
department of EUA Service for five years;
responsible for the resource planning, power
supply and contract administration activities of
the EUA System.
Donald G. Pardus, 56* Chairman of the Board since July 1989 and
Director and Director since 1979 of both Blackstone and
Chairman of the Board Eastern Edison.
Robert G. Powderly, 49* Executive Vice President and Director since March
Director and Executive 1992 of both Blackstone and Eastern Edison.
Vice President
John R. Stevens, 56* Vice Chairman of the Board since July 1989 and
Director and Vice Director since July 1987 of both Blackstone and
Chairman of the Board Eastern Edison.
* Please refer to the material supplied under the caption "EXECUTIVE OFFICERS
OF EASTERN UTILITIES ASSOCIATES" following Item 4 herein for other
information regarding this officer.
Item 11. EXECUTIVE COMPENSATION
Eastern Utilities Associates
The information concerning executive compensation set forth under the
caption "COMPENSATION AND OTHER TRANSACTIONS" in EUA's definitive Proxy
Statement to be mailed to shareholders in connection with the shareholders'
annual meeting to be held on May 19, 1997 and filed with the SEC is
incorporated herein by reference with the exception of the Report of the
Compensation and Nominating Committee on Compensation of Executive Officers
and accompanying Corporate Performance Graph that appears therein and which are
specifically not incorporated herein by reference.
Blackstone and Eastern Edison
The Chief Executive Officer and the four other most highly compensated
executive officers of Blackstone and Eastern Edison hold the same or similar
positions with EUA and are not paid directly by either Blackstone or Eastern
Edison. The information required by this item is incorporated herein by
reference to the material under the caption "COMPENSATION AND OTHER
TRANSACTIONS" in the definitive Proxy Statement of EUA, dated March 26, 1997,
with the exception of the Report of the Compensation and Nominating Committee
on Compensation of Executive Officers and accompanying Corporate Performance
Graph that appears therein and which are specifically not incorporated herein
by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners of Blackstone and
Eastern Edison.
Amount (number of
Name and Address of shares) and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class
Common Stock Eastern Utilities Associates 2,891,357 of Eastern Edison* 100%
One Liberty Square 184,062 of Blackstone* 100%
Boston, Massachusetts
_______________
*All shares, which are the only voting securities of Eastern Edison and
Blackstone, are registered in the name of the beneficial owner.
(b) Security ownership of certain beneficial owners of EUA and management of
EUA, Blackstone and Eastern Edison.
The statements concerning security ownership of certain beneficial owners
and management set forth under the caption "ELECTION OF TRUSTEES AND OWNERSHIP
OF COMMON SHARES" in EUA's definitive Proxy Statement to be mailed to
shareholders in connection with the shareholders' annual meeting to be held on
May 19, 1997 and filed with the SEC are incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The response to this portion of Item 14 is set forth under Item 8.
(a)(2) Financial Statement Schedules
The following additional consolidated financial statement schedules filed
herewith for EUA and Blackstone should be considered in conjunction with the
financial statements in the EUA's Annual Report to Shareholders and
Blackstone's Annual Report for the year ended December 31, 1996 (Exhibit 13-
1.03 and 13-1.01, respectively, filed herewith):
1. Financial Statement Schedules:
EUA
Schedule II - Valuation and Qualifying Accounts for the three years
ended December 31, 1996.
Blackstone
Schedule II - Valuation and Qualifying Accounts for the three years
ended December 31, 1996.
(a)(3) Exhibits (*denotes filed herewith).
Articles of Incorporation and By-Laws:
-EUA-
3-1.03 - Declaration of Trust of EUA, dated April 2, 1928, as amended
(Exhibit A-3, File No. 70-3188; Exhibit 1 to EUA's 8-K Reports for
April in each of the years 1957, 1962, 1966, 1968, 1972, and 1973,
File No. 1-5366; Exhibit A-1 (a), Amendment No. 2 to Form U-1,
File No. 70-5997; Exhibit 4-3, Registration No. 2-72589; Exhibit 1
to Certificate of Notification, File No. 70-6713; Exhibit 1 to
Certificate of Notification, File No. 70-7084; Exhibit 3-2, Form
10-K of EUA or 1987, File No. 1-5366).
- Eastern Edison -
3-1.08 - Form of Restated and Amended Articles of Organization (filed as
Exhibit B-1 to Form U5S of EUA for 1993).
Instruments Defining the Rights of Shareholders, Including Indentures:
- Eastern Edison -
4-1.08 - Indenture of First Mortgage and Deed of Trust dated as of
September 1, 1948 of Eastern Edison (Exhibit 4-1, Registration No.
2-77468), and twenty-six supplements thereto (Exhibit A, File No.
70-3015; Exhibit A-3, File No. 70-3371; Exhibit C to Certificate
of Notification, File No. 70-3371; Exhibit D to Certificate of
Notification, File No. 3619; Exhibit D to Certificate of
Notification, File No. 70-3798; Exhibit F to Certificate of
Notification, File No. 70-4164; Exhibit D to Certificate of
Notification, File No. 70-4748; Exhibit C to Certificate of
Notification, File No. 70-5195; Exhibit F to Certificate of
Notification, File No. 70-5379; Exhibit C to Certificate of
Notification, File No. 70-5719; Exhibit 5-24 Registration No. 2-
65785; Exhibit F to Certificate of Notification, File No. 70-6463;
Exhibit C to Certificate of Notification, File No. 70-6608;
Exhibit C to Certificate of Notification, File No. 70-6737;
Exhibit F to Certificate of Notification, File No. 70-6851;
Exhibit 4-31, Form 10-K of EUA for 1984, File No. 1-5366; Exhibit
F to Certificate of Notification, File No. 70-7254; Exhibit C to
Certificate of Notification, File No. 70-7373; Exhibit C to
Certificate of Notification, File No. 70-7373; Exhibit C to
Certificate of Notification, File No. 70-7373; Exhibit F to
Certificate of Notification, File No. 20-7511; Exhibit 4-34, Form
10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 4-24,
Form 10-K of Eastern Edison for 1992, File No. 0-8480; Exhibit
4-35, Form 10-K of Eastern Edison for 1990, File No. 0-8480;
Exhibit 4-36, Form 10-K of Eastern Edison for 1990, File No. 0-
8480; Exhibit C-33 to Form U5S of EUA for 1993; Exhibit C-34 to
Form U5S of EUA for 1993; Exhibit 4-29.08, Form 10-K of Eastern
Edison for 1994, File No. 0-8480).
- Montaup -
4-1.05 - Form of 8% Debenture Bonds due 2000 of Montaup (Exhibit 4-10,
Registration No. 2-41488).
4-2.05 - Form of 8-1/4% Debenture Bonds due 2003 of Montaup (Exhibit B-3,
Form U5S of EUA for year 1973).
4-3.05 - Form of 14% Debenture Bonds due 2005 of Montaup (Exhibit 4-11,
Registration No. 2-55990).
4-4.05 - Form of 10% Debenture Bonds due 2008 of Montaup (Exhibit 5-3,
Registration No. 2-65785).
4-5.05 - Form of 16-1/2% Debenture Bonds due 2010 of Montaup (Exhibit 4-11,
Form 10-K of EUA for 1980, File No. 1-5366).
4-6.05 - Form of 12-3/8% Debenture Bonds due 2013 of Montaup (Exhibit 4-13,
Form 10-K of EUA for 1983, File No. 1-5366).
4-7.05 - Form of 10-1/8% Debentures due 2008 of Montaup (Exhibit 4, Form
10-Q of Eastern Edison for quarter ended September 30, 1983, File
No. 0-8480).
4-8.05 - Form of 9% Debenture Bonds due 2020 of Montaup (Exhibit 4-10, Form
10-K of Eastern Edison for 1990, File No. 0-8480).
4-9.05 - Form of 9 3/8% Debenture Bonds due 2020 of Montaup (Exhibit 4-11,
Form 10-K of Eastern Edison for 1990, File No. 0-8480).
- Blackstone -
4-1.01 - First Mortgage Indenture and Deed of Trust dated as of December 1,
1980 of Blackstone (Exhibit A, Form 8-K of EUA dated January 14,
1981, File No. 1-5366) and two supplements thereto (Exhibit 4-33,
Form 10-K of EUA for 1989, File No. 1-5366; Exhibit 4-3, Form 10-K
of BVE for 1990, File No. 0-2602).
4-4.01 - Loan Agreement between Rhode Island Industrial Facilities
Corporation and Blackstone dated as of December 1, 1984 (Exhibit
10-72, Form 10-K of EUA for 1984, File No. 1-5366).
- EUA Service -
4-1.07 - Note Purchase Agreement dated as of January 13, 1988 of Service
(Exhibit 4-38, Form 10-K of EUA for 1987, File No. 1-5366).
- EUA Cogenex -
4-1.10 - Note Agreement dated as of June 28, 1990 of EUA Cogenex with the
Prudential Insurance Company of America (Exhibit 4-46, Form 10-K
of EUA for 1990, File No. 1-5366).
4-2.10 - Note Agreement dated as of October 29, 1991 between EUA Cogenex
and Prudential Insurance Company of America (Exhibit 4-55, Form
10-K of EUA for 1991, File No. 1-5366).
4-3.10 - Note Purchase Agreement dated as of September 29, 1992 of EUA
Cogenex and the Prudential Life Insurance Company of America
(Exhibit 4-44, Form 10-K of EUA for 1992, File No. 1-5366).
4-4.10 - Indenture dated September 1, 1993 between EUA Cogenex and the Bank
of New York as Trustee (Exhibit 4-4.10, Form 10-K of EUA for 1993,
File No. 1-5366).
- Newport -
4-1.14 - Indenture of First Mortgage dated as of June 1, 1954 of Newport,
as supplemented on August 1, 1959, April 1, 1962, October 1, 1964,
April 1, 1967, September 1, 1969, September 1, 1970, June 1, 1978,
October 1, 1978, May 1, 1986, December 1, 1987 and November 1,
1989 (Exhibit 4-49, Form 10-K of EUA for 1990, File No. 1-5366).
4-2.14 - United States Government Small Business Administration Loan to
Newport entitled, "Base Closing Economic Injury Loan", signed May
30, 1975 and amended on October 6, 1983 (Exhibit 4-50, Form 10-K
of EUA for 1990, File No. 1-5366).
4-3.14 - Indenture of Second Mortgage dated as of September 1, 1982 of
Newport, as supplemented on December 1, 1988 (Exhibit 4-51, Form
10-K of EUA for 1990, File No. 1-5366).
4-4.14 - Loan Agreement between the Rhode Island Port Authority and
Economic Development Corporation and Newport Electric Corporation
dated as of January 6, 1994 (Exhibit 4-4.14, Form 10-K of EUA for
1993, File No. 1-5366).
4-5.14 - Trust Indenture between the Rhode Island Authority and Economic
Development Corporation and Newport Electric Corporation dated as
of January 1, 1994 (Exhibit 4-5.14, Form 10-K of EUA for 1993,
File No. 1-5366).
4-6.14 - Letter of Credit and Reimbursement Agreement dated January 6, 1994
(Exhibit 4-6.14, Form 10-K of EUA for 1993, File No. 1-5366).
- EUA Ocean State -
4-1.12 - Note Purchase Agreement dated as of January 16, 1992 between EUA
Ocean State Corporation and John Hancock Mutual Life Insurance
Company (Exhibit 4-56, Form 10-K of EUA for 1991, File No. 1-
5366).
Material Contracts:
- EUA -
10-1.03 - Employees' Retirement Plan of Eastern Utilities Associates and its
Subsidiary Companies Trust Agreement as amended and restated,
effective July 1, 1981 (Exhibit 10-1, Registration No. 2-80205).
10-2.03 - Eastern Utilities Associates Employees' Savings Plan Trust
Agreement (Exhibit 10-3, Form 10-K of EUA for 1992, File No. 1-
5366).
10-3.03 - Eastern Utilities Associates Employees' Savings Plan as amended
and restated effective January 1, 1989 and December 21, 1994
(Exhibit 10-4, Form 10-K of EUA for 1992, File No. 1-5366; Exhibit
10-17.03 Form 10-K of EUA for 1995, File No. 1-5366).
10-4.03 - Stock Purchase Agreement dated as of December 10, 1986, among
Eastern Utilities Associates, Citizens Corporation and Citizens
Energy Corporation (Exhibit 10-104, Form 10-K of EUA for 1986,
File No. 1-5366).
10-5.03 - Precedent Agreement dated as of November 29, 1989 between EUA and
NECO Enterprises, Inc. (Exhibit B-4, Form U-1, File No. 70-7677).
10-6.03 - Amendment to and Restatement of Stock Purchase Agreement dated as
of February 1, 1990 between EUA, NECO Enterprises, Inc., Newport
Electric Corporation and a special-purpose subsidiary of EUA for
the acquisition by EUA of the stock of Newport Electric
Corporation (Exhibit B-3, Form U-1, File No. 70-7677).
10-7.03 - Letter of Assurance in connection with the Credit Agreement
between Vermont Electric Transmission Company, Inc. and Bank of
America National Trust and Savings Association dated July 19, 1983
(Exhibit 10-111, Form 10-K of EUA for 1990, File No. 1-5366).
10-8.03 - Amended and Restated Equity Maintenance Agreement dated as of
September 29, 1992 among EUA and The Prudential Insurance Company
of America and Pruco Life Insurance Company (Exhibit 10-9, EUA 10-
K for 1992, File No. 1-5366).
10-9.03 - Guaranty, dated June 28, 1990 made by EUA in favor of The
Prudential Life Insurance Company of America (Exhibit 10-10, EUA
10-K for 1992, File No. 1-5366).
10-10.03 - Guaranty, dated January 16, 1992 made by EUA in favor of John
Hancock Mutual Life Insurance Company (Exhibit 4-125, Form 10-K of
EUA for 1991, File No. 1-5366).
10-11.03 - Form of Service Contract between EUA Service Corporation and each
of the other companies (including EUA) in the EUA System (Exhibit
13-1.03, Registration No. 2-55990).
10-12.03 - Form of EUA Restricted Stock Plan effective July 17, 1989 (Exhibit
10-13, EUA Form 10-K for 1992, File No. 1-5366).
10-13.03 - Eastern Utilities Associates Employees' Share Ownership Plan Trust
Agreement (Exhibit 5, Form 10-K of EUA for 1977, File No. 1-5366).
10-14.03 - Employees' Retirement Plan of Eastern Utilities Associates and Its
Affiliated Companies as amended and restated effective January 1,
1989, and December 21, 1994 (exhibit 10-14.03, Form 10-K of EUA
for 1995, File No. 1-5 366; Exhibit 10-16.03, Form 10-K of EUA for
1995, File No. 1-5366).
- Eastern Edison -
10-1.08 - Trust Agreement dated as of July 1, 1993 between Massachusetts
Industrial Finance Agency and Shawmut Bank, N.A. (filed as Exhibit
10-1.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480).
10-2.08 - Loan Agreement dated as of July 1, 1993 between Massachusetts
Industrial Finance Agency and Eastern Edison (filed as Exhibit 10-
2.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480).
10-3.08 - Power Purchase Agreement entered into as of September 20, 1993 by
and between Meridian Middleboro Limited Partnership and Eastern
Edison Company (filed as Exhibit 10-3.08 to Eastern Edison's Form
10-K for 1993, File No. 0-8480).
10-4.08 - Inducement Letter dated July 14, 1993 from Eastern Edison to the
Massachusetts Industrial Finance Agency and Goldman, Sachs &
Company and Citicorp Securities Markets, Inc. (filed as Exhibit
10-4.08 to Eastern Edison's Form 10-K for 1993, File No. 0-8480).
- Montaup -
10-1.05 - Montaup Contract, as amended (Exhibit 4-B, Registration No. 2-
14119; Exhibit 13-A1, Registration No. 2-14718; Exhibit 4-B-2,
Registration No. 2-26509; Exhibit 4-B-3, Registration No. 2-
33061; Exhibits 13-3 and 13-4, Registration No. 2-48966; Exhibit
B-2, Form U5S of EUA for year 1974 and Exhibit 5-40, Registration
No. 2-62862).
10-2.05 - Power Contract (composite copy) between Connecticut Yankee Atomic
Power Company and Montaup dated July 1, 1964 as amended and
supplemented March 1, 1978, August 22, 1980, and October 15, 1982
(Exhibit B-1, File No. 70-4245; Exhibit 20, Form 10-K of EUA for
1977, File No. 1-5366; Exhibit 10-52, Form 10-K for EUA for 1981,
File No. 1-5366; Exhibit 10-67, Form 10-K for EUA for 1983, File
No. 1-5366).
10-3.05 - Capital Funds Agreement (composite copy) between Connecticut
Yankee Atomic Power Company and Montaup dated September 1, 1964
(Exhibit B-2, File No. 70-4245).
10-4.05 - Stockholder Agreement (composite copy) among Connecticut Yankee
Atomic Power Company's Sponsors, including Montaup, dated July 1,
1964 (Exhibit B-4, File No. 70-4245).
10-5.05 - Contract for sale of power to Montaup by Canal Electric Company
dated December 1, 1965 (Exhibit 2D, File No. 0-688).
10-6.05 - Capital Funds Agreement (composite copy) between Vermont Yankee
Nuclear Power Corporation and Montaup dated as of February 1,
1968, and Amendment thereto dated as at March 12, 1968 (Exhibit B-
2, File No. 70-4611; Exhibit B-3, File No. 70-4611).
10-7.05 - Form of Power Contract between Vermont Yankee Nuclear Power
Corporation and Montaup dated as of February 1, 1968, as amended
June 1, 1972, April 15, 1983, April 24, 1985, June 1, 1985, May 6,
1988 (2), June 15, 1989 and December 1, 1989 (Exhibit B-4, File
No. 70-4591; Exhibit 13-21, Registration No. 2-46612; Exhibit 10-
63, Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-74,
Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-78, Form
10-K of EUA for 1986, File No. 1-5366; Exhibits 10-97 and 10-98,
Form 10-K of EUA for 1988, File No. 1-5366; Exhibit 10-95, Form
10-K of EUA for 1989, File No. 1-5366; Exhibit 10-80, Form 10-K of
Eastern Edison for 1990, File No. 0-8480).
10-8.05 - Sponsor Agreement (composite copy) among Vermont Yankee Nuclear
Power Corporation's Sponsors, including Montaup, dated as of
August 1, 1968 (Exhibit 4-0, Registration No. 2-33061).
10-9.05 - Capital Funds Agreement (composite copy) between Maine Yankee and
Montaup dated May 20, 1968 and as amended August 1, 1985 (Exhibit
B-2, File No. 70-4658; Exhibit 10-78, Form 10-K of EUA for 1985,
File No. 1-5366).
10-10.05 - Power Contract (composite copy) between Maine Yankee Atomic and
Montaup dated May 20, 1968, as amended December 19, 1983 and
January 1, 1984 (Exhibit B-3, File No. 70-4658; Exhibit 10-64,
Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-66, Form
10-K of EUA for 1984, File No. 1-5366).
10-11.05 - Stockholder Agreement (composite copy) among Maine Yankee
Sponsors, including Montaup, dated May 20, 1968 (Exhibit B-4, File
70-4658).
10-12.05 - Agreement (composite copy) among Vermont Yankee Nuclear Power
Corporation's Sponsors, including Montaup, dated as of April 30,
1969 (Exhibit B-7, File No. 70-4435).
10-13.05 - Form of Agreement among Maine Yankee Atomic Power Company's
Sponsors dated as of May 20, 1969 (Exhibit B-5, File No. 70-4658).
10-14.05 - Form of New England Power Pool Agreement dated as of September 1,
1971, as amended as of July 1, 1972, March 1, 1973, April 2, 1973,
March 15, 1974, June 1, 1975, September 1, 1975, December 31,
1976, January 31, 1977, July 1, 1977, August 1, 1977, August 15,
1978, January 31, 1980, February 1, 1980, September 1, 1981,
December 1, 1981, June 1, 1982, June 15, 1983, October 1,
1983, August 1, 1985, August 15, 1985, January 1, 1986, September
1, 1986, March 1, 1988, May 1, 1988, March 15, 1989, October 1,
1990, September 15, 1992, and May 1, 1993, (Exhibit 13-45,
Registration No. 2-41488; Exhibit 13-38, Registration No. 2-
46612; Exhibits 13-39 and 13-40, Registration No. 2-48966;
Exhibit B-3, Form U5S of EUA for year 1974; Exhibit 13-35(a),
Registration No. 2-54449; Exhibit 13-35, Registration No. 2-55990,
Exhibits 5-69 and 5-70, Registration Exhibit 13-35(a),
Registration No. 2-54449; Exhibit 13-35, Registration No. 2-
55990, Exhibits 5-69 and 5-70, Registration No. 2-58625; Exhibit
6, Form 10-K of EUA for 1977, File No. 1-5366; Exhibit 1,
Form 10-K of EUA for 1979, File No. 1-5366; Exhibit No. 10-67,
Registration No. 2-80205; Exhibit 10-65, Form 10-K of EUA for
1983, File No. 1-5366; Exhibit 10-66, Form 10-K of EUA for 1983,
File No. 1-5366; Exhibits 10-75, 10-76, and 10-77, Form 10-K of
EUA for 1985, File No. 1-5366; Exhibit 10-79, Form 10-K of EUA for
1986, File No. 1-5366; Exhibits 10-99 and 10-100, Form 10-K of EUA
for 1988, File No. 1-5366; Exhibit 10-96, Form 10-K of EUA for
1989, File No. 1-5366; Exhibit 10-81, Form 10-K of Eastern Edison
for 1990, File No. 0-8480; Exhibit 10-38.05, Form 10-K of EUA for
1995, File No. 1-5366; Exhibit 10-39.05, Form 10-K of EUA for
1995, File No. 1-5366; Exhibit 10-40.05, Form 10-K of EUA for
1995, File No. 1-5366).
10-15.05 - Unit Participation Agreement between Maine Electric Power Company,
Inc. and New Brunswick Electric Power Commission dated November
15, 1971 (Exhibit 13-43.1, Registration No. 2-44377).
10-16.05 - Assignment Agreement dated March 20, 1972 between Maine Electric
Power Company, Inc. and New Brunswick Electric Power Commission
(Exhibit 13-43.3, Registration No. 2-44377).
10-17.05 - Agreement between Montaup and Boston Edison Company dated August
1, 1972 and as amended January 1, 1985 for purchase of power from
Pilgrim No. 1 nuclear unit at Plymouth, Massachusetts (Exhibit 13-
41, Registration No. 2-46612; Exhibit 10-67, Form 10-K of EUA for
1984, File No. 1-5366).
10-18.05 - Agreement dated as of May 1, 1973 for Joint Ownership,
Construction and Operation of New Hampshire Nuclear Units among
Public Service Company of New Hampshire and other utilities
including Montaup, as amended as of May 24, 1974, June 21, 1974,
September 25, 1974, October 25, 1974, January 31, 1975, as
supplemented by Letter Agreement dated April 27, 1978 and amended
as of April 18, 1979 (two amendments), April 25, 1979, June 8,
1979, October 11, 1979, December 15, 1979, June 16, 1980, December
31, 1980, June 1, 1982, April 27, 1984, June 15, 1984, March 8,
1985, March 14, 1986, May 1, 1986, September 19, 1986, November 5,
1987, January 13, 1989 and November 1, 1990. (Exhibit 13-57,
Registration No. 2-48966; Exhibit B-6, Form U5S of EUA for year
1974; Exhibit 5-130, Registration No. 2-62862; Exhibit 5-70,
Registration No. 2-65785; Exhibit 2, Form 10-K of EUA for 1979,
File No. 1-5366; Exhibit 5-34, Registration No. 2-69052; Exhibit
20-1, Form 10-K of EUA for 1980, File No. 1-5366; Exhibit 10-69,
Registration No. 2-80205; Exhibit 2, Form 10-Q of EUA for the
Quarter Ended March 31, 1984, File No. 1-5366; Exhibit 3, Form
10-Q of EUA for the Quarter Ended June 30, 1984, File No. 1-5366;
Exhibit 10-70, Form 10-K of EUA for 1985, File No. 1-5366;
Exhibits 10-80 and 10-81, Form 10-K of EUA for 1986, File No.
1-5366; Exhibits 10-95 and 10-96, Form 10-K of EUA for 1987, File
No. 1-5366; Exhibit 10-101, Form 10-K of EUA for 1988, File No.
1-5366; Exhibit 10-82, Form 10-K of Eastern Edison for 1990, File
No. 0-8480).
10-19.05 - Sharing Agreement dated as of September 1, 1973 among The
Connecticut Light and Power Company and other utilities, including
Montaup, concerning participation in a nuclear generating unit
located in Connecticut (Millstone Unit No. 3), as amended and
supplemented by Amendatory Agreement dated May 11, 1984 as amended
as of April 1, 1986 (Exhibit B-17, Form U5S of EUA for year 1973;
Exhibit B-8, as amended as of April 11, 1986, Form U5S of EUA for
year 1974; Exhibit B-30, Form U5S of EUA for year 1976; Exhibit
10-68, Form 10-K of EUA for 1984, File No. 1-5366; Exhibit 10-82,
Form 10-K of EUA for 1986, File No. 1-5366).
10-20.05 - Agreement for Joint Ownership, Construction and Operation of
William F. Wyman Unit No. 4 dated November 1, 1974 as amended June
30, 1975, August 16, 1976 and December 31, 1978 among Central
Maine Power Company and other utilities including Montaup (Exhibit
B-9, Form U5S of EUA for year 1974; Exhibit 13-58, Registration
No. 2-55990; Exhibit 5-95, Registration No. 2-58625; Exhibit 5-40,
Registration No. 2-69052).
10-21.05 - Agreement for Joint Ownership dated as of October 27, 1970 between
Canal Electric Company and Montaup (Exhibit 13-71, Registration
No. 2-55990).
10-22.05 - Agreement for use of Common Facilities by Canal Units I and II and
for Allocation of Related Costs dated as of October 27, 1970
between Canal Electric Company and Montaup (Exhibit 13-72,
Registration No. 2-55990).
10-23.05 - Guarantee Agreement (composite copy) dated as of November 13, 1981
between The Connecticut Bank and Trust Company, as Trustee, and
Montaup relating to debentures of Connecticut Yankee Atomic Power
Company (Exhibit 10-61, Form 10-K of EUA for 1981, File No.
1-5366).
10-24.05 - Agreement for Seabrook Project Disbursing Agent, dated as of May
23, 1984, as amended March 8, 1985, May 20, 1985, June 18, 1985,
January 1, 1986, November, 1987, August 1, 1989, and restated as
of November 1, 1990, among the participants in the Seabrook
nuclear generating project, including Montaup and Yankee Atomic
Electric Company (Exhibit 2, Form 10-Q of EUA for the Quarter
Ended June 30, 1984, File No. 1-5366; Exhibit 10-69, Form 10-K of
EUA for 1985, File No. 1-5366; Exhibits 10-86, 10-87 and 10-88,
Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-97, Form
10-K of EUA for 1987, File No. 1-5366; Exhibit 10-105, Form 10-K
of EUA for 1989, File No. 1-5366; Exhibit 10-84, Form 10-K of
Eastern Edison for 1990, File No. 0-8480).
10-25.05 - Guarantee Agreement dated as of August 1, 1985 among The
Connecticut Bank and Trust Company, Connecticut Yankee Atomic
Power Company and Montaup Electric Company relating to Revolving
Credit Loans of Connecticut Yankee (Exhibit 10-85, Form 10-K of
EUA for 1985, File No. 1-5366).
10-26.05 - Equity Funding Agreement for New England Hydro-Transmission
Corporation dated as of June 1, 1985, between New England Hydro-
Transmission Corporation and several New England electric
utilities, including Montaup as amended as of May 1, 1986 and
September 1, 1987 (Exhibits 10-96 and 10-97, Form 10-K of EUA for
1986, File No. 1-5366; Exhibit 10-116, Form 10-K of EUA for 1987,
File No. 1-5366).
10-27.05 - Equity Funding Agreement for New England Hydro-Transmission
Electric Company, Inc. dated as of June 1, 1985, between New
England Hydro-Transmission Electric Company, Inc. and several New
England electric utilities, including Montaup as amended as of May
1, 1986 and September 1, 1987 (Exhibits 10-98 and 10-99, Form 10-K
of EUA for 1986, File No. 1-5366; Exhibit 10-117, Form 10-K of EUA
for 1987, File No. 1-5366).
10-28.05 - Unit Power Agreement for the Sale of Unit Capacity and Energy from
Ocean State Power Project to Montaup Electric Company dated as of
May 14, 1986 as amended as of August 27, 1986, September 27, 1988,
October 21, 1988, July 21, 1989, February 7, 1990 and December 21,
1990 (Exhibits 10-101 and 10-102, Form 10-K of EUA for 1986, File
No. 1-5366; Exhibits 10-106 and 10-107, Form 10-K of EUA for 1988,
File No. 1-5366; Exhibit 10-106, Form 10-K of EUA for 1989, File
No. 1-5366; Exhibits 10-86 and 10-87, Form 10-K of Eastern Edison
for 1990, File No. 0-8480).
10-29.05 - Power Purchase Agreement dated as of October 17, 1986, between
Northeast Energy Associates and Montaup as amended as of June 28,
1989 (Exhibit 10-103, Form 10-K of EUA for 1986, File No. 1-5366;
Exhibit 10-103, Form 10-K of EUA for 1989, File No. 1-5366).
10-30.05 - Settlement Agreement dated as of January 13, 1989 among Montaup,
EUA Power, certain past and present owners of the Seabrook
Project and Yankee Atomic Electric Company (Exhibit 10-110, Form
10-K of EUA for 1988, File No. 1-5366).
10-31.05 - Unit Power Agreement for the Sale of Second Unit Capacity and
Energy from Ocean State Power Project to Montaup Electric Company
dated as of September 28, 1988 as amended by an amendment dated
July 21, 1989, and February 7, 1990 and a Supplemental Agreement
dated July 21, 1989 (Exhibit 10-104, Form 10-K of EUA for 1989,
File No. 1-5366; Exhibit No. 10-88, Form 10-K of Eastern Edison
for 1990, File No. 0-8480).
10-32.05 - Purchase Power Contract between Newport and Montaup dated July 23,
1963, as revised on March 23, 1983 (Exhibit 10-108, Form 10-K of
EUA for 1990, File No. 1-5366).
10-33.05 - Purchase Power Contract between Newport and Montaup for Contract
Demand Service effective May 1, 1983, as amended on July 1, 1983,
December 28, 1983 and November 1, 1984 (Exhibit 10-89, Form 10-K
of Eastern Edison for 1990, File No. 0-8480 and Exhibit 10-109,
Form 10-K of EUA for 1990, File No. 1-5366).
10-34.05 - Power Contract (composite copy) between Yankee Atomic Electric
Company and Montaup dated June 30, 1959 as revised April 1, 1975,
as further amended October 1, 1980, April 1, 1985, May 6, 1988,
June 26, 1989, July 1, 1989 and February 1, 1992 (Exhibit 10-6,
Registration No. 2-72655; Exhibit 10-73, Form 10-K of EUA for
1985, File No. 1.5366; Exhibit 10-96, Form 10-K of EUA for 1988,
File No. 1-5366; Exhibits 10-93 and 10-94, Form 10-K of EUA for
1989, File No. 1-5366; Exhibit 10-46 Form 10-K of Eastern Edison
for 1992, File No. 0-8480).
10-35.05 - Memorandum of understanding by and between Canal Electric Company
and Montaup Electric Company dated September 23, 1993 (Exhibit 10-
39.05, Eastern Edison 10-K for 1993, File No. 0-8480).
10-36.05 - Ancillary Agreement by and between Algonquin Gas Transmission
Company, Canal Electric Company and Montaup Electric Company dated
October 8, 1993. (Exhibit 10-40.05 of Eastern Edison 10-K for
1993, File No. 0-8480).
*10-37.05 - Amendment to 10-2.05 dated December 4, 1996.
*10-38.05 - Thirty-third Amendment to 10-14.05 dated December 31, 1996.
*10-39.05 - Seventh Amendment to 10-28.05 dated February 12, 1996.
*10-40.05 - Eighth Amendment to 10-28.05 dated February 12, 1996.
*10-41.05 - Third Amendment to 10-31.05 dated February 12, 1996.
*10-42.05 - Fourth Amendment to 10-31.05 dated February 12, 1996.
- Blackstone -
10-1.01 - Trust Indenture between Rhode Island Industrial Facilities
Corporation and the Rhode Island Hospital Trust Company dated as
of December 1, 1984 (Exhibit 10-73, Form 10-K of EUA for 1984,
File No. 1-5366).
10-2.01 - Remarketing Agreement between Rhode Island Hospital Trust Company,
Citibank and Blackstone dated as of December 19, 1984 (Exhibit
10-74, Form 10-K of EUA for 1984, File No. 1-5366).
10-3.01 - Letter of Credit and Reimbursement Agreement between Blackstone
Valley Electric Company and The Bank of New York dated as of
January 21, 1993 (Exhibit 10-10, Form 10-K of Blackstone for 1992,
File No. 0-2602).
10-4.01 - Interconnection Agreement by and between Blackstone and Ocean
State Power dated November 1, 1988, as amended and restated
effective August 16, 1989 by and among Blackstone, Ocean State
Power I and Ocean State Power II (Exhibit 10-100, Form 10-K of
EUA for 1989, File No. 1-5366).
10-5.01 - Power Purchase Agreement between Blackstone and Blackstone Hydro,
Inc. dated as of January 8, 1989 and assignment to Montaup
(Exhibits 10-101 and 10-102, Form 10-K of EUA for 1989, File No.
1-5366).
- Newport -
10-1.14 - Phase I Vermont Transmission Line Support Agreement dated as of
December 1, 1981 and as amended as of June 1, 1982, November 1,
1982 and January 1, 1986 between Vermont Electric Transmission
Company, Inc. and several New England utilities, including
Montaup (Exhibit 10-65, Form 10-K of EUA for 1981, File No. 1-
5366; Exhibit 10-72, Registration No. 2-80205; Exhibit 10-64, Form
10-K of EUA for 1982, File No. 1-5366; Exhibit 10-84. Form 10-K of
EUA for 1986, File No. 1-5366).
10-2.14 - Letter amendment dated August 4, 1983 reallocating the
participating shares originally assigned to the Chicopee Municipal
Lighting Plant and the Taunton Municipal Lighting Plant under the
Phase I Vermont Transmission Line Support Agreement between
Vermont Electric Transmission Company, Inc. and several New
England electric utilities, including Newport, dated December
1, 1981, as amended on June 1, 1982 and November 1, 1982 (Exhibit
10-110, Form 10-K of EUA for 1990, File No. 1-5366).
10-3.14 - Phase I Terminal Facility Support Agreement dated December 1, 1981
and as amended as of June 1, 1982, November 1, 1982 and January
1, 1986 between New England Electric Transmission Corporation and
several New England utilities, including Montaup (Exhibit 10-68,
Form 10-K of EUA for 1981, File No. 1-5366; Exhibit 10-74,
Registration No. 1-5366; Exhibit 10-68. Form 10-K of EUA for
1986, File No. 1-5366).
10-4.14 - Letter amendment dated July 29, 1983 reallocating the
participating shares originally assigned to the Chicopee Municipal
Lighting Plant and the Taunton Municipal Lighting Plant under the
Phase I Terminal Facility Support Agreement between New England
Transmission Corporation and several New England electric
utilities, including Newport, dated December 1, 1981, as amended
on June 1, 1982 and November 1, 1982 (Exhibit 10-112, Form 10-K
of EUA for 1990, File No. 1-5366).
10-5.14 - Purchase Power Contract between Newport and City of Burlington
Electric Department (life of the unit contract) for purchase of
15.24% of net capability of station output from Joseph C. McNeil
Electric Generating Station located in Burlington, Vermont dated
December 19, 1984 (Exhibit 10-115, Form 10-K of EUA for 1990,
File No. 1-5366).
10-6.14 - Firm Energy Contract between Hydro-Quebec and several New England
electric utilities, including Newport, dated as of October 14,
1985 (Exhibit 10-116, Form 10-K of EUA for 1990, File No. 1-5366).
10-7.14 - Unit Power Agreement for the Sale of Unit Capacity and Energy from
Ocean State Power Project to Newport Electric Corporation dated
May 14, 1986, as amended on August 20, 1986, July 12, 1988,
September 23, 1988, October 21, 1988, July 21, 1989, February 7,
1990 and December 21, 1990 (Exhibit 10-117, Form 10-K for 1990,
File No. 1-5366).
10-8.14 - Unit Power Agreement for the Sale of Second Unit Capacity and
Energy from Ocean State Power Project to Newport Electric
Corporation dated July 12, 1988 as amended and supplemented
September 23, 1988, July 21, 1989 and February 7, 1990 (Exhibit
10-118, Form 10-K for 1990, File No. 1-5366).
10-9.14 - Agreement for Joint Ownership, Construction and Operation of
William F. Wyman Unit No. 4 dated November 1, 1974 as amended June
30, 1975, August 16, 1976 and December 31, 1978 among Central
Maine Power Company and other utilities including Newport (Exhibit
B-9, Form U5S of EUA for year 1974; Exhibit 13-58, Registration
No. 2-55990; Exhibit 5-95, Registration No. 2-58625; Exhibit 5-40,
Registration No. 2-69052).
- EUA Ocean State -
10-1.12 - Ocean State Power Amended and Restated General Partnership
Agreement among EUA Ocean State, Ocean State Power Company, TCPL
Power Ltd., Narragansett Energy Resources Company and NECO Power,
Inc. (collectively, the "OSP Partners") dated as of December 2,
1988, as amended March 27, 1989, December 31, 1990, November 12,
1992 and February 23, 1993 (Exhibit 10-107, Form 10-K of EUA for
1989; File No. 1-5366, Exhibits 10-3.12, 10-4.12 and 10-5.12, Form
10-K of EUA for 1994, File No. 1-5366).
10-2.12 - Ocean State Power II Amended and Restated General Partnership
Agreement among EUA Ocean State, JMC Ocean State Corporation,
Makowski Power, Inc., TCPL Power Ltd., Narragansett Energy
Resources Company and Newport Electric Power Corporation
(collectively, the "OSP II Partners") dated as of September 29,
1989 (Exhibit 10-110, Form 10-K of EUA for 1989, File No. 1-5366).
Annual Reports to Shareholders:
*13-1.03 - Annual Report to Shareholders of EUA for 1996, portions of which
are incorporated by reference in this Annual Report on Form 10-K.
Only the portions expressly so incorporated under PART II, Items
5, 6, 7 and 8 are to be deemed filed herewith.
*13-1.01 - Annual Report to Shareholders of Blackstone for 1996, portions of
which are incorporated by reference in this Annual Report on Form
10-K. Only the portions expressly so incorporated under PART II,
Items 5, 6, 7 and 8 are to be deemed filed herewith.
*13-1.08 - Annual Report to Shareholders of Eastern Edison for 1996, portions
of which are incorporated by reference in this Annual Report on
Form 10-K. Only the portions expressly so incorporated under PART
II, Items 5, 6, 7 and 8 are to be deemed filed herewith.
Subsidiaries of EUA:
21-1.03 - Direct subsidiaries of Eastern Utilities Associates and the state
of organization of each are: Blackstone Valley Electric Company
(Rhode Island), Eastern Edison Company (Massachusetts), EUA
Cogenex Corporation (Massachusetts), EUA Service Corporation
(Massachusetts), EUA Ocean State Corporation (Rhode Island), EUA
Energy Investment Corporation (Massachusetts), Newport Electric
Corporation (Rhode Island) and EUA Energy Services, Inc.
(Massachusetts). Montaup Electric Company (Massachusetts) is a
subsidiary of Eastern Edison Company. Each of the above
subsidiaries does business under its indicated corporate name.
Consent of Experts and Counsel:
*23-1.03 - Consent of Independent Accountants.
(b) Reports on Form 8-K.
On January 6, 1997, EUA filed a Current Report on Form 8-K with
respect to Item 5 (Other Events).
On January 6, 1997, Eastern Edison filed a Current Report on
Form 8-K with respect to Item 5 (Other Events).
[This page left blank intentionally]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
EASTERN UTILITIES ASSOCIATES
By /s/ Richard M. Burns Comptroller March 17, 1997
Richard M. Burns (Principal Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/Donald G. Pardus Chairman and Chief Executive Officer
Donald G. Pardus (Principal Executive Officer) and Trustee
/s/John Stevens President and Chief Operating Officer
John R. Stevens (Principal Financial Officer) and Trustee
/s/ Richard M. Burns Comptroller
Richard M. Burns (Principal Accounting Officer)
Russell A. Boss Trustee
/s/Paul J. Choquette, Jr. Trustee
Paul J. Choquette, Jr.
March 17, 1997
/s/Peter S. Damon Trustee
Peter S. Damon
/s/Peter B. Freeman Trustee
Peter B. Freeman
/s/Larry A. Liebenow Trustee
Larry A. Liebenow
/s/Jacek Makowski Trustee
Jacek Makowski
Wesley W. Marple, Jr. Trustee
Wesley W. Marple, Jr.
/s/Margaret M. Stapleton Trustee
Margaret M. Stapleton
/s/W. Nicholas Thorndike Trustee
W. Nicholas Thorndike
[This page left blank intentionally]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
BLACKSTONE VALLEY ELECTRIC COMPANY
By/s/ Richard M. Burns Vice President March 17, 1997
Richard M. Burns (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/Donald G. Pardus Chairman of the Board and
Donald G. Pardus Director (Principal Executive Officer)
/s/John R. Stevens Vice Chairman and Director
John R. Stevens (Principal Financial Officer)
/s/Richard M. Burns Vice President
Richard M. Burns (Principal Accounting Officer)
/s/John D. Carney President and Director
John D. Carney
/s/David H. Gulvin Senior Vice President
David H. Gulvin and Director March 17, 1997
/s/Robert G. Powderly Executive Vice President and
Robert G. Powderly Director
[This page left blank intentionally]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Signature Title
Date
EASTERN EDISON COMPANY
March 17, 1997
By/s/Richard M. Burns Vice President
Richard M. Burns (Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/Donald G. Pardus Chairman of the Board and Director
Donald G. Pardus (Principal Executive Officer)
/s/John R. Stevens Vice Chairman and Director
John R. Stevens (Principal Financial Officer)
March 17, 1997
/s/Richard M. Burns Vice President
Richard M. Burns (Principal Accounting Officer)
/s/John D. Carney President and Director
John D. Carney
/s/David H. Gulvin Senior Vice President
David H. Gulvin and Director
/s/Robert G. Powderly Executive Vice President and
Robert G. Powderly Director
[This page left blank intentionally]
EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
Item 14(a)(2). Financial Statement Schedules
Schedule II
Eastern Utilities Associates and Subsidiary Companies
Valuation and Qualifying Accounts
(In Thousands)
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deductions- End of
Description of Period Expenses Accounts Describe Period
For the Year Ended December 31, 1996:
Allowance for Doubtful Accounts $690 $1,754 $292 <F1> $1,760 <F2> $976
For the Year Ended December 31, 1995:
Allowance for Doubtful Accounts $629 $1,217 $287 <F1> $1,443 <F2> $690
For the Year Ended December 31, 1994:
Allowance for Doubtful Accounts $613 $1,141 $277 <F1> $1,402 <F2> $629
<FN>
<F1> Recoveries of accounts previously written off.
<F2> Principally Accounts Receivable written off.
</FN>
Schedule II
Blackstone Valley Electric Company
Valuation and Qualifying Accounts
(In Thousands)
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deductions- End of
Description of Period Expenses Accounts Describe Period
For the Year Ended December 31, 1996:
Allowance for Doubtful Accounts $127 $800 $232 <F1> $1,008 <F2> $151
For the Year Ended December 31, 1995:
Allowance for Doubtful Accounts $125 $585 $217 <F1> $800 <F2> $127
For the Year Ended December 31, 1994:
Allowance for Doubtful Accounts $158 $710 $213 <F1> $956 <F2> $125
<FN>
<F1> Recoveries of accounts previously written off.
<F2> Principally Accounts Receivable written off.
</FN>
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Report of Independent Accountants
To the Trustees and Shareholders of
Eastern Utilities Associates:
Our report on the consolidated financial statements of Eastern Utilities
Associates and subsidiaries has been incorporated by reference in this Form
10-K from page 40 of the 1996 Annual Report to Shareholders of Eastern
Utilities Associates. In connection with our audits of such consolidated
financial statements, we have also audited the related consolidated financial
statement schedule listed in Item 14 (a)(2) of this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be included therein.
/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 5, 1997
Report of Independent Accountants
To the Directors and Shareholder of
Blackstone Valley Electric Company:
Our report on the financial statements of Blackstone Valley Electric Company
has been incorporated by reference in this Form 10-K from page 27 of the 1996
Annual Report of Blackstone Valley Electric Company. In connection with our
audits of such financial statements, we have also audited the related
financial statement schedule listed in Item 14 (a)(2) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 5, 1997
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