SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: February 16, 1996
NEW ENGLAND ELECTRIC SYSTEM
(exact name of registrant as specified in charter)
Massachusetts 1-3446 04-1663060
(state or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
(508) 389-2000
(Registrant's telephone number, including area code)
Item 5. Other Events
_____________________
On February 16, 1996, Massachusetts Electric Company (Mass.
Electric), a subsidiary of New England Electric System (NEES),
filed a plan with the Massachusetts Department of Public
Utilities (MDPU) to allow all customers of electric utilities in
Massachusetts to choose their power supplier beginning in 1998.
The NEES Companies have previously disclosed most of the elements
of the plan called, Choice: New England.
Mass. Electric serves approximately 35 percent of the
electric customers in Massachusetts. New England Power Company
(NEP), another NEES subsidiary, is Mass. Electric's all-
requirements wholesale supplier of electricity. The NEES
Companies derive approximately 72 percent of their revenues from
customers in Massachusetts.
Choice: New England provides for the recovery of the cost
of past generation commitments through a transition access charge
on utility transmission and distribution wires. Those past
commitments are divided into four categories: generating plant
commitments, regulatory assets, above market power contracts, and
nuclear costs independent of plant operation (costs which would
not be eliminated by shutting the plants down, such as
decommissioning costs). The portion of these commitments to
serve Massachusetts customers of the NEES Companies is currently
estimated at approximately $3 billion on a net present value
basis using 1998 dollars. Generating plant commitments and
regulatory assets would be recovered over 10 years. The return
on equity on unrecovered costs would be reduced to one percentage
point over the rate on long-term "BBB" rated utility bonds. This
lower return on equity (currently estimated to be 9 percent)
would reduce the total access charge in Massachusetts over the
period by approximately $100 million on a present value basis
when compared to the allowed return on equity. The above market
portion of power contract costs and nuclear costs independent of
operation would be recovered as incurred over the life of those
obligations, which is expected to be longer than 10 years.
Three other utilities and the Massachusetts Division of
Energy Resources (DOER) also filed restructuring plans with the
MDPU in February 1996. The DOER's plan also calls for direct
access for all customers beginning in 1998 with a pilot program
beginning in 1997. The DOER plan, however, proposes that, in
exchange for stranded cost recovery, utilities be required to
divest their generating assets, either through sale or spinoff.
The NEES Companies are opposed to mandatory divestiture of
generation assets. The timetable for consideration of the
various plans by the MDPU is uncertain. There can be no assurance
that any final order by the MDPU will include access charges that
would recover all past commitment costs. The transition access
charges proposed in Choice: New England are also subject to
approval by the Federal Energy Regulatory Commission.
Mass. Electric also announced that it will request the MDPU
to allow the implementation of two pilot programs to test Choice:
New England. The first would allow high technology customers
representing one percent of the NEES Companies retail sales to
have direct access to alternative power suppliers beginning in
July 1996. The second would allow residential and small business
customers representing 0.5 percent of the NEES Companies retail
sales to have direct access beginning September 1, 1996.
For a discussion of risk factors and possible accounting
consequences see the NEES Form 8-K dated February 7, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this Current Report on
Form 8-K to be signed on its behalf by the undersigned thereunto
duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/Alfred D. Houston
By
Alfred D. Houston
Executive Vice President and
Chief Financial Officer
Date: February 16, 1996
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent thereof assumes
or shall be held to any liability therefor.