FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: January, 1998
MAINE PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Maine 1-3429 01-0113635
(State, or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
209 State Street, Presque Isle, Maine 04769
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 207-768-5811
Current Report, Form 8-K for Date of Report
Maine Public Service Company January, 1998
Item 5(a) Other Material Events - Maine Public Utilities Commission
Approves Rate Increase Pursuant to Previously Approved Rate
Plan, MPUC Docket No. 97-830.
Reference is made to the Company's Form 10-K for December 31,
1996 where the Company's rate stabilization plan approved by
the Maine Public Utilities Commission (MPUC) (Docket No. 95-
052) in November, 1995 is described. In addition, in the
Company's Form 8-K filed November 19, 1997, the Company
announced its annual filing under the rate plan.
On November 13, 1997, the Company filed with the MPUC its
annual rate increase pursuant to the Company's rate plan. The
filing supported an annual increase in retail rates of 7.6%
effective February 1, 1998 consisting of the following:
- 2.75% specified annual increase provided in the rate
plan;
- 2.22% increase for 50% of the Maine Yankee replacement
power costs in accordance with the Maine Yankee plant
outage provisions of the rate plan; and
- 2.63% increase in accordance with the profit-sharing
mechanism of the rate plan since earnings for the review
period, i.e. the twelve months ended September 30, 1997,
were more than 300 basis points below the target return
on equity.
Additional capacity payments to restart Maine Yankee and
incremental replacement power costs have adversely impacted
the Company's 1997 earnings and triggered the rate plan
profit-sharing mechanism noted above. The Company's ability
to increase its rates for the profit-sharing and for 50% of
Maine Yankee replacement power costs is subject to the MPUC's
pending review (MPUC Docket No. 97-781, as reported in the
Company's Form 10-Q for the Quarter ended September 30, 1997)
of the prudency of the decision to close Maine Yankee.
Therefore, the Company could not predict whether these
elements of the rate plan increase would be collected.
In addition, the Company had amended its November, 1997 filing
requesting that the savings from the restructured
Wheelabrator-Sherman (WS) Contract, as approved by the MPUC on
December 22, 1997 (Docket No. 97-727, as reported in the
Company's Form 10-Q for the Quarter ended September 30, 1997)
be used to offset future Maine Yankee replacement power costs.
However, this treatment was again subject to the results of
the MPUC's review of the prudency of closing Maine Yankee.
The restructuring of the W-S Contract requires an up-front
payment of approximately $8.7 million, which the Company
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Current Report, Form 8-K for Date of Report
Maine Public Service Company January, 1998
Item 5(a) Other Material Events - Maine Public Utilities Commission
Approves Rate Increase Pursuant to Previously Approved Rate
Plan, MPUC Docket No. 97-830 - Continued
intends to finance from funds obtained from the Finance
Authority of Maine (FAME), under its rate stabilization
program. The Company's application with FAME is pending, and
the Company cannot predict whether FAME will approve the
financing.
On January 15, 1998, the Public Advocate and the Company, with
the support of the MPUC Staff, reached an agreement on the
rate increase for February 1, 1998. The principal elements of
the stipulation are as follows:
- the rate increase effective February 1, 1998 will be
3.9%, consisting of the specified increase of 2.75% and
approximately $562,000 of the 1997 recoverable Maine
Yankee replacement power costs (1.15%);
- the minimum rate increase effective February 1, 1999 will
be 3.1%, consisting of a specified increase of 2% and the
remaining recoverable 1997 Maine Yankee replacement power
costs of $523,000;
- Maine Yankee replacement power costs for the period
October 1, 1997 through September 30, 1998 will be offset
by the 1998 savings under the restructured W-S contract,
with the recovery of any incremental Maine Yankee
replacement power costs subject to a final order by the
MPUC in its previously mentioned review of the prudency
of closing Maine Yankee;
- the Company will write off in 1997 unamortized Maine
Yankee refueling outage costs of approximately
$1,458,000;
- the Company waives its right to collect additional
revenues for the profit-sharing review period, i.e. the
twelve months ended September 30, 1997, since the
earnings deficiency was the result of the closing of
Maine Yankee;
- a customer service and reliability standards penalty will
be suspended pending review of these standards during the
rate plan's mid-term review in September of 1998.
This agreement was approved by the MPUC on January 26, 1998.
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Current Report, Form 8-K for Date of Report
Maine Public Service Company January, 1998
Item 5(a) Other Material Events - Maine Public Utilities Commission
Approves Rate Increase Pursuant to Previously Approved Rate
Plan, MPUC Docket No. 97-830 - Continued
With this resolution of the uncertainties regarding the near-
term recovery of Maine Yankee replacement power costs, the
Company will continue its efforts to resolve the possible
violation of interest coverage tests for 1997. Amendments to
the Company's revolving credit agreement and letter of credit
and reimbursement agreement supporting the tax exempt bond
issue excluded Maine Yankee incremental replacement power
costs only through September 30, 1997. Without these
amendments, the Company would have been in violation of
interest coverage tests on these instruments. Interest
coverage tests for the periods after September 30, 1997 will
include Maine Yankee replacement power costs, unless amended.
Based on projected 1997 financial results, the Company will be
in violation of its coverage tests without similar amendments
or waivers from the Banks providing the revolving credit
agreement and letter of credit. The Company and the Banks
have discussed additional amendments to the interest coverage
tests. However, the Banks were waiting for the MPUC's
decisions on the restructured Wheelabrator-Sherman agreement,
pending the previously mentioned financing with FAME, and the
Company's February 1, 1998 rate increase pursuant to the rate
plan as discussed above. The Company cannot predict the terms
of these additional amendments to the interest coverage tests,
but is working with the Banks to reach a resolution.
MAINE PUBLIC SERVICE COMPANY
Registrant
Dated: January 28, 1998 /s/ Larry E. LaPlante
Larry E. LaPlante, Vice President,
Finance, Administration & Treasurer
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