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, 1997
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)
750 W. Center Street
West Bridgewater, Massachusetts 02379
Telephone (508) 559-1000
0-8480 Eastern Edison Company 04-1123095
(A Massachusetts Corporation)
750 W. Center Street
West Bridgewater, Massachusetts 02379
Telephone (508) 559-1000
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 16, 1998:
Eastern Utilities Associates Common Shares, $5 par value - $510,899,925
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 16, 1998: 20,435,997
Blackstone Valley Electric Company Common Shares
Outstanding at March 16, 1998: 184,062
Eastern Edison Company Common Shares
Outstanding at March 16, 1998: 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, 1997, are incorporated by reference into Part II.
Portions of the Eastern Utilities Associates Proxy Statement dated March 25,
1998 are incorporated by reference into Part III.
EASTERN UTILITIES ASSOCIATES
BLACKSTONE VALLEY ELECTRIC COMPANY
EASTERN EDISON COMPANY
1997 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 - Retail . . . . . . . . . . . . . . . . . .6
Massachusetts - Retail . . . . . . . . . . . . . . . . .7
FERC - Wholesale . . . . . . . . . . . . . . . . . . . .8
Divestiture . . . . . . . . . . . . . . . . . . . . . . .9
Accounting Issues . . . . . . . . . . . . . . . . . . . .9
General - EUA Cogenex . . . . . . . . . . . . . . . . . . 10
General - EUA Energy Investment . . . . . . . . . . . . . 12
Capital Requirements . . . . . . . . . . . . . . . . . . 13
Capital Requirements - EUA. . . . . . . . . . . . . . . 13
Construction Program - Blackstone . . . . . . . . . . . 13
Construction Program - Eastern Edison . . . . . . . . . 14
Fuel for Generation . . . . . . . . . . . . . . . . . . . 14
Nuclear Power Issues . . . . . . . . . . . . . . . . . . 17
General . . . . . . . . . . . . . . . . . . . . . . . . 17
Decommissioning . . . . . . . . . . . . . . . . . . . . 18
Millstone 3 . . . . . . . . . . . . . . . . . . . . . . 18
Connecticut Yankee . . . . . . . . . . . . . . . . . . 20
Maine Yankee . . . . . . . . . . . . . . . . . . . . . 20
Yankee Atomic . . . . . . . . . . . . . . . . . . . . . 21
General . . . . . . . . . . . . . . . . . . . . . . . . 21
Public Utility Regulation . . . . . . . . . . . . . . . . 22
Rates . . . . . . . . . . . . . . . . . . . . . . . . . 23
FERC Proceedings - Transmission . . . . . . . . . . . . 25
FERC Proceedings - Supply . . . . . . . . . . . . . . . 26
Massachusetts Proceedings . . . . . . . . . . . . . . . 26
Rhode Island Proceedings . . . . . . . . . . . . . . . 27
Environmental Regulation . . . . . . . . . . . . . . . . 28
General . . . . . . . . . . . . . . . . . . . . . . . . 28
Preconstruction Reviews . . . . . . . . . . . . . . . . 28
Solid and Hazardous Waste Regulation. . . . . . . . . . 28
Superfund Requirements. . . . . . . . . . . . . . . . . 29
Chemical Regulation . . . . . . . . . . . . . . . . . . 29
Potential Regulation of Electric and Magnetic Fields. . 29
Water Regulation. . . . . . . . . . . . . . . . . . . . 30
Air Regulation. . . . . . . . . . . . . . . . . . . . . 30
Other Requirements. . . . . . . . . . . . . . . . . . . 32
Environmental Regulation of Nuclear Power . . . . . . . . 33
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . 33
Power Supply . . . . . . . . . . . . . . . . . . . . . . 33
Other Property. . . . . . . . . . . . . . . . . . . . . . 36
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . 37
Rate Proceeding . . . . . . . . . . . . . . . . . . . . . 37
Environmental Proceedings . . . . . . . . . . . . . . . . 37
Ridgewood . . . . . . . . . . . . . . . . . . . . . . . . 40
Other Proceedings . . . . . . . . . . . . . . . . . . . . 41
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS 41
Executive Officers of Eastern Utilities Associates. . . . 42
PART II
Item 5. MARKET FOR EUA'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS. . . . . . . . . . . . . . . . . . . . . . . . 43
Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . 43
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . . 43
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . 43
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES. . . . . . . . 43
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS 44
Eastern Utilities Associates. . . . . . . . . . . . . . . 44
Blackstone and Eastern Edison . . . . . . . . . . . . . . 44
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 45
Eastern Utilities Associates. . . . . . . . . . . . . . . 45
Blackstone and Eastern Edison . . . . . . . . . . . . . . 46
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 46
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 46
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K. . . . . . . . . . . . . . . . . . . . . . 47
(a)(1) Financial Statements . . . . . . . . . . . . . . . 47
(a)(2) Financial Statement Schedules . . . . . . . . . . 47
(a)(3) Exhibits (*denotes filed herewith).. . . . . . . . 47
(b) Reports on Form 8-K. . . . . . . . . . . . . . . . . 61
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Report of Independent Accountants. . . . . . . . . . . . . . . 74
Consent of Independent Accountants . . . . . . . . . . . . . . 76
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 Ocean State EUA Ocean State Corporation
EUA Service EUA Service Corporation
EUA Energy EUA Energy Investment Corporation
EUA Energy Services EUA Energy Services Corporation
EUA Telecommunications EUA Telecommunications Corporation
Montaup Montaup Electric Company
Newport Newport Electric Corporation
Registrants EUA, Blackstone and Eastern Edison
Renova Renova (formerly EUA Nova), a division
of EUA Cogenex
Retail Subsidiaries Blackstone, Eastern Edison and Newport
Non-Affiliated Companies
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
DTE Massachusetts Department of Telecommunications
and Energy (formerly Massachusetts Department
of Public Utilities)
EITF Emerging Issues Task Force
Energy Policy Act Energy Policy Act of 1992
EPA Federal Environmental Protection Agency
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
IRS Internal Revenue Service
MADEP Massachusetts Department of Environmental
Protection
MADOER Massachusetts Department of Energy Resources
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
RIDEM Rhode Island Department of Environmental
Management
RIDIV Rhode Island Division of Public Utilities
and Carriers
RIPUC Rhode Island Public Utilities Commission
SEC Securities and Exchange Commission
TSCA Toxic Substances Control Act
Other
BTU British Thermal Unit
DSM Demand Side Management
EMF Electric and Magnetic Fields
EWG Exempt Wholesale Generator
IPP Independent Power Producer
ISO Independent System Operator
kv Kilovolt
kWh Kilowatthour
mmBtu Millions of British Thermal Units
MOU Memorandum of Understanding
mw Megawatt
NEPOOL New England Power Pool
PCB Polychlorinated Biphenyls
GLOSSARY OF DEFINED TERMS (Cont'd)
Other (continued)
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
currently 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,
EUA Service and EUA Telecommunications. 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 markets energy and energy
related services. EUA Telecommunications provides telecommunications and
information services. The holding company system of EUA, the Retail
Subsidiaries, Montaup, EUA Service, EUA Cogenex, EUA Energy, EUA Ocean State,
EUA Energy Services, and EUA Telecommunications 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. (See
Electric Utility Industry Restructuring for a discussion of changes
taking place in the utility industry in the territories served by EUA's Core
Electric Business.) The Energy Related Business includes EUA Cogenex, EUA
Energy, EUA Ocean State, EUA Energy Services and EUA Telecommunications. The
Corporate Business is made up of EUA and EUA Service.
General - Core Electric Business
As of December 31, 1997, the number of regular employees in the core
electric and corporate business units was 983. Blackstone had 95 regular non-
union employees. Eastern Edison and Montaup had 281 regular employees.
Newport and EUA Service employed 58 and 549, respectively, at December 31,
1997. Labor bargaining unit contracts covering approximately 70 employees of
Eastern Edison in the Fall River area, and approximately 62 employees of
Montaup, and 53 employees of Newport expire in June 1999, January 2000, 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 737,000. At December 31, 1997,
Core Electric Business served approximately 302,000 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, 1997, 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 461,000. At December 31, 1997, Eastern Edison served
approximately 184,000 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.
The Core Electric Business accounted for approximately 89% of total
operating revenues of the EUA System in 1997 and 1996, and approximately 86% in
1995. The remaining balance of operating revenues during these periods were
primarily attributable to EUA Cogenex.
Montaup is currently required to backstop the Retail Subsidiaries'
standard offer energy requirements (See "Massachusetts-Retail" under Electric
Utility Industry Restructuring below.) About 48% of the current 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).
Consistent with Electric Utility Industry Restructuring legislation passed
in Rhode Island and Massachusetts and settlement agreements approved by
regulators in Rhode Island, Massachusetts, and at FERC, Montaup has agreed to
sell its generating assets. EUA anticipates the sale will be completed in
early 1999. (See Electric Utility Industry Restructuring for further
discussion of the divestiture process.)
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. Section 312 of the Massachusetts Electric Industry Restructuring Act
signed into law on November 25, 1997 directs the DTE in conjunction with the
Massachusetts Department of Energy Resources (MADOER) to commence, no sooner
than January 1, 2000, an investigation and review of the manner in which
metering billing and information services (MBIS) are provided and the
exclusivity of electric distribution service territories. In the event that
the DTE determines that such services should be subject to competition or that
territorial exclusivity shall be terminated or altered in any manner, the DTE
shall, by no later than January 1, 2001, file its recommendations, along with
drafts of legislation necessary to implement said recommendations, with the
clerk of the house of representatives. Any unbundling and creation of
competition of such services shall not commence unless statutorily authorized.
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.
The electric generation, or supply function is now a competitive industry
in Rhode Island and Massachusetts, and initiatives nationwide are considering
adopting similar principles. Recently announced sales of generating portfolios
by regional utility companies, including Montaup, should generate a more robust
energy market in the regions served by EUA's Core Electric Business as new
supply entrants vie for customers. Montaup faces competition from these new
suppliers as well as existing suppliers and marketers in selling the output of
its current generating capacity and its capacity remaining after divestiture.
Competition in the generation sector has been developing for two decades,
enabled and encouraged by federal and state initiatives. 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 currently 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. 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. 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 DTE and the RIPUC implemented regulations in
the 1980's and early 1990's which require utilities to integrate least-cost
planning with competitive proposals to meet requirements for new generation.
Both states also approved in 1993 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 Electric Utility Industry Restructuring and
Public Utility Regulation below).
On April 24, 1996, the FERC issued orders No. 888 and No. 889 to encourage
competition in the bulk power market by 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, establishing the right and a mechanism for recovery of
prudently incurred stranded costs and requiring public utilities to implement
standards of conduct and an Open Access Same-time Information System (OASIS).
FERC also issued 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. (See Public Utility Regulation below.)
NEPOOL is a voluntary organization open to any person engaged in the
electric business such as investor-owned utilities, municipals, cooperative
utilities, power marketers, brokers and load aggregators. On December 31, 1996,
NEPOOL, on behalf of its participants, filed a restructuring proposal with
FERC. The NEPOOL restructuring proposal is the product of over two years of
intense discussions, deliberations and negotiations among the over 130 NEPOOL
member participants and many non-participants, including New England state
regulators. The key elements of the restructuring proposal are the
implementation of a regional NEPOOL Open Access Transmission Tariff (NEPOOL
Tariff), the creation of an Independent System Operator (ISO), and the
restatement of the NEPOOL Agreement to establish a broader governance structure
for NEPOOL and to develop a more open competitive market structure.
The NEPOOL Tariff, which became effective on March 1, 1997, ensures non-
discriminatory open access to the regional transmission network by providing a
single rate for all transactions that utilize the NEPOOL's bulk power
transmission facilities. The NEPOOL Tariff promotes competition in the New
England power market through its single transmission rate structure. All
regional service within NEPOOL, except for wheeling through or out, is to be
provided as a network service.
On June 25, 1997, FERC issued an order conditionally authorizing the
establishment of an ISO by NEPOOL effective July 1, 1997, affirming that the
transfer of control of transmission facilities owned by the public utility
members of NEPOOL to the ISO is consistent with the public interest under
section 203 of the Federal Power Act.
NEPOOL is in the process of transferring operational control of the New
England bulk power system to the ISO, a newly created non-profit Delaware
corporation. The ISO's primary responsibility is to ensure system reliability,
administer the NEPOOL Tariff, and oversee the efficient and competitive
functioning of the regional power market. The selection of the ISO's Board of
Directors was announced in April 1997.
To give market participants more choice and to foster competition, the
restructured NEPOOL proposes the unbundling of electric service in the NEPOOL
control area. The restructured NEPOOL calls for the development of competitive
wholesale markets for installed capability, operable capability, energy, and
reserves. These wholesale products will be market priced based on bid clearing
pricing rather than the current cost-based pricing. Market participants will be
able to transfer their responsibility for these products by buying or selling
these various services through bilateral transactions or through the regional
power exchange that will be administered through the ISO. The installed
capability market will most likely be implemented in April of 1998, the
operable capability and energy markets are planned for November of 1998, and
the reserve markets will subsequently be implemented.
In general, the EUA System companies support the changes to NEPOOL because
much of the cross-subsidies for sharing costs will be eliminated. These changes
will have an impact on the Company's operating revenues and costs as NEPOOL
transitions from a cost based to a bid based system.
Electric Utility Industry Restructuring
Unbundled Services:
The electric utility industry in both Massachusetts and Rhode Island, the
states in which EUA provides electric services, is transitioning from a
traditional rate regulated environment to a competitive marketplace.
Traditional electric utility services - generation, transmission and
distribution - have been unbundled into separate and distinct services. The
generation, or supply, function is now competitive with customers able to
choose their own electricity supplier at market prices. The transmission and
distribution functions remain regulated services. The local distribution
company is responsible for providing distribution services to the ultimate
electricity consumer within its franchised service territory and the
transmission company is required to provide open access, non-discriminatory
transmission services to generation or supply companies.
Stranded Costs:
Stranded costs represent prudently incurred costs of generation which are
now 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. A December 19, 1997 order from FERC provides
Montaup, the EUA System's generation company, with full recovery of its
stranded costs. Stranded costs are recovered, via a Contract Termination
Charge (CTC) under a contract termination agreement which replaced the all-
requirements contracts formerly in force between Montaup and its retail
affiliates. In its order, FERC approved settlement agreements between Montaup,
its retail affiliates and consumer representatives in Massachusetts and Rhode
Island. Both states' regulatory bodies have approved retail settlements in
accordance with enabling state legislation. At December 31, 1997 Montaup
estimated its stranded costs, including unmitigated investment in owned
generation, generation-related regulatory assets, above-market purchase power
commitments, nuclear decommissioning and transition expenses to be
approximately $1 billion on a present value basis. This estimate is subject to
significant uncertainties including the future market price of electricity.
(See "Divestiture" below for a discussion of stranded cost mitigation.)
Rhode Island - Retail:
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 in several phases commencing July 1, 1997 for certain
customers and culminating with choice for all customers by July 1, 1998, or
sooner. Under the URA, the local distribution company retains the
responsibility of providing distribution services to the ultimate electricity
consumer within its franchised service territory. For customers who do not
choose an alternative supplier, the local distribution company must arrange for
standard offer service. Distribution companies are providers of last resort
service for customers who are unable to obtain their own supply.
The URA provides for full recovery of stranded costs, through a non-
bypassable transition charge initially set at 2.8 cents per kWh through
December 31, 2000. The transition charge recovers, among other things, costs
of depreciated generation, net of its market value; regulatory assets;
nuclear decommissioning costs; and above-market payments to power suppliers.
The costs of net, above-market generation assets and regulatory assets will be
recovered, with a return, through a fixed component of the transition charge
from January 1, 1998, through December 31, 2009. A variable component of the
transition charge will recover, on a reconciling basis, among other things,
nuclear decommissioning and above market purchased power commitments from
January 1, 1998, through the life of the respective unit or contract. The URA
also provides for commitments to demand side management initiatives and
renewables, low-income customer protections, divestiture of at least 15%
of owned non-nuclear generating units as a valuation basis for mitigation of
stranded cost recovery, and performance-based ratemaking (PBR) standards for
electric distribution companies to be in effect until the end of 1998. These
performance-based standards provide for a 6% minimum and an approximate 12%
maximum allowed return on equity for Blackstone and Newport, EUA's Rhode
Island Distribution Companies (R.I. Distribution Companies). In addition, the
URA provides for adjustments to electric distribution companies' base rates
using the prior year's Consumer Price Index for 1997 and 1998 and other
performance factors. Under this provision of the law, rates were
increased 1.3% for customers of both Blackstone and Newport effective January
1, 1998.
In February 1997, Blackstone, Newport and Montaup reached a settlement in
principle with the Rhode Island Division of Public Utilities and Carriers
(RIDIV) and the state's Attorney General and filed a Memorandum of
Understanding (MOU) with the Rhode Island Public Utilities Commission (RIPUC),
outlining the terms of the settlement. The settlement was submitted to the
RIPUC in two separate filings which were approved on April 21, 1997 and
December 17, 1997, respectively. In addition to complying with the URA, the
settlement, similar in many respects to the settlement negotiated in
Massachusetts, described below, provided for a 4% rate reduction for
Newport's customers and a 13% rate reduction for Blackstone's customers
effective January 1, 1998, amendments to Blackstone and Newport power contracts
with Montaup to replace all-requirements provisions with a CTC concurrent with
retail access and the filing of a plan to divest all of Montaup's generating
assets. The net proceeds of the divestiture will be used to mitigate the
amount of Montaup's stranded costs to be recovered through the CTC. (See
"Divestiture" below for a discussion of Montaup's divestiture process.)
On December 17, 1997, the RIPUC approved a retail settlement which
included a distribution rate freeze through December 31, 2000, except for any
temporary credit or surcharge resulting from PBR implementation or the standard
offer reconciliation, and retail access for all customers commencing January 1,
1998.
Massachusetts - Retail:
On December 23, 1996, Eastern Edison and Montaup reached an agreement in
principle with the Attorney General of Massachusetts and the MADOER and filed a
MOU with the Massachusetts Department of Telecommunications and Energy (DTE)
(formerly the Department of Public Utilities) outlining the terms of a plan,
similar in many aspects to the URA, which would allow retail customers to
choose their supplier of electricity in 1998 and provide Eastern Edison and
Montaup full recovery of stranded costs. On May 16, 1997 an Offer of
Settlement was filed with the DTE.
The Offer of Settlement provided all of Eastern Edison's customers the
ability to choose an alternative supplier of electricity beginning as soon as
January 1, 1998. Until a customer chooses an alternative supplier, that
customer would receive standard offer service which would be priced to
guarantee at least a 10% reduction in electricity rates. Eastern Edison would
be required to arrange for standard offer service through December 31, 2004 and
would purchase power for standard offer service from suppliers through a
competitive bidding process. Montaup has guaranteed standard offer supply at a
fixed price schedule for the duration of the standard offer period. For
competitive suppliers to be eligible to provide supplies for standard offer
service, their prices must be competitive with the fixed prices guaranteed by
Montaup. In the event that some, or all, of the standard offer requirement is
not awarded to competitive suppliers, Montaup has an obligation to provide such
requirement at the indicated fixed price schedule, so called backstop service.
This backstop service will be assigned proportionately to purchasers of
Montaup's generating capacity. The agreement is also designed to achieve full
divestiture of Montaup's generating assets via implementation of a plan, that
would require (1) functional separation by Montaup of its generating and
transmission businesses, and (2) full market valuation and sale of all
non-nuclear generating assets through an auction or equivalent process.
On March 1, 1998, concurrent with retail choice in Massachusetts,
Montaup's FERC - approved, all-requirements wholesale contract with Eastern
Edison was terminated. In its place, Montaup is billing Eastern Edison a CTC
designed to recover, among other things, Montaup's stranded costs. Eastern
Edison recovers the CTC through a non-bypassable transition access charge
to all of its distribution customers. The transition access charge will 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.
(See "Divestiture" below.)
Embedded costs associated with generating plants and regulatory assets are
recovered, with a return, over a period of twelve years ending December 31,
2009. Purchased power contracts and nuclear decommissioning costs are
recovered as incurred over the life of those obligations, a period expected to
extend beyond twelve years. The initial transition access charge is set at
3.04 cents per kWh through December 31, 2000, and is expected to decline
thereafter.
The agreement also establishes a performance component for Eastern Edison,
incorporating a floor and cap on allowed return on equity. Under the
agreement, Eastern Edison's distribution rates are frozen until December 31,
2000. Subsequent to the commencement of retail choice, Eastern Edison's annual
return on equity is subject to a floor of 6% and a ceiling of 11.75%.
On November 25, 1997, the Governor of Massachusetts signed the Electric
Industry Restructuring Act (the Act) into law. The Act directed the DTE to
require electric companies to accommodate retail access to generation services
and choice of supplier by March 1, 1998 and to require electric companies to
file restructuring plans to do so. The Act also provides for a 10%
reduction in electric rates commencing March 1, 1998 and an additional 5%
reduction, adjusted for inflation, commencing September 1, 1999. The
additional 5% reduction may be accomplished with benefits from asset
divestiture and/or securitization. Recognizing the fact that certain electric
companies, including Eastern Edison, had already submitted restructuring
settlement agreements, the Act provided that "an electric company that has
filed a plan which substantially complies or is consistent with this chapter as
determined by the department shall not be required to file a new plan,
and the department shall allow such plans previously approved or pending before
the department to be implemented." On December 5, 1997, the DTE issued a
notice seeking comments on whether the Eastern Edison Settlement Agreement
"substantially complies or is consistent with this chapter." Eastern Edison and
other parties provided comments.
on December 23, 1997 the DTE approved the Settlement as being in
substantial compliance with the Act. Retail access commenced on March 1, 1998
for Eastern Edison's retail customers.
In January 1998, several parties filed motions for reconsideration of
Eastern Edison's approved settlement agreement and motions to extend the
judicial appeal period with the DTE. The motions for reconsideration claim
that provisions of the approved plan involving consumer rates, cost recovery,
energy efficiency and reliability do not meet standards set forth in the Act.
The DTE denied one party's motion and that party has appealed the DTE's ruling
to the Massachusetts Supreme Judicial Court. Management cannot predict the
ultimate outcome of the pending motions for reconsideration or judicial appeal.
The Office of the Attorney General has certified a referendum petition to
repeal the Act as a matter appropriate for a referendum initiative. A petition
was filed with the Election Division of the Office of the Secretary of State in
February 1998. A question on repealing the Act will be presented to voters on
the November 1998 ballot. EUA and the electric industry in Massachusetts
will actively oppose repeal. Management cannot predict the outcome of the
November ballot question.
FERC - Wholesale:
On May 1, 1997, Montaup and the R.I. Distribution Companies jointly filed
amendments to their FERC-approved all-requirements power contracts. The filing
included a calculation for a CTC to recover stranded costs and a provision for
standard offer service for resale to retail customers who do not choose an
alternate generation supplier as discussed under "Massachusetts-Retail" above.
These provisions replaced the services offered by the all-requirements
contracts upon full retail access pursuant to the URA. The filing also
included hold harmless provisions for Montaup's other wholesale customers and
for retail customers of the R.I. Distribution Companies and lost revenue
provisions, which allow for recovery of any of Montaup's lost revenues for the
period from the initial phases of retail access in Rhode Island through
completion of Montaup's divestiture process. This filing allowed the R.I.
Distribution Companies to implement on July 1, 1997 the phase-in provisions
of the URA and prevented any cross-subsidies by their retail customers who were
excluded from the groups of customers given retail choice prior to January 1,
1998 and by Montaup's other customers.
On May 30, 1997, elements of the Massachusetts Settlement Agreement,
including the CTC calculation, which fall under the jurisdiction of FERC were
filed with FERC.
The May 1st and May 30th filings were consolidated by FERC and on October
29, 1997, settlement agreements among Montaup, its affiliated and non-
affiliated customers, the Massachusetts Attorney General, the MADOER, the RIDIV
and RIPUC were submitted for FERC approval. These settlements represent a
comprehensive resolution of federal/wholesale issues of electric utility
industry restructuring based on the settlement agreements in Massachusetts and
Rhode Island. FERC approved the settlements on December 19, 1997,
accommodating retail choice for EUA's retail customers in Massachusetts and
Rhode Island.
Divestiture:
Montaup began marketing its portfolio of generation assets in July 1997,
and subsequently received bids from a number of potential purchasers. On
January 23, 1998, based on a review of the offers and discussions with
potential purchasers, Montaup announced that it was reopening the sales
process on the majority of its generating assets. The process is expected to
require four to six months to execute the purchase and sale agreement. The net
proceeds of the sale, as defined in the settlement agreements, will be used to
mitigate Montaup's CTC to its retail affiliates via a Residual Value Credit
(RVC). The RVC will reduce the fixed component of the CTC for the net
proceeds, with a return, in equal annual amounts over the period commencing on
the date the RVC is implemented through December 31, 2009. Subject to
regulatory approvals, Montaup anticipates the sale will be completed in early
1999.
Accounting Issues:
Historically, electric rates have been designed to recover a utility's
full cost of providing electric service including recovery of investment in
plant assets. 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.
In July 1997, the Financial Accounting Standards Board's (FASB) Emerging
Issues Task Force (EITF) reached a consensus regarding certain issues raised
related to the application of Statement of Financial Accounting Standards No.
71 (FAS71), "Accounting for the Effects of Certain Types of Regulation." The
EITF determined that when sufficient detail is available for an enterprise to
reasonably determine, from legislation and enabling rate orders, how the
transition plan will affect the separable portion of its business being
deregulated, the enterprise should discontinue the application of FAS71 to that
deregulated portion of its business. The EITF also concluded that utilities
can continue to carry previously recorded regulatory assets on their balance
sheet if regulators have guaranteed a regulated cash flow stream to recover the
cost of those assets.
In light of approved restructuring settlement agreements and restructuring
legislation in both Massachusetts and Rhode Island, EUA has determined that
Montaup no longer will apply the provisions of FAS71 to the generation portion
of its business. Due to the recoverability of regulatory assets granted in the
approved restructuring plans, EUA believes that the discontinuation of FAS71
for the generation portion of Montaup's business will not have a material
impact on EUA's results of operation or financial condition. EUA believes its
transmission and retail distribution businesses continue to meet the criteria
for continued application of FAS71.
In addition, if legislative or regulatory changes and/or competition
result in electric rates which do not fully recover a 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." EUA does not anticipate any write-down
of plant assets as a result of approved restructuring plans or enacted
legislation at this time.
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 "Fixed Rate 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 through its
"flexifund" finance division.
EUA Cogenex's principal markets include institutional, commercial,
industrial, government entities and, through its EUA Citizens Conservation
Services subsidiary, public and private multi-family housing.
Difficulties in turning project proposals into signed contracts, the
virtual elimination of utility sponsored DSM programs and the termination of
two 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 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 the early part of 1997, EUA Cogenex restructured its senior management
to provide a more efficient control function and created a "team" concept
whereby every employee is assigned to a work team for project implementation
and administrative purposes. 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 continue to improve the performance of its
sales activity.
EUA Cogenex also operates a lighting services division, Renova (Formally
EUA Nova), and a controls division, EUA Day. Renova 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, 1997, EUA Cogenex employed 197 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 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 1996, the move toward electric industry
deregulation resulted in a reduction of electric utility sponsored DSM programs
which resulted in a reduction of EUA Cogenex's revenues. However, certain
electric industry restructuring statutes have created additional DSM spending
requirements and those requirements should provide greater revenue
opportunities for EUA Cogenex.
As of December 31, 1997, 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,
1997 1996 1995
(In Thousands)
Operating Revenues $61,321 $ 56,317 $ 79,499
Pre-tax (Loss) Income $769 $(10,186)(1) $ (13,885)(2)
Net (Loss) Earnings $202 $ (6,522)(1) $ (7,904)(2)
Total Assets $188,351 $195,161 $ 199,115
(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.
General - EUA Energy Investment
EUA Energy Investment is a wholly owned subsidiary of EUA. EUA Energy
Investment invests in energy related projects such as EUA BIOTEN, Separation
Technologies, and EUA TransCapacity. EUA BIOTEN is an investment in a general
partnership which is developing a generating unit that burns biomass-
agricultural waste and creates renewable energy. Separation Technologies, Inc.
of which EUA Energy Investment has a 20% equity interest, markets and installs
patented technology that separates unburned carbon from coal fly-ash, which
enables the customer to sell the fly-ash to secondary markets and to reburn the
separated carbon. EUA TransCapacity is an investment in a limited partnership
which has developed and now markets software system of data acquisition,
delivery and coordination using electronic data interchange (EDI) for the
natural gas industry. EUA Compression Services holds our 50% equity interest
in the joint venture which develops services to upgrade natural gas pipeline
compression infrastructure.
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, 1997 (Exhibit 13-1.03 filed herewith).
Capital Requirements
Capital Requirements - EUA:
The EUA System's cash construction expenditures for the year ended
December 31, 1997 were approximately $76.1 million.
Planned core electric cash construction expenditures and energy related
capital requirements for 1998, 1999 and 2000 as set forth below, are estimated
to total $271.6 million, and are expected to be financed with internally
generated funds.
EUA SYSTEM CONSTRUCTION PROGRAM
(In Thousands)
1998 1999 2000 3-Yr. Total
Generation $10,080 $ (a) $ (a) $ 10,080
Transmission 2,606 5,171 3,242 11,019
Distribution 16,746 19,774 18,429 54,949
General 1,025 762 785 2,572
Total Utility
Construction
Requirements 30,457 25,707 22,456 78,620
EUA Cogenex Capital
Requirements 49,509 56,935 65,476 171,920
EUA Energy Capital
Requirements 6,765 10,300 4,000 21,065
Total $86,731 $92,942 $91,932 $271,605
(a) Based on anticipated divestiture of Montaup's generation assets, no
construction expenditures are being forecasted by EUA beyond 1998
(See "Divestiture" under Electric Utility Industry Restructuring).
Construction Program - Blackstone:
Blackstone's cash construction expenditures for the year ended December
31, 1997 were approximately $3.8 million, related primarily to its electric
distribution system.
Planned cash construction expenditures for 1998, 1999 and 2000, as set
forth below, are estimated to total $15.3 million.
BLACKSTONE CONSTRUCTION PROGRAM
(In Thousands)
1998 1999 2000 3-Yr. Total
Transmission $ 90 $ 293 $ 141 $ 524
Distribution 4,071 5,903 4,251 14,225
General 185 190 196 571
Total $4,346 $6,386 $4,588 $15,320
Construction Program - Eastern Edison:
Eastern Edison's cash construction expenditures for the year ended
December 31, 1997 were approximately $15.7 million.
Cash construction expenditures of Eastern Edison and Montaup for 1998,
1999 and 2000 as set forth below, are estimated to total $53.4 million.
EASTERN EDISON CONSTRUCTION PROGRAM
(In Thousands)
1998 1999 2000 3-Yr. Total
Eastern Eastern Eastern Eastern
Edison Montaup Edison Montaup Edison Montaup Edison Montaup Combined
Generation(a) $ $10,074 $ $ $ $ $ $10,074 $10,074
Transmission 722 1,767 1,870 2,982 1,892 1,182 4,484 5,931 10,415
Distribution 9,931 190 11,197 11,421 32,549 190 32,739
General 42 42 44 128 128
Total $10,695 $12,031 $ 13,109 $ 2,982 $13,357 $1,182 $37,161 $16,195 $53,356
(a) Based on anticipated divestiture of Montaup's generation assets, no
construction expenditures are being forecasted by EUA beyond 1998 (See
"Divestiture" under Electric Utility Industry Restructuring).
Fuel for Generation
The Retail Subsidiaries currently rely primarily on power purchased from
Montaup to meet the electric energy requirements of their standard offer and
default service customers. The standard offer requirement will be subjected to
a competitive solicitation expected to be completed by the second quarter of
1998. Power purchases for Montaup's remaining obligations to the retail
subsidiaries 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. Future purchases for standard offer
and default service will likely be made by the Retail Subsidiaries themselves.
(See Electric Utility Industry Restructuring above.)
The Retail Subsidiaries recover their cost of power through the operation
of revenue adjustment clauses which are designed to provide timely recovery of
such costs.
For 1997, the EUA System's sources of energy, by fuel type, were as
follows: 31% oil, 28% gas, 18% coal, 17% nuclear, and 6% other. During 1997,
Montaup had an average inventory of 40,550 tons of coal for its steam
generating unit at the Somerset Station, the equivalent of 52 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 $49.54
per ton in 1997 which is equivalent to oil at $11.16 per barrel. 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 540 barrels and
30,040 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 $25.69 per barrel and $18.79 per barrel in 1997, respectively.
Montaup also maintained an average inventory of jet oil of 2,816 barrels at an
average cost per barrel of $27.11 during 1997 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 1997 year-end coal inventory of approximately 58,382
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 a one year contract with a supplier for up to 100% of the fuel-oil
requirements of Canal Unit Nos. 1 and 2 that expires in March of 1999. 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 1997, the cost of oil per barrel at Canal averaged $17.26. Additionally,
Canal has a contract with a gas supplier for approximately 70% of Canal No. 2's
daily gas requirements. Canal No. 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 1995 through
1997, together with the weighted average cost of all fuels, are set forth
below:
Mills* per kWh
1997 1996 1995
Nuclear . . . . . . . . . 5.7 5.0 6.3
Gas . . . . . . . 16.4 14.4 14.3
Coal . . . . . . . . 18.6 19.6 20.3
Oil . . . . . . . . . 31.0 37.7 30.2
All fuels . . . . . . . . . 19.2 16.7 16.7
*One Mill is 1/10 of one cent
OSP has two gas supply contracts which expire on September 30, 2011, for
its two 250 mw generators. The cost of gas for 1997 averaged $1.45 per mmBtu
or approximately 12.3 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
at least the year 2010. Montaup owns a 4.01% interest in Millstone 3 and a
2.9% interest in Seabrook I. Northeast Utilities, the operator of the units,
indicates that Millstone 3 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 the contract termination charge.
In early 1998, Yankee Atomic, Maine Yankee, and Connecticut Yankee
individually, as well as a number of other utilities filed suit in federal
appeals court seeking a court order to require the Department of Energy (DOE)
to immediately establish a program for the disposal of spent nuclear
fuel. Yankee Atomic and Connecticut Yankee are also seeking damages in of
approximately $70 million, and $90 million, respectively. Under the Federal
Energy Policy Act of 1992 and Nuclear Waste Policy Act, the DOE was to provide
for the disposal of radioactive wastes and spent nuclear fuel starting in 1998
and has collected funds from owners of nuclear facilities to do so. Management
cannot predict the ultimate outcome of this issue.
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 canceled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction problems 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, the unit must be decontaminated of any residual radioactivity so as
to satisfy NRC regulations which generally require that the property be
releasable 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:
Vermont Yankee, an operating nuclear generating company in which Montaup
has an equity ownership interest (see Item 2. PROPERTIES -- Power Supply) has
developed its estimate of the cost of decommissioning its unit and has 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, Vermont Yankee re-estimates the cost of decommissioning and applies 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 "Connecticut Yankee" and "Maine Yankee"
below.)
Montaup is recovering through rates its share of estimated decommissioning
costs for Millstone 3 and Seabrook I. Montaup's share of the current estimate
of total costs to decommission Millstone 3 is $21.9 million in 1997 dollars,
and Seabrook I is $13.7 million in 1997 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.
Millstone 3:
Montaup has a 4.01% ownership interest in Millstone 3, an 1154-mw nuclear
unit that is jointly owned by a number of New England utilities, including
subsidiaries of Northeast Utilities (Northeast). Subsidiaries of Northeast are
the lead participants in Millstone 3. On March 30, 1996, 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 Nuclear Regulatory Commission (NRC) has raised numerous issues with
respect to Millstone 3 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" below.)
In October 1996, the NRC informed Northeast that it was establishing a
Special Projects Office to oversee inspection and licensing activities at
Millstone. The Special Projects Office is responsible for (1) licensing and
inspection activities at Northeast's Connecticut plants, (2) oversight of an
Independent Corrective Action Verification Program (ICAVP), (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. Also, the NRC directed Northeast to submit a plan
for disposition of safety issues raised by employees and retain an independent
third-party to oversee implementation of this plan.
In March 1997, Northeast announced that Millstone 3 had been designated as
the lead unit in the recovery process of the three Millstone nuclear units that
are currently out of service. Millstone 3 is the largest of the three units
currently out of service, and its return to service will most benefit the
energy needs of the New England region.
On January 8, 1998, Northeast announced that Millstone 3 was "physically
ready for restart" indicating that virtually all of the restart-required
physical work had been completed. Northeast indicated that a small amount of
systems work needs to be completed prior to restart. Various NRC and
independent inspections are required prior to restarted. EUA cannot predict
when the plant will be restarted.
While Millstone 3 is out of service, Montaup will incur incremental
replacement power costs estimated at up to $1 million per month.
In August 1997, nine non-operating owners, including Montaup, who together
own approximately 19.5% of Millstone 3, filed a demand for arbitration against
Connecticut Light and Power (CL&P) and Western Massachusetts Electric Company
(WMECO) as well as lawsuits against Northeast and its Trustees. CL&P and
WMECO, owners of approximately 65% of Millstone 3, are Northeast subsidiaries
that agreed to be responsible for the proper operation of the unit.
The non-operating owners of Millstone 3 claim that Northeast and its
subsidiaries failed to comply with NRC regulations, failed to operate the
facility in accordance with good utility operating practice and attempted to
conceal their activities from the non-operating owners and the NRC. The
arbitration and lawsuits seek to recover costs associated with replacement
power and O&M costs resulting from the shutdown of Millstone 3. The non-
operating owners conservatively estimate that their losses will exceed $200
million.
Montaup pays its share of Millstone 3's O&M expenses on a reservation of
right basis. The fact that Montaup makes payment for these expenses is not an
admission of financial responsibility for expenses incurred or to be incurred
due to the outage.
EUA cannot predict the ultimate outcome of the NRC inquiries or legal
proceedings brought against CL&P, WMECO and Northeast or the impact which they
may have on Montaup and the EUA system.
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 $5.0 million at December 31, 1997.
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. In
December 1996, the Board of Directors of Connecticut Yankee 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. Montaup's share of the total estimated costs for the permanent
shutdown, decommissioning, and recovery of the investment in Connecticut Yankee
is approximately $27.4 million and is included with Other Liabilities on the
Consolidated Balance Sheet as of December 31, 1997. The recovery of this
estimated amount, elements of which have been disputed by certain intervening
parties, is subject to approval of FERC. Also, due to anticipated
recoverability, a regulatory asset has been recorded for the same amount and is
included with Other Assets. Montaup cannot predict the ultimate outcome of
FERC's review.
See Fuel for Generation for a discussion of a Connecticut Yankee action against
the DOE.
Maine Yankee:
On August 6, 1997, as the result of an economic evaluation, the Maine
Yankee Board of Directors voted to permanently close that nuclear plant.
Montaup has a 4.0% equity ownership in Maine Yankee with a book value of
approximately $3.2 million at December 31, 1997. Montaup's share of the total
estimated costs for the permanent shutdown, decommissioning, and recovery of
the remaining investment in Maine Yankee, is approximately $35.4 million and is
included with Other Liabilities on the Consolidated Balance Sheet at December
31, 1997. Also, due to anticipated recoverability, a regulatory asset has been
recorded for the same amount and is included with Other Assets.
On August 7, 1997, Maine Yankee submitted to the NRC a certification
that the plant had ceased operations permanently and a certification that the
nuclear fuel had been permanently removed from the plant's reactor. On August
27, 1997, Maine Yankee submitted to the NRC its Post Shutdown Decommissioning
Activities Report describing its plan for decommissioning the plant. On
November 5, 1997, Maine Yankee submitted a rate filing to the FERC to provide
for recovery of its costs during the decommissioning period. The filing
provides for the investment in plant, nuclear fuel and associated facilities to
continue to be recovered through October 2008. There are several intervenors
in this FERC filing and Montaup cannot predict the outcome of FERC's review.
In November 1997, Maine Yankee and Entergy Nuclear, Inc. (Entergy) signed
an agreement to renew the contract for Entergy to provide management services
to Maine Yankee. Entergy will provide management services for the initial
decommissioning of Maine Yankee activities through September 30, 1998.
Also, as a result of the August 1997 shutdown, Montaup and the other
equity owners have been notified by the Secondary Purchasers that they will no
longer make payments for purchased power to Maine Yankee. The Secondary
Purchase Contracts are between the equity owners as a group and 30
municipalities throughout New England. Presently, the equity owners are making
payments to Maine Yankee to cover the payments that would be made by the
municipals.
On November 28, 1997, the Secondary Purchasers sent a Notice of Initiation
of Arbitration to the equity owners of Maine Yankee. On December 15, 1997, the
equity owners as a group filed at FERC a Complaint and Petition for
Investigation, Contract Modification, and Declaratory Order. The equity owners
are seeking an order from FERC declaring that the Secondary Purchasers remain
responsible for payments due under the Purchase Contracts and directing the
Secondary Purchasers to make such payments. The equity owners also seek a
modification of the Secondary Purchase Contracts to extend the termination date
or otherwise to ensure that the equity owners may fully recover from the
Secondary Purchasers a share of the costs of shutting down and decommissioning
the Maine Yankee plant that is proportionate to the Secondary Purchasers'
entitlements to energy from the plant. Management does not believe that this
contract issue will have a material effect on EUA's future operating results or
financial position and cannot predict its ultimate outcome at this time.
See Fuel for Generation for a discussion of a Maine Yankee action against the
DOE.
Yankee Atomic Electric Company (Yankee Atomic):
Montaup holds a 4.5% equity ownership in Yankee Atomic. In October 1997,
Yankee Atomic announced that it had accepted a Duke Engineering and Services
(DE&S) Letter of Intent to acquire Yankee Atomic's Nuclear Services Division.
Yankee Atomic indicated it was seeking a purchaser with a long-term commitment
to excellence in nuclear operations and support services that would continue to
provide that level of service to its affiliated New England nuclear plants.
Yankee Atomic's plan is to continue as a smaller organization responsible for
the completion of the safe and effective decommissioning of the Yankee Nuclear
Power Plant in Rowe, Massachusetts. The acquisition was completed on December
1, 1997.
See Fuel for Generation for a discussion of a Yankee Atomic action against the
DOE.
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 DTE 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.
In 1993, the DTE and RIPUC approved a Memorandum of Understanding (MOU)
between Eastern Edison, Blackstone, Newport and Montaup which established a
framework for a coordinated, regional review of the resource planning and
procurement process of those companies. It was 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 were to file with the DTE
and Blackstone and Newport were to file with the RIPUC an integrated
resource plan concurrently. The MOU outlined a mechanism and a timetable by
which the reviews by the two commissions would be coordinated and any
inconsistencies among the decisions by the state commissions would be resolved.
In conjunction with its approval of the MOU, the DTE granted Eastern
Edison and Montaup an exemption from the DTE'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 has not had 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. Retail customers' direct access to power suppliers
and the limitation of distribution companies' power supply activities to
standard offer and default services competitively procured from the market may
substantially alter the practical effect of state regulation. As competition
becomes more prevalent in the electric industry, it is anticipated that
regulatory review of power supply 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 DTE in the case of Eastern Edison and with the RIPUC in the case of
Blackstone and Newport. For the twelve months ended December 31, 1997, 61% of
EUA's consolidated revenues were subject to the jurisdiction of FERC, 15% to
that of the DTE and 13% 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, 1997, 79.9% of Eastern Edison's
consolidated revenues were subject to the jurisdiction of the FERC and 20.1% to
DTE. 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 (1) Return on
Annual Annual Common
Revenue Date Revenue Date Equity %
Federal
- Montaup See Electric Utility Industry Restructuring
Massachusetts
None
Rhode Island
- Blackstone
RIPUC - 2498 3,094 11/15/96(2) 2,821 1/1/97
RIPUC - 2498 2,265 11/15/97(3) 2,265 1/1/98
- Newport
RIPUC - 2499 1,437 11/15/96(2) 1,425 1/1/97
RIPUC - 2499 1,031 11/15/97(3) 1,055 1/1/98
Notes:
(1) Per final order or settlement agreement.
(2) 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 Consume Price Index for the most recent 2
months ended September 30, 1996.
(3) The revenue requirement represents the compliance with
R.I.G.L. 39-1-27.4 to file rates reflecting the change in the
Consumer Price Index for the most recent 12 months ended
September 30, 1997.
FERC Proceedings - Transmission:
Open-access transmission tariffs for point-to-point and local 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 July 9, 1996 to modify its terms and conditions in conformance with FERC
orders No. 888 and No. 889, issued on April 24, 1996.
On December 31, 1996, Montaup filed revisions to its Open Access
Transmission tariff necessary to comply with FERC's order on September 11,
1996, which dealt with use rights of High Voltage Direct Current (HVDC)
interconnection transmission facilities with the Hydro Quebec system and on
January 21, 1997, filed additional revisions to coincide with the NEPOOL Open
Access Transmission filing.
On January 3, 1997, as required by FERC in Order No. 889, Montaup filed its
Standards of Conduct Implementation Procedures detailing Montaup's compliance
with the requirements of FERC's standards. Coincident with this filing,
Montaup complied with OASIS's requirements as part of a region wide OASIS in
NEPOOL.
On March 4, 1997, FERC issued Orders 888A and 889A which reaffirmed the
legal and policy bases in which Orders 888 and 889 were grounded and addressed
interventions that were filed in response to Orders 888 and 889. As a result,
on July 14, 1997, Montaup filed revisions to its open access transmission
service for compliance with FERC Order 888A. The filing incorporates all of
the tariff amendments to date.
On June 4, 1997, as supplemented on July 14, 1997, Montaup filed with FERC
in Docket No. ER97-3200-000 amendments to its open access transmission tariff
to provide for unbundled retail transmission service. Montaup proposed to
allow retail customers to obtain retail transmission service directly from
Montaup or through Montaup's retail affiliates acting as the retail customers'
agent. Montaup requested FERC to allow the tariff amendments to become
effective for service to retail customers in Blackstone's and Newport's service
areas on July 1, 1997. FERC accepted the amendment to become effective
subject to refund on that date in an order issued September 12, 1997. FERC
accepted the amendment subject to any modification that may be required as a
result of other pending proceedings concerning Montaup's transmission tariff
and ordered Montaup to make a compliance filing changing the amendments in
certain limited respects. The compliance filing was made by Montaup on October
10, 1997.
On October 29, 1997 Montaup filed an Offer of Settlement for all non-rate
issues in FERC Docket ER97-2338-000. This docket included the filing of
unsigned network transmission service agreements and network operating
agreements with Montaup's non-affiliated wholesale customers. The Offer of
Settlement was accepted by FERC on October 31, 1997.
On October 31, 1997 Montaup filed an amendment to its open access
transmission tariff to include retail transmission service to customers of the
Pascoag Fire District. This filing was accepted by FERC subject to refund and
became effective on January 1, 1998. Montaup has concluded settlement
discussions with the Pascoag Fire District and has filed an Offer of Settlement
with FERC.
On November 25, 1997 Montaup filed an amendment to its open access
transmission tariff to include support payments made by Montaup for Pool
Transmission Facilities (PTF). The impact of this filing in FERC Docket
ER98-861-000 is to increase Montaup's annual transmission revenue requirement
by approximately $1.8 million. On January 14, 1998 the Commission consolidated
this filing with FERC Docket ER97-4691-000. Montaup has reached a settlement
with the municipals and the FERC Staff in this docket and has filed and Offer
Settlement with FERC.
On December 15, 1997 Montaup reached a settlement with its wholesale
customers and FERC to resolve FERC Docket ER97-4691-000. This docket
established a formula rate schedule for Montaup's annual transmission revenue
requirement. Filing of the Settlement has been delayed by the Commission's
decision on January 14, 1998 to consolidate FERC Docket ER98-861-000 into this
proceeding.
FERC Proceedings - Supply:
Montaup submitted an informational filing of a Divestiture Plan on July 1,
1997 whereby Montaup would no longer be a subsidiary of Eastern Edison.
On October 29, 1997 Montaup filed settlement agreements in dockets ER97-
2800 and ER97-3121 among Montaup, Blackstone, Newport, RIDIV, RIPUC and the
R.I. Attorney General; a settlement agreement among Montaup, the Division of
Energy Resources of the Office of the Attorney General of Massachusetts and
Eastern Edison; separate settlements between Montaup and the Middleborough Gas
and Electric Department; Montaup and the Pascoag Fire District; and a
settlement between Montaup and Taunton Municipal Lighting Plant. These
settlements shorten the notice of termination from three years to 90 days.
(See Electric Utility Industry Restructuring for further discussion of the
termination of Montaup's all-requirements contracts with its affiliated
customers and other electric utility industry restructuring issues.)
Massachusetts Proceedings:
On May 16, 1997 a restructuring Settlement Agreement was filed with the
DTE outlining terms of a settlement of electric utility industry restructuring
issues reached among Eastern Edison, Montaup the Massachusetts Attorney
General, MADOER and several other signatories. The DTE held evidentiary
hearings on the Settlement Agreement in July 1997, and issued a letter of
conditional approval on October 3, 1997. Eastern made a compliance filing
addressing specific concerns of the DTE on October 10, 1997 and final approval
was expected within 30 days of that compliance filing. In light of pending
electric utility industry restructuring legislation, the DTE did not act upon
the compliance filing within the 30 days. On November 25, 1997 the Electric
Industry Restructuring Act was signed into law and on December 5, 1997 DTE
issued a notice seeking comments on whether the Settlement Agreement was
in substantial compliance with the Act. Eastern Edison and others provided
comments and on December 23, 1997 the DTE approved Eastern Edison's Settlement
Agreement. (See Electric Utility Industry Restructuring for further discussion
of settlement terms.) On December 31, 1997 Eastern made a partial compliance
filing of unbundled rates and Terms and Conditions to facilitate the Settlement
Agreement and received an order approving them on January 8, 1998. On February
9, 1998 Eastern made a second compliance filing of retail delivery rates and
standard offer and default service. On February 25, 1998, Eastern Edison
submitted revisions to its February 9, 1998 compliance filing and on February
27, 1998 the DTE approved the filing. Rates were effective March 1, 1998.
Retail choice of electricity supplier started March 1, 1998.
On July 1, 1997, the EUA companies filed their Plan for Implementing
Divestiture and Corporate Restructuring with the DTE, seeking approval of the
plan for divestiture of generation assets, creation of a transmission
affiliate, the transfer of control over transmission assets to that affiliate,
and the various financing transactions necessary to accomplish restructuring.
At the DTE's request, consideration of the plan was deferred until the third
quarter of 1997, and is currently pending before the DTE in Docket DTE 97-105.
The plan was updated in a supplemental filing on November 21, 1997.
Rhode Island Proceedings:
On December 18, 1996 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 and a decision was reached in June 1997 directing Newport
to use its 1996 Purchased Capacity Adjustment Clause refund from Montaup,
approximately $1.2 million, to fund the Newport Storm Contingency fund.
Stipulations filed by each of the companies and the RIDPUC outlining individual
storm thresholds and deductibles for eligible storm fund coverage were also
accepted.
The RIPUC opened Docket No. 2514 to investigate a restructuring plan filed
on December 27, 1996 by Blackstone and Newport in compliance with the URA. The
plan covered such issues as corporate restructuring, unbundled rates, terms and
conditions, and performance based rates. In February 1997, Blackstone, Newport
and Montaup reached a settlement with the RIDPUC and the Rhode Island Attorney
General and subsequently filed a Memorandum of Understanding with the RIPUC
outlining the terms of the settlement for implementation of their restructuring
plan. A hearing on the MOU was held on March 20, 1997.
On September 4, 1997, the RIPUC issued an order approving a partial
settlement of retail issues. This partial settlement approves specifically the
Transmission Cost Adjustment Clause, Customer Terms and Conditions, Retail
Delivery Rate Schedules and Terms and Conditions for Nonregulated Power
Producers. A settlement agreement filed on June 9, 1997 defining Performance
Standards under PBR was also approved. However, as explained above under
Montaup's Open Access Transmission Tariff, as amended, in FERC Docket No. ER97-
3200-000, Montaup will directly, or indirectly through Blackstone and Newport,
acting as Montaup's agents, bill retail choice customers for transmission
service. Consequently, Blackstone and Newport amended their Retail Delivery
Rate Schedules and Terms and Conditions for Electric Service by removing the
transmission service charges and references thereto from these tariffs, and to
cancel their Transmission Cost Adjustment Clauses as the need for the clauses
no longer exists. The remaining retail issues were approved by the RIPUC on
December 17, 1997.
On July 1, 1997 a Plan for Implementing Divestiture and Corporate
Restructuring was filed. After holding hearings the plan was approved at an
open meeting of the RIPUC on September 2, 1997, and by written order dated
October 21, 1997. Montaup, Blackstone and Newport are required to report
on the progress of the divestiture plan.
Also included in the settlement, approved at an open meeting held on
December 17, 1997, is a stipulation to expand eligibility to the low income
rate. It was also stipulated that Blackstone would sell its Pawtucket No. 2
Hydro Station and associated properties. The RIPUC issued its order December
31, 1997.
Blackstone and Newport made a Standard Offer and Last Resort Power Supply
filing on November 7, 1997. By order of December 31, 1997 the Standard Offer
filing was found not to comply with the URA since it was not subject to
separate bid. However, interim generation services rates and the last resort
service rates were approved for service on and after January 1, 1998.
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, EUA instituted an environmental audit program for Montaup
and the Retail Subsidiaries, designed to ensure compliance with environmental
laws and regulations and to identify and reduce liability with respect to those
requirements.
Preconstruction Reviews:
Federal, Massachusetts and Rhode Island legislation and regulations
require the preparation of reports evaluating the environmental impact of large
projects and of ways for limiting their adverse impact as a prerequisite to the
granting of various government permits and licenses. 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 of energy demand 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 owned or operated by Montaup and Newport as well as
those in which they 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.
Solid and Hazardous Waste Regulation:
Federal, Massachusetts and Rhode Island legislation and regulations impose
requirements on the generation, transportation, storage and disposal of
hazardous and solid wastes. In Massachusetts, the state and some of the
federal requirements are implemented and enforced by the MADEP, whereas in
Rhode Island, RIDEM carries out these activities. Generating facilities owned
or operated by Montaup and Newport, as well as those in which they have an
interest and must pay a share of the costs, are subject to these requirements.
Superfund Requirements:
Remediation of contaminated sites is subject to federal and state
legislation and regulation. At the federal level, the governing statute is the
Comprehensive Environmental Responsibility, Compensation, and Liability Act of
1980 (CERCLA), as amended by the Superfund Amendments and Reauthorization Act
of 1986. In Massachusetts, the superfund statute is known as Chapter 21E,
while in Rhode Island it is called the "Industrial Property Site Remediation
and Reuse Act." In addition, certain sections of the Massachusetts and Rhode
Island hazardous waste requirements are relevant to the reporting, study, and
cleanup of site contamination. Such authorities impose liability for site
contamination and spills and authorize response by government agencies. Under
these provisions, joint and several liability may be imposed for cleanup costs
upon, 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
Rhode Island law. As a rule, the subsidiaries employ licensed contractors
to dispose of such materials. (See Item 3. LEGAL PROCEEDINGS -- Environmental
Proceedings, for a discussion of specific sites where such authorities have
been invoked.)
Chemical Regulation:
The EPA, pursuant to the Toxic Substances Control Act (TSCA),
regulates the use, storage, and disposal of polychlorinated biphenyls (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 PCBs and which may be subject to regulations
pursuant to TSCA.
Potential Regulation of 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. The Rhode Island legislation 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, an energy
facility siting application, in Rhode Island must include, when applicable, any
current independent, scientific research pertaining to EMF exposure for review
by the Board. 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 (FWPCA) is to
restore and maintain the chemical, physical, and biological integrity of the
nation's navigable waters, and it prohibits the discharge of pollutants
(including heat) into navigable waters without a permit. All wastewater
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. In addition, the EPA
has promulgated requirements under the authority of the FWPCA regarding the
preparation of oil spill prevention counter measure and control (SPCC) plans
for certain oil storage facilities that are located near a waterway. Similar
requirements are mandated under the Oil Pollution Act of 1990 which mandates
the preparation of contingency plans to prevent releases of oil and to ensure
that sufficient resources are in place and ready to respond to any release of
oil.
Standards have been established to control the dredging and filling of
wetlands under the FWPCA, the Massachusetts Wetland Protection Act, the
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. In addition, the MADEP is responsible for promulgating
regulations relating to water usage and conservation, under the Massachusetts
Water Management Act, and for licensing structures (Chapter 91 licenses) in
Massachusetts waterways.
Most of the generating units from which Montaup obtains power operate
under permits which limit their wastewater discharges into waterways, 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. Such units are also subject to stormwater discharge and
wetlands permitting requirements, and the Somerset plant and the South Somerset
property have been issued Chapter 91 licenses. In addition, the Somerset plant
has an approved contingency plan under the Oil Pollution Act, as well as an
SPCC Plan under the EPA rules, implementing the FWPCA which is designed to
minimize the release of oil and other substances into navigable waters.
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). Canal No. 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. The 1990 amendments to the federal Clean Air Act created additional
regulatory programs and strengthened air pollution control requirements that
affect 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,
imposes more stringent emission limits 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 set for the end of 1999. The control program establishes a national
cap of 8.90 million tons per year for SO2 emissions for utilities. Beginning
in the year 2000, the EPA will issue these allowances to utilities on an annual
basis. Such utilities will include Montaup's Somerset Station and Canal No. 2.
MADEP regulations established 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 Title IV of the
Clean Air Act, Montaup would not be required to meet this SO2 emission level
until the year 2000. 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 using lower sulfur content fuels.
Other provisions of the Clean Air Act Amendments will likely impact
Montaup. Title I of the Act establishes a strategy to be followed by the
states in order to attain national air quality standards, particularly the
ozone standard. NOx is an important precursor in the formation of ozone.
Title I requires additional controls on industrial sources of NOx, including
utility power plants. It also creates the Northeast Ozone Transport Region
covering a multi-state area that includes Massachusetts and Rhode Island.
Areas within the transport region will become subject to enhanced controls on
NOx emissions.
In April 1992, the Northeast States for Coordinated Air Use Management
(NESCAUM), an environmental advisory group for eight Northeast states including
Massachusetts and Rhode Island, issued recommendations with respect to NOx
controls for existing utility boilers required to meet the ozone non-attainment
requirements of the Clean Air Act Amendments. The NESCAUM recommendations
cover more facilities 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 received NOx RACT approvals for a boiler and two combustion
turbines at the Somerset facility and has initiated compliance through, among
other things, selective noncatalytic reduction processes. In 1996, MADEP
issued regulations that establish an emissions budget for NOx in the
Commonwealth and would require additional NOx emission reductions beginning on
May 1, 1999. Montaup is evaluating its compliance options under this program.
Title V of the Clean Air Act Amendments provides for the issuance of
federally enforceable operating permits which contain limits and conditions
necessary to comply with all applicable air requirements. 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, and
a permit is expected to be issued in 1998. Although individual sources will
be required to pay fees to the various states which will administer the
program, it is not expected to have a material financial impact on the EUA
System.
On July 16, 1997, the EPA issued a new and more stringent rule covering
ozone and particulate matter under the federal Clean Air Act to be followed by
promulgation of more stringent ozone and particulate matter standards. The
states will prepare plans for meeting these standards beginning about 2004.
At this time, management is unable to predict the financial impact this rule
might have on the EUA System since the federal standards and the state plans
for adopting these standards have yet to be adopted. Moreover, more data must
be collected prior to promulgation of particulate matter standards.
On October 28, 1997, Eastern Edison, Montaup, the Massachusetts Attorney
General and Division of Energy Resources entered into a settlement regarding
electric utility restructuring in the State of Massachusetts which was approved
by the FERC, subject to compliance with certain conditions, on December 19,
1997. The 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 No. 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 (effective emission rates) by any
combination of control technologies, fuel switching, operational
changes, and/or the use of purchased or surplus allowances;
- By January 1, 2000, Somerset Units 5 & 6 must comply with an effective
annual SO2 emission rate of 0.30 lbs/mmBtu;
- By January 1, 2000, Units 5 & 6 must comply with an effective 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). For Unit 6, the cost of compliance with this NOx
limit is capped at $405,000 per year until January 1, 2003. Unit 5, if
reactivated, must comply with the more stringent of: (1) best available
control technology (or BACT), and (2) the emission rates set forth above
with no cost cap; and
- By January 1, 2003, Unit 6 must comply with an effective annual emission
limit of 0.15 lbs Nox/mmBtu. Unit 5, if reactivated, must comply with
the more stringent of: (1) BACT, or (2) 0.15 lbs NOx /mmBtu.
- By January 1, 2010, Canal No. 2 must comply with an effective SO2
emission rate of 0.30 lbs/mmBtu, and an effective NOx emission rate of
0.15 lbs/mmBtu, on an annual basis; this commitment only applies to
Montaup's 50% ownership share of Canal No. 2.
Other Requirements:
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.
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.
Under the Nuclear Waste Policy Act (NWPA), the federal government is
charged with providing facilities for the disposal or permanent storage of
civilian nuclear waste. (See Fuel for Generation above.) The NRC has
promulgated regulations for the protection of the public from radiological
dangers in connection with the disposal of nuclear waste materials.
In certain instances the NRC and the EPA have overlapping jurisdiction.
Thus, NRC regulations are supplemented by requirements imposed by the EPA under
a variety of federal environmental statutes. Those include requirements for
permits covering the discharge of pollutants (including heat) into the
nation's waters and compliance with EPA standards for so-called mixed waste
(i.e. hazardous waste which contains radioactive materials) and for certain
toxic air pollutants which include radionuclides. The EPA has also promulgated
environmental radiation protection standards for nuclear power plants to
regulate the doses of radiation received by the general public.
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. They could also result in delays or
cancellation of construction of planned improvements, or in modification or
termination of existing facilities.
Other
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.
Item 2. PROPERTIES
Power Supply
In 1997, 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), leased to
Montaup, 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. (See Item 1. BUSINESS -- Electric Utility
Industry Restructuring for a discussion of future power needs and plans to
divest all of Montaup's generating assets.)
The EUA System experienced a new all-time peak demand of approximately 933
mw on July 17, 1997.
EUA SYSTEM CAPABILITY
GENERATING UNITS IN SERVICE AS OF DECEMBER 31, 1997
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. 100.00 115.32 115.32 0.00 115.32
1970 SOMERSET J1 JET OIL MONTAUP ELECTRIC CO. 100.00 23.70 23.70 0.00 23.70
1971 SOMERSET J2 JET OIL MONTAUP ELECTRIC CO. 100.00 24.30 24.30 0.00 24.30
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 8.00 8.00 0.00 8.00
1978 ELDRED DIESEL NEWPORT ELECTRIC CORP. 100.00 8.60 8.60 0.00 8.60
SUBTOTAL: 118.16 0.00 181.16
JOINT OWNERSHIP:
1976 CANAL 2 NO. 6 OIL CANAL ELECTRIC COMPANY 50.00 556.33 278.17 34.53 243.64
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 0.00
1990 SEABROOK NUCLEAR NORTH ATLANTIC ENERGY CORP 2.90 1162.00 33.70 0.00 33.70
SUBTOTAL: 374.10 34.53 293.63
EQUITY OWNERSHIP:
1972 VERMONT YANKEE NUCLEAR VT. YANKEE NUCLEAR POWER 2.25 531.00 11.95 0.00 11.95
SUBTOTAL: 11.95 0.00 11.95
PURCHASED POWER:
1968 CANAL 1 NO. 6 OIL CANAL ELECTRIC COMPANY 25.00 564.00 141.00 0.00 141.00
1972 PILGRIM 1 NUCLEAR BOSTON EDISON COMPANY 11.00 666.13 73.27 0.00 73.27
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 13.64 110.00 15.00 0.00 15.00
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 26.50 56.60 15.00 0.00 15.00
1974 BEAR SWAMP GT1 HYDRO NEW ENGLAND POWER 5.13 292.50 15.00 0.00 15.00
1974 BEAR SWAMP GT2 HYDRO NEW ENGLAND POWER 5.13 292.50 15.00 0.00 15.00
1990 OSP 1 GAS OCEAN STATE POWER 28.00 306.60 85.85 0.00 85.85
1991 OSP 2 GAS OCEAN STATE POWER 28.00 306.60 85.85 0.00 85.85
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. 2.94 85.00 2.50 0.00 2.50
1970 NU JETS JET OIL NORTHEAST UTILITIES 2.94 85.00 2.50 0.00 2.50
SUBTOTAL: 527.79 0.00 527.79
HYDRO QUEBEC ENTITLEMENT:
1991 HYDRO QUEBEC I&II HYDRO HQ / NEPOOL 4.06 630.00 25.57 0.00 25.57
SUBTOTAL: 25.57 0.00 25.57
TOTAL GROSS SYSTEM CAPABILITY (MW) -------------------------- 1,120.57
LESS: MILLSTONE 3 CAPABILITY (MW) ------------------------- 45.93
LESS: UNIT CONTRACT SALES (MW) ------------------ 34.53
TOTAL NET SYSTEM CAPABILITY (MW) ------------------------------ 1,040.11
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.) (See also Item 1. BUSINESS --
Electric Utility Industry Restructuring regarding Montaup's disposition of its
generating assets.)
Other Property
The EUA System owns approximately 6,900 miles of transmission and
distribution lines and approximately 84 substations located in the cities and
towns served.
Blackstone owns approximately 1,700 miles of transmission and distribution
lines and approximately 26 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 1997 Annual Report (Exhibit 13-1.01 filed herewith) regarding
encumbrances.
Eastern Edison and Montaup own approximately 4,400 miles of transmission
and distribution lines and approximately 44 substations located in the cities
and towns served. See Note F of Notes to Consolidated Financial Statements in
Eastern Edison's 1997 Annual Report (Exhibit 13-1.08 filed herewith) regarding
encumbrances.
Newport owns approximately 800 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, 1997, (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, 1997, (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 is now 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. In 1997, the PRPs resolved outstanding issues with
the MADEP relative to the status of the site under the current Massachusetts
Contingency Plan (MCP). A Phase II site study was initiated in May 1997 and
is expected to be completed in early 1998. Site remediation may begin later in
1998; Blackstone's share of these costs is expected to be minimal.
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
Massachusetts General 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 the 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 the 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 Street 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 Street 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. On August 15,
1996 Blackstone signed an amended Administrative Consent Order and a Tier IB
permit pursuant to Chapter 21E. The site assessment work began in the Summer
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 ferric ferrocyanide (FFC)
waste removed from the Mendon Road site was not "hazardous" within the meaning
of CERCLA or Massachusetts General Laws Chapter 21E, and that 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. 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 which
were followed by the Commonwealth's written reply in March 1997. Both parties
submitted additional memoranda to the EPA during the remainder of the year.
The EPA will now 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. 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.
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 8
acres), the No. 1 Station owned by Blackstone (approximately 12 acres), and
land formerly owned by Blackstone that was sold in 1968 to the City of
Pawtucket (approximately 8 acres). RIDEM told Blackstone that the site
contained hazardous materials 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 Hazard 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. Preliminary field work was completed in
September 1996. However, RIDEM required additional sampling to be conducted by
Blackstone and Valley. In 1997, that sampling was completed and RIDEM is
currently reviewing the draft Remedial Investigation Report and follow-up
documents. It is expected that RIDEM will order further investigation and
clean up.
4. 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 for the Mendon Road site described above. If EPA finds 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
appeal that determination in district court in Massachusetts.
5. On January 10, 1997, Blackstone, Valley, and a representative of RIDEM
met at Valley's Woonsocket property (the Hamlet Avenue, Woonsocket site), which
is the site of a former manufactured gas plant owned by Blackstone's and
Valley's predecessor, Blackstone Valley Gas & Electric Company and a
predecessor, the Woonsocket Gas Company. The site also includes an active
electric substation, and a former electric generating facility previously owned
by Blackstone Valley Gas & Electric Company and a predecessor, Woonsocket
Electric Machine and Power Company. The entire site consists of several
adjoining properties encompassing approximately nine acres. On February 11,
1997, RIDEM ordered Blackstone and Valley to conduct a site assessment of the
site. Blackstone and Valley submitted a Work Plan on June 16, 1997. The Work
Plan is under review by RIDEM.
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 Street, Cumberland,
and Hamlet Avenue, Woonsocket Sites.
Neither Blackstone or Montaup are able to predict the outcome of any of
the foregoing environmental matters or that pertain to each of them to estimate
the potential costs which may ultimately result. It is the policy of EUA
System 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 the
insurance carriers will honor such claims, or whether such claims can be
enforced against them. 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, 1997, the EUA System has incurred costs of
approximately $6.7 million (excluding the Mendon Road judgment) in connection
with the foregoing environmental matters. These amounts have been financed
primarily by internally generated cash. EUA estimates that additional
expenditures (excluding the Mendon Road judgment) may be incurred through 1998
of up to $1.3 million, substantially all of which relates to Blackstone.
As a general matter, the EUA System will seek to recover costs relating to
environmental proceedings in their rates. Blackstone is currently amortizing
all of its incurred costs over a five-year period consistent with prior
regulatory recovery periods and is recovering certain of those costs in 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.
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. In
1997, the American Arbitration Association set a preliminary hearing date of
June 14, 1998. 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 if Eastern Edison were to be liable for payments,
only approximately $170,000 would be 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 counterclaims in excess of $20 million and a
request for treble damages. Eastern Edison paid MMLP, under a reservation of
rights, approximately $192,000 as the amount Eastern Edison might owe to MMLP.
The Company is vigorously defending itself from the counterclaims. 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
was $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. Counsel has been retained by the insurers and
is actively defending all cases. Three cases have been dismissed as against
EUA companies, with prejudice. EUA cannot predict the ultimate outcome of this
matter at this time.
See Item 1. BUSINESS -- Fuel for Generation for a discussion of legal
actions filed against the DOE.
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 16, 1998, 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 1998 Annual Meeting of Shareholders is scheduled to be held on May 18,
1998. 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
John D. Carney, 53 Executive Vice President since April 1995;
Executive Vice President President of Eastern Edison Company since January
1990; President of Blackstone and Newport since
April 1995. Responsible for the day-to-day
activities of The EUA System's retail electric
operations.
Clifford J. Hebert, Jr., Treasurer since April 1986; Secretary since May,
50, Treasurer and 1995. Responsible for financial, treasury and
Secretary corporate affairs of the EUA System.
Donald G. Pardus, 57 Chairman since July 1990; Chief Executive Officer
Chairman of the Board, since April 1989. Responsible for the overall
Chief Executive Officer management of the EUA System.
and Trustee
Robert G. Powderly, 50 Executive Vice President since April 1992.
Executive Vice President Responsible for purchasing, customer information
services, information systems, human resources,
marketing and rate activities of the EUA System.
John R. Stevens, 57 President since July 1990; Chief Operating
President, Chief Officer since January 1990. Responsible for
Operating Officer and retail operations and new ventures of the EUA
Trustee 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, 1997 (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 1997 Annual Reports (Exhibit 13-
1.01 and 13-1.08, respectively, filed herewith).
As of February 1, 1998 there were 11,130 EUA common shareholders of
record.
The closing price of EUA's Common Shares as reported by the Wall Street
Journal on March 16, 1998 was $25.
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, 1997, (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, 1997 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 9 through 28 in the 1997 EUA Annual Report to Shareholders, pages 3
through 10 in the 1997 Blackstone Annual Report and pages 3 through 14 in the
1997 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 30 through 45 in the 1997 EUA Annual Report to Shareholders, page 2
and pages 12 through 29 in the 1997 Blackstone Annual Report and, page 2 and
pages 16 through 36 in the 1997 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 18, 1998, and filed with the SEC
is incorporated herein by reference. (See Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY-HOLDERS -- Executive Officers of Eastern Utilities
Associates.)
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 16, 1998 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
John D. Carney, 53* President and Director of Blackstone and Newport
Director and President since April 1995; President and Director of
Eastern Edison since January 1990.
Barbara A. Hassan, 48 Vice President of Blackstone since April 1995;
Vice President Vice President of Eastern Edison since January
1990. Responsible for employee benefits, wages,
risk management and labor relations.
Clifford J. Hebert, Jr., 50* Director of both Blackstone and Eastern Edison
Director, Treasurer and since April 1997. Treasurer since April 1986
Secretary/Clerk and Secretary/Clerk since April 1995 of both
Blackstone and Eastern Edison.
Michael J. Hirsh, 43 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, 47 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.
Marc F. Mahoney, 43 Vice President of Blackstone and Eastern Edison
Vice President since July 1997; prior to that he was Director of
Transmission & Distribution for Blackstone and
Eastern Edison since April 1995 and Distribution
Superintendent of Eastern Edison since November
1991. Responsible for the operation and
maintenance of the transmission and distribution
facilities.
Donald G. Pardus, 57* 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, 50* Executive Vice President and Director since March
Director and Executive 1992 of both Blackstone and Eastern Edison.
Vice President
John R. Stevens, 57* 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 18, 1998 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 25, 1998,
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 18, 1998 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, 1997 (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, 1997.
Blackstone
Schedule II - Valuation and Qualifying Accounts for the three years
ended December 31, 1997.
(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. 70-3619; 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. 70-7511; 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).
*4-1.09 - Twenty-Seventh Supplemental Indenture of Eastern Edison dated as
of January 1, 1998.
- 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 - 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 (including amendments
through January 1, 1992) and December 21, 1994 (Exhibit 10-15.03,
Form 10-K of EUA for 1995, 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).
*10-15.03 - Second Amendment to the Eastern Utilities Associates Employees'
Savings Plan dated May 30, 1997.
*10-16.03 - Third Amendment to the Eastern Utilities Associates Employees'
Savings Plan dated March 17, 1997.
*10-17.03 - Fourth Amendment to the Eastern Utilities Associates Employees'
Savings Plan dated June 16, 1997.
*10-18.03 - Second Amendment to the Employees' Retirement Plan of Eastern
Utilities Associates and its Affiliated Companies dated March 17,
1997.
*10-19.03 - First Amendment to the Eastern Utilities Associates Restricted
Stock Plan dated November 17, 1997.
- 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, October 15, 1982, and
December 4, 1996 (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; Exhibit 10-37.05, Form 10-K for
EUA for 1996, 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, May 1, 1993, and December 31, 1996, (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 Exhibit 10-38.05 Form 10-K of EUA for 1996, 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, December 21,
1990, and February 12, 1996 (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; Exhibit 10-39.05
and 10-40.05, Form 10-K of EUA for 1996, File No. 1-5366).
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 as of July 21, 1989,
February 7, 1990, and February 12, 1996 and a Supplemental
Agreement dated July 21, 1989 (Exhibit 10-104, Form 10-K of EUA
for 1989, File No. 1-5366; Exhibits 10-41.05 and 10-42.05, Form
10-K of EUA for 1996, 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).
- 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 1997, 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 1997, 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 1997, 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), EUA Energy Services, Inc.
(Massachusetts) and EUA Telecommunications (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 October 2, 1997, EUA 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/John R. Stevens President and Chief Operating Officer March 16, 1998
John R. Stevens (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 R. Stevens President and Chief Operating Officer
John R. Stevens (Principal Accounting Officer) and Trustee
/s/Clifford J. Hebert, Jr. Treasurer
Clifford J. Hebert, Jr. (Principal Financial Officer)
Russell A. Boss Trustee
/s/Paul J. Choquette, Jr. Trustee
Paul J. Choquette, Jr.
March 16, 1998
/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
/s/Wesley W. Marple, Jr. Trustee
Wesley W. Marple, Jr.
/s/Margaret M. Stapleton Trustee
Margaret M. Stapleton
Trustee
W. Nicholas Thorndike
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/John R. Stevens Vice Chairman and Director March 16, 1998
John R. Stevens (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 Accounting Officer)
/s/Clifford J. Hebert, Jr. Treasurer and Director
Clifford J. Hebert, Jr. (Principal Financial Officer)
/s/John D. Carney President and Director March 16, 1998
John D. Carney
/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 16, 1998
By/s/John R. Stevens Vice Chairman and Director
John R. Stevens (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 Accounting Officer)
/s/Clifford J. Hebert, Jr. Treasurer and Director March 16, 1998
Clifford J. Hebert, Jr. (Principal Financial Officer)
/s/John D. Carney President and Director
John D. Carney
/s/Robert G. Powderly Executive Vice President and
Robert G. Powderly Director
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, 1997:
Allowance for Doubtful Accounts $976 $1,090 $450 (a) $1,407 (b) $1,109
For the Year Ended December 31, 1996:
Allowance for Doubtful Accounts $690 $1,754 $292 (a) $1,760 (b) $976
For the Year Ended December 31, 1995:
Allowance for Doubtful Accounts $629 $1,217 $287 (a) $1,443 (b) $690
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, 1997:
Allowance for Doubtful Accounts $151 $550 $332 (a) $884 (b) $149
For the Year Ended December 31, 1996:
Allowance for Doubtful Accounts $127 $800 $232 (a) $1,008 (b) $151
For the Year Ended December 31, 1995:
Allowance for Doubtful Accounts $125 $585 $217 (a) $800 (b) $127
(a) Recoveries of accounts previously written off.
(b) Principally Accounts Receivable written off.
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 44 of the 1997 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.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 3, 1998
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 29 of the 1997
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.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 3, 1998