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, 1998
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 15, 1999:
Eastern Utilities Associates Common Shares, $5 par value - $579,871,415
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 15, 1999: 20,435,997
Blackstone Valley Electric Company Common Shares
Outstanding at March 15, 1999: 184,062
Eastern Edison Company Common Shares
Outstanding at March 15, 1999: 2,339,401
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, 1998, are incorporated by reference into Part II.
Portions of the Eastern Utilities Associates Proxy Statement, to be filed on or
about April 14, 1999 are incorporated by reference into Part III.
EASTERN UTILITIES ASSOCIATES
BLACKSTONE VALLEY ELECTRIC COMPANY
EASTERN EDISON COMPANY
1998 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
Proposed Merger Agreement . . . . . . . . . . . . . . . . .1
General - Core Electric Business. . . . . . . . . . . . . .2
Electric Utility Industry Restructuring . . . . . . . . . .5
Generation Divestiture . . . . . . . . . . . . . . . . .6
General - EUA Cogenex . . . . . . . . . . . . . . . . . . 7
General - EUA Energy Investment . . . . . . . . . . . . . 9
Capital Requirements . . . . . . . . . . . . . . . . . . 10
Capital Requirements - EUA. . . . . . . . . . . . . . . 10
Construction Program - Blackstone . . . . . . . . . . . 10
Construction Program - Eastern Edison . . . . . . . . . 11
Fuel for Generation . . . . . . . . . . . . . . . . . . . 11
Nuclear Power Issues . . . . . . . . . . . . . . . . . . 14
General . . . . . . . . . . . . . . . . . . . . . . . . 14
Decommissioning . . . . . . . . . . . . . . . . . . . . 15
Millstone 3 . . . . . . . . . . . . . . . . . . . . . . 15
Connecticut Yankee . . . . . . . . . . . . . . . . . . .16
Maine Yankee . . . . . . . . . . . . . . . . . . . . . .17
NRC Oversight . . . . . . . . . . . . . . . . . . . . . 18
Public Utility Regulation . . . . . . . . . . . . . . . . 18
Rates . . . . . . . . . . . . . . . . . . . . . . . . . 19
FERC Proceedings - Transmission . . . . . . . . . . . . 20
FERC Proceedings - Supply . . . . . . . . . . . . . . . 21
Rhode Island Proceedings . . . . . . . . . . . . . . . 22
Massachusetts Proceedings . . . . . . . . . . . . . . . 23
Environmental Regulation . . . . . . . . . . . . . . . . 24
General . . . . . . . . . . . . . . . . . . . . . . . . 24
Preconstruction Reviews . . . . . . . . . . . . . . . . 24
Solid and Hazardous Waste Regulation. . . . . . . . . . 25
Superfund Requirements. . . . . . . . . . . . . . . . . 25
Chemical Regulation . . . . . . . . . . . . . . . . . . 25
Potential Regulation of Electric and Magnetic Fields. . 25
Water Regulation. . . . . . . . . . . . . . . . . . . . 26
Air Regulation. . . . . . . . . . . . . . . . . . . . . 27
Permit Transfers . . . . . . . . . . . . . . . . . . . .28
Other Requirements. . . . . . . . . . . . . . . . . . . 29
Environmental Regulation of Nuclear Power . . . . . . . . 29
The Year 2000 Issue . . . . . . . . . . . . . . . . . . . 29
EUA's State of Readiness . . . . . . . . . . . . . . . 30
Costs to Address EUA's Year 2000 Issues . . . . . . . . 30
Risks of EUA's Year 2000 Issues . . . . . . . . . . . . 30
Year 2000 Contingency Plans . . . . . . . . . . . . . . 31
Summary of the Year 2000 Issue. . . . . . . . . . . . . 31
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . 32
Power Supply . . . . . . . . . . . . . . . . . . . . . . 32
Other Property. . . . . . . . . . . . . . . . . . . . . . 34
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . 35
Rate Proceeding . . . . . . . . . . . . . . . . . . . . . 35
Environmental Proceedings . . . . . . . . . . . . . . . . 35
Other Proceedings . . . . . . . . . . . . . . . . . . . . 39
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.40
Executive Officers of Eastern Utilities Associates. . . . 40
PART II
Item 5. MARKET FOR EUA'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . 41
Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . 41
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . 41
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . 41
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES. . . . . . . 41
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANTS. . . . . . . . . . . . . . . . . . . 42
Eastern Utilities Associates. . . . . . . . . . . . . . . 42
Blackstone and Eastern Edison . . . . . . . . . . . . . . 42
Item 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . 43
Eastern Utilities Associates. . . . . . . . . . . . . . . 43
Blackstone and Eastern Edison . . . . . . . . . . . . . . 43
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 44
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . 44
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . 44
(a)(1) Financial Statements . . . . . . . . . . . . . . . 44
(a)(2) Financial Statement Schedules . . . . . . . . . . 45
(a)(3) Exhibits (*denotes filed herewith).. . . . . . . . 45
(b) Reports on Form 8-K. . . . . . . . . . . . . . . . . 59
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Report of Independent Accountants. . . . . . . . . . . . . . . 71
Consent of Independent Accountants . . . . . . . . . . . . . . 73
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 BIOTEN EUA BIOTEN Inc.
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
EUA TransCapacity EUA TransCapacity, Inc.
Montaup Montaup Electric Company
Newport Newport Electric Corporation
Registrants EUA, Blackstone and Eastern Edison
Renova Renova LLC (formerly EUA Nova)
Retail Subsidiaries Blackstone, Eastern Edison and Newport
Non-Affiliated Companies
Connecticut Yankee Connecticut Yankee Atomic Power Company
Maine Yankee Maine Yankee Atomic Power Company
OSP Ocean State Power Project Units 1 and 2
Vermont Yankee Vermont Yankee Power Corporation
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
GLOSSARY OF DEFINED TERMS (Cont'd)
Regulators/Regulations (continued)
DEQE Massachusetts Department of Environmental
Quality Engineering
DOE Department of Energy
DTE Massachusetts Department of Telecommunications
and Energy (formerly Massachusetts Department
of Public Utilities)
Energy Policy Act Energy Policy Act of 1992
EPA Federal Environmental Protection Agency
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
IDIQ Indefinite Delivery and Indefinite
Quantity Contract
IPP Independent Power Producer
ISO Independent System Operator
kv Kilovolt
GLOSSARY OF DEFINED TERMS (Cont'd)
Other (continued)
kWh Kilowatthour
mmBtu Millions of British Thermal Units
mw Megawatt
NEPOOL New England Power Pool
PCB Polychlorinated Biphenyls
PRP Potentially Responsible Party
QF Qualifying cogeneration and small power
production facilities pursuant to PURPA
Seabrook Project Seabrook Nuclear Power Project located in
Seabrook, New Hampshire
PART I
Item 1. BUSINESS
System Overview
Eastern Utilities Associates is a Massachusetts voluntary association
organized and existing under a Declaration of Trust dated April 2, 1928, as
amended, and is a registered holding company under the 1935 Act. Blackstone, a
registered retail electric utility organized under the laws of the State of
Rhode Island in 1912 operates in northern Rhode Island. Eastern Edison, a
registered retail electric utility company, was organized under the laws of the
Commonwealth of Massachusetts in 1883 and operates in southeastern
Massachusetts. EUA owns directly all of the shares of common stock of
Blackstone, Eastern Edison, and Newport, a retail electric utility which
operates in south coastal Rhode Island. These subsidiaries are collectively
referred to as the Retail Subsidiaries. Eastern Edison owns all of the
permanent securities of Montaup, a generation and transmission company, which
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 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.
Proposed Merger Agreement
On February 1, 1999, EUA and New England Electric System (NEES) announced a
merger agreement under which NEES will acquire all outstanding shares of EUA
for $31 per share in cash. The merger agreement, which is subject to the
approval of EUA shareholders and various regulatory agencies, values the equity
of EUA at approximately $634 million, which represents a 23% premium above the
price of EUA shares on December 4, 1998, the last trading day before other
regional merger announcements affected EUA's share price. EUA shareholders
will continue to receive dividends at the current level as declared by the
Board of Trustees, until closing of the merger, which is expected to occur by
early 2000.
General - Core Electric Business
As of December 31, 1998, the number of regular employees in the core electric
and corporate business units was 950. Blackstone had 93 regular non-union
employees. Eastern Edison and Montaup had 256 regular employees. Newport and
EUA Service employed 50 and 551, respectively, at December 31, 1998. Labor
bargaining unit contracts covering approximately 66 employees of Eastern Edison
in the Fall River area, approximately 56 employees of Montaup, and 48 employees
of Newport expire in June 1999, January 2000, and March 2002, 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 597 square miles and has an
estimated population of approximately 740,000. At December 31, 1998, Core
Electric Business served approximately 305,000 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, 1998, Blackstone furnished retail electric service to approximately 86,000
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 392 square miles and has an estimated population of
approximately 463,000. At December 31, 1998, Eastern Edison served
approximately 186,000 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 70,000.
The Core Electric Business accounted for approximately 89% of total operating
revenues of the EUA System in 1998, 1997 and 1996. The remaining balance of
operating revenues during these periods were primarily attributable to EUA
Cogenex.
In 1998, Montaup was required to backstop the Retail Subsidiaries' standard
offer energy requirements. (See Electric Utility Industry Restructuring below.)
In 1998, about 52% of the current net generating capacity of the EUA System
came from a combination of the following sources: (i) wholly owned EUA System
generating plants, primarily Montaup's 163-mw Somerset facility located in
Somerset, Massachusetts; (ii) Montaup's net entitlement of 248 mw from the
565-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 48% of the net
generating capacity of the EUA System came 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 those states and at FERC, Montaup has agreed to sell its
generating assets. (See "Divestiture" under 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, referred to as EWGs, which
are exempt from the 1935 Act. EWGs and another class of 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, 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 was 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 were 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.
On April 20, 1998, FERC accepted the NEPOOL Tariff conditional on NEPOOL's
compliance with a number of issues raised by FERC. On July 22, 1998, NEPOOL
made its compliance filing at FERC. The NEPOOL Tariff changes and amendments
to the Restated NEPOOL Agreement included in the filing effected compliance
with the Commission's April 20, 1998 Order. While there were a large number of
changes in the filing, the principal areas of change relate to the addition in
the NEPOOL Tariff of a separately available Internal Point to Point Service,
the addition of a mechanism to allocate costs to update the regional
transmission system, and the replacement of a Non-Use Charge with an In-Service
Charge across interconnections.
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,
automatic generation control, 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 meet 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. On October 29, 1997, FERC issued an order permitting
implementation of the installed capability market, which occurred in April of
1998. The remaining markets - operable capability, energy, automatic
generation control and the reserve markets are expected to start on April 1,
1999. A favorable FERC order was received on December 17, 1998. Pursuant to
the order, NEPOOL made a compliance filing on January 19, 1999, which includes
the NEPOOL market rules and procedures. FERC has sixty days to rule on this
filing.
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
Legislation enacted in Rhode Island in 1996 and Massachusetts in 1997
along with approved electric utility industry restructuring settlement
agreements in both states and at the federal level granted EUA's Rhode Island
and Massachusetts electric customers with choice of electricity supplier
and rate reductions commencing January 1, 1998 and March 1, 1998, respectively.
Until a customer chooses an alternative supplier, that customer will receive
standard offer service from the EUA retail distribution company. Blackstone
and Newport are required to arrange for standard offer service through December
31, 2009 and Eastern Edison must arrange for this service through February 28,
2005. Under the approved settlement agreements, Montaup had guaranteed
standard offer supply at a fixed price schedule for the duration of the
standard offer periods and Blackstone, Newport and Eastern Edison agreed to
subject their standard offer requirements to a competitive bidding process
in which competitive suppliers would bid against the guaranteed price. Through
its successful divestiture process, combined with a competitive bidding process
conducted in late 1998, Montaup has assigned 100% of its standard offer
obligation to purchasers of its generating assets. The guaranteed standard
offer price will increase over time to encourage customers to leave standard
offer service and enter the competitive power supply market.
Provisions of the approved settlement agreements also allowed Montaup to
replace its all-requirements wholesale contracts with its affiliated retail
distribution companies with a contract termination charge (CTC) which permits
Montaup to recover, among other things, its above market investments and
commitments in generation assets. Montaup began billing the CTC coincident
with retail access and the distribution companies are recovering the CTC
through a non-bypassable transition charge to all of their distribution
customers.
As part of the approved settlement agreements, Montaup agreed to divest
its entire generation portfolio. 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 by an amount equal to the net proceeds, with a return,
over the period commencing on the date the RVC is implemented through December
31, 2009. Montaup has filed to implement the RVC effective April 1, 1999 and
is awaiting FERC approval.
Generation Divestiture
Montaup now has agreements to sell all of its non-nuclear power generation
assets and its 2.9% ownership share of the Seabrook Nuclear Station and has
agreements to transfer all of its remaining purchased power contracts with the
exception of its purchase power commitment with the Vermont Yankee Nuclear
Station.
On January 5, 1999, EUA announced that Montaup had agreed to transfer its
remaining non-nuclear power purchase contracts, amounting to approximately 177
mw to Constellation Power Source, Inc. Montaup previously entered into
agreements to sell: its 160-mw Somerset, Massachusetts electric generating
station for approximately $55 million to NRG Energy, Inc.; its 2.6% (16 mw)
share of the W. F. Wyman Unit 4 in Yarmouth, Maine to the Florida based FPL
Group for approximately $2.4 million; and its 2.9% share (34 mw) of the
Seabrook Station nuclear power plant to the Great Bay Power Corporation, a
subsidiary of BayCorp Holdings, Ltd. for $3.2 million. Montaup has also signed
agreements for the transfer of power purchase contracts for approximately 170
mw between Montaup and Ocean State Power and for the buyout of its 11% (73
mw) power entitlement from the Pilgrim Nuclear Power Station in Plymouth,
Massachusetts. All of the sale and contract transfer agreements are subject to
federal and/or state regulatory approvals, including that of the Nuclear
Regulatory Commission with respect to the Seabrook sale. Closing of the non-
nuclear sale agreements are anticipated to take place in the first quarter of
1999. The Seabrook sale and Pilgrim buyout are expected to take place later in
1999.
The sale of Montaup's 50% share (280 mw) of Unit 2 of the Canal generating
station in Sandwich, Massachusetts to Southern Energy for $75 million, which
was announced in May 1998, was completed on December 30, 1998, and the sale of
two diesel-powered generating units (totaling approximately 16 mw) owned by
Newport to Illinois-based Wabash Power Equipment Co. for $1.5 million closed on
October 1, 1998.
Montaup's remaining generating capacity includes approximately 46 mw from
its 4.0% joint ownership share of Millstone 3 nuclear unit and 12 mw from its
2.25% equity ownership of the Vermont Yankee nuclear facility. EUA will
continue to attempt to sell and/or transfer its minority interests in these
units.
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.
On October 23, 1998, an arbitrators' panel rendered their decision in a
matter involving the 1995 sale of a portfolio of cogeneration units by EUA
Cogenex to Ridgewood/Mass Power Partners, et al (Ridgewood). Ridgewood claimed
that financial and other warranties in the purchase and sale agreement had been
breached. Cogenex entered counterclaims seeking recovery of costs of certain
services performed for Ridgewood. The arbitration panel found for the buyer on
some of the warranty claims, and awarded damages of approximately $2.6 million
plus interest of approximately $900,000 (an amount substantially less than
claimed). Cogenex was awarded approximately $400,000 plus interest of
approximately $130,000 on its counterclaim. Cogenex has paid the arbitration
panel's net award less interest and has recorded this charge to earnings during
the quarter ended December 31, 1998. Ridgewood has claimed attorney fees and
costs in excess of $900,000. The issue of the parties' respective rights to
attorney's fees has been heard and is under advisement. Cogenex has taken the
position that the claim is excessive and that in fact EUA Cogenex should be
awarded a substantial portion of attorney fees and costs incurred by it as a
prevailing party against several claimants and otherwise.
Through May 1, 1998, EUA Cogenex also operated a lighting services
division, Renova. Renova provides lighting products designed to achieve an
efficiency gain through the integration of various lamp, ballast and light
reflector products. In order that EUA Cogenex concentrate on its core
business, the assets and liabilities of RENOVA were transferred to EUA Energy
Investment. EUA Cogenex also operates a controls division, EUA Day. 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.
At December 31, 1998, EUA Cogenex employed 187 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.
In addition, EUA Cogenex has recently concentrated on obtaining contract
awards under the Department of Energy's (DOE) Energy Saving Performance
Contracting Programs. In 1998, EUA Cogenex was awarded the DOE's Midwest
region's Indefinite Delivery and Indefinite Quantity (IDIQ) contract to
provide energy conservation services to reduce energy and water consumption and
associated utility costs. Early in 1999, EUA Cogenex was awarded its second
IDIQ from the DOE to provide energy-saving services in the Mid-Atlantic region.
The DOE has authorized $750 million in capital expenditures under this
contract.
Under the Mid-Atlantic IDIQ contract, EUA Cogenex will provide energy
conservation services in federally-owned facilities in the six-state area of
Delaware, Maryland, New Jersey, Pennsylvania, Virginia, and West Virginia, in
addition to Washington, D.C.
Over the past year, EUA Cogenex has been involved in energy saving
projects at numerous federal facilities such as the U.S. Department of Energy
Headquarters in Washington, D.C, the U.S. Army Base at Fort Lewis, Washington,
the National Cancer Institute and U.S. Army Garrison at Fort Detrick, Maryland
and the Department of Veterans Affairs Medical Center in West Haven,
Connecticut.
As of December 31, 1998, 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.
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.
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,
1998 1997 1996
(In Thousands)
Operating Revenues $54,776 $61,321 $56,317
Pre-tax Income (Loss) $(2,090)(1) $769 $(10,186)(2)
Net Earnings (Loss) $(1,299)(1) $202 $(6,522)(2)
Total Assets $157,188 $188,351 $195,161
(1) Includes after-tax charge of $2.1 million related to the 1995 sale of
cogeneration projects.
(2) Includes pre-tax charge of $5.9 million, $3.7 million after-tax, related to
the June 1996 write down of certain project costs.
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, Inc. 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. EUA BIOTEN is currently in
negotiations with a third party investor for the restructuring of the BIOTEN
G.P. into a corporation. EUA BIOTEN intends to transfer its total partnership
investment of approximately $13.5 million at December 31, 1998, into a non-
voting preferred equity ownership interest in a newly-formed corporation.
Effective March 1, 1999, EUA BIOTEN will no longer have any funding
obligations to the BIOTEN Partnership or the restructured entity. 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. RENOVA operations were transferred from
EUA Cogenex to EUA Energy Investment in May 1998. EUA Energy Investment is
continuing in its efforts to negotiate strategic alliances or sales of its
other energy related investments, including EUA Transcapacity and RENOVA.
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, 1998 (Exhibit 13-1.03 filed herewith).
Capital Requirements
Capital Requirements - EUA:
The EUA System's cash construction expenditures for the year ended
December 31, 1998 were approximately $51.2 million.
Planned core electric cash construction expenditures and energy related
capital requirements for 1999, 2000 and 2001 as set forth below, are estimated
to total $270.2 million, and are expected to be financed with internally
generated funds.
EUA SYSTEM CONSTRUCTION PROGRAM
(In Thousands)
1999 2000 2001 3-Yr. Total
Generation $5,310 $3,573 $3,573 $12,456
Transmission 8,328 8,578 8,835 25,741
Distribution 19,582 20,169 20,775 60,526
General 473 487 502 1,462
Total Utility Construction
Requirements 33,693 32,807 33,685 100,185
EUA Cogenex Capital
Requirements 51,240 55,926 61,315 168,481
EUA Energy Capital
Requirements 1,500 - - 1,500
Total $86,433 $88,733 $95,000 $270,166
Construction Program - Blackstone:
Blackstone's cash construction expenditures for the year ended December
31, 1998 were approximately $6.0 million, related primarily to its electric
distribution system.
Planned cash construction expenditures for 1999, 2000 and 2001, as set
forth below, are estimated to total $26.7 million.
BLACKSTONE CONSTRUCTION PROGRAM
(In Thousands)
1999 2000 2001 3-Yr. Total
Transmission $1,966 $2,025 $2,086 $6,077
Distribution 6,598 6,796 7,000 20,394
General 87 90 92 269
Total $8,651 $8,911 $9,178 $26,740
Construction Program - Eastern Edison:
Eastern Edison's cash construction expenditures for the year ended
December 31, 1998 were approximately $14.0 million.
Cash construction expenditures of Eastern Edison and Montaup for 1999,
2000 and 2001 as set forth below, are estimated to total $61.9 million.
EASTERN EDISON CONSTRUCTION PROGRAM
(In Thousands)
1999 2000 2001 3-Yr. Total
Eastern Eastern Eastern Eastern
Edison Montaup Edison Montaup Edison Montaup Edison Montaup Combined
Generation $ $5,252 $ $3,573 $ $3,573 $ $12,398 $12,398
Transmission 1,319 4,557 1,359 4,694 1,399 4,835 4,077 14,086 18,163
Distribution 10,108 10,411 10,724 31,243 31,243
General 34 35 36 105 105
Total $11,461 $9,809 $11,805 $8,267 $12,159 $8,408 $35,425 $26,484 $61,909
Fuel for Generation
In 1998, the Retail Subsidiaries relied primarily on power purchased from
Montaup to meet the electric energy requirements of their standard offer and
default service customers. The standard offer requirement became subject to a
competitive solicitation in the third quarter of 1998. Alternate suppliers
will begin satisfying the requirements of the Retail Subsidiaries in 1999.
Completion of the competitive solicitation for default service requirements is
expected by the second quarter of 1999. (See Electric Utility Industry
Restructuring above.)
The Retail Subsidiaries recover their costs associated with the purchase
of power to meet their standard offer and default service through the operation
of revenue adjustment clauses which are designed to provide recovery of such
costs.
For 1998, the EUA System's sources of energy, by fuel type, were as
follows: 26% oil, 29% gas, 17% coal, 23% nuclear, and 6% other. During 1998,
Montaup had an average inventory of 58,795 tons of coal for its steam
generating unit at the Somerset Station, the equivalent of 65 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 $49.50
per ton in 1998 which is equivalent to oil at $11.15 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 1,748 barrels and
60,066 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 $16.55 per barrel and $12.45 per barrel in 1998, respectively.
Montaup also maintained an average inventory of jet oil of 2,132 barrels at an
average cost per barrel of $20.75 during 1998 for its two peaking units at the
Somerset Station.
Currently, Montaup has a one year purchase order effective through
December 1999 with a coal producer. Barge and rail agreements for coal
transportation are also in place through 1999. The 1998 year-end coal
inventory of approximately 93,072 tons is all 0.6% to 0.7% sulfur coal which is
compliant with Clean Air Act requirements. Montaup has an agreement to sell
its Somerset Generating Station, expected to be completed in the first quarter
of 1999.
Canal Electric Company (Canal), on behalf of itself, Montaup and others
had a one year contract with a supplier for up to 100% of the fuel-oil
requirements of Canal Unit Nos. 1 and 2 that expired in March of 1999. Those
contracts permitted up to 50% of fuel oil purchases in the spot market. Fuel
prices are based on oil market posting at the time of delivery. For 1998, the
cost of oil per barrel at Canal averaged $12.90. Additionally, Canal had a
contract in 1998 with a gas supplier of Canal No. 2's daily gas requirements
from March through October 1998. On December 30, 1998, Montaup sold its 50%
ownership interest in Canal 2 and has an agreement to transfer its obligations
under a power purchase contract from Canal 1 expected to be effective in the
first quarter of 1999.
Montaup's costs of fossil and nuclear fuels for the years 1996 through
1998, together with the weighted average cost of all fuels, are set forth
below:
Mills* per kWh
1998 1997 1996
Nuclear . . . . . . . . . 5.0 5.7 5.0
Gas . . . . . . . . . 15.6 16.4 14.4
Coal . . . . . . . . . 18.9 18.6 19.6
Oil . . . . . . . . . 22.3 31.0 37.7
All fuels . . . . . . . . . 15.7 19.2 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 1998 averaged $1.38 per mmBtu
or approximately $11.5 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 currently owns a 4.01% interest in Millstone 3
and a 2.9% interest in Seabrook I. Montaup has an agreement to sell its 2.9%
ownership interest in the Seabrook Nuclear Station, expected to be completed in
the later part of 1999. 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 until 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 DOE to immediately establish
a program for the disposal of spent nuclear fuel. Under the Nuclear Waste
Policy Act of 1992, 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.
On February 19, 1998, Maine Yankee also filed a petition in the U.S. Court
of Appeals seeking to compel the Department of Energy to remove and dispose of
the spent fuel at the Maine Yankee site. Under their Standard Contract, the
DOE had a deadline for beginning the removal process at all nuclear plants on
January 31, 1998, which was not met. On May 5, 1998, the Court of Appeals
denied several motions brought in the proceeding, including several motions for
injunctive relief brought by the utility petitioners. In particular, the Court
denied the requests to require the DOE to immediately establish a program for
the disposal of spent nuclear fuel.
Also, Yankee Atomic, Connecticut Yankee, and Maine Yankee filed lawsuits
against the DOE in the U.S. Court of Federal Claims seeking damages of $70
million, $90 million and $128 million, respectively, as a result of the DOE's
refusal to accept the spent nuclear fuel. In late October and early November
1998, the U.S. Court of Federal Claims issued rulings with respect to Yankee
Atomic, Maine Yankee, and Connecticut Yankee finding that the DOE was
financially responsible for failing to accept spent nuclear fuel. These
rulings clear the way for Yankee Atomic, Connecticut Yankee and Maine Yankee to
pursue at trial their individual damage claims. Management cannot predict at
this time the ultimate outcome of these actions.
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 limit of
liability for a nuclear incident would not exceed an amount which at present is
about $9.9 billion. Under the Price-Anderson Act, prior to operation of a
nuclear reactor, the facility 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 liability for an
incident exceed $200 million, the difference between such liability and the
overall maximum liability, currently about $9.7 billion, will be made up by the
retrospective rating program. Under such a program, each operating nuclear
facility may be assessed a retrospective premium of up to a limit of $88.1
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 $22.4 million in 1998 dollars,
and Seabrook I is $14.4 million in 1998 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.
In October 1996, the NRC, which had raised numerous issues with respect to
Millstone 3 and certain of the other nuclear units in which Northeast and its
subsidiaries, who either individually or collectively have the largest
ownership shares, informed Northeast that it was establishing a Special
Projects Office to oversee inspection and licensing activities at Millstone.
The Special Projects Office was responsible for (1) licensing and inspection
activities at Northeast's Connecticut plants, (2) oversight of an Independent
Corrective Action Verification Program, (3) oversight of Northeast's corrective
actions related to safety issues involving employee concerns, and (4)
inspections necessary to implement NRC oversight of the plants' restart
activities. 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.
On April 8, 1998, Northeast announced that Millstone 3 was ready for NRC
inspection indicating that virtually all of the restart-required physical work
had been completed. On June 29, 1998, the NRC authorized Northeast to begin
restart activities of Millstone 3. The authorization was given after the NRC
staff verified that several final technical and programmatic issues were
resolved. Millstone 3 was restarted during the first week of July, and on July
14, 1998, Millstone 3 returned to full power operations. The NRC will continue
to closely monitor Millstone 3's performance.
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's share of this estimate is approximately $8.0 million. In
December 1997, Northeast filed a motion to dismiss the non-operating owners'
claims, or alternatively to stay the pending lawsuit until after resolution of
the arbitration case. These requests were denied in July 1998.
Montaup paid its share of Millstone 3's O&M expenses during the prolonged
outage on a reservation of right basis. The fact that Montaup made payment for
these expenses is not an admission of financial responsibility for expenses
incurred during 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.
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 $23.8 million and is included with Other Liabilities on the
Consolidated Balance Sheet as of December 31, 1998. 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.
On August 31, 1998, a FERC law judge rejected Connecticut Yankee's plan to
decommission the plant. The judge claimed that estimates of clean-up costs
were flawed and certain restoration costs were not supported. The judge also
said Connecticut Yankee could not pass on spent fuel storage costs to rate-
payers. The judge recommended that Connecticut Yankee withdraw its
decommissioning plan and submit a new plan which addresses the issues cited by
him. FERC will review the judge's recommendations and issue a decision on this
case in the coming months. If FERC concurs with the judge's recommendation,
this may result in a write down of certain of Connecticut Yankee plant
investments. 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. Montaup's share of the
total estimated costs for the permanent shutdown, decommissioning, and recovery
of the remaining investment in Maine Yankee is approximately $31.0 million and
is included with Other Liabilities on the Consolidated Balance Sheet as of
December 31, 1998. Also, due to recoverability, a regulatory asset has been
recorded for the same amount and is included with Other Assets.
On November 6, 1997, Maine Yankee submitted an estimate of its costs,
including recovery of unamortized plant investment (including fuel), to the
FERC reflecting the fact that the plant was no longer operating and had entered
the decommissioning phase. On January 14, 1998, the FERC accepted the new
rates, subject to refund, and amounts of Maine Yankee's collections for
decommissioning. FERC also granted intervention requests and ordered a public
hearing on the prudency of Maine Yankee's decision to shut down the plant and
on the reasonableness of the proposed rate amendments. On January 19, 1999,
Maine Yankee and the active intervening parties, including the Secondary
Purchasers, filed an Offer of Settlement with FERC which was supported
by FERC trial staff on February 8, 1999. Upon commission approval, this
agreement will constitute full settlement of issues raised in this proceeding.
As a result of the August 1997 shutdown, Montaup and the other equity
owners had been notified by the Secondary Purchasers that they would 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. At present, the equity owners are making payments to
Maine Yankee to cover the payments that would be made by the municipals. Prior
to shutdown, the municipals had been assigned 0.41% of Montaup's 4.0% share and
Montaup had retained a 3.59% share.
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. On April 7, 1998,
a Maine judge denied the Secondary Purchasers' motion to compel arbitration and
indicated the jurisdictional question should be first decided by FERC. On
April 15, 1998, the Secondary Purchasers notified FERC of the judge's decision
and asked for expedited action on the pending complaint against them for non-
payment. A separately negotiated Settlement Agreement filed with FERC on
February 5, 1999, upon approval, would resolve issues raised by the Secondary
Purchasers by limiting the amount they will pay for decommissioning and
settling other points of contention.
Management does not believe that these settlements, if approved, will have
a material effect on EUA's future operating results or financial position.
On August 4, 1998, the Maine Yankee Board of directors selected Stone &
Webster Engineering Corporation to execute a $250 million contract for the
decommissioning and decontamination of Maine Yankee. The decommissioning plan
includes an option for Stone & Webster to repower the Maine Yankee site with a
gas-fired plant.
See Fuel for Generation for a discussion of a Maine Yankee action against the
DOE.
NRC Oversight:
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.
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.
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, 1998, 60% of
EUA's consolidated revenues were subject to the jurisdiction of FERC, 16% to
that of the DTE and 13% to that of the RIPUC. The remaining 11% of
consolidated revenues were generated from EUA Cogenex and EUA Energy Investment
and are not subject to jurisdiction of utility commissions. For the twelve
months ended December 31, 1998, 79.5% of Eastern Edison's consolidated revenues
were subject to the jurisdiction of the FERC and 20.5% 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 for Montaup and the Retail Subsidiaries are
as follows (In Thousands):
Applied For Effective (1)
Annual Annual
Revenue Date Revenue Date
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 Consumer Price Index for the most recent 12 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:
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 filed an Offer of Settlement on
January 23, 1998.
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.
On January 20, 1998 Montaup revised its Network Transmission Agreements
with its retail affiliates to eliminate a provision for an access charge to
comply with a prior FERC order.
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. This docket established a formula
rate schedule for Montaup's annual transmission revenue requirement. Montaup
reached a settlement with the municipals and the FERC Staff in these dockets
and filed an Offer Settlement on all rate issues on March 6, 1998 with FERC and
was accepted by FERC on June 25, 1998.
On March 26, 1998 Montaup filed a revision to Schedule 13 of its Open
Access Transmission Tariff. This filing provides for the collection of Rhode
Island Gross Receipts Tax. This filing was accepted by the FERC on April 24,
1998.
On September 21, 1998 Montaup filed an amendment to its Open Access
Transmission Tariff. The amendment was precipitated by a FERC order on July
22, 1998 of NOATT. Three municipals intervened in Montaup's filing. On
October 28, 1998, Montaup and the municipals agreed upon a settlement.
On December 14, 1998 Montaup filed revisions to its Standard of Conduct to
comply with a FERC order on November 30, 1998.
FERC Proceedings - Supply:
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.)
On August 7, 1998, Montaup petitioned FERC to approve the sale of its 50%
interest in the Canal 2 generating facility to Southern Energy New England, LLC
for $75 million. Approval was granted in an order issued by FERC on November
12, 1998.
On October 2, 1998, Montaup filed with FERC an agreement for the transfer
of its OSP I and OSP II purchased power obligations to TransCanada Power
Marketing LTD (TransCanada) in exchange for fixed monthly contributions from
Montaup beginning in 1999 and ending December 31, 2007. TransCanada will
assume all future OSP I and OSP II contractual obligations of Montaup less the
fixed monthly contributions for the balance of the contracts periods. FERC
accepted the agreement on October 29, 1998.
On November 30, 1998, Montaup petitioned FERC to approve the sales of its
160 mw Somerset Station to Somerset Power, LLC for approximately $55 million
and its 2.63% interest in Wyman Station electric generating plant to FPL Energy
Wyman IV LLC for approximately $2.4 million. This filing is currently pending
before FERC.
On January 7, 1999, Montaup petitioned FERC to approve the sale of its
2.9% interest in the Seabrook nuclear generating facility to Great Bay Power
Corporation for approximately $3.2 million. The agreement also provides that
Montaup prefund its 2.9% share of the unit's decommissioning liability up to an
agreed upon amount at the time of sale. Great Bay will assume all future
operating and decommissioning obligations of the unit. This filing is
currently pending before FERC.
On February 1, 1999, Montaup filed with FERC an agreement for the transfer
of approximately 177 mw of its purchased power obligations to Constellation
Power Source Inc. (Constellation) in exchange for fixed monthly contributions
from Montaup beginning in 1999 and ending December 31, 2009. Constellation
will assume all future Canal I, McNeil, Northeast Energy Associates, Blackstone
Hydro Electric and Hydro Quebec Firm Energy contractual obligations of Montaup
less the fixed monthly contribution for the balance of the contracts periods.
This filing is currently pending before FERC.
On February 5, 1999, Montaup petitioned FERC for a declaratory order
approving Montaup's Recovery of a proposed buyout of Montaup's obligations
under the Pilgrim Nuclear Station Purchased Power Agreement with Boston Edison
(BEC) and above market costs of a purchase power agreement with the station's
prospective owner. The buyout agreement is in conjunction with BEC's plans to
sell the unit to Entergy Nuclear Generating Co. (Entergy). Along with the
buyout payment of $115.8 million, assuming a June 30, 1999 closing, Montaup has
agreed to a short-term, fixed price purchased power contract with Entergy for
declining shares of Pilgrim's output beginning with 11% in 1999 and ending
with 5.5% in 2004. Entergy will assume all future operating and decommissioning
obligations of the unit. This filing is currently being litigated.
On February 12, 1999, Montaup petitioned FERC to implement a RVC effective
April 1, 1999. This filing seeks approval to lower Montaup's CTC to the Retail
Subsidiaries as a result of Montaup's generation assets divestiture and other
adjustments. Montaup is requesting to lower the CTC it bills from 3.04 cents
per kWh to 2.10 per cents kWh for Eastern Edison and from 3.0 cents per kWh to
2.04 cents per kWh and 2.06 cents per kWh in the case of Blackstone and
Newport, respectively. This filing is currently being litigated. See Electric
Utility Industry Restructuring.
Rhode Island Proceedings:
On November 13, 1997, Blackstone and Newport filed a report on their
annual return on equity for the twelve months ended September 30, 1997 as
prescribed in the URA. These filings resulted in the refund of approximately
$307,000 and $136,000 to customers of Blackstone and Newport, respectively.
The annual return on equity reports for the twelve months ended December 31,
1998 were filed on February 16, 1999 resulting in approximately $300,000 and
$438,000 being refunded to Blackstone and Newport customers, respectively.
On April 1, 1998, Blackstone and Newport filed their Annual Performance
Standards Report in Compliance with Order 15383. This report presented
Blackstone's and Newport's performance against each of the Performance
Standards based on actual data for the twelve months ending December 31,
1997 resulting in revenue increases of $127,288 for Blackstone and $69,088 for
Newport. These increases are being collected through a per-kilowatthour factor
effective July 1, 1998 through June 30, 1999. The factor for Blackstone is
$0.00010/kWh and the factor of Newport of $0.00012/kWh. Blackstone and Newport
will be making their Annual Performance Standard Report filing for the twelve
months ending December 31, 1998 in early 1999.
On April 15, 1998, Blackstone and Newport made a Standard Offer Service
and Last Resort Service filing, docket No. 2716 with the RIPUC. The purpose of
the filing was to comply with the URA by replacing the Interim Generation
Service and Last Resort Service tariffs approved for service on and after
January 1, 1998. The tariffs were approved in Order 15640 for consumption on
and after June 1, 1998.
On October 30, 1998, Blackstone and Newport made a Standard Offer Service
Tariff Advice Filing with the RIPUC, docket No. 2834. The purpose of this
filing was to update the Companies' tariffs to reflect the change in Montaup's
Standard Offer Rate effective January 1, 1999 and also to update the Companies'
Last Resort Service rates. These rates were approved by the RIPUC in Order
15756, however, the Companies are required to procure Last Resort Service
through a competitive solicitation once the NEPOOL energy markets are operating
in early 1999. Effective January 1, 1999, Blackstone and Newport began billing
the new Standard Offer Rate at an average of 3.5 cents per kilowatthour.
On March 1, 1999, Blackstone and Newport filed with the RIPUC to reduce
their access charge from 2.8 cents per kilowatthour to 2.04 cents and 2.06
cents per kilowatthour, respectively. This filing will change their rates to
reflect the residual value credit calculated from the divestiture of Montaup's
generation assets which lowers the contract termination charge that Montaup
charges Blackstone and Newport.
Massachusetts Proceedings:
On December 31, 1997, Eastern made a partial compliance filing of
unbundled rates and Terms and Conditions to facilitate its 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, standard
offer service, and default service. On February 25, 1998, Eastern 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 coincident
with retail choice of electricity supplier. On that date, Eastern Edison began
billing an access charge of 3.04 cents per kilowatthour and a Standard Offer
rate of 2.8 cents per kilowatthour.
On July 1, 1997, the EUA companies filed their Plan for Implementing
Divestiture and Corporate Restructuring with the DTE, Docket DTE 97-105. The
plan was updated in a supplemental filing on November 21, 1997.
On August 7, 1998, Montaup petitioned the DTE to approve the sale of its
50% interest in the Canal 2 generating facility to Southern Energy New England,
LLC. This filing was docketed DTE 98-83 and consolidated with Docket DTE 98-
78, the ComEnergy companies' petition for sale of its generating assets.
Approval of the sale was granted in an order issued by the DTE on October 30,
1998.
On December 4, 1998, Montaup petitioned the DTE to approve the sales of
its 160 mw Somerset Station to Somerset Power, LLC and its 1.96% interest in
Wyman Station electric generating plant to FPL Energy Wyman IV LLC. This
filing is part of Docket 97-105 and is currently being litigated.
On January 9, 1999, Montaup petitioned the DTE to approve the sale of its
2.9% interest in the Seabrook nuclear generating facility to Great Bay Power
Corporation. This has been docketed DTE 99-9 by the DTE and is currently being
litigated.
On February 16, 1999, Eastern Edison petitioned the DTE to approve its
guaranty of the obligations of Montaup pursuant to Montaup's purchase and sale
agreement with Constellation Power Source. This has been docketed DTE 99-21 by
the DTE and is scheduled for a hearing in March 1999.
On March 12, 1999, Eastern Edison made a filing with the DTE to reduce its
access charge from 3.04 cents per kilowatthour to 2.10 cents per kilowatthour.
This filing will change Eastern Edison's rates to reflect the residual value
credit calculated from the divestiture of Montaup's generation assets which
lowers the contract termination charge that Montaup charges Eastern Edison.
This filing also requests an increase in Eastern Edison's Standard Offer Rate
from the current 3.1 cents per kilowatthour, which became effective January 1,
1999, to 3.5 cents per kilowatthour. This filing is currently being litigated.
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 electrical equipment
containing mineral oil in which there may be traces of PCBs. Such equipment
may therefore 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 Electric and Magnetic Fields (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. 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."
Additional studies, which are intended to provide a better understanding of
EMF, are continuing.
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 surface waters, and it prohibits the discharge of pollutants
(including heat) into navigable waters without a permit. Similar laws have
been adopted in Massachusetts and Rhode Island. All wastewater discharge
permits for plants in Massachusetts, including those for the Somerset plant,
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, countermeasure and control (SPCC) plans for certain oil
storage facilities that are located near a waterway. Similar requirements are
imposed under the authority of the Oil Pollution Act of 1990 and mandate the
preparation of contingency plans to prevent releases of oil into waters of the
United States 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 or
alteration of wetlands under the FWPCA, the Massachusetts Wetlands Protection
Act, and the Rhode Island Wetlands Act, and of land alterations in close
proximity to a river under the Massachusetts Rivers Protection 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.
Reapplication for the Somerset plant permit was made on April 3, 1998 in
accordance with the necessary procedures prior to its expiration on September
30, 1998, and thus the permit conditions remain in effect until agency action
is completed on the renewal application. 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.
Effective April 5, 1998, the Somerset plant's stormwater discharges, previously
covered under the wastewater permit, became covered under a Multi-Sector Group
Permit issued by EPA. In addition, the Somerset plant has an approved
contingency plan under the Oil Pollution Act, as well as an SPCC Plan pursuant
to the EPA rules.
Air Regulation:
All fossil fuel plants from which Montaup obtains power operate under
permits which limit their emissions into the air and require monitoring of the
emissions. Air quality requirements adopted by state authorities in
Massachusetts pursuant to the Clean Air Act impose limitations with respect to
pollutants such as sulfur dioxide (SO2), oxides of nitrogen (NOx) and
particulate matter. Montaup's Somerset Station is permitted to burn coal which
results in SO2 emissions not in excess of 1.2 pounds per million BTU heat
release potential (approximately 0.75% sulfur content coal).
The 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 from utilities. Beginning
in the year 2000, the EPA will issue these allowances to utilities on an annual
basis.
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 control
requirements for 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 that require additional NOx emission reductions beginning on
May 1, 1999.
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 1999.
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.
On October 28, 1997, Eastern Edison, Montaup, the Massachusetts Attorney
General and the Massachusetts 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. 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 emission 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.
Permit Transfers:
Because the electric generation of Montaup's Somerset Station are under
agreement to be sold to NRG Energy (NRG), the environmental permits covering
operation of those assets are in the process of being transferred to NRG. The
transfer will be completed on or about March 31, 1999 and no interruption in
operation or other adverse impact is expected to occur as a result of the
transfer.
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.
See "Generation Divestiture" under Electric Utility Industry Restructuring
for a discussion of Montaup's divestiture of its generation assets.
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 or activities 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.
The Year 2000 Issue
EUA's Year 2000 Program (the Program) is proceeding on schedule. The
Program is addressing the potential impact on computer systems and embedded
systems and components resulting from a common software program code convention
that utilizes two digits instead of four to represent a year. If not
addressed, the year 2000 may be systemically recognized as the year 1900, which
could cause system or equipment failures or malfunctions, and ultimately result
in disruptions to Company operations.
EUA's State of Readiness:
To address potential Year 2000 issues, EUA has divided the focus of its
Year 2000 Program into three major categories of business activity: the
generation and delivery of electricity to customers, the acquisition of goods
and services (including purchased power), and, ongoing general and
administrative activities relating to the corporate infrastructure and support
functions, which includes among other things, billings and collections.
EUA has adopted a four phase approach in addressing information technology
(IT) issues. As of January 31, 1999, each phase was at the following percentage
of completion: analysis - 100%; remediation - 79%; unit testing - 78%; and
integrated testing - 11%. EUA is on schedule to achieve Year 2000 readiness
for 100% of mission critical projects by June 30, 1999. For non-IT projects,
approximately 90% are either Year 2000 ready or not affected by the Year 2000.
The remaining items are in the process of being remediated and tested and are
scheduled to be Year 2000 ready by June 30, 1999.
EUA has an ongoing process to identify and assess the Year 2000 readiness
of third parties with which it has a material relationship. Where necessary,
contingency plans will be developed. This process is on schedule to be
completed by June 30, 1999.
Costs to Address EUA's Year 2000 Issues:
Through December 31, 1998, EUA has incurred costs of approximately $3.0
million to address Year 2000 issues, including approximately $1.5 million of
non-incremental labor, $1.2 million of capital expenditures and $300,000 of
consulting and other costs. EUA estimates it will incur additional costs
approximating $7.0 million during the period January 1, 1999 through March 31,
2000, to complete its resolution of Year 2000 issues including approximately
$5.5 million of non-incremental labor, $500,000 of capital expenditures and
$1.0 million of consulting and other costs. Because 70% of the total
estimated costs associated with the Year 2000 issue relate to non-incremental
internal labor, management continues to believe that the Year 2000 will not
present a material incremental impact to future operating results or financial
condition.
Risks of EUA's Year 2000 Issues:
EUA's first priority continues to be the minimization of any potential
disruptions to electric service as a result of the Year 2000. The provision of
electric service depends in large part on the viability of the New England
power grid which is managed by ISO/NEPOOL. EUA is actively participating on
ISO/NEPOOL's Year 2000 operating and oversight committees. EUA's assessment of
its own transmission and distribution equipment and facilities indicated that
the risk of failure of this equipment does not appear to be significant.
However, due to the interconnectivity to the New England power grid, and the
reliance on many other entities also connected to the grid, it is not possible
to conclude with certainty that there will be no significant interruptions in
service.
In addition, dependable voice and data telecommunications are critical to
EUA's ongoing operations. EUA's internal telecommunication systems are either
Year 2000 ready now, or on schedule to become Year 2000 ready by June 30, 1999.
EUA also relies heavily on external telecommunication systems, i.e., the local
and regional telephone systems, and has identified these providers as critical
vendors. EUA has made direct contact with representatives of the telephone
companies on which EUA depends, each of which anticipates being Year 2000 ready
and devoid of major system failures.
No other significant reasonably likely failure scenarios stemming solely
from Year 2000 related problems have been identified thus far. Accordingly,
EUA does not currently believe that any Year 2000 related risks in and of
themselves constitute reasonably likely worst case scenarios. Rather, EUA's
most reasonably likely Year 2000 related worst case scenario would be the
occurrence of isolated Year 2000 failures such as described above in
conjunction with a severe winter storm. However, EUA believes that such Year
2000 failures would not likely affect whether the storm event would have a
material impact on EUA's business or financial condition.
Year 2000 Contingency Plans:
Contingency planning teams consisting of managers and employees
experienced in system reliability, disaster recovery and risk have been
established and are responsible for developing contingency plans. The overall
strategy will be to identify Year 2000 risks, both internal and external to
EUA, that could have a material impact on EUA's operations or financial well
being. Preliminary plans are expected by the end of the first quarter of 1999.
Final plans are scheduled to be in place and ready to implement, if necessary,
by June 30, 1999.
Summary of the Year 2000 Issue:
The amount of effort and resources necessary to address Year 2000 issues
and make EUA Year 2000 ready is significant. There are dedicated teams in place
to ensure EUA's transition into the next century occurs with minimal
disruption. EUA's Year 2000 program is on schedule and in accordance
with timetables and progress points published by the North American Electric
Reliability Council. In addition, EUA is utilizing outside technical
consultants and other experts to help ensure EUA's Year 2000 program remains on
schedule and effective. Management believes EUA's Year 2000 project is well
managed and has the appropriate resources and plans in place to ensure the
Company is positioned for a successful transition to the Year 2000.
The foregoing constitutes a Year 2000 Statement and Readiness Disclosure
subject to the protections afforded by the federal Year 2000 Information and
Readiness Disclosure Act of 1998.
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. This report contains information about the Company's future
business prospects including, without limitation, statements about the
potential impact of Year 2000 issues on the Company's financial condition or
results. These statements are considered "forward-looking" within the meaning
of the Private Securities Litigation Reform Act. These statements are based
on the Company's current plans and expectations and involve risks and
uncertainties that could cause actual future activities and results of
operations to be materially different from those set forth in the forward-
looking statements. The Company expressly undertakes no duty to update any
forward-looking statement.
Item 2. PROPERTIES
Power Supply
In 1998, 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 8.0 mw and 8.9 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
Restructuring for a discussion of future power needs and divestiture of
Montaup's generating assets.)
The EUA System (including retail load served by alternate suppliers)
experienced a new all-time peak demand of approximately 940 mw on July 23,
1998.
EUA SYSTEM CAPABILITY
GENERATING UNITS AS OF DECEMBER 31, 1998
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. 100.00 113.10 113.10 0.00 113.10
1970 SOMERSET J1 JET OIL MONTAUP ELECTRIC CO. 100.00 24.00 24.00 0.00 24.00
1971 SOMERSET J2 JET OIL MONTAUP ELECTRIC CO. 100.00 25.80 25.80 0.00 25.80
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 8.90 8.90 0.00 8.90
SUBTOTAL: 181.04 0.00 181.04
JOINT OWNERSHIP:
1976 CANAL 2 <F1> NO. 6 OIL CANAL ELECTRIC COMPANY 50.00 565.00 282.50 34.67 247.83
1978 WYMAN 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 1140.00 45.70 0.00 45.70
1990 SEABROOK NUCLEAR NORTH ATLANTIC ENERGY CORP 2.90 1162.00 33.70 0.00 33.70
SUBTOTAL: 378.20 34.67 343.53
EQUITY OWNERSHIP:
1972 VERMONT YANKEE NUCLEAR VT. YANKEE NUCLEAR POWER 2.25 529.08 11.90 0.00 11.90
SUBTOTAL: 11.90 0.00 11.90
PURCHASED POWER:
1968 CANAL 1 NO. 6 OIL CANAL ELECTRIC COMPANY 25.00 566.00 141.50 0.00 141.50
1972 PILGRIM 1 NUCLEAR BOSTON EDISON COMPANY 11.00 667.48 73.42 0.00 73.42
1977 POTTER 2 GAS/OIL BRAINTREE ELEC. LIGHT DEPT 41.03 97.50 40.00 0.00 40.00
1975 CLEARY 9 <F2> 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
1990 OSP 1 GAS OCEAN STATE POWER 28.00 310.00 86.80 0.00 86.80
1991 OSP 2 GAS OCEAN STATE POWER 28.00 307.00 85.96 0.00 85.96
1991 NEA GAS NORTHEAST ENERGY ASSOC. 8.62 333.43 28.74 0.00 28.74
SUBTOTAL: 479.50 0.00 479.50
HYDRO QUEBEC ENTITLEMENT:
1991 HYDRO QUEBEC I&II HYDRO HQ / ISO - NE 4.06 630.00 25.57 0.00 25.57
SUBTOTAL: 25.57 0.00 25.57
TOTAL GROSS SYSTEM CAPABILITY (mw) ------------------------------ 1,076.21
LESS: UNIT CONTRACT SALES (mw) --------------------------------------- 34.67
TOTAL NET SYSTEM CAPABILITY (mw) ---------------------------------- 1,041.54
<FN>
<F1> On December 30, 1998, Montaup sold its 50 percent (283-mw) share in the Canal 2 Generating Station to Southern Energy.
<F2> Contract was terminated on December 31, 1998 as a result of the sale of Canal 2.
</FN>
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 7,100 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, the dam and generating equipment of which is under
agreement to be sold to Pawtucket Generating Company, L.L.C. for $250,000. See
Note E of Notes to Financial Statements in Blackstone's 1998 Annual Report
(Exhibit 13-1.01 filed herewith) regarding encumbrances.
Eastern Edison and Montaup own approximately 4,600 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 1998 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, 1998, (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, 1998, (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 (PRP) under Massachusetts law with respect to a condition of
soil and ground water contamination at a site 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
other facilities from in the early 1960s and until 1984. Among the
contaminants apparently released at the site were PCBs. The PRPs, including
Blackstone, performed site studies and proposed a remedial action plan which
was approved by the DEQE several years ago. The remediation option selected
was solidification of onsite material. However, as a result of a risk
assessment required under MADEP's current regulations, the PRPs may instead
choose to cap the site with the cost of remediation ranging from $250,000 for
capping to $600,000 for solidification. Blackstone is alleged to be the fifth
ranked generator, and its 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 has been completed and site remediation should be underway in the
near future; Blackstone's share of these costs is expected to be minimal.
2. On July 14, 1987, the Commonwealth of Massachusetts (the Common-
wealth), on behalf of the MADEP, filed a cost recovery action pursuant to
CERCLA and Massachusetts General Law 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 disposal waste site at Mendon Road in
Attleboro, Massachusetts. 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 had 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 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.
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 in Attleboro known as the Lawn Street site. Under the Order,
Blackstone agreed to perform preliminary assessments at both sites in order to
determine what remediation, if any, is necessary at the sites. On August 15,
1996, Blackstone entered into an Amended Administrative Consent Order to
complete investigation and cleanup of these sites pursuant to the revised
Massachusetts Contingency Plan, and in 1998 Blackstone purchased properties at
both sites to facilitate site closure. Investigation of the Mendon Road site
was completed in 1998, and it was concluded that no future remedial action will
be required at the site. Investigation and cleanup of the Lawn Street site is
expected to be completed in 1999 for a cost of approximately $650,000.
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. On June 27, 1997, that case was stayed
for the same reasons that the Massachusetts case was stayed.
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 in 1998 RIDEM
completed its review of the draft Remedial Investigation Report and followup
documents and requested additional information. A risk assessment and
feasibility study will be conducted in 1999.
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 reached 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 ground that RIDEM's cleanup of the site in 1986 was not required by law.
In 1998, representatives of Blackstone and RIDEM discussed implementation of
certain actions under Rhode Island regulations to close the site. In
accordance with these discussions, Blackstone may initiate an investigation in
1999 to determine whether RIDEM's 1986 removal action meets current RIDEM
regulations, in order to close the site.
5. On February 11, 1997, RIDEM ordered Blackstone and Valley to conduct
a site assessment of 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 the predecessor of that company, which was 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. Blackstone and Valley submitted a Work Plan on June 16, 1997.
RIDEM approved the Work Plan in 1998. Phase I studies were undertaken in 1998;
further field work has been required by RIDEM under Phase I, and that work will
be performed in 1999.
6. In accordance with the regulations implementing Chapter 21E, Montaup
notified MADEP on October 2, 1998 of contamination at the South Somerset
property resulting from prior permitted deposits of ash. On November 17, 1998,
MADEP issued a Notice of Responsibility to Montaup with respect to
investigation and remediation of the contamination at the South Somerset site.
Montaup expects to complete the investigation during 1999, and to complete the
remediation work during 1999 or 2000. The estimated cost of cleanup work is
$700,000.
7. In May 1989, the U.S. Environmental Protection Agency issued an
Administrative Consent Order to Bay State Gas Company to conduct contaminant
removal activities under CERCLA at a site know as Lot 55 Brockton,
Massachusetts. These removal actions, which were completed in 1990,
impacted an adjacent, downgradient parcel (Lot 94-1) owned by Eastern Edison.
The removal work included the installation of an engineered cap over fill
material and the erection of a security fence on part of Lot 94-1 without the
prior knowledge or consent of Eastern Edison.
Subsequent to these actions, in 1998, MADEP required Bay State Gas to
conduct further investigations in accordance with regulations implementing MGL
Chapter 21E. In October 1998, Bay State Gas informed Eastern Edison for the
first time of the prior work conducted on Lot 94-1. It also requested
permission to access the parcel in order to conduct these further investi-
gations. The investigation now being undertaken by Bay State Gas Company
includes the installation of groundwater monitoring wells and the collection of
soil, surface water, and groundwater samples. Until these further investi-
gations have been completed, it is not possible to determine the need for, or
extent of, response actions at Lot 94-1. However, it should be noted that the
regulations implementing Chapter 21E provide relief for landowners located
downgradient from the source of groundwater contamination.
Blackstone has notified certain liability insurers and has filed claims
with respect to the Mendon Road site. In addition, Blackstone submitted claims
to various carriers with respect to the Mendon Road, Tidewater, Lawn Street,
Cumberland, and Hamlet Avenue, sites.
Blackstone, Montaup and Eastern Edison are not able to predict the outcome
of any of the foregoing environmental matters or to estimate the potential
costs which may ultimately result. It is the policy of 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. With respect to any liability 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, 1998, the EUA System has incurred costs of
approximately $7.7 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 1999
of up to $2.5 million, $1.8 million of which relates to Blackstone, and
$700,000 which relates to Montaup.
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 1999 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.
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.
On July 20, 1998, the judge granted limited summary judgement in favor of
Eastern Edison Company, finding that MMLP had not done an audit by an
independent auditor as required under the subject agreement. To date, no such
audit has been done. The Company has filed a motion for partial summary
judgement. The Company will continue to defend itself from the counterclaims,
and cannot determine the outcome of this proceeding at this time.
In 1997, the Internal Revenue Service (IRS) issued a report in connection
with its examination of the consolidated federal income tax returns of EUA for
1992 and 1993. This report included 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 in 1992 relating to EUA Power's
Common and Preferred Stock that was redeemed in 1993. EUA filed an
administrative appeal contesting the IRS's position. In January 1999, EUA
reached an understanding with the IRS Appeals Office concerning settlement of
this matter. Reductions in EUA's tax reserves, to reflect this and other
items, resulted in a net $1.9 million addition to fourth quarter 1998 earnings.
Since early 1997, fourteen plaintiffs brought suits against numerous
defendants, including EUA, for injuries and illness allegedly caused by
exposure to asbestos over approximately a thirty-year period, at various
premises, including some owned by EUA companies. The total damages claimed in
all of these complaints is $34 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. Four cases have been
dismissed as against EUA companies. EUA cannot predict the ultimate outcome of
this matter at this time.
A pending class action, filed on March 2, 1998, in the Massachusetts
Supreme Judicial Court naming all Massachusetts electric distribution
companies, including Eastern Edison, and certain Massachusetts state agencies
as defendants, seeks to invalidate certain sections of the Electric Utility
Restructuring Act of 1997. The Act directs the DTE to impose mandatory charges
on all electricity sold to customers, except those served by a municipal
lighting plant, to fund energy efficient activities and to promote renewable
energy projects. In addition to declaratory judgment, plaintiffs seek
remittance of monies paid to each distribution company by customers along with
any interest earned. The outcome of this class action is unknown at this time,
however Eastern Edison is vigorously defending the lawsuit.
See Item 1. BUSINESS -- Fuel for Generation for a discussion of legal
actions filed against the DOE. Also, see Item 1. BUSINESS -- General-EUA
Cogenex, for a discussion of an arbitrators panel's decision in a matter
involving the 1995 sale of a portfolio of cogeneration units by EUA Cogenex to
Ridgewood/Mass Power Partners et al (Ridgewood).
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 15, 1999, 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 1999 Annual Meeting of Shareholders is scheduled to be held on May 17,
1999. 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, 54 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., 51 Treasurer since April 1986; Secretary since
Treasurer and May, 1995. Treasurer and Responsible for
Secretary financial, treasury and corporate affairs
of the EUA System.
Donald G. Pardus, 58 Chairman since July 1990; Chief Executive
Chairman of the Board, Officer since April 1989. Responsible for the
Chief Executive Officer overall management of the EUA System.
and Trustee
Robert G. Powderly, 51 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, 58 President since July 1990; Chief Operating
President, Chief Operating Officer since January 1990. Responsible for
Officer and Trustee retail operations and new ventures of the EUA
System.
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability and integrity of any director or executive officer during the past five
years.
PART II
Item 5. MARKET FOR EUA'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "QUARTERLY FINANCIAL AND
COMMON SHARE INFORMATION" included in EUA's Annual Report to Shareholders for
the year ended December 31, 1998 (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 1998 Annual Reports (Exhibit 13-
1.01 and 13-1.08, respectively, filed herewith).
As of February 1, 1999 there were 10,227 EUA common shareholders of
record.
The closing price of EUA's Common Shares as reported by the Wall Street
Journal on March 15, 1999 was $28.375.
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, 1998, (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, 1998 for Blackstone (Exhibit 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 7 through 24 in the 1998 EUA Annual Report to Shareholders, pages 3
through 10 in the 1998 Blackstone Annual Report and pages 3 through 14 in the
1998 Eastern Edison Annual Report (Exhibits 13-1.03, 13-1.01 and 13-1.08 for
EUA, Blackstone and Eastern Edison, respectively, filed herewith).
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference
to pages 26 through 41 in the 1998 EUA Annual Report to Shareholders, page 2
and pages 12 through 31 in the 1998 Blackstone Annual Report and, page 2 and
pages 16 through 38 in the 1998 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 17, 1999, 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 15, 1999 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, 54* 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, 49 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., 51* Director of both Blackstone and Eastern Edison
Director, Treasurer and since April 1997; Treasurer since April 1986 and
Secretary/Clerk Secretary/Clerk since April 1995 of both
Blackstone and Eastern Edison.
Michael J. Hirsh, 44 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, 48 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, 44 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 distri-
bution facilities.
Donald G. Pardus, 58* Chairman of the Board since July 1989 and
Director and Director since 1979 of both Blackstone and Eastern
Chairman of the Board Edison.
Robert G. Powderly, 51* Executive Vice President and Director since March
Director and Executive 1992 of both Blackstone and Eastern Edison.
Vice President
John R. Stevens, 58* 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 17, 1999 and to be 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, to be mailed to
shareholders in connection with the Shareholders' Annual Meeting to be held on
May 17, 1999 and to be filed with the SEC, 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 2,339,401 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 17, 1999 and to be 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, 1998 (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, 1998.
Blackstone
Schedule II - Valuation and Qualifying Accounts for the three years
ended December 31, 1998.
(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-seven 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;
Exhibit 4-1.09, Form 10-K of EUA for 1997, File No. 1-5366).
- 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 10% Debenture Bonds due 2008 of Montaup (Exhibit 5-3,
Registration No. 2-65785).
4-4.05 - 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).
4-5.05 - 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).
4-6.05 - Form of 9% Debenture Bonds due 2020 of Montaup (Exhibit 4-10, Form
10-K of Eastern Edison for 1990, File No. 0-8480).
4-7.05 - 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;
Exhibit 10-18.03, Form 10-K of EUA for 1997, 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;
Exhibit 10-18.03, Form 10-K of EUA for 1997, File No. 1-5366).
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; Exhibit 10-15.03, Form 10-K
of EUA 1997, File No. 1-5366; Exhibit 10-16.03, Form 10-K of EUA
for 1997, File No. 1-5366; Exhibit 10-17.03, Form 10-K EUA for
1997, 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 as
amended (Exhibit 10-13, EUA Form 10-K for 1992, File No. 1-5366;
Exhibit 10-19.03, Form 10-K of EUA for 1997, 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 - Fifth Amendment to the Eastern Utilities Associates Employees'
Savings Plan dated April 23, 1998.
*10-16.03 - Sixth Amendment to the Eastern Utilities Associates Employees'
Savings Plan dated September 28, 1998.
*10-17.03 - Third Amendment to the Employees' Retirement Plan of Eastern
Utilities Associates dated April 20, 1998.
*10-18.03 - Fourth Amendment to the Employees' Retirement Plan of Eastern
Utilities Associates dated April 30, 1998.
*10-19.03 - Agreement and Plan of Merger dated as of February 1, 1999 by and
among New England Electric System, Research Drive LLC and Eastern
Utilities Associates.
- 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).
*10-5.08 - Wholesale Standard Offer Service Agreement between Blackstone
Valley Electric Company, Eastern Edison Company, Newport Electric
Corporation and TransCanada Power Marketing LTD., dated April 7,
1998.
*10-6.08 - Wholesale Standard Offer Service Agreement between Blackstone
Valley Electric Company, Eastern Edison Company, Newport Electric
Corporation and NRG Energy Power Marketing, Inc., dated October
13, 1998.
*10-7.08 - Wholesale Standard Offer Service Agreement (20.1775%) between
Blackstone Valley Electric Company, Eastern Edison Company,
Newport Electric Corporation and Constellation Power Sources,
Inc., dated December 21, 1998.
*10-8.08 - Wholesale Standard Offer Service Agreement (35.7695%) between
Blackstone Valley Electric Company, Eastern Edison Company,
Newport Electric Corporation and Constellation Power Sources,
Inc., dated December 21, 1998.
- 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).
10-22.05 - 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).
10-23.05 - 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).
10-24.05 - 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).
10-25.05 - 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).
10-26.05 - 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).
10-27.05 - 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).
10-28.05 - 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).
10-29.05 - 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).
10-30.05 - 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).
10-31.05 - 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).
10-32.05 - 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).
10-33.05 - 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).
*10-34.05 - Amended and Restated Power Sales Contract by and between Southern
Eenrgy Canal L.L.C. (as assignee of Canal Electric Company) and
Montaup Electric Company, dated December 18, 1998 and effective on
December 30, 1998.
*10-35.05 - Third Amendment to the Pilgrim Power Sale Agreement between Boston
Edison Company and Montaup Electric Company, dated Novemeber 18,
1998.
*10-36.05 - Power Purchase Agreement between Entergy Nuclear Generation
Company and Montaup Electric Company, dated November 18, 1998.
*10-37.05 - Power Purchase and Sale Agreement between Montaup Electric Company
and Constellation Power Source, Inc., dated December 21, 1998.
*10-38.05 - PPA Transfer Agreement between Montaup Electric Company and
TransCanada Power Marketing Ltd, dated April 7, 1998.
- 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).
- See Exhibits 10-5.08, 10-6.08, 10-7.08 for Exhibits involving
Blackstone, Eastern Edison and Newport.
- 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 partici-
pating 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 partici-
pating 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).
- See Exhibits 10-5.08, 10-6.08, 10-7.08 for Exhibits involving
Blackstone, Eastern Edison and Newport.
- 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 1998, 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 1998, 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 1998, 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
Eastern Utilities Associates
On February 5, 1999, EUA filed a Current Report on Form 8-K with respect to
Item 5 (Other Events).
On January 5, 1999, EUA filed a Current Report on Form 8-K with respect to
Item 5 (Other Events).
On November 19, 1998, EUA filed a Current Report on Form 8-K with respect to
Item 5 (Other Events).
On October 15, 1998, EUA filed a Current Report on Form 8-K with respect to
Item 5 (Other Events).
Eastern Edison Company
On January 5, 1999, Eastern Edison Company filed a Current Report on Form 8-K
with respect to Item 5 (Other Events).
On November 19, 1998, Eastern Edison Company filed a Current Report on Form
8-K with respect to Item 5 (Other Events).
On October 15, 1998, Eastern Edison Company filed a Current Report on Form
8-K with respect to Item 5 (Other Events).
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 15, 1999
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
Paul J. Choquette, Jr. Trustee
March 15, 1999
/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
/s/ W. Nicholas Thorndike Trustee
W. Nicholas Thorndike
[This page left blank intentionally]
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Signature Title Date
BLACKSTONE VALLEY ELECTRIC COMPANY
By /s/ John R. Stevens Vice Chairman and Director March 15, 1999
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 15, 1999
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
By /s/ John R. Stevens Vice Chairman and Director March 15, 1999
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 15, 1999
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
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EASTERN UTILITIES ASSOCIATES AND SUBSIDIARY COMPANIES
Item 14(a)(2). Financial Statement Schedules
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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, 1998:
Allowance for Doubtful Accounts $1,109 $1,378 $893 (a) $2,079 (b) $1,301
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
(a) Recoveries of accounts previously written off.
(b) Principally Accounts Receivable written off.
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, 1998:
Allowance for Doubtful Accounts $149 $795 $246 (a) $1,044 (b) $146
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
(a) Recoveries of accounts previously written off.
(b) Principally Accounts Receivable written off.
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Report of Independent Accountants
To the Trustees and Shareholders of
Eastern Utilities Associates:
Our report on the consolidated financial statements of Eastern Utilities
Associates and subsidiaries has been incorporated by reference in this Form
10-K from page 40 of the 1998 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.
PriceWaterhouseCoopers LLP
Boston, Massachusetts
March 5, 1999
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 31 of the 1998
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.
PriceWaterhouseCoopers LLP
Boston, Massachusetts
March 5, 1999
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