SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Registrant; State of
Incorporation or I.R.S. Employer
Commission Organization; Address; Identification
File Number and Telephone Number Number
------------ ---------------------- ---------------
1-3446 NEW ENGLAND ELECTRIC SYSTEM 04-1663060
(A Massachusetts voluntary
association)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
1-6564 NEW ENGLAND POWER COMPANY 04-1663070
(A Massachusetts corporation)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
0-5464 MASSACHUSETTS ELECTRIC COMPANY 04-1988940
(A Massachusetts corporation)
25 Research Drive
Westborough, Massachusetts 01582
Telephone: 508-389-2000
1-7471 THE NARRAGANSETT ELECTRIC COMPANY 05-0187805
(A Rhode Island corporation)
280 Melrose Street
Providence, Rhode Island 02907
Telephone: 401-784-7000
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.
(X) Yes ( ) 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 registrant's 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)
Securities registered pursuant to Section 12(b) of the Act:
Outstanding at Name of each exchange
Registrant Title of each class March 18, 1997 on which registered
- ---------- ------------------- -------------- ---------------------
New England Common Shares 64,826,067 New York Stock Exchange
Electric Boston Stock Exchange
System
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of each class
- ---------- -------------------
New England 6.00% Cumulative Preferred Stock
Power Company Dividend Series Preferred Stock
Massachusetts Cumulative Preferred Stock
Electric Company Preferred Stock - Cumulative
The Narragansett Cumulative Preferred Stock
Electric Company
Aggregate market value
of the voting stock Number of shares of
held by nonaffiliates common stock outstanding
of the registrants at of the registrants at
March 18, 1997 March 18, 1997
---------------------- ------------------------
New England $2,187,879,761 64,826,067 ($1 par value)
Electric System
New England $6,095,375 6,449,896 ($20 par value)
Power Company
Massachusetts None 2,398,111 ($25 par value)
Electric Company
The Narragansett None 1,132,487 ($50 par value)
Electric Company
Documents Incorporated by Reference
Part of Form 10-K into which
Description document is incorporated
- ---------------------------------- ----------------------------
Portions of Annual Reports to Part II
Shareholders for the year ended
December 31, 1996 of the following
companies, as set forth in Part II
New England Electric System
New England Power Company
Massachusetts Electric Company
The Narragansett Electric Company
Portions of Proxy Statement of Part III
New England Electric System
filed in connection with its
annual meeting of shareholders to
be held on April 29, 1997, as set
forth in Part III
This combined Form 10-K is separately filed by New England Electric
System, New England Power Company, Massachusetts Electric Company, and The
Narragansett Electric Company. Information contained herein relating to
any individual company is filed by such company on its own behalf. Each
company makes no representation as to information relating to the other
companies.
TABLE OF CONTENTS PAGE
GLOSSARY OF TERMS........................................... iii
FORWARD LOOKING INFORMATION................................. v
PART I
ITEM 1. BUSINESS............................................ 1
THE SYSTEM.................................................. 1
System Organization.................................... 1
Employees.............................................. 3
ELECTRIC UTILITY OPERATIONS................................. 4
Industry Restructuring................................. 4
Massachusetts Settlement Agreement.................. 5
Rhode Island Legislation............................ 7
New Hampshire Proceeding and Settlement Agreement... 8
Federal Activity.................................... 9
1935 Act............................................ 10
Divestiture of Generation Business.................. 10
Risk Factors........................................ 11
Accounting Implications............................. 12
Business Activity...................................... 13
Results of Operations.................................. 17
Rates.................................................. 18
General............................................. 18
NEP Rates........................................... 19
Mass. Electric Rates................................ 20
Narragansett Rates.................................. 21
Granite State Rates................................. 22
Recovery of Demand-Side Management Expenditures..... 22
Electric Utility Properties............................ 23
Divestiture......................................... 23
Energy Mix.......................................... 23
Generation, Transmission, and Distribution
Properties....................................... 24
Map - Electric Utility Properties................... 28
Fuel for Generation................................. 29
Nonutility Power Producer Information............... 32
Nuclear Units....................................... 33
Regulatory and Environmental Matters.................... 43
Regulation.......................................... 43
Hydroelectric Project Licensing..................... 43
Environmental Requirements.......................... 44
Construction and Financing.............................. 49
Research and Development................................ 53
EXECUTIVE OFFICERS........................................... 54
ITEM 2. PROPERTIES........................................... 58
ITEM 3. LEGAL PROCEEDINGS.................................... 58
-i-
PAGE
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 59
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS..................... 59
ITEM 6. SELECTED FINANCIAL DATA............................. 59
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................. 60
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......... 60
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................. 61
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 61
ITEM 11. EXECUTIVE COMPENSATION............................. 66
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT......................................... 81
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..... 84
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K................... 85
INDEX TO FINANCIAL STATEMENTS............................... 114
-ii-
GLOSSARY OF TERMS
Term Meaning
---- -------
AFDC allowance for funds used during
construction
AllEnergy AllEnergy Marketing Company, LLC
BUW Brotherhood of Utility Workers of New
England, Inc.
C&LM Conservation and Load Management
Connecticut Yankee Connecticut Yankee Atomic Power Company
Distribution Companies Mass. Electric, Narragansett, Granite
State, and Nantucket
DOE U.S. Department of Energy
DOJ Department of Justice
DSM demand-side management
EMF electric and magnetic fields
EPA U.S. Environmental Protection Agency
FERC Federal Energy Regulatory Commission
FAS 121 Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets
to Be Disposed Of
FAS 71 Financial Accounting Standards No. 71,
Accounting for the Effects of Certain
Types of Regulation
Firm Energy agreement between NEPOOL members and
Contract Hydro-Quebec
Granite State Granite State Electric Company
Granite State Granite State Energy, Inc.
Energy
IBC Intercoastal Bulk Carriers, Inc.
Interconnection transmission interconnection between
participating New England utilities
and Hydro-Quebec
ISA independent safety assessment
ISC International Shipping Company
Keystone Keystone Shipping Company
kWh kilowatt hour
Maine Yankee Maine Yankee Atomic Power Company
Mass. Electric Massachusetts Electric Company
Mass. Hydro New England Hydro-Transmission Electric
Company, Inc.
MDPU Massachusetts Department of Public
Utilities
MRS Monitored Retrievable Storage
Nantucket Nantucket Electric Company
Narragansett The Narragansett Electric Company
NEEI New England Energy Incorporated
NEERI New England Electric Resources, Inc.
NEES New England Electric System
NEESCom NEES Communications, Inc.
NEES companies the subsidiaries of NEES
NEES Energy NEES Energy, Inc.
NEET New England Electric Transmission
Corporation
-iii-
GLOSSARY OF TERMS
Term Meaning
---- -------
NEP New England Power Company
NEPOOL New England Power Pool
NEUs New England Utilities
N.H. Hydro New England Hydro-Transmission Corporation
NHPUC New Hampshire Public Utilities Commission
North Atlantic North Atlantic Energy Corporation
NOx nitrogen oxide
NRC Nuclear Regulatory Commission
NU Northeast Utilities
NU Companies Public Service Company of New Hampshire,
North Atlantic Energy Corporation, and
Northeast Utilities
OSP Ocean State Power
OSP II Ocean State Power II
PBOPs postretirement benefits other than pensions
PPCA purchased power cost adjustment
PRP potentially responsible party
Pricing Policy SEC approved pricing policy between NEEI and
NEP
PSNH Public Service Company of New Hampshire
Resources Narragansett Energy Resources Company
retail choice retail customers are allowed to choose their
electricity supplier
retail wheeling utilities required to deliver electricity
over their transmission and distribution
systems to retail customers who have
chosen a different electricity supplier
RIDEM Rhode Island Department of Environmental
Management
RIPUC Rhode Island Public Utilities Commission
Samedan Samedan Oil Corporation
Seabrook 1 Seabrook Nuclear Generating Station Unit 1
SEC Securities and Exchange Commission
SED service extension discount
Service Company New England Power Service Company
SO2 sulphur dioxide
spent nuclear fuel high level radioactive waste
SPCC Spill prevention control and counter-measure
stranded costs the amounts by which prudently incurred
costs incurred to supply customers
electricity under a regulated industry
structure exceed market prices under an
unregulated industry structure
System the subsidiaries of NEES collectively
unbilled revenues electricity delivered but not yet billed
Vermont Yankee Vermont Yankee Nuclear Power Corporation
Yankee Atomic Yankee Atomic Electric Company
Yankee Companies Yankee Atomic, Vermont Yankee, Maine Yankee,
and Connecticut Yankee
1935 Act Public Utility Holding Company Act of 1935,
as amended
-iv-
FORWARD LOOKING INFORMATION
This report and other presentations made by NEES and its
subsidiaries contain forward looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended.
Throughout this report, forward looking statements can be
identified by the words or phrases "will likely result", "are
expected to", "will continue", "is anticipated", "estimated",
"project", "believe", or similar expressions. Although NEES and each
of its subsidiaries believe that, in making any such statements,
its expectations are based on reasonable assumptions, any such
statements may be influenced by factors that could cause actual
outcomes and results to be materially different from those
projected. Important factors that could cause actual results to
differ materially from those in the forward looking statements
include, but are not limited to: the impact of general economic
changes in New England; changing fuel prices; the impact of
industry restructuring and increased competition in the electric
utility industry, as more fully set out below under INDUSTRY
RESTRUCTURING, page 4; federal and state regulatory developments
and changes in law which may have a substantial adverse impact on
the value of NEES and the NEES companies' assets; changes in
accounting rules and interpretations which may have an adverse
impact on the NEES companies' statements of financial position and
reported earnings; timing and adequacy of rate relief; adverse
changes in electric load and customer growth; climatic changes or
unexpected changes in weather patterns; generating plant and
distribution facility performance and possible power shortages, as
more fully set out below under Generation, Transmission, and
Distribution Properties, page 24; and decommissioning costs
associated with nuclear generating facilities, as set out under
Nuclear Units below, page 33 (see Risk Factors, page 11, for more
information).
-v-
PART I
Item 1. BUSINESS
THE SYSTEM
SYSTEM ORGANIZATION
New England Electric System (NEES) is a voluntary association created under
Massachusetts law on January 2, 1926, and is a registered holding company under
the Public Utility Holding Company Act of 1935, as amended (the 1935 Act). NEES
owns voting stock in the amounts indicated of the following companies, which
together constitute the System.
% Voting
Securities
State of Type of Owned by
Name of Company Organization Business NEES
--------------- ------------ -------- ---------
AllEnergy Marketing Company, Mass. Marketing *
L.L.C. (AllEnergy)
Granite State Electric Company N.H. Retail 100
(Granite State) Electric
Granite State Energy, Inc. N.H. Marketing 100
(Granite State Energy)
Massachusetts Electric Company Mass. Retail 100
(Mass. Electric) Electric
Nantucket Electric Company Mass. Retail 100
(Nantucket) Electric
The Narragansett Electric Company R.I. Retail 100
(Narragansett) Electric
Narragansett Energy Resources R.I. Wholesale 100
Company (Resources) Electric
Generation
NEERI International Cayman International **
Islands, Project
B.W.I. Development
NEES Communications, Inc. Mass. Telecommunications 100
(NEESCom)
NEES Energy, Inc. (NEES Energy) Mass. Marketing 100
New England Electric Resources, Mass. Development 100
Inc. (NEERI) Services
New England Electric Transmission N.H. Electric 100
Corporation (NEET) Transmission
New England Energy Incorporated Mass. Oil and Gas 100
(NEEI) Exploration
& Development
New England Hydro Finance Company, Mass. Debt Financing ***
Inc. (N.E. Hydro Finance)
New England Hydro-Transmission N.H. Electric 53.97(a)
Corporation (N.H. Hydro) Transmission
* NEES Energy owns 50% of the voting securities
** NEERI owns 100% of the voting securities
***Mass. Hydro and N.H. Hydro each own 50% of the voting securities
% Voting
Securities
State of Type of Owned by
Name of Company Organization Business NEES
--------------- ------------ -------- ---------
New England Hydro-Transmission Mass. Electric 53.97(a)
Electric Company, Inc. Transmission
(Mass. Hydro)
New England Power Company (NEP) Mass. Wholesale 98.85(b)
Electric
Generation &
Transmission (c)
New England Power Service Company Mass. Service 100
(Service Company) Company
(a) The common stock of these subsidiaries is owned by NEES and
certain participants (or their parent companies) in the second
phase of the Hydro-Quebec project. See Interconnection with
Quebec, page 32.
(b) Holders of common stock and 6% Cumulative Preferred Stock of
NEP have general voting rights. The 6% Cumulative Preferred
Stock represents 1.15% of the total voting power.
(c) For information on NEP's ownership interest in nuclear
generating units, see Nuclear Units, page 33.
The facilities of NEES' four distribution electric
subsidiaries, Mass. Electric, Narragansett, Granite State, and
Nantucket (collectively referred to as the Distribution Companies),
and of its principal wholesale electric subsidiary, NEP, constitute
a single integrated electric utility system that is directly
interconnected with other utilities in New England and New York
State, and indirectly interconnected with utilities in Canada. See
ELECTRIC UTILITY OPERATIONS, page 4.
Granite State Energy is a wholly-owned, nonutility subsidiary
of NEES which provides a range of energy and related services,
including but not limited to sales of electric energy, audits,
power quality, fuel supply, repair, maintenance, construction,
design, engineering, and consulting.
NEES Energy is a wholly-owned, nonutility marketing subsidiary
of NEES. NEES Energy owns a 50% interest in AllEnergy, an energy
marketing joint venture between NEES Energy and a wholly-owned
subsidiary of Eastern Enterprises, a regional gas holding company.
NEESCom is a wholly-owned, nonutility subsidiary of NEES which
provides telecommunications and information-related products and
services.
NEET owns and operates a portion of an international
transmission interconnection between the electric systems of
Hydro-Quebec and New England. Mass. Hydro and N.H. Hydro own and
operate facilities in connection with an expanded second phase of
this interconnection. N.E. Hydro Finance provides the debt
financing to Mass. Hydro and N.H. Hydro for the capital costs of
the interconnection. For more information, see Interconnection
with Quebec, page 32.
NEEI is engaged in various activities relating to fuel supply
for the System. These activities primarily include participation
(principally through a partnership with a nonaffiliated oil
company) in domestic oil and gas exploration, development, and
production and the sale to NEP of fuel purchased in the open
market. As part of the NEES companies' plan to divest their
generating business, NEEI is planning to sell its oil and gas
properties. For more information, see INDUSTRY RESTRUCTURING, page
4, and Oil and Gas Operations, page 30.
Resources is a general partner, with a 20% interest, in each
of two partnerships formed in connection with the Ocean State Power
project. NEES' ownership interest in Resources is being offered
for sale as part of the NEES companies' divestiture of their
generating business. For more information, see INDUSTRY
RESTRUCTURING, page 4, and Ocean State Power, page 32.
The Service Company has contracted with NEES and its
subsidiaries to provide, at cost, such administrative, engineering,
construction, legal and financial services as the companies
request.
NEERI is a wholly-owned, nonutility subsidiary of NEES which
provides consulting and independent project development services
domestically and internationally to nonaffiliates. NEERI also
provides maintenance and construction services under contract to
certain nonaffiliated utility customers. NEERI International is a
wholly-owned, nonutility subsidiary of NEERI which will serve as a
holding company for NEERI's capitalized international projects.
EMPLOYEES
At December 31, 1996, NEES subsidiaries had approximately
4,790 employees. At that date, the total number of employees was
approximately 845 at NEP, 1,740 at Mass. Electric, 760 at
Narragansett, 70 at Granite State, 30 at Nantucket and 1,345 at the
Service Company. Of the 4,790 employees, approximately 3,000 are
members of labor organizations. Collective bargaining agreements
with the Brotherhood of Utility Workers of New England, Inc. (BUW),
the International Brotherhood of Electrical Workers, and the
Utility Workers Union of America, AFL-CIO expire in May, 1999. The
NEES companies have reached agreement with the BUW on certain
employee benefits related to industry restructuring and
divestiture, including a voluntary early retirement package and
benefits for displaced employees.
ELECTRIC UTILITY OPERATIONS
INDUSTRY RESTRUCTURING
On October 1, 1996, the NEES companies announced their
intention to divest their generating business. The decision to
divest the generating business was due to a combination of factors,
discussed below, relating to the restructuring of the electric
utility industry.
For the past several years, the electric utility business has
been subjected to rapidly increasing competitive pressures stemming
from a number of trends, including the presence of surplus
generating capacity, a disparity in electric rates among regions of
the country, improvements in generation efficiency, increasing
demand for customer choice, and new regulations and legislation
intended to foster competition.
In the recent past, this competition was most prominent in the
bulk power market, in which nonutility generators have
significantly increased their market share. Despite increased
competition in the bulk power market, competition in the retail
market has been limited as electric utilities have maintained
exclusive franchises for the retail sale of electricity in
specified service territories.
In states across the country, including Massachusetts, Rhode
Island, and New Hampshire, there have been proposals to allow
retail customers to choose their electricity supplier, with
incumbent utilities required to deliver that electricity over their
transmission and distribution systems (also known as "retail
wheeling"). When electricity customers are allowed to choose their
electricity supplier, utilities across the country will face the
risk that market prices may not be sufficient to recover the costs
of the commitments incurred to supply customers under a regulated
structure. The amounts by which costs exceed market prices are
commonly referred to as "stranded costs."
NEES provides electric service to retail customers through
separate distribution subsidiaries operating in Massachusetts,
Rhode Island, and New Hampshire. Each of the distribution
subsidiaries currently purchases electricity on behalf of its
customers under wholesale all-requirements contracts with NEES's
wholesale generating subsidiary, NEP. NEP also provides all-
requirements service to seven unaffiliated electric utilities. NEP
estimates that at December 31, 1996, its above-market commitments
on behalf of its all-requirements customers are as much as $4.5
billion on a present-value basis (before the application of the
proceeds from the sale of its generating business). Those
commitments consist of (i) the above-market portion of generating
plant commitments, (ii) regulatory assets, (iii) the above-market
portion of purchased power contracts, and (iv) the operating cost
of nuclear plants that cannot be avoided by shutting down the
plants, including nuclear decommissioning costs.
As described below, comprehensive legislation was enacted in
Rhode Island and a settlement agreement was reached in
Massachusetts which, when all regulatory approvals are in place,
would allow recovery of NEP's above-market commitments to retail
customers in those states, which make up 95% of NEP's all-
requirements sales. In return for that recovery, the NEES
companies have agreed to provide lower rates to customers, as well
as sell their generating business. Efforts are ongoing with New
Hampshire and unaffiliated customers to secure recovery of the
balance of NEP's above-market commitments.
Massachusetts Settlement Agreement
On February 26, 1997, the Massachusetts Department of Public
Utilities (MDPU) approved a settlement among NEP, its Massachusetts
distribution affiliates Mass. Electric and Nantucket, the
Massachusetts Attorney General, the Massachusetts Division of
Energy Resources, and 12 other parties, which provides for retail
choice for Massachusetts customers and the recovery of NEP's above-
market commitments to serve those customers.
The settlement provides for the commencement of retail choice
on January 1, 1998 (contingent on choice being available to the
customers of all Massachusetts investor-owned utilities).
Customers who do not choose an alternative supplier would receive
"standard offer" service, which would be priced to guarantee
customers at least a 10% savings in 1998 compared with September
1996 bundled electricity prices.
In accordance with the settlement, NEP's wholesale contracts
with Mass. Electric and Nantucket have been amended to allow for
early termination of all-requirements service under those
contracts. The amendment provides that upon early termination,
Mass. Electric's and Nantucket's share of the cost of NEP's above-
market generation commitments will be recovered through a
transition access charge on distribution facilities.
The above-market portion of costs associated with generating
plants and regulatory assets would be recovered over 12 years and
would earn a return on equity of 9.4%. As the transition access
charge declines, NEP would earn mitigation incentives that would
supplement its return on equity. The incentives are structured
such that NEP believes, based on its expectations of the level of
mitigation it can achieve through divestiture and other means, that
it could earn a cumulative return on equity on unrecovered costs of
approximately 11%. The above-market component of purchased power
contracts and nuclear decommissioning costs would be recovered as
incurred over the life of those obligations, a period expected to
extend beyond 12 years. Initially, the transition access charge
would be set at 2.8 cents per kilowatt-hour (kWh) through December
31, 2000, and is expected to decline thereafter. The initial
transition access charge assumes that the generating plants have no
market value. To measure their actual market value, the NEES
companies agreed to sell their generating business. The net
proceeds from the sale will be used to reduce the transition access
charge.
The settlement also establishes performance-based rates for
Mass. Electric. Under the settlement, Mass. Electric's nonfuel
rates (and NEP's wholesale rates to Mass. Electric) would be frozen
at current levels until the earlier of the commencement of retail
choice or January 1, 2001. Upon commencement of retail choice,
Mass. Electric's distribution rates would be set at a level
approximately $45 million above the level embedded in its current
bundled rates, with such rates then frozen through the year 2000.
This increase reflects changes to the distribution cost of service
that include an $11 million increase in annual depreciation
expense, a $3 million annual contribution to a storm fund, and
increased amortization of unfunded deferred income taxes of $1
million over six years. Mass. Electric's return on equity would be
subject to a floor of 6% and a ceiling of 11%, effective upon
commencement of retail choice. Earnings over the ceiling would be
shared equally between customers and shareholders up to a maximum
of 12.5%. This sharing results in an effective cap on the
shareholder's return on equity of 11.75%. To the extent that
earnings fall below the floor, Mass. Electric would be authorized
to surcharge customers for the shortfall.
The settlement would also eliminate Mass. Electric's purchased
power cost adjustment (PPCA) mechanism as of July 31, 1996. This
mechanism allows Mass. Electric to reconcile purchased power rate
changes from NEP and the effects of NEP's seasonal rates. The
settlement also stipulates that Mass. Electric's net $18 million
PPCA refund liability balance at July 31, 1996 will be used to
prefund a storm contingency fund with $3 million, while the
remainder will be used to offset regulatory assets for hazardous
waste costs.
The settlement is subject to approval by the Federal Energy
Regulatory Commission (FERC). The FERC accepted the filing to
become effective February 1, 1997, subject to refund, and ordered
hearings.
The Utility Workers Union of America and the Massachusetts
Alliance of Utility Unions, who intervened in the MDPU proceeding
on the settlement, have indicated they intend to appeal the MDPU's
order approving the settlement to the Massachusetts Supreme
Judicial Court. If an appeal is brought, the NEES companies will
oppose it.
Several bills are pending before the Massachusetts legislature
on electric industry restructuring, including comprehensive
legislation introduced by Governor William F. Weld and by the
legislature's Joint Committee on Electric Restructuring. These
bills cover many of the topics addressed in the settlement and
could impact the implementation of the settlement.
Among the issues being considered by the legislature is
securitization, whereby a utility would assign to a trust all or a
portion of its rights to receive access charges in exchange for a
lump sum reimbursement of stranded costs.
Rhode Island Legislation
In August 1996, the state of Rhode Island enacted pioneering
legislation that allows customers in that state the opportunity to
choose their electricity supplier. Under the Rhode Island statute,
state accounts, certain new customers, and the largest
manufacturing customers will be able to choose their supplier
beginning on July 1, 1997. These customers represent approximately
2% of NEES's retail customer kWh sales. The balance of Rhode
Island customers will be able to choose their supplier in 1998,
with an additional 10% of customers load having choice on January
1 and the remainder on July 1. All Rhode Island customers would
have choice of supplier at an earlier date if retail access becomes
available to 40% or more of the kWh sales in New England.
The statute calls for NEP's contract with NEES's Rhode Island
distribution subsidiary, Narragansett, to be amended to permit a
gradual, early termination of all-requirements service under this
contract. The amendment provides that, in return, Narragansett's
22% share of the cost of NEP's above-market generation commitments
would be recovered through a transition access charge on
Narragansett's distribution facilities. The specifics of the
transition access charge are similar to, and were a model for,
those contained in the Massachusetts settlement. One difference is
the statute's return on equity, which will be set at 11% as long as
the NEES companies complete the divestiture or other market
valuation of their generating business; otherwise, the return will
be equal to 9.2%. Provisions relative to Narragansett's above-
market generation commitments are parallel to those discussed above
under Massachusetts Settlement Agreement.
The statute also establishes performance-based rates for
distribution utilities, such as Narragansett. Under the statute,
Narragansett increased distribution rates by approximately $11
million in 1997 and is entitled to a similar increase in 1998.
In addition, in 1997, Narragansett's return on equity from
distribution operations, exclusive of any performance standards
factors, will be subject to a floor of 6% and a ceiling of 11%.
Earnings over the ceiling will be shared equally between customers
and shareholders up to a maximum return on equity from distribution
operations of 12.5%. This sharing results in an effective cap on
the shareholder's return on equity of 11.75%. To the extent that
earnings fall below the floor, Narragansett will be authorized to
surcharge customers for the shortfall.
NEP and Narragansett filed with the FERC an amendment to their
all-requirements contract in order to implement the statute. The
FERC has set down the amendment, along with the Massachusetts
settlement, for hearing. Narragansett has indicated it is willing
to make certain changes to its plan in Rhode Island to parallel
provisions in the Massachusetts settlement. Implementation of other
aspects of the statute is subject to approval of the Rhode Island
Public Utilities Commission (RIPUC). Proposed legislation has also
been introduced in Rhode Island dealing with securitization of
stranded costs.
New Hampshire Proceeding and Settlement Agreement
On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its plan to implement a New Hampshire law
calling for retail access by 1998. Under the plan, utilities such
as Granite State whose rates are below the regional average would
be allowed full recovery of stranded costs as calculated by the
NHPUC. However, the NHPUC indicated that its methodology and
proposed timing of recovery would yield both initial access charges
and total recovery less than that requested by Granite State.
Further, the NHPUC indicated that its decision would not result in
savings for Granite State's customers.
On March 3, 1997, Public Service Company of New Hampshire
(PSNH), the largest utility in New Hampshire, North Atlantic Energy
Corporation (North Atlantic), and Northeast Utilities
(collectively, the NU Companies) filed in federal court to stay the
implementation of the NHPUC's plan. The NU Companies asserted that
the NHPUC plan as applied to them could trigger bankruptcy of North
Atlantic and PSNH. The case was transferred to the United States
District Court of Rhode Island, which issued a temporary
restraining order staying the NHPUC plan as applied to the NU
Companies pending further action. The NHPUC on March 19, 1997,
also granted a temporary stay of its own order. Granite State is
seeking to intervene in the federal action to protect its rights,
and will seek rehearing of the NHPUC plan by the NHPUC.
Prior to the issuance of the NHPUC order, Granite State had
reached an interim settlement with several customers and other
stakeholders that would set initial access charges at 2.8 cents per
kWh for two years, and in other respects would mirror the
Massachusetts settlement described above. Stranded costs to be
recovered after the two-year period would be subject to future
regulatory determination. Unlike the NHPUC order, the interim
agreement would provide all customers with a rate reduction of
approximately 10%. This interim settlement is still pending before
the NHPUC.
Granite State's all-requirements purchased power contract with
NEP requires either party to give seven years notice prior to
terminating the contract. Termination of the contract would create
stranded costs at NEP that it would seek permission from the FERC
to recover from Granite State pursuant to the contract. However,
it is unclear whether Granite State would be allowed under the
NHPUC's rules to fully recover all of the stranded costs billed to
it by NEP. If the NHPUC did not allow Granite State to fully
recover stranded costs billed to it by NEP pursuant to FERC order,
Granite State would seek a remedy in the courts.
Federal Activity
In April 1996, the FERC issued Order No. 888 requiring
utilities that own transmission facilities to file open access
tariffs to make available transmission service to affiliates and
nonaffiliates at fair, nondiscriminatory rates. Order No. 888 also
stated that public utilities will be allowed to seek recovery of
legitimate and verifiable stranded costs from departing customers
as a result of wholesale competition. The FERC indicated that it
will provide for the recovery of retail stranded costs only if
state regulators lack the legal authority to address those costs at
the time retail wheeling is required. The FERC also stated that it
would permit stranded cost recovery under wholesale all-
requirements contracts, such as those between NEP and its retail
affiliates. However, upon reconsideration, FERC determined that it
will serve as the primary forum for deciding stranded cost recovery
cases if a nonjurisdictional municipal utility annexes territory
currently served by a local retail utility. This move by FERC
fills in a jurisdictional gap that could have arisen under the
original Order No. 888, since municipal utilities are not
necessarily subject to state commission jurisdiction. On February
26, 1997, the FERC announced Order No. 888-A, reaffirming the
principles of Order No. 888, including stranded cost recovery.
Because of the Massachusetts settlement and the Rhode Island
statute, NEP does not expect it will rely exclusively on Order No.
888 to recover stranded costs from its affiliates in Massachusetts
and Rhode Island. NEP cannot predict at this time whether an Order
No. 888 filing will be necessary to fully recover stranded costs
from Granite State or from seven unaffiliated wholesale customers
should any of those customers choose to terminate service under
their contracts with NEP. Granite State and these seven
unaffiliated customers are responsible for approximately 3% and 2%
of NEP's sales, respectively.
In July 1996, NEP, on behalf of the NEES companies, filed a
transmission tariff with the FERC pursuant to Order No. 888. The
FERC accepted the filing, but ordered NEP to refile to conform more
closely with the FERC's requirements under Order No. 888. The
implementation of the tariff in mid-1996 did not have a significant
impact on NEP's revenues.
A number of proposals for federal legislation related to
industry restructuring have been brought forward for consideration
by the current Congress. The scope and aim of these vary widely;
however, the NEES companies and others will argue that state
settlements should be respected. NEES cannot predict what federal
legislation, if any, may be enacted.
1935 Act
The 1935 Act generally has been construed to limit the
operations of a registered holding company to a single integrated
public utility system, plus such additional businesses as are
functionally related to such system. Among other things, the 1935
Act requires NEES and its subsidiaries to seek prior SEC approval
before effecting mergers and acquisitions or pursuing other types
of nonutility initiatives. Such pervasive regulation may impede or
delay NEES's efforts to achieve its strategic and operating
objectives. Consequently, NEES continues to support efforts to
repeal or modify this legislation.
In 1995, the SEC issued a report to the United States Congress
advocating repeal of the 1935 Act, either on a conditional and
transitional basis or immediate and outright repeal. The basis for
the SEC's recommendation for repeal is that the 1935 Act is no
longer reflective of regulatory and economic conditions. Following
the SEC's report, there were several bills introduced in both the
United States Senate and House of Representatives in 1996 which
would have repealed the 1935 Act on a conditional and transitional
basis and transferred its oversight functions to the FERC and the
states. Although this proposed legislation did not pass, several
bills addressing 1935 Act repeal or amendment have been introduced
in the current legislative session.
Divestiture of Generation Business
Under the Massachusetts settlement and, if such settlement is
approved by the FERC, automatically under the Rhode Island statute,
the NEES companies must complete the divestiture of their
nonnuclear generating business within six months of the later of
the commencement of retail choice in Massachusetts or the receipt
of all necessary regulatory approvals. The NEES companies are in
the process of soliciting proposals for the acquisition of their
nonnuclear generating business with the objective of reaching
definitive purchase and sale agreements by mid-1997. Closing would
follow the receipt of regulatory approvals, which are expected to
take at least six to 12 months following the execution of purchase
and sale agreements. At December 1996, the nonnuclear net book
value of the generating plant was approximately $1.1 billion.
As part of the divestiture plan, NEP will endeavor to sell, or
otherwise transfer, its minority interest in four nuclear power
plants to nonaffiliates. NEP may retain responsibility for
decommissioning and related expenses, if necessary. To the extent
that NEP is unable to divest its nuclear generating interests, the
Massachusetts settlement provides for a sharing between customers
and shareholders of the revenues associated with the nuclear
interests and the costs not otherwise reflected in the access
charge, with 80% allocated to customers and 20% to shareholders.
This sharing mechanism is not included in the Rhode Island statute
previously discussed.
Narragansett will be compensated by NEP for any difference
between the sale price of Narragansett's share of the Manchester
Street Station and its net book value. In addition, NEEI is
planning to sell its oil and gas properties, the cost of which is
supported by NEP through fuel purchase contracts.
NEP has approximately $740 million of mortgage bonds
outstanding. The bond indenture restricts the sale of the trust
property in its entirety or substantially in its entirety. The
proposed sale of NEP's generating business would likely require
that NEP either amend the bond indenture or either defease or call
the bonds in connection with the proposed sale. Any defeasance of
bonds would be by the deposit of cash representing principal and
interest to the maturity date or interest, principal, and general
redemption premium to an earlier redemption date.
Risk Factors
While substantial progress has been made in resolving the
uncertainty regarding the impact on shareholders from industry
restructuring, significant risks remain. These include, but are
not limited to: (i) the potential that ultimately the Massachusetts
settlement and the Rhode Island statute will not be implemented in
the manner anticipated by NEES, (ii) the possibility of state or
federal legislation that would increase the risks to shareholders
above those contained in the Massachusetts settlement and Rhode
Island statute, and (iii) the potential for adverse stranded cost
recovery decisions involving Granite State and NEP's unaffiliated
customers.
The major risk factors affecting the Distribution Companies
relate to the possibility of adverse regulatory or judicial
decisions or legislation which limits the level of revenues the
Distribution Companies are allowed to charge for their services.
While substantial progress has been made in resolving the
uncertainty regarding recovery by the Distribution Companies of
stranded costs billed to them by NEP, significant risks remain.
These risks are primarily attributable to the potential that
ultimately the Massachusetts settlement and the Rhode Island
statute, referred to above, will not be implemented in the manner
anticipated by the Distribution Companies and/or the possibility of
other state or federal legislation which would increase the risks
to the Distribution Companies above those contained in the
Massachusetts settlement and the Rhode Island statute.
Even if these risks do not materialize, the implementation of
the Massachusetts settlement and the Rhode Island statute will
negatively impact financial results for NEES, starting in 1998.
The returns on equity permitted on NEES subsidiaries' transmission
and distribution operations (up to 11.75%) and on the unrecovered
commitments in the generating business (generally 9.4% to 11%) are
less than those historically earned by NEES. In addition, starting
in 1998, earnings will be affected by the return on the
reinvestment of the proceeds from the sale of the generation
business. Such reinvestment return is likely, at least in the near
term, to be less than is currently earned by the generation
business. Also, once NEP has divested its generating business and
completed its stranded cost recovery, it will become solely a
provider of transmission services with at least initially a smaller
capital investment than currently exists.
Accounting Implications
Historically, electric utility rates have been based on a
utility's costs. As a result, electric utilities are subject to
certain accounting standards that are not applicable to other
business enterprises in general. Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation
(FAS 71), requires regulated entities, in appropriate
circumstances, to establish regulatory assets, and thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. The NEES companies have recorded
approximately $550 million in regulatory assets in compliance with
FAS 71 of which approximately $75 million relate to the
transmission and distribution business.
Both the Massachusetts settlement and the Rhode Island statute
provide for full recovery of the costs of generating assets and oil
and gas related assets (including regulatory assets) not
recoverable from the proceeds of the divestiture of NEP's
generating business. The costs of these assets would be recovered
as part of a transition access charge imposed on all distribution
customers. After the proposed divestiture, substantially all of
NEP's business, including the recovery of its stranded costs, would
remain under cost-based rate regulation. NEES believes the
Massachusetts settlement and the Rhode Island statute will enable
the NEES distribution companies operating in those states to
recover through rates their specific costs of providing ongoing
distribution services. In addition, FERC Order No. 888 enables
transmission companies to recover their specific costs of providing
transmission service. NEES believes these factors will allow its
principal subsidiaries to continue to apply FAS 71 and that no
impairment of plant assets will exist under Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (FAS
121). Any loss from the divestiture of generating assets and oil
and gas assets will be recorded as a regulatory asset to be
recovered through the ongoing transition access charge.
Although NEES believes that its subsidiaries will continue to
meet the criteria for continued application of FAS 71, NEES
understands that members of the SEC staff have raised questions
concerning the continued applicability of FAS 71 to certain other
electric utilities facing restructuring. In addition, despite the
progress made to date in Massachusetts and Rhode Island, it is
possible that the final restructuring plans ultimately ordered by
regulatory bodies would not reflect full recovery of stranded
costs, including a fair return on those costs as they are being
recovered. In the event that future circumstances should cause the
application of FAS 71 to be discontinued, a noncash write-off of
previously established regulatory assets and liabilities related to
the affected operations would be required. In addition, write-
downs of plant assets under FAS 121 could be required, including a
write-off of any loss from the divestiture of the generating
business.
BUSINESS ACTIVITY
NEP's business is principally generating, purchasing,
transmitting, and selling electric energy in wholesale quantities.
In 1996, 95% of NEP's all-requirement revenue from the sale of
electricity was derived from sales for resale to affiliated
companies and 5% from sales for resale to municipal and other
utilities. NEP is the wholesale supplier of the electric energy
requirements of the Distribution Companies under contracts that,
absent the amendments discussed under Federal Activity above,
require seven years notice of termination. Narragansett receives
credits against its purchases of power from NEP for the cost of
generation from its Providence units, which are functionally
integrated with NEP's facilities to achieve maximum economy and
reliability. Discussions of NEP's generating properties, load
growth, energy mix, and fuel supplies include the related
properties of Narragansett. For details of sales of energy and
operating revenue for the last five years, see OPERATING STATISTICS
on page 29 of the New England Power Company 1996 Annual Report to
Stockholders (the NEP 1996 Annual Report). (For a discussion of
electric utility operations in a more competitive environment, see
INDUSTRY RESTRUCTURING, page 4.)
The combined service area of the Distribution Companies
constitutes the retail service area of the System and covers more
than 4,500 square miles with a population of about 3,000,000 (1990
census). See Map - Electric Utility Properties, page 28. The
largest cities served are Worcester, Mass. (population 170,000) and
Providence, R.I. (population 161,000).
Mass. Electric provides approximately 960,000 customers with
electric service at retail in a service area comprising
approximately 43% of the area of The Commonwealth of Massachusetts.
The population of the service area is about 2,160,000 or 36% of the
total population of the Commonwealth (1990 Census). Mass.
Electric's service area consists of 146 cities and towns including
the highly diversified commercial and industrial cities of
Worcester, Lowell, and Quincy, the Interstate 495 high technology
belt, suburban communities, and many rural towns. The economy of
the area is diversified. Principal industries served by Mass.
Electric include computer manufacturing and related businesses,
electrical and industrial machinery, plastic goods, fabricated
metals and paper, and chemical products. In addition, a broad
range of professional, banking, medical, and educational
institutions is served. During 1996, 41% of Mass. Electric's
revenue from the sale of electricity was derived from residential
customers, 37% from commercial customers, 21% from industrial
customers, and 1% from others. In 1996, the 20 largest customers
of Mass. Electric accounted for approximately 7% of its electric
revenue. For details of sales of energy and operating revenue for
the last five years, see OPERATING STATISTICS on page 27 of Mass.
Electric's 1996 Annual Report to Stockholders (the Mass. Electric
1996 Annual Report). In February 1997, a settlement agreement
among Mass. Electric and two affiliates, the Massachusetts Attorney
General, the Massachusetts Division of Energy Resources, and 12
other parties was approved by the MDPU. This settlement provides
for retail choice of power supplier by Massachusetts customers
beginning January 1, 1998 (see INDUSTRY RESTRUCTURING, page 4).
Narragansett provides approximately 330,000 customers with
electric service at retail. Its service territory, which includes
urban, suburban, and rural areas, covers about 839 square miles or
80% of the area of Rhode Island, and encompasses 27 cities and
towns including the cities of Providence, East Providence,
Cranston, and Warwick. The population of the area is about 725,000
(1990 Census) which represents about 72% of the total population of
the state. The economy of the territory is diversified. Principal
industries served by Narragansett produce fabricated metal
products, electrical and industrial machinery, transportation
equipment, textiles, jewelry, silverware, and chemical products.
In addition, a broad range of professional, banking, medical, and
educational institutions is served. During 1996, 44% of
Narragansett's revenue from the sale of electricity was derived
from residential customers, 41% from commercial customers, 14% from
industrial customers, and 1% from others. In 1996, the 20 largest
customers of Narragansett accounted for approximately 9% of its
electric revenue. For details of sales of energy and operating
revenue for the last five years, see OPERATING STATISTICS on page
32 of Narragansett's 1996 Annual Report to Stockholders (the
Narragansett 1996 Annual Report). Rhode Island legislation passed
in 1996 allows utility customers to choose their power supplier.
Distribution companies, including Narragansett, would be required
to deliver the power to their customers. This customer choice is
being phased in over 12 months beginning July 1997 (see INDUSTRY
RESTRUCTURING, page 4).
Granite State provides approximately 36,000 customers in 21 New
Hampshire communities with electric service at retail in the State
of New Hampshire in a service area having a population of about
73,000 (1990 Census), including several communities along the
Connecticut River, especially in the Lebanon and Walpole areas, and
the Salem area in Southern New Hampshire. During 1996, 47% of
Granite State's revenue from the sale of electricity was derived
from commercial customers, 39% from residential customers, 13% from
industrial customers, and 1% from others. In 1996, the 10 largest
customers of Granite State accounted for about 18% of its electric
revenue. Granite State is not subject to the reporting
requirements of the Securities Exchange Act of 1934, and its
financial impact on the System is relatively small. Information on
Granite State is provided herein solely for the purpose of
furnishing a more complete description of System operations. In
February 1997, the NHPUC issued its plan to implement a law calling
for retail access in New Hampshire by 1998 (see INDUSTRY
RESTRUCTURING, page 4).
On March 26, 1996, NEES acquired Nantucket Electric Company for
$3.5 million. Nantucket provides approximately 8,300 customers
with electric service at retail. Its service territory is limited
to the Island and Town of Nantucket, which is located in the
Atlantic Ocean approximately 30 miles off the coast of Cape Cod,
Massachusetts. The Town has a resident population of approximately
7,800 and an estimated average yearly tourist population of
approximately 40,000, peaking in July and August. During 1996, 61%
of Nantucket's revenue from the sale of electricity was derived
from residential customers, 38% from commercial customers, and 1%
from others. During 1996, a 26-mile-long submarine cable
connecting Nantucket Island with the transmission system on the
mainland was constructed. Nantucket is not subject to the
reporting requirements of the Securities Exchange Act of 1934, and
its financial impact on the System is relatively small.
Information on Nantucket is provided herein solely for the purpose
of furnishing a more complete description of System operations.
The electric utility business of NEP and the Distribution
Companies is not highly seasonal. For NEP and the Distribution
Companies, industrial customers are broadly distributed among
standardized industrial classifications. No single industrial
classification exceeds 3% of operating revenue, and no single
customer of the System contributes more than 1% of operating
revenue.
NEESCom was established in August 1996 to allow the NEES
companies to generate revenues from the global telecommunications
industry. This subsidiary is not regulated under the Public
Utility Holding Company Act of 1935 (an exempt telecommunications
company) and has a license from the Federal Communications
Commission. It will focus on the fiber optics, cable, and personal
communications sectors of the telecommunications industry.
AllEnergy's principal purpose is to sell energy and provide a
range of energy-related services, including but not limited to,
marketing, brokering and sales of energy, audits, fuel supply,
repair, maintenance, construction, operation, design, engineering,
and consulting, to customers in the competitive market in New
England and New York. In December 1996, AllEnergy announced the
acquisition of Texas Liquids, Ltd., Inc. of New Jersey, adding
propane and other petroleum products to AllEnergy's menu of
offerings.
NEERI is a wholly-owned nonutility subsidiary of NEES. Its
principal purpose is to provide consulting and independent project
development services for domestic and international transmission
projects. In December 1996, NEERI proposed a 600-megawatt high
voltage direct current submarine cable transmission connection
between Connecticut and Long Island, which would introduce
competitively attractive sources of power to Long Island. Under
the proposal, NEERI, or an affiliate, would build, operate, own,
and maintain the facilities.
NEES and the NEES companies have from time to time considered,
and expect to consider in the future, various strategies designed
to enhance NEES's competitive position and to increase its ability
to anticipate and adapt to changes in the electric utility
industry. These strategies may include business combinations with
other companies, internal restructurings, acquisitions or
dispositions of assets or lines of business, and additions to or
reductions of franchised service territories. NEES and the NEES
companies may from time to time engage in discussions, either
internally or with third parties, regarding one or more of these
potential strategies. Those discussions may be subject to
confidentiality agreements and NEES's policy is generally not to
comment on such activities. No assurances can be given that any
potential transaction of the type described above may actually
occur, or, if one does occur, the ultimate effect thereof on NEES's
or any NEES company's results of operations, financial condition
or competitive position. See Divestiture of Generation Business,
page 10.
RESULTS OF OPERATIONS
The following is the detail of consolidated kWh sales and
deliveries and revenue from sales of electricity by the System for
the last five years.
Sales and Deliveries of Electricity
(in thousands of kWh)
------------------------------------
Classification 1996 1995 1994 1993 1992
- -------------- ---- ---- ---- ---- ----
Residential 7,993,375 7,837,527 7,879,747 7,749,514 7,666,992
Commercial 8,559,082 8,378,580 8,266,754 8,064,024 7,851,859
Industrial 4,892,524 4,952,217 4,858,638 4,863,059 4,870,612
Other 137,378 142,848 149,724 154,981 164,450
---------- ---------- ---------- ---------- ----------
Total Sales
to Ultimate
Customers 21,582,359 21,311,172 21,154,863 20,831,578 20,553,913
Sales for
Resale 3,611,643 1,592,577 2,289,091 1,958,499 2,125,463
---------- ---------- ---------- ---------- ----------
Total Sales 25,194,002 22,903,749 23,443,954 22,790,077 22,679,376
Deliveries 101,402
---------- ---------- ---------- ---------- ----------
Total Sales
and Deliveries 25,295,404 22,903,749 23,443,954 22,790,077 22,679,376
========== ========== ========== ========== ==========
Revenues from Sales of Electricity
(in thousands of dollars)
----------------------------------
Classification 1996 1995 1994 1993 1992
- -------------- ---- ---- ---- ---- ----
Residential $ 849,070 $ 841,433 $ 811,585 $ 818,120 $ 775,973
Commercial 792,380 773,138 741,194 742,121 728,645
Industrial 383,659 393,174 381,062 401,533 408,243
Other 26,902 25,836 24,580 24,745 24,776
---------- ---------- ---------- ---------- ----------
Total Sales
to Ultimate
Customers 2,052,011 2,033,581 1,958,421 1,986,519 1,937,637
Amortization
of Unbilled
Revenues 8,209 38,458 2,700
Sales for
Resale 140,110 79,452 88,912 80,554 82,580
---------- ---------- ---------- ---------- ----------
Total 2,192,121 2,121,242 2,085,791 2,069,773 2,020,217
Other Operating
Revenue 158,577 150,470 157,238 164,205 161,459
---------- ---------- ---------- ---------- ----------
Total Operating
Revenue $2,350,698 $2,271,712 $2,243,029 $2,233,978 $2,181,676
========== ========== ========== ========== ==========
In 1996, kWh deliveries to ultimate customers increased 1.7%,
while total kWh sales increased 1.3%. The difference is the result
of pilot programs in Massachusetts and New Hampshire, whereby the
NEES distribution companies delivered power provided by other
companies. The increase in kWh deliveries reflects the effects of
an improving economy and the acquisition of Nantucket, partially
offset by the effects of milder weather in the last half of the
year.
RATES
General
In 1996, 71% of the System's electric utility revenues was
attributable to NEP, whose rates are subject to regulation by the
FERC. The rates of Mass. Electric and Nantucket, Narragansett, and
Granite State are subject to the respective jurisdictions of the
state regulatory commissions in Massachusetts, Rhode Island, and
New Hampshire.
The rates of each of the Distribution Companies contain a PPCA.
The PPCA is designed to allow the Distribution Companies to pass on
to their customers changes in purchased power expense resulting
from changes allowed by the FERC in NEP's rates. PPCA changes
become effective on the dates specified in the filing of the
adjustments with the state regulatory commission (not earlier than
30 days after such filing) unless the state regulatory commission
orders otherwise. There have been, on occasion, regulatory delays
in permitting PPCA increases. Narragansett and Granite State rates
have PPCA clauses that fully reconcile on an annual basis purchased
power expenses incurred by the companies against purchased power
related revenues. Mass. Electric's PPCA is designed to allow Mass.
Electric to pass on to its customers changes in purchased energy
costs resulting from rate increases or decreases by NEP. Mass.
Electric's PPCA mechanism is also designed to pass on to customers
the effects of NEP's seasonal rates. A settlement approved by the
MDPU on February 26, 1997 and currently pending before the FERC
would terminate Mass. Electric's and Nantucket's PPCA as of July
31, 1996. However, since the Massachusetts settlement had not been
approved at the end of 1996, Mass. Electric accrued refund
provisions of $9 million related to assumed operation of the PPCA
provision during the last five months of 1996. For more
information, see INDUSTRY RESTRUCTURING, page 4.
Under a case decided by the Rhode Island Supreme Court in 1977
(Narragansett v. Burke), NEP's wholesale rates must be accepted as
allowable expenses for rate-making purposes by state commissions in
retail rate proceedings. In 1986 and 1988 the U.S. Supreme Court
reaffirmed this doctrine in two cases that did not involve NEP.
However, the Narragansett v. Burke doctrine has been indirectly
challenged by a number of state regulatory commissions which have
held that federal preemption of the regulation of wholesale
electric rates does not preclude the state commission from
reviewing the prudence of a utility's decision to purchase power
under a FERC-approved rate, and from disallowing costs if it finds
that the purchase was an imprudent choice among alternative
sources. In a 1985 opinion, the New Hampshire Supreme Court took
this position on the issue of state regulation of wholesale power
purchases. Also, legislation has been filed from time to time in
Congress that would have eroded or repealed the doctrine. If state
commissions were to refuse to allow the Distribution Companies to
include the full cost of power purchased from NEP in their rates,
System earnings could be adversely affected.
The rates of NEP and the Distribution Companies contain fuel
adjustment clauses that allow the rates to be adjusted to reflect
changes in the cost of fuel. NEP's fuel clause is on a current
basis. Mass. Electric has a fuel clause billing procedure that
provides for billing of fuel costs estimated on a quarterly basis,
while fuel costs billed by Narragansett and Granite State are
estimated on a semi-annual basis. Billings are adjusted in the
subsequent period for any excess or deficiency in fuel cost
recovery.
For a discussion of rates in a more competitive environment and
the divestiture of the generation business, see INDUSTRY
RESTRUCTURING, page 4.
NEP Rates
In February 1995, the FERC approved a rate agreement filed
by NEP. Under the agreement, which became effective January 1995,
NEP's base rates were frozen through 1996. Before this rate
agreement, NEP's rate structure contained two surcharges that were
recovering the costs of a coal conversion project and a portion of
NEP's investment in Seabrook 1. These two surcharges fully
recovered their related costs by mid-1995. The agreement also
provides for (i) full recovery of costs associated with the
Manchester Street Station repowering project, which began
commercial operation in late 1995, (ii) the recovery of
approximately $50 million of deferred costs associated with
terminated purchased power contracts and postretirement benefits
other than pensions (PBOPs) over seven years, (iii) full recovery
of currently incurred PBOP costs, (iv) the recovery over three
years of $27 million of costs related to the dismantling of a
retired generating station in Rhode Island and the replacement of
a turbine rotor at one of NEP's generating units, and (v) increased
recovery of depreciation expense by approximately $8 million
annually to recognize costs that will be incurred upon the eventual
dismantling of its Brayton Point and Salem Harbor generating
plants. Under the agreement, approximately $15 million of the $38
million in Seabrook 1 costs scheduled for recovery in 1995 pursuant
to a 1988 settlement agreement were deferred for recovery in 1996
and are now fully recovered.
Finally, the agreement provided that NEP would reimburse its
wholesale customers for discounts provided by those wholesale
customers to their retail customers under service extension
discount (SED) programs. Under these programs, retail customers
are entitled to such discounts only if they have signed an
agreement not to purchase power from another supplier or generate
any additional power themselves for a three to five-year period.
Reimbursements totaled approximately $12 million in each of 1995
and 1996.
Mass. Electric Rates
Rate schedules applicable to electric services rendered by
Mass. Electric are on file with the MDPU.
In 1993, the MDPU approved a rate agreement filed by Mass.
Electric, the Massachusetts Attorney General, and two groups of
large commercial and industrial customers. Under the agreement,
effective December 1, 1993, Mass. Electric implemented an 11-month
general rate decrease of $26 million (annual basis). This rate
reduction continued in effect through October 31, 1994, at which
time rates increased to the previously approved levels. The
agreement also provided for the recognition of electricity
delivered but not yet billed (unbilled revenues) for accounting
purposes. Unbilled revenues at September 30, 1993 of approximately
$35 million were amortized to income over 13 months ending December
1994. The agreement further provided for rate discounts for large
commercial and industrial customers who signed agreements to give
a five-year notice to Mass. Electric before they purchase power
from another supplier or generate any additional power themselves.
In addition, commencing in 1995 the cost of these discounts is
being passed on to NEP as a result of a NEP rate settlement that
was approved by the FERC in early 1995. Under a settlement
approved by the MDPU on February 26, 1997, and currently pending
before the FERC, these discounts would end when retail choice
commences, and the notice provision would be waived to the extent
that it would limit a customer's ability to purchase electricity
from an alternate supplier.
On February 7, 1997, the MDPU approved a settlement that would
set unbundled distribution rates at a level approximately $45
million above the level embedded in current bundled rates upon the
commencement of retail choice. The settlement is subject to the
approval of the FERC. For more information, see INDUSTRY
RESTRUCTURING, page 4.
The MDPU approved a $31 million increase to base rates for
Mass. Electric, effective October 1, 1995.
Narragansett Rates
Rate schedules applicable to electric services rendered by
Narragansett are on file with the RIPUC and the Rhode Island
Division of Public Utilities and Carriers.
The RIPUC approved a $10.8 million increase to base rates for
Narragansett effective January 1, 1997 pursuant to the 1996
legislation providing customers the opportunity to choose their
electric supplier. Under this legislation, Narragansett is
entitled to a similar increase in 1998.
The RIPUC approved a settlement agreement that provided for a
$15 million increase to base rates for Narragansett effective
December 1, 1995. The RIPUC also approved $3 million of new
discounts for manufacturing customers.
In February 1995, the FERC approved a rate agreement, effective
in January 1995, for NEP. This rate agreement, among other things,
increased the credits Narragansett receives from NEP for the costs
of owning and operating its generation and transmission facilities
by $14 million on an annual basis. Narragansett supplies all of
the output of its generating facilities to NEP. The increase in
the credits reflects Narragansett's 10% investment in the
Manchester Street Station, which entered commercial operation in
the second half of 1995, and the transmission facilities associated
with the station, which were placed in service in September 1994.
An additional increase in these credits of approximately $2 million
took effect in January 1996.
In 1994, the RIPUC approved a rate agreement between
Narragansett and the Rhode Island Division of Public Utilities and
Carriers that provided for Narragansett to recognize, for
accounting purposes, $14 million of unbilled revenues over a 21-
month period which ended in December 1995. The agreement further
provided for rate discounts for large commercial and industrial
customers who signed agreements to give a five-year notice to
Narragansett before they purchase power from another supplier or
generate any additional power themselves. In addition, commencing
in 1995, the cost of these discounts is being passed on to NEP as
a result of the NEP rate settlement referred to above. Effective
January 1, 1997, the RIPUC approved a settlement that made the
discounts unavailable to customers not already receiving the
discounts. The settlement also provides for terminating the
discounts and five-year notice obligations to existing customers if
those customers begin to purchase their electricity from a
nonregulated power producer. NEP made a filing at the FERC (which
the FERC has accepted, made effective, and set for hearing) waiving
the requirement that NEP consent prior to Narragansett modifying
agreements with its customers that include the discount and notice
provisions.
Effective January 1993, the RIPUC approved a $1.5 million
increase in rates for Narragansett, representing the first step of
a three-year phase-in of Narragansett's recovery of costs
associated with PBOPs. The second and third $1.5 million increases
took effect in January 1994 and 1995, respectively.
A 1986 Rhode Island Supreme Court decision held that the
RIPUC's rate-making power includes the authority to order refunds
of amounts earned in excess of an allowed return. As a result, the
RIPUC monitors Narragansett's earnings on a regular basis.
However, in 1996, the General Assembly enacted a statute
establishing a floor and ceiling on Narragansett's return on equity
from distribution operations. For more information, see INDUSTRY
RESTRUCTURING, page 4.
Granite State Rates
In May 1996, the NHPUC approved a permanent Granite State rate
increase of $1.1 million, effective June 1, 1996. In October 1995,
the company had received approval to collect an interim increase of
$0.9 million, effective November 1, 1995. Granite State was also
permitted to modify its fuel clause and PPCA mechanisms related to
the treatment of its gross receipts tax. This modification yielded
an additional $0.5 million of increased revenues, which is included
in rate increases.
Commencing in 1995, Granite State began offering discounts to
large commercial and industrial customers who give Granite State a
five-year notice before they purchase power from another supplier
or generate additional power themselves. Granite State is
reimbursed for these discounts by NEP. Under the NHPUC's
restructuring rules, the five-year notice obligations would remain
in effect. However, the restructuring settlement proposed by
Granite State would waive the five-year notice obligations and
terminate the discounts.
Recovery of Demand-Side Management Expenditures
The Distribution Companies offer conservation and load
management programs, usually referred to in the industry as Demand-
Side Management (DSM) programs, which are designed to help
customers use electricity efficiently, as a part of meeting the
NEES companies' regulatory requirements and customers' needs for
energy services.
The Distribution Companies regularly file their DSM programs
with their respective regulatory agencies and have received
approval to recover DSM program expenditures in rates on a current
basis. Mass. Electric's expenditures were $48 million, $53
million, and $59 million in 1996, 1995, and 1994, respectively.
Narragansett's expenditures were $10 million, $9 million, and $10
million in 1996, 1995, and 1994, respectively. Since 1990, the
Distribution Companies have been allowed to earn incentives based
on the results of their DSM programs. The Distribution Companies
must be able to demonstrate the electricity savings produced by
their DSM programs to their respective state regulatory agencies
before incentives are recorded. Mass. Electric recorded $5.7
million, $5.1 million, and $7.1 million of before-tax incentives in
1996, 1995, and 1994, respectively. Narragansett recorded $0.2
million, $0.5 million, and $0.6 million of before-tax incentives
in 1996, 1995, and 1994, respectively. The Distribution Companies,
other than Narragansett, have received regulatory orders that will
give them the opportunity to continue to earn incentives based on
1997 DSM program results. In Rhode Island, the RIPUC approved
Narragansett's request to recover lost base revenues based on its
1997 DSM programs.
ELECTRIC UTILITY PROPERTIES
Divestiture
On October 1, 1996, the NEES companies announced their
intention to divest their generating business. For more
information, see INDUSTRY RESTRUCTURING, page 4.
Energy Mix
The following table displays the contributions of various fuel
sources and other generation to total net generation of electricity
by NEP during the past three years, as well as an estimate for
1997:
% of Net Generation
------------------------------
Estimated Actual
--------- -------------------
1997 1996 1995 1994
---- ---- ---- ----
Coal 37 42 38 37
Nuclear 8 14 14 19
Gas (1) 27 24 22 16
Oil 9 1 10 10
Hydroelectric 7 7 5 6
Hydro-Quebec 6 6 5 6
Renewable Nonutility
Generation (2) 6 6 6 6
--- --- --- ---
100 100 100 100
(1) Gas includes both utility and nonutility generation.
(2) Waste to energy and hydro.
Generation, Transmission, and Distribution Properties
The electric utility properties of the System companies consist
of NEP's and Narragansett's fossil-fuel base load and intermediate
load steam and combined cycle generating units, conventional and
pumped storage hydroelectric stations, internal combustion peaking
units, portions of fossil fuel and nuclear generating units, the
ownership interests of NEET, Mass. Hydro, and N.H. Hydro in the
Hydro-Quebec Interconnection, and an integrated system of
transmission lines, substations, and distribution facilities. See
Map - Electric Utility Properties, page 28.
NEP's integrated system consists of 2,277 circuit miles of
transmission lines, 118 substations with an aggregate capacity of
13,876,563 kVA, and 7 pole or conduit miles of distribution lines.
The properties of Mass. Electric and Narragansett include
substations and distribution and transmission lines, which are
interconnected with transmission and other facilities of NEP. At
December 31, 1996, Mass. Electric owned 252 substations, which had
an aggregate capacity of 2,830,614 kVA, 140,141 line transformers
with the capacity of 7,204,723 kVA, and 16,055 pole or conduit
miles of distribution lines. Mass. Electric also owns 83 circuit
miles of transmission lines. At December 31, 1996, Narragansett
owned 240 substations, which had an aggregate capacity of 2,917,267
kVA, 46,854 line transformers with the capacity of 2,009,013 kVA,
and 4,338 pole or conduit miles of distribution lines.
Narragansett, in addition, owns 324 circuit miles of transmission
lines.
Substantially all of the properties and franchises of Mass.
Electric, Narragansett, and NEP are subject to the liens of
indentures under which mortgage bonds have been issued. NEP's
bond indenture restricts the sale of the trust property in its
entirety or substantially in its entirety. The proposed sale of
NEP's generating business would likely require that NEP either
amend the bond indenture or either defease or call the bonds in
connection with the proposed sale. For details of the mortgage
liens on these properties see the long-term debt note in Notes to
Financial Statements in each of these companies' respective 1996
annual reports. The properties of NEET are subject to a mortgage
under its financing arrangements.
The net capability at December 31, 1996, and the net generation for the
twelve months ended December 31, 1996, from all sources were as follows:
Year(s)
Placed Energy Net Net
Source Location In-Service Source Capability Generation
------ -------- ---------- ------ ---------- -------------
Fossil Fuel Units (MW) (000's of MWh)
Brayton Point
Station
Units 1,2 & 3 Somerset, 1963-1969 Coal-Oil-Gas(a) 1,130 7,924
Unit 4 Mass. 1974 Oil-Gas 446 569
Salem Harbor
Station
Units 1,2 & 3 Salem, 1952-1958 Coal-Oil(a) 314 2,019
Unit 4 Mass. 1972 Oil 400 932
Manchester St. Prov., 1995 Gas-Oil 495 3,299
Station(b) R.I.
Other System Me., Mass. 1963-1978 Oil 99 110
Units(c)
Hydroelectric Units(d)
Conventional Mass.,N.H. 1909-1987
& Vt. Water 578 1,819
Pumped Storage
Bear Swamp Rowe, Mass. 1974 Water 589 (196)
Nuclear Units(e)
Yankees Me. and Vt. 1972 Nuclear 253 2,015
Millstone 3 Waterford, 1986 Nuclear 140 302
Conn.
Seabrook 1 Seabrook, 1990 Nuclear 116 894
N.H.
Other(f) - - - 716 3,807
----- ------
Total 5,276 23,494
===== ======
(a) These units currently burn coal, but are also capable of
burning oil. In addition Brayton Point Units 1, 2, and 3 are
capable of limited co-firing of natural gas.
(b) In 1995, NEES subsidiaries completed the approximately 500 MW
repowering of Manchester Street Station in Providence, R.I.
Total costs for the generating station were approximately $440
million, including allowance for funds used during construction
(AFDC).
(c) Includes (i) an interest in a jointly owned oil-fired unit in
Yarmouth, Maine, and (ii) diesel units at various locations.
(d) See Hydroelectric Project Licensing, page 43.
(e) See Nuclear Units, page 33.
(f) Capability includes contracted purchases (1,313 MW) less
contract sales (597 MW). Net generation includes the effects
of the above contracted purchases and economy interchanges
through the New England Power Exchange (including a 223 MW
capacity credit associated with purchases from Hydro-Quebec and
purchases from nonutility generation). For further information
see Nonutility Power Producer Information, page 32.
NEP and Narragansett are members of the New England Power Pool
(NEPOOL). Mass. Electric, Nantucket, and Granite State
participate in NEPOOL through NEP. The NEPOOL Agreement provides
for coordination of the planning and operation of the generation
and transmission facilities of its members. The NEPOOL Agreement
incorporates generating capacity reserve obligations, provisions
regarding the use of major transmission lines, and provisions for
payment for facilities usage. The NEPOOL Agreement further
provides for New England-wide central dispatch of generation
through the New England Power Exchange. Through NEPOOL, operating
and capital economies are achieved and reserves are established on
a region-wide rather than an individual company basis.
At the end of 1996, NEPOOL filed with the FERC a comprehensive
proposal to restructure NEPOOL. The main elements of the proposal
include: (1) the establishment of a regional transmission tariff
that will ensure open, nondiscriminatory access to the regional
transmission network; (2) the development of wholesale competitive
markets and a power exchange for capacity, energy and several
ancillary services with market-based pricing for these products and
services; (3) a new governance structure for NEPOOL that will allow
for more flexible and representative governance; and (4) the
creation of a new institution, the Independent System Operator,
that will operate the bulk power system, administer the regional
tariff and power exchange. The NEES companies support this
restructuring proposal because they believe it will facilitate the
development of robust competition in the electricity markets in New
England. A number of parties intervened in the proceeding. In
February 1997, the FERC accepted the filing and set the matter down
for hearings.
The 1996 NEPOOL peak demand of 19,507 MW occurred on August 6,
1996. This was below the all time NEPOOL peak demand of 20,519 MW
set on July 21, 1994.
The 1996 summer peak for the System of 4,091 MW occurred at
the same day as the NEPOOL peak demand. The previous all-time peak
load of 4,385 MW occurred on July 21, 1994. The 1996-1997 winter
peak of 3,868 MW occurred on January 20, 1997.
NEPOOL currently projects a capacity shortfall of approximately
450 MW from long-range planning criteria for the summer of 1997,
assuming normal summer weather. This projection further assumes
that the three Millstone units and the Maine Yankee unit will be
unavailable during the summer. Extensive or extended hot weather
or losses of other major generating units or transmission ties
could further strain the System. NEPOOL participants are working
to mitigate any capacity shortages and prevent disruptions in
electric service this summer. Among the steps being taken are:
(1) acceleration or deferral of planned maintenance outages to
occur outside of the summer period; (2) reactivation of currently
idle generating units; (3) reduction of exposure to peak customer
loads through increased availability of interruptible loads; and
(4) coordination with neighboring power systems to maximize
NEPOOL's ability to purchase and import emergency power as
necessary. The NEES companies cannot predict whether these steps
will be sufficient to prevent service disruptions or, if there are
disruptions, how extensive they might be.
MAP
(Displays electric utility properties of NEES subsidiaries)
Fuel for Generation
NEP burned the following amounts of coal, residual oil, and gas
during the past three years:
1996 1995 1994
---- ---- ----
Coal (in millions of tons) 3.8 3.4 3.3
Oil (in millions of barrels) 2.2 1.7 3.4
Natural Gas (in billions of cubic feet) 28.6 16.2 4.0
Coal Procurement Program
Depending on coal-fired generating unit availability and the
degree to which the units are dispatched, NEP's 1997 coal
requirements should range between 3.7 and 3.9 million tons. NEP
obtains its domestic coal under contracts of varying lengths and on
a spot basis from domestic coal producers in Kentucky, West
Virginia, and Virginia, and from mines in Colombia and Venezuela.
Two different rail systems (CSX and Norfolk Southern) transport
coal from domestic sources to loading ports on the east coast.
NEP's coal is transported from east coast ports by ocean-going
collier to Brayton Point and Salem Harbor. NEP has a term charter
with International Shipholding Corporation for the S.S. Energy
Enterprise, a self-unloading collier, which carries most of NEP's
U.S. coal and a portion of foreign coal. NEP also charters other
coal-carrying vessels for the balance of foreign coal, and
presently has contracts of affreightment with Canada Steamship
Lines, International and Marbulk Shipping Inc. As protection
against interruptions in coal deliveries, NEP maintains average
coal inventories at its generating stations of 35 to 55 days.
To meet environmental requirements, NEP uses coal with a
relatively low sulphur content. NEP's average price for coal
burned, including transportation costs, calculated on a 26 million
Btu per ton basis, was $42.90 per ton in 1994, $42.25 in 1995, and
$42.03 in 1996. Based on a 42 gallon barrel of oil producing 6.3
million Btu's, these coal prices were equivalent to approximately
$10.41 per barrel of oil in 1994, $10.25 in 1995, and $10.20 in
1996.
Oil Procurement Program
Depending on unit availability, dispatch, and the relationship
of oil and gas prices, the System's 1997 oil requirements are
expected to be approximately 4.2 to 4.5 million barrels. The
System obtains its oil requirements through short-term contracts
with oil suppliers and purchases on the spot market. The System
currently has a total storage capacity for approximately
1.3 million barrels of residual and diesel fuel oil. The System's
average cost of oil burned, calculated on a 6.3 million Btu per
barrel basis, was $13.17 in 1994, $14.46 in 1995, and $17.19 in
1996.
Natural Gas
NEP has contracts with two Canadian natural gas suppliers for
a total of 35 million cubic feet per day as well as a 7.5 million
cubic feet per day liquified natural gas supply contract with a
Massachusetts corporation. NEP has service agreements for firm
transportation of natural gas with a number of pipeline companies.
The agreements are sufficient to cover a total delivery to New
England of an aggregate amount of approximately 127.5 million cubic
feet per day. Service under the pipeline agreements and one of the
supply contracts require minimum fixed payments. NEP's minimum
fixed payments under all pipeline and supply agreements are
currently estimated to be approximately $57 million to $60 million
per year from 1997 to 2001. Remaining fixed payments from 2002
through 2014 total approximately $525 million. The amount of the
fixed payments is subject to FERC regulation and will depend on
FERC actions affecting the rates on each of the pipelines. In
connection with managing its fuel supply, NEP uses a portion of
this pipeline capacity to sell natural gas. Proceeds from sales of
natural gas and pipeline capacity of $50.2 million, $71 million,
and $55 million in 1996, 1995, and 1994, respectively, have been
passed on to customers through NEP's fuel clause.
Nuclear Fuel Supply
As noted below, NEP participates with other New England
utilities in the ownership of several nuclear units. See Nuclear
Units, page 33. The utilities responsible for supply for these
units are not experiencing any difficulty in obtaining commitments
for the supply of each element of the nuclear fuel cycle.
Oil and Gas Operations
As part of the NEES companies' divestiture of their generating
business, NEEI is planning to sell its oil and gas properties. For
more information, see INDUSTRY RESTRUCTURING, page 4.
Since 1974, NEEI has engaged in oil and gas exploration and
development, primarily through a partnership with Samedan Oil
Corporation (Samedan), a subsidiary of Noble Affiliates, Inc.
NEEI's oil and gas activities are regulated by the SEC under the
1935 Act.
Under the terms of the Samedan-NEEI partnership agreement,
Samedan is the managing partner and oversees all partnership
operations including the sale of production. Effective January 1,
1987, NEEI decided not to acquire new oil and gas prospects due to
prevailing and expected oil and natural gas market conditions.
This decision did not affect NEEI's interests and commitments in
oil and gas properties owned as of December 31, 1986 by the
Samedan-NEEI partnership. Samedan continues to explore, develop,
and manage these properties on behalf of the partnership. Thus,
the results of NEEI's operations are substantially affected by the
performance of Samedan. Samedan may elect to terminate the
partnership at the end of any calendar year upon one year's prior
notice.
NEEI is required to obtain SEC approval for further investment
in these oil and gas properties. On December 20, 1994, the SEC
issued an order authorizing NEEI to invest up to $30 million in its
partnership with Samedan for the years 1995-1998. NEEI is winding
down its oil and gas program. The level of expenditures for
exploration and development of existing properties has declined as
a result of the decision not to acquire new oil and gas prospects
after December 31, 1986.
NEEI's activities are primarily rate-regulated and consist of
all prospects entered into prior to 1984. Losses from this
rate-regulated program are being passed on to NEP and ultimately to
retail customers, under an intercompany pricing policy (Pricing
Policy) approved by the SEC. Due to declines in oil and gas
prices, NEEI has incurred operating losses since 1986 and expects
to generate substantial additional losses in the future. NEP's
ability to pass such losses on to its customers was favorably
resolved in NEP's 1988 FERC rate settlement. This settlement
covered all costs incurred by or resulting from commitments made by
NEEI through March 1, 1988. Other subsequent costs incurred by
NEEI are subject to normal regulatory review. NEEI follows the
full cost method of accounting for its oil and gas operations,
under which capitalized costs (including interest paid to banks)
relating to wells and leases determined to be either commercial or
noncommercial are amortized using the unit of production method.
Due to the Pricing Policy, NEEI's rate-regulated program has
not been subject to certain SEC accounting rules, applicable to
non-rate-regulated companies, which limit the costs of oil and gas
property that can be capitalized. The Pricing Policy has allowed
NEEI to capitalize all costs incurred in connection with fuel
exploration activities of its rate regulated program, including
interest paid to banks of which $7 million was capitalized in 1996
and $10 million was capitalized in 1995 and 1994, respectively. In
the absence of the Pricing Policy, the SEC's full cost "ceiling
test" rule requires non-rate-regulated companies to write-down
capitalized costs to a level which approximates the present value
of their proved oil and gas reserves. Based on NEEI's 1996 average
oil and gas selling prices at December 31, 1996, if this test were
applied, it would have resulted in a write-down of approximately
$93 million after-tax.
Nonutility Power Producer Information
The System companies purchase a portion of the electricity
generated by, or provide back-up or standard service to, 136 small
power producers, cogenerators, or independent power producers (a
total of 6,188,414 MWh of purchases in 1996). As of December 31,
1996, these nonutility generation sources include 24 low-head
hydroelectric plants, 49 wind or solar generators, 9 waste to
energy facilities, 51 cogenerators, and 3 independent power
producers. The total capacity of these sources is as follows:
Source MW at 12/31/96
------ --------------
Hydro 37
Waste to Energy 173
Cogeneration 305
Independent Power Producers 374
----
Total 889
These amounts include 735 MW of long-term capacity, 16 MW of
short-term capacity, and 138 MW treated as load reductions and
includes the Ocean State Power contracts discussed below. These
contracts are being offered for sale pursuant to the NEES
companies' divestiture of their generating business. For more
information, see INDUSTRY RESTRUCTURING, page 4.
Ocean State Power
Ocean State Power (OSP) and Ocean State Power II (OSP II) are
general partnerships that own and operate a two unit gas-fired
combined cycle electric power plant in Burrillville, R.I. The two
units have a combined winter net electrical capability of
approximately 562 MW. Each unit's capacity and energy output is
sold under 20-year unit power agreements to a group of New England
utilities, including NEP, which has contracts for 48.5% of the
output of each unit. NEP is required to make certain minimum fixed
payments to cover capital and fixed operating costs of these units
in amounts estimated to be $75 million per year.
Resources is a general partner with a 20% interest in both OSP
and OSP II and had an equity investment of approximately $35
million at December 31, 1996.
Interconnection with Quebec
NEET, Mass. Hydro, and N.H. Hydro own and operate, on behalf
of NEPOOL participants in the project, a 450 kV direct current
transmission line and related terminals to interconnect the New
England and Quebec transmission systems (the Interconnection). The
transfer capability of the Interconnection is 2,000 MW. Operating
limits implemented by adjacent Power Pools covering New York, New
Jersey, Pennsylvania, and Maryland often restrict the effective
transfer capability to a lower level. NEPOOL members purchase from
and sell energy to Hydro-Quebec pursuant to several agreements.
The principal agreement calls for NEPOOL members to purchase 7
billion kWh of energy each year for ten years (the Firm Energy
Contract). Purchases under the Firm Energy Contract totaled over
5.3 billion kWh in 1996. Net energy deliveries from Hydro-Quebec
over the Interconnection totaled more than 8.1 billion kWh in 1996.
These additional deliveries reflect the use of the Interconnection
by participants to conduct independent transactions with Hydro-
Quebec on a regular basis.
The Interconnection has two phases. NEP's participation in
both is approximately 18%. NEP and the other participants have
entered into support agreements that end in 2020, to pay monthly
their proportionate share of the total cost of constructing,
owning, and operating the transmission facilities. NEP accounts
for these support agreements as capital leases and accordingly
recorded approximately $69 million in utility plant at December 31,
1996. Under the support agreements, NEP has agreed to guarantee
its share of debt financing for the second phase. At December 31,
1996, NEP had guaranteed approximately $27 million of project debt.
In the event any Interconnection facilities are abandoned for any
reason, each participant is contractually committed to pay its
pro-rata share of the net investment in the abandoned facilities.
On July 11, 1996, various New England utilities which are
members of NEPOOL, including NEP (collectively, the New England
Utilities or NEUs), submitted a dispute to arbitration regarding
their Firm Energy Purchased Power Contract with Hydro-Quebec. The
dispute concerns the components of a pricing formula. Based on
NEP's interpretation of Hydro-Quebec's claims, NEP's share of
additional billings owed to Hydro-Quebec would be approximately
$3.5 million on a retroactive basis and an estimated $3.8 million
per year on a prospective basis through 2001. The arbitrator
denied the NEUs' motion to dismiss Hydro-Quebec's claims as
untimely, without prejudice to their right to raise that motion
later at the conclusion of the evidence. Discovery is under way,
and hearings are expected to commence in June 1997.
Nuclear Units
General
NEP is a stockholder of Yankee Atomic Electric Company (Yankee
Atomic), Vermont Yankee Nuclear Power Corporation (Vermont Yankee),
Maine Yankee Atomic Power Company (Maine Yankee), and Connecticut
Yankee Atomic Power Company (Connecticut Yankee). Each of these
companies (collectively referred to as the Yankee Companies) owns
a single nuclear generating unit. NEP purchases the output of the
Maine Yankee and Vermont Yankee nuclear electric generating plants
in the same percentages as its stock ownership, less small
entitlements taken by municipal utilities. NEP has power contracts
with each Yankee Company that require NEP to pay an amount equal to
its share of total fixed and operating costs (including
decommissioning costs) of the plant plus a return on equity.
The stockholders of three Yankee Companies (Vermont Yankee,
Maine Yankee, and Connecticut Yankee) have agreed, subject to
regulatory approval, to provide capital requirements in the same
proportion as their ownership percentages of the particular Yankee
Company. Yankee Atomic and Connecticut Yankee have permanently
ceased operations.
In addition, NEP is a joint owner of the Millstone 3 nuclear
generating unit in Connecticut and the Seabrook 1 nuclear
generating unit in New Hampshire. Millstone 3 and Seabrook 1 are
operated by subsidiaries of NU. NEP pays its proportionate share
of costs and receives its proportionate share of output from the
Yankee Companies, Millstone 3, and Seabrook 1. Listed below is
information on each operating nuclear plant in which NEP has an
ownership interest.
<CAPTION
NEP's Share of
NEP's Net Plant
Ownership Assets
Unit Interest (%) ($ in millions)
---- ------------ ---------------
Maine Yankee 20 44
Vermont Yankee 20 36
Millstone 3 12 379
Seabrook 1 10 55
Nuclear Plant Decommissioning
NEP is liable for its share of decommissioning costs for
Millstone 3, Seabrook 1, and each of the Yankee Companies. See
Decommissioning Trust Funds, page 35, regarding a Maine statute
relating to Maine Yankee's decommissioning trust fund.
Decommissioning costs include not only estimated costs to
decontaminate the units as required by the Nuclear Regulatory
Commission (NRC), but also costs to dismantle the uncontaminated
portion of the units. NEP records decommissioning cost expense on
its books consistent with its rate recovery. NEP is recovering its
share of projected decommissioning costs for Millstone 3 and
Seabrook 1 through depreciation expense. In addition, NEP is
paying its portion of projected decommissioning costs for all of
the Yankee Companies through purchased power expense. Such costs
reflect estimates of total decommissioning costs approved by the
FERC.
Connecticut Yankee
NEP has a 15% equity ownership interest in Connecticut Yankee.
As a result of an economic analysis, the Connecticut Yankee board
of directors voted in December 1996 to permanently shut down and
decommission the plant.
In December 1996, Connecticut Yankee filed with the FERC to
recover all of its approximately $246 million undepreciated
investment in the plant and other costs over the period extending
through June 2007, when the plant's NRC operating license would
have expired. In a 1993 decision, the FERC allowed Yankee Atomic
to recover its undepreciated investment in its permanently shut
down nuclear plant, in part on the grounds that owners should not
be discouraged from closing uneconomic plants. Several parties
have intervened in opposition to Connecticut Yankee's filing. NEP
believes that the FERC will allow NEP to recover from its customers
all costs that the FERC allows Connecticut Yankee to recover from
NEP.
NEP has recorded the estimated future payment obligation to
Connecticut Yankee of $114 million as a liability and as an
offsetting regulatory asset, reflecting NEP's expected future rate
recovery of such costs. The NRC has identified numerous apparent
violations of its regulations, which may result in the assessment
of civil penalties.
Yankee Atomic
NEP has a 30% ownership interest in Yankee Atomic. In 1992,
the Yankee Atomic board of directors decided to permanently cease
power operation of, and decommission, the facility.
Decommissioning is currently under way.
NEP has recorded an estimate of its total future payment
obligations to Yankee Atomic for post operating costs as a
liability and as an offsetting regulatory asset, reflecting its
expected future rate recovery of such costs. This liability and
related regulatory asset are approximately $52 million each at
December 31, 1996.
Decommissioning Trust Funds
Each nuclear unit in which NEP has an ownership interest has
established a decommissioning trust fund or escrow fund into which
payments are being made to meet the projected costs of
decommissioning. Each of the Yankee Companies includes charges for
all or a portion of decommissioning costs in its cost of energy.
These charges vary depending upon rate treatment, the method of
decommissioning assumed, economic assumptions, site and unit
specific variables, and other factors. Any increase in these
charges is subject to FERC approval.
Estimates of NEP's pro-rata share (based on ownership) of
decommissioning costs, NEP's share of the actual book values of
decommissioning fund balances set aside for each unit at
December 31, 1996, and the expiration date of the operating license
of each plant are as follows:
NEP's share of
($ in millions)
-----------------------------
Estimated Decommissioning
Decommissioning Fund License
Costs Balances (1) Expiration
Unit (in 1996 $) (12/31/96) Date
---- --------------- --------------- ----------
Maine Yankee $74 $31 2008
Vermont Yankee $75 $30 2012
Millstone 3 $62 $16 2025
Seabrook 1 $45 $ 7 2026
(1) Certain additional amounts are anticipated to be
available through tax deductions.
NEP is currently collecting through rates amounts for
decommissioning based upon cost estimates and funding methodologies
authorized by FERC. Such estimates are determined periodically for
each plant and may not reflect the current projected cost of
decommissioning.
There is no assurance that decommissioning costs actually
incurred by the Yankee Companies, Millstone 3, or Seabrook 1 will
not substantially exceed these amounts. For example,
decommissioning cost estimates assume the availability of permanent
repositories in the United States for both low-level and high-level
nuclear waste; currently, only low-level waste sites are available.
See Low-Level Waste Disposal, page 41. If any of the units were
shut down prior to the end of their operating licenses, the funds
collected for decommissioning to that point would be insufficient.
NRC rules require that reasonable assurance be provided that
adequate funds will be available for the decommissioning of
commercial nuclear power plants. The rule establishes minimum
funding levels that licensees must satisfy. Each of the units in
which NEP has an interest has filed a report with the NRC providing
assurance that funds will be available to decommission the
facility.
A Maine statute provides that if both Maine Yankee and its
decommissioning trust fund have insufficient assets to pay for the
plant decommissioning, the owners of Maine Yankee are jointly and
severally liable for the shortfall. The definition of owner under
the statute covers NEP and may cover companies affiliated with it.
NEP and the Distribution Companies cannot determine, at this time,
the constitutionality, applicability, or effect of this statute.
If NEP or the Distribution Companies were required to make payments
under this statute, they would assess their legal remedies at that
time. In any event, NEP and the Distribution Companies would
attempt to recover through rates any payments required. If any
claim in excess of NEP's ownership share were enforced against a
NEES company, that company would seek reimbursement from any other
Maine Yankee stockholder which failed to pay its share of such
costs.
Investments in Nuclear Units
There is widespread concern about the safety of nuclear
generating plants. The NRC regularly reviews the adequacy of its
comprehensive requirements for nuclear plants. In fact, during
1996, the NRC placed heightened emphasis upon assurance that plants
are operating in compliance with their design and licensing bases.
Many local, state, and national public officials have expressed
their opposition to nuclear power in general and to the continued
operation of nuclear power plants. From time to time, various
organizations and individuals file petitions raising safety
concerns at particular nuclear units. It is possible that this
controversy will result in cost increases and modifications to, or
premature shutdown of, the operating nuclear units in which NEP has
an interest.
The Millstone 3 and Maine Yankee nuclear generating units are
currently shut down and have been placed on the NRC "Watch List,"
signifying that their safety performance exhibits sufficient
weakness to warrant increased NRC attention. Neither may restart
without NRC approval. At present, the Vermont Yankee and Seabrook
1 nuclear generating units appear to be operating routinely without
major problems.
On October 9, 1996, the NRC issued letters to operators of
nuclear power plants requiring them to document that the plants are
operated and maintained within their design and licensing bases,
and that any deviations are reconciled in a timely manner. The
Seabrook 1, Maine Yankee, and Vermont Yankee nuclear power plants
responded to the NRC letters in February 1997.
Uncertainties regarding the future of nuclear generating
stations, particularly older units, such as Maine Yankee and
Vermont Yankee, are increasing rapidly and could adversely affect
their service lives, availability, and costs. These uncertainties
stem from a combination of factors, including the acceleration of
competitive pressures in the power generation industry and
increased NRC scrutiny.
In general, the increased NRC scrutiny on the nuclear plants
mentioned above, coupled with accelerating competitive pressures in
the power generation industry, is expected to have a negative
impact upon NEP's operations and costs and those of co-owners of
the various units. North Atlantic, a subsidiary of Northeast
Utilities (NU) that owns 35.57% of the Seabrook unit, has announced
that it may have to seek protection under the bankruptcy laws due
to the effect of the NHPUC restructuring rules announced February
28, 1997. For more information, see New Hampshire Proceeding and
Settlement Agreement, page 8.
Millstone 3
In April 1996, the NRC ordered Millstone 3, which has
experienced numerous technical and nontechnical problems, to remain
shut down pending verification that the unit's operations are in
accordance with NRC regulations and the unit's operating license.
Millstone 3 is operated by a subsidiary of NU. NEP is not an owner
of the Millstone 1 and 2 nuclear generating units, which are also
shut down under NRC orders.
A number of significant prerequisites must be fulfilled prior
to restart of Millstone 3, including certification by NU that the
unit adequately conforms to its design and licensing bases, an
independent verification of corrective actions taken at the units,
an NRC assessment concluding a culture change has occurred, public
hearings, and a vote of the NRC Commissioners. NU announced in
December 1996 that it expects Millstone 3 to be ready for restart
around the end of 1997, subject to review by the NRC Commissioners.
NEP cannot predict when Millstone 3 will be allowed by the NRC to
restart, but believes that the unit will remain shut down for a
very protracted period.
NEP incurred $10 million of actual costs in 1996 related to
corrective actions associated with the outage. NEP has also
accrued a liability of approximately $3 million for its share of
future corrective action costs. Additional costs may be incurred.
During the outage, NEP is also incurring approximately $1.6 million
per month in incremental replacement power costs, which it has been
recovering from customers through its fuel clause.
Several criminal investigations related to Millstone 3 are
ongoing. The NRC has identified numerous apparent violations of
its regulations which may result in the assessment of civil
penalties. NEP and other minority owners of Millstone 3 are
assessing their legal rights with respect to NU's operation of
Millstone 3.
Maine Yankee
Over the past few years, the Maine Yankee nuclear generating
plant has experienced numerous technical and nontechnical problems.
In 1995, the plant had been shut down for much of the year due to
the discovery of cracks in its steam generator tubes. The plant is
currently shut down due to a cable routing problem. In addition,
due to leaking nuclear fuel rods, 68 fuel assemblies will be
replaced. As a result, Maine Yankee management does not expect the
unit to restart until summer of 1997.
In late 1995, allegations were made to the NRC that inadequate
analyses of the plant's emergency core cooling system had been
performed. As a result of the allegations, the NRC limited the
plant's operation to 90% of full capacity. In September 1996, the
NRC asked the Department of Justice (DOJ) to review, for potential
criminal violations, an NRC investigatory report on the
allegations. The DOJ is not limited in its investigation to the
matters covered in that report.
During 1996, the NRC conducted an independent safety assessment
(ISA) and identified a number of weaknesses, deficiencies, and
apparent violations which could result in fines. Yankee Atomic
performed professional services for Maine Yankee associated with
the matters being investigated. In response to the ISA results,
Maine Yankee has indicated that it will spend more than $50 million
in 1997 on operational improvements. Additionally, in February
1997, Entergy Corporation, an operator of five nuclear units,
commenced providing management services.
Under a confirmatory action letter issued by the NRC on
December 18, 1996, and supplemented on January 30, 1997, Maine
Yankee must fulfill certain commitments before its plant will be
allowed by the NRC staff to return to service. Because of
regulatory and other uncertainties faced by Maine Yankee, NEP
cannot predict whether or when Maine Yankee will return to service.
During the outage, NEP is incurring approximately $1.8 million
per month in incremental replacement power costs, which it has been
recovering from customers through its fuel clause.
High-Level Waste Disposal
The Nuclear Waste Policy Act of 1982 provides a framework and
timetable for selection of sites for repositories of high-level
radioactive waste (spent nuclear fuel) from United States nuclear
plants. The U.S. Department of Energy (DOE) has entered into
contracts with the Yankee Companies, the Millstone 3 joint owners,
and the Seabrook 1 joint owners for acceptance of title to, and
transportation and storage of, this waste. Under these contracts,
each operating unit will pay fees to the DOE to cover the
development and creation of waste repositories. Fees for fuel
burned since April 1983 have been collected by the DOE on an
ongoing basis at the rate of one tenth of a cent per kWh of net
generation. Fees for generation up through April 1983 were
determined by the DOE as follows: $13.2 million for Yankee Atomic,
$48.7 million for Connecticut Yankee, $50.4 million for Maine
Yankee, and $39.3 million for Vermont Yankee. Neither Millstone 3
nor Seabrook 1 has been assessed any fees for fuel burned through
April 1983, because they did not enter commercial operation until
1986 and 1990, respectively.
The Yankee Companies had several options to pay these fees.
Yankee Atomic paid its fee to the DOE for the period through April
1983. The other three Yankee Companies elected to defer payment
until a future date, thereby incurring interest expense. However,
payment to the DOE must occur prior to the first delivery of spent
fuel. Connecticut, Maine, and Vermont Yankee have segregated a
portion of their respective DOE obligations in external accounts.
The remainder of the funds have been used to support general
capital requirements. All expect to separately fund in full in
external accounts their DOE obligation (including accrued interest)
prior to payment to the DOE. To the extent that any of the three
Yankee Companies is unable to fully meet its DOE obligation at the
prescribed time, NEP might be required to provide additional funds.
Prior to such time that the DOE takes delivery of a plant's
spent nuclear fuel, it is stored on site in spent fuel pools.
Maine Yankee, Millstone 3, Seabrook 1, and Vermont Yankee are in
the process of reconfiguring their spent fuel pools to allow for
additional storage capability. Upon successful completion of the
reconfiguring, Maine Yankee and Millstone 3 will have sufficient
spent fuel pool capacity to support plant operation through the
expiration of their respective current NRC license. Seabrook 1's
licensed storage capacity will allow a full core discharge until
2011. Vermont Yankee will be able to maintain a full core
discharge capability until 2004. Yankee Atomic has adequate
on-site storage capacity for all its spent fuel.
Federal legislation enacted in 1987 directed the DOE to proceed
with the studies necessary to develop and operate a permanent
high-level waste disposal site at Yucca Mountain, Nevada. There is
local opposition to development of this site. Although originally
scheduled to open in 1998, the DOE currently estimates that the
permanent disposal site is not expected to open before 2015.
Nuclear waste legislation mandating DOE acceptance of spent fuel at
an interim storage site in Nevada by January 1, 1998 was passed by
the U.S. Senate in July 1996, but the House failed to vote on any
waste bill prior to adjourning for the year. Therefore, new
legislation will be considered in the next (105th) Congress. On
July 23, 1996, the U.S. Court of Appeals for the District of
Columbia Circuit issued its decision in a lawsuit petitioning the
Court to declare the 1998 contract date a binding legal obligation.
The Court stated that the DOE is obligated "to start disposing
Spent Nuclear Fuel no later than January 31, 1998." The Court's
decision did not specify a plan for ensuring that the DOE meets its
obligations, but rather noted that it was premature to determine
the appropriate remedy since the DOE had not yet defaulted upon
either its statutory or contractual obligation. The DOE did not
file an appeal by the October 22, 1996 deadline and its next course
of action is unclear.
On November 12, 1996, a group consisting of 40 agencies from
29 states and several municipal utilities sent a letter to the DOE
asking what procedures and schedule the DOE will implement to
comply with the court decision obligating DOE to begin taking spent
fuel in 1998. On January 31, 1997, 36 utilities and 33 states
filed lawsuits against DOE in the U.S. Court of Appeals for the
District of Columbia Circuit. The plaintiffs want to suspend
payments to the Nuclear Waste Fund until DOE begins taking spent
fuel. The payment would instead be made to special escrow
accounts.
The petitioners in the lawsuits requested that the court review
the above decision in which the same court ruled that the January
31, 1998 contract date was binding and order DOE to prepare a plan
to begin taking spent fuel by that date. They also requested that
the court order DOE to submit that plan to the court within 30 days
of the ruling. Lastly, the plaintiffs requested that the court
protect them from any retaliatory action by DOE by not allowing DOE
to suspend or terminate the waste acceptance contracts of utilities
participating in the lawsuit, or to penalize suspended payments.
The legislation enacted in 1987 also provides for the
development of a Monitored Retrievable Storage (MRS) facility and
abandons plans to identify and select a second, permanent disposal
site. An MRS facility would provide temporary storage for
high-level waste prior to eventual permanent disposal. Pending new
legislation filed in the next Congress, it is not known when an MRS
facility would begin accepting deliveries. Additional delays due
to political and technical problems are likely.
Federal authorities have deferred indefinitely the commercial
reprocessing of spent nuclear fuel.
Low-Level Waste Disposal
Federal law allows the states in which the three existing low-
level waste disposal sites were located to deny access to
nonregional waste generators after 1992. Under the statute,
individual states are responsible for finding local sites for
disposal or forming regional disposal compacts by defined milestone
dates.
None of the states in which NEP holds an interest in a nuclear
facility has met the statutory milestones toward developing
disposal sites. Currently, two low-level waste disposal sites in
the U.S. are accepting nonregional waste, Chem-Nuclear Systems,
Inc.'s site in Barnwell, South Carolina and Envirocare of Utah,
Inc's site in Clive, Utah. The Barnwell facility reopened its
services to most nonregional generators on July 1, 1995 and is
authorized to remain open until July 1, 2005. In 1996, the South
Carolina Supreme Court upheld the constitutionality of the
legislative action that reopened Barnwell to nonregional
generators. Envirocare began accepting Class A low-level waste in
1995. Class A waste is the least contaminated of the three
categories defining low-level waste. The Barnwell facility accepts
all three categories of waste. Connecticut Yankee, Maine Yankee,
Millstone 3, Seabrook, and Yankee Atomic are currently shipping
low-level waste to these sites.
The states of Maine and Vermont have established a compact with
Texas for the disposal of low-level waste in Hudspeth County,
Texas. The compact agreement has been approved in all three states
and is now before the U.S. Congress. If Congress approves, the
site is expected to begin accepting waste during 1998. While Maine
Yankee has been shipping its low-level waste off-site, Vermont
Yankee has elected to store low-level waste on-site until that
time. The compact releases Maine and Vermont from having to site
an in-state disposal facility. Connecticut, Massachusetts, and New
Hampshire are still required to pursue local or regional low-level
waste disposal facilities. However, Massachusetts suspended its
search for a local disposal facility in 1996.
Nuclear Insurance
The Price-Anderson Act limits the amount of liability claims
that would have to be paid in the event of a single incident at a
nuclear plant to $8.9 billion (based upon 110 licensed reactors).
The maximum amount of commercially available insurance coverage to
pay such claims is $200 million. The remaining $8.7 billion would
be provided by an assessment of up to $79.3 million per incident
levied on each of the participating nuclear units in the United
States, subject to a maximum assessment of $10 million per incident
per nuclear unit in any year. The maximum assessment, which was
most recently adjusted in 1993, is adjusted for inflation at least
every five years. NEP's current interest in Maine Yankee, Vermont
Yankee, Millstone 3, and Seabrook 1 would subject NEP to a $58.0
million maximum assessment per incident. NEP's payment of any such
assessment would be limited to a maximum of $7.3 million per
incident per year. As a result of the permanent cessation of power
operation of the Yankee Atomic plant, Yankee Atomic has received
from the NRC a partial exemption from obligations under the
Price-Anderson Act. However, Yankee Atomic must continue to
maintain $100 million of commercially available nuclear insurance
coverage. Connecticut Yankee is planning to file with the NRC for
a similar exemption.
Each of the nuclear units in which NEP has an ownership
interest also carries nuclear property insurance to cover the costs
of property damage, decontamination or premature decommissioning,
and workers' claims resulting from a nuclear incident. These
policies may require additional premium assessments if losses
relating to nuclear incidents at units covered by this insurance
occurring in a prior six-year period exceed the accumulated funds
available. NEP's maximum potential exposure for these assessments,
either directly, or indirectly through purchased power payments to
the Yankee Companies, is approximately $11 million per year.
Other Items
Federal legislation requires emergency response plans, approved
by federal authorities, for nuclear generating units. The Yankee
Companies, Seabrook 1, and Millstone 3 are not currently
experiencing difficulty in maintaining approval of their emergency
response plans.
REGULATORY AND ENVIRONMENTAL MATTERS
Regulation
Numerous activities of NEES and its subsidiaries are subject
to regulation by various federal agencies. Under the 1935 Act,
many transactions of NEES and its subsidiaries are subject to the
jurisdiction of the SEC. With the intensifying competitive
pressures within the electric utility industry, there has been
increasing debate about modifying or repealing the 1935 Act. The
System supports its repeal. Under the Federal Power Act, certain
electric subsidiaries of NEES are subject to the jurisdiction of
the FERC with respect to rates, accounting, and hydroelectric
facilities. In addition, the NRC has broad jurisdiction over
nuclear units and federal environmental agencies have broad
jurisdiction over environmental matters. The electric utility
subsidiaries of NEES are also subject to the jurisdiction of
regulatory bodies of the states and municipalities in which they
operate.
For more information, see: INDUSTRY RESTRUCTURING, page 4,
RATES, page 18, Fuel for Generation, page 29, Oil and Gas
Operations, page 30, Nuclear Units, page 33, and Environmental
Requirements, page 44.
Hydroelectric Project Licensing
NEP is the largest operator of conventional hydroelectric
facilities in New England. Most of NEP's hydroelectric projects
are licensed by the FERC. These licenses expire periodically and
the projects must be relicensed at that time. NEP's present
licenses expire over a period from 2001 to 2020, excluding the
Deerfield River Project discussed below. Upon expiration of a FERC
license for a hydro project, the project may be taken over by the
United States or licensed to the existing, or a new licensee. If
the project were taken over, the existing licensee would receive an
amount equal to the lesser of (i) fair value of the project or
(ii) original cost less depreciation and amounts held in
amortization reserves, plus in either case severance damages. The
net book value of NEP's hydroelectric projects was $238 million as
of December 31, 1996.
In the event that a new license is not issued when the existing
license expires, FERC must issue annual licenses to the existing
licensee which will allow the project to continue operation until
a new license is issued. A new license for a project may
incorporate operational restrictions and requirements for
additional nonpower facilities (e.g., fish passage or recreational
facilities) that could affect operation of the project, and may
also require additional capital investment. For example, NEP has
previously received new licenses for projects on the Connecticut
River that involved construction of an extensive system of fish
ladders.
The license for the 84 MW Deerfield River Project expired at
the end of 1993. NEP filed an application for a new license in
1991. NEP has signed, with 15 governmental agencies and advocacy
groups, an Offer of Settlement which embodies operational,
environmental and recreational conditions acceptable to the
parties. In 1996, FERC issued a final environmental impact
statement which supports the Offer of Settlement. NEP has received
water quality certifications from the Commonwealth of Massachusetts
and the State of Vermont needed to complete the FERC relicensing
processing. The Vermont certificate was appealed by an advocacy
group; however, the appeal has subsequently been settled. On March
25, 1997, the FERC voted to issue NEP a new 40-year license for the
project.
The next NEP project to require a new license will be the 368
MW Fifteen Mile Falls Project on the Connecticut River in New
Hampshire and Vermont. This license expires in 2001. The formal
process of preparing an application for a new license began in 1996
with the filing of a Letter of Intent to Relicense with the FERC.
In 1994, the FERC adopted a policy statement in which it
asserted that it has authority over the decommissioning of licensed
hydroelectric projects being abandoned or denied a new license.
However, the FERC has recognized in the process leading to the
policy statement that mandated project removal would occur in only
rare circumstances. The FERC also declined to require any generic
funding mechanism to cover decommissioning costs. If a project is
decommissioned, the licensee may incur substantial costs.
Environmental Requirements
Existing Operations
The NEES subsidiaries are subject to federal, state, and local
environmental regulation of, among other things, wetlands and flood
plains; air and water quality; storage, transportation, and
disposal of hazardous wastes and substances; underground storage
tanks; and land-use. It is likely that the stringency of
environmental regulation affecting the System and its operations
will increase in the future.
Siting and Construction Activities for New Facilities
All New England states require, in certain circumstances,
regulatory approval for site selection or construction of electric
generating and major transmission facilities. Connecticut, Maine,
Massachusetts, New Hampshire, and Rhode Island also have programs
of coastal zone management that might restrict construction of
power plants and other electrical facilities in, or potentially
affecting, coastal areas. All agencies of the federal government
must prepare a detailed statement of the environmental impact of
all major federal actions significantly affecting the quality of
the environment. The New England states have environmental laws
which require project proponents to prepare reports of the
environmental impact of certain proposed actions for review by
various agencies. The System is not currently constructing
generating plants or major transmission facilities.
Environmental Expenditures
Total System capital expenditures for environmental protection
facilities have been substantial. System capital expenditures for
such facilities amounted to approximately $51 million in 1994, $39
million in 1995, and $9 million in 1996, including expenditures by
NEP of $44 million, $32 million, and $3 million, respectively, for
those years. The System estimates that capital expenditures for
environmental protection facilities in 1997 and 1998 will not be
material to the System.
Hazardous Substances
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly known as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous substances.
A number of states, including Massachusetts, have enacted similar
laws.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. NEES subsidiaries currently have in
place an internal environmental audit program and an external waste
disposal vendor audit and qualification program intended to enhance
compliance with existing federal, state, and local requirements
regarding the handling of potentially hazardous products and by-
products.
NEES and/or its subsidiaries have been named as potentially
responsible parties (PRPs) by either the U.S. Environmental
Protection Agency (EPA) or the Massachusetts Department of
Environmental Protection for 23 sites at which hazardous waste is
alleged to have been disposed. Private parties have also contacted
or initiated legal proceedings against NEES and certain
subsidiaries regarding hazardous waste cleanup. The most prevalent
types of hazardous waste sites with which NEES and its subsidiaries
have been associated are manufactured gas locations. (Until the
early 1970s, NEES was a combined electric and gas holding company
system.) NEES is aware of approximately 40 such manufactured gas
locations (including nine of the 23 locations for which NEES
companies have been named PRPs) mostly located in Massachusetts.
NEES and its subsidiaries are currently aware of other possible
hazardous waste sites and may in the future become aware of
additional sites, that they may be held responsible for
remediating.
In 1993, the MDPU approved a settlement agreement regarding the
rate recovery of remediation costs of former manufactured gas sites
and certain other hazardous waste sites located in Massachusetts.
Under that agreement, qualified costs related to these sites are
paid out of a special fund established on Mass. Electric's books.
Mass. Electric made an initial $30 million contribution to the
fund. Rate-recoverable contributions of $3 million, adjusted since
1993 for inflation, are added annually to the fund along with
interest and any recoveries from insurance carriers. At December
31, 1996, the fund had a balance of $17 million. Under the 1996
Massachusetts settlement, an additional $15 million will be
transferred to the fund in 1997 out of existing reserves for
refunds.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. There are also
significant uncertainties as to the portion, if any, of the
investigation and remediation costs of any particular hazardous
waste site that may ultimately be borne by NEES or its
subsidiaries. Where appropriate, the NEES companies intend to seek
recovery from their insurers and from other PRPs, but it is
uncertain whether, and to what extent, such efforts will be
successful. At December 31, 1996, NEES had total reserves for
environmental response costs of $48 million and a related
regulatory asset of $18 million. NEES believes that hazardous
waste liabilities for all sites of which it is aware, and which are
not covered by a rate agreement, are not material to its financial
position.
In October 1996, the American Institute of Certified Public
Accountants issued new accounting rules for Environmental
Remediation Liabilities which become effective in 1997. NEES does
not believe these new rules will have a material effect on NEES's
financial position or results of operations.
Electric and Magnetic Fields (EMF)
In recent years, concerns have been raised about whether EMF,
which occur near transmission and distribution lines as well as
near household wiring and appliances, cause or contribute to
adverse health effects. Numerous studies on the effects of these
fields, some of them sponsored by electric utilities (including
NEES companies), have been conducted and are continuing. In
October 1996, the National Research Council of the National Academy
of Sciences released a report stating no conclusive and consistent
evidence demonstrates that exposures to residential EMF produce
adverse health effects. It is impossible to predict the ultimate
impact on NEES subsidiaries and the electric utility industry if
further investigations were to demonstrate that the present
electricity delivery system is contributing to increased risk of
cancer or other health problems.
Several state courts have recognized a cause of action for
damage to property values in transmission line condemnation cases
based on the fear that power lines cause cancer. It is difficult
to predict what the impact on the NEES companies would be if this
cause of action is recognized in the states in which NEES companies
operate and in contexts other than condemnation cases.
Air
Approximately 45% of NEP's electricity is produced at eight
older thermal generating units in Massachusetts. Six are
principally fueled by coal, one by oil, and one by oil and gas.
The federal Clean Air Act requires significant reduction in utility
sulfur dioxide (SO2) and nitrogen oxides (NOx) emissions that
result from burning fossil fuels by the year 2000 to reduce acid
rain and ground-level ozone (smog).
NEP reduced SO2 emissions under Phase 1 of the federal acid
rain program and SO2 and NOx emissions under Massachusetts
regulations, all of which took effect in 1995. The SO2 and NOx
reductions that were made to meet 1995 requirements have resulted
in one-time operation and maintenance costs of $21 million and
capital costs of $113 million through December 31, 1996. Depending
on fuel prices, NEP also expects to incur not more than $5 million
annually in increased costs to purchase cleaner fuels to meet SO2
emission reduction requirements.
All eight of NEP's thermal units will be subject to Phase 2 of
the federal and state acid rain regulations that become effective
in 2000. NEP believes that the SO2 controls already installed for
the 1995 requirements will satisfy the Phase 2 acid rain
regulations.
In connection with the federal ozone emission requirements,
state environmental agencies in ozone nonattainment areas are
developing a second phase of NOx reduction regulations that would
have to be fully implemented by NEP no later than 1999. While the
exact costs are not known, NEP estimates that the cost of
implementing these regulations would not jeopardize continued
operation of NEP's units.
The generation of electricity from fossil fuel also emits trace
amounts of certain hazardous air pollutants and fine particulates.
An EPA study of utility hazardous air pollutant emissions is
expected to be completed in 1997. The study's conclusions could
lead to new emission standards requiring costly controls or fuel
restrictions on NEP plants. At this time, NEES and its
subsidiaries cannot estimate the impact the findings of this
research might have on NEP's operations.
In 1995, the NEES companies and the DOE executed an accord
pursuant to the Climate Challenge Program, a joint voluntary effort
of the DOE and the electric utility industry. Under the accord,
the NEES companies committed to reduce greenhouse gas emissions 20%
below 1990 levels by 2000. Climate Challenge is a component of
President Clinton's Climate Change Action Plan.
Water
The federal Clean Water Act prohibits the discharge of any
pollutant (including heat), except in compliance with a discharge
permit issued by the states or the EPA for a term of no more than
five years. NEP and Narragansett have received required permits
for all their steam-generating plants. NEET has received its
required surface water discharge permits for all of its current
operations.
NEES facilities store substantial amounts of oil and are
required to have spill prevention control and counter-measure
(SPCC) plans. Currently, major System facilities such as Brayton
Point and Salem Harbor have up-to-date SPCC plans. A comprehensive
study of smaller facilities has been completed to determine the
appropriate plans for these facilities and a five-year
implementation plan is under way.
In October 1996, the EPA announced it was beginning a process
to determine whether to modify or revoke NEP's water discharge
permit for its Brayton Point 1,576 megawatt power plant. This
action came two years before the permit expiration date. The EPA
stated it took this step in response to a request from the Rhode
Island Department of Environmental Management (RIDEM) that action
be taken on the Brayton Point permit prior to its 1998 renewal,
based on concerns raised in a final RIDEM report issued in October
1996. The report asserted a statistical correlation between the
decline in the fish population in Mount Hope Bay and a change in
operations at Brayton Point that occurred in the mid-1980's.
In February 1997, NEP signed a memorandum of agreement
negotiated with the various federal and state environmental
agencies under which NEP will voluntarily operate under more
stringent conditions than under its existing permit. The agreement
is in lieu of any immediate action on the permit, but will cover
only the months of February and March 1997. During this time, the
parties will continue to work toward a longer-term solution. NEP
cannot predict at this time what permit changes will be required or
the impact on Brayton Point's operations and economics. However,
permit changes may substantially impact the plant's capacity and
ability to produce energy as well as require significant capital
expenditures of tens of millions of dollars to construct equipment
to address the concerns raised by the environmental agencies.
Nuclear
The NRC, along with other federal and state agencies, has
extensive regulations pertaining to environmental aspects of
nuclear reactors. Safety aspects of nuclear reactors, including
design controls and inspection programs to mitigate any possibility
of nuclear accidents and to reduce any damages therefrom, are also
subject to NRC regulation. See Nuclear Units, page 33.
CONSTRUCTION AND FINANCING
Estimated construction expenditures (including nuclear fuel)
for the System's electric utility companies are shown below for
1997 through 1999.
The System conducts a continuing review of its construction and
financing programs. These programs and the estimates shown below
are subject to revision based upon changes in assumptions as to
System load growth, rates of inflation, receipt of adequate and
timely rate relief, the availability and timing of regulatory
approvals, new environmental and legal or regulatory requirements,
total costs of major projects, and the availability and costs of
external sources of capital.
Estimated Construction Expenditures
-----------------------------------
1997 1998 1999 Total
---- ---- ---- -----
(In Millions - excluding AFDC)
NEP
- ---
Generation (1)(2) 20 20 10 50
Transmission 50 50 50 150
---- ---- ---- ----
Total NEP 70 70 60 200
---- ---- ---- ----
Mass. Electric
- --------------
Distribution 95 90 95 280
Narragansett
- ------------
Transmission 5 5 5 15
Distribution 40 35 35 110
---- ---- ---- ----
Total Narragansett 45 40 40 125
---- ---- ---- ----
Granite State
- -------------
Distribution 5 4 4 13
---- ---- ---- ----
Nantucket
- ---------
Distribution 15 1 1 17
---- ---- ---- ----
Combined Total
- --------------
Generation (1)(2) 20 20 10 50
Transmission 55 55 55 165
Distribution 155 130 135 420
---- ---- ---- ----
Grand Total 230 205 200 635
---- ---- ---- ----
<FN>
(1) Includes nuclear fuel.
(2) Due to the NEES companies' pending divestiture of the generating business,
estimated generation construction expenditures would substantially decrease.
For more information, see INDUSTRY RESTRUCTURING, page 4.
</FN>
Financing
All of NEP's construction expenditures during the period from
1997 to 1999 will be financed by internally generated funds. The
proportion of the Distribution Companies' construction expenditures
estimated to be financed by internally generated funds during the
period from 1997 to 1999 is:
Mass. Electric 90%
Narragansett 75%
Granite State 75%
Nantucket 100%
The general practice of the operating subsidiaries of NEES has
been to finance construction expenditures in excess of internally
generated funds initially by issuing unsecured short-term debt.
This short-term debt is subsequently reduced through sales by such
subsidiaries of long-term debt securities and preferred stock, and
through capital contributions from NEES to the subsidiaries. NEES,
in turn, generally has financed capital contributions to the
operating subsidiaries through retained earnings and the sale of
additional NEES shares. Since April 1991, NEES has been meeting
all of the requirements of its dividend reinvestment and common
share purchase plan and employee share plans through open market
purchases. Under these plans, NEES may revert to the issuance of
new common shares at any time.
The ability of NEP and the Distribution Companies to issue
short-term debt is limited by regulatory restrictions, by
provisions contained in their charters, and by certain debt and
other instruments. Under the charters or by-laws of NEP, Mass.
Electric, and Narragansett, short-term debt is limited to 10% of
capitalization. The preferred stockholders authorized these
limitations to be increased to 20% of capitalization until 1998 for
NEP and Narragansett, and until 1999 for Mass. Electric, at which
time the limits will revert to 10% of capitalization. The
following table summarizes the short-term debt limits at
December 31, 1996, and the amount of outstanding short-term debt
and lines of credit and standby bond facilities at such date.
($ millions)
Lines of Credit/
Standby Bond
Limit Outstanding Facilities
----- ----------- ----------------
NEP 335 94 530
Mass. Electric 150 44 90
Narragansett 100 19 41
Granite State 10 5 7
Nantucket 5 1.5 3
NEES and certain subsidiaries, with regulatory approval,
operate a money pool to more effectively utilize cash resources and
to reduce outside short-term borrowings. Short-term borrowing
needs are met first by available funds of the money pool
participants. Borrowing companies pay interest at a rate designed
to approximate the cost of outside short-term borrowings.
Companies which invest in the pool share the interest earned on a
basis proportionate to their average monthly investment in the
money pool. Funds may be withdrawn from or repaid to the pool at
any time without prior notice. At December 31, 1996, NEP, Mass.
Electric, Narragansett, and Granite State each had money pool
borrowings of approximately $5 million.
In order to issue additional long-term debt and preferred
stock, NEP and the Distribution Companies, excluding Nantucket,
must comply with earnings coverage requirements contained in their
respective mortgages, note agreements, and preference provisions.
The most restrictive of these provisions in each instance generally
requires (1) for the issuance of additional mortgage bonds by NEP,
Mass. Electric, and Narragansett, for purposes other than the
refunding of certain outstanding mortgage bonds, a minimum earnings
coverage (before income tax) of twice the pro forma annual interest
charges on mortgage bonds, and (2) for the issuance of additional
preferred stock by NEP, Mass. Electric, and Narragansett, minimum
gross income coverage (after income tax) of one and one-half times
pro forma annual interest charges and preferred stock dividends, in
each case for a period of twelve consecutive calendar months within
the fifteen calendar months immediately preceding the proposed new
issue.
The respective long-term debt and preferred stock coverages of
NEP and the Distribution Companies, excluding Nantucket, under
their respective mortgage indentures, note agreements, and
preference provisions, are stated in the following table for the
past three years:
Coverage
-----------------------
1996 1995 1994
---- ---- ----
NEP
- ---
General and Refunding Mortgage Bonds 4.16 4.05 4.13
Preferred Stock 2.47 2.45 2.60
Mass. Electric
- --------------
First Mortgage Bonds 3.25 2.82 3.65
Preferred Stock 1.93 1.71 2.02
Narragansett
- ------------
First Mortgage Bonds 3.22 3.10 2.16
Preferred Stock 2.04 2.01 1.61
Granite State
- -------------
Notes (1) 2.82 2.38 2.26
(1) As defined under the most restrictive note agreement.
RESEARCH AND DEVELOPMENT
Expenditures for the System's research and development
activities totaled $8.3 million, $7.5 million, and $5.5 million in
1994, 1995, and 1996, respectively. Total expenditures are
expected to be about $7.6 million in 1997.
About 39% of these expenditures support the Electric Power
Research Institute, which conducts research and development
activities on behalf of its sponsors and provides the System with
access to a wide range of relevant research results at minimum
cost.
The System also directly funds research projects of a more
site-specific concern to the System and its customers. These
projects include:
- creating options to maintain electric service
quality and reliability for customers at the lowest
cost;
- developing conservation, load control, and rate
design measures that will help customers use
electric energy more efficiently; and
- developing, assessing, and demonstrating new
technologies and fuels that will ensure economic,
efficient and environmentally sound production and
delivery of electric energy in the future.
EXECUTIVE OFFICERS
NEES
- ----
All executive officers are elected to continue in office
subject to Article 19 of the Agreement and Declaration of Trust
until the first meeting of the Board of Directors following the
next annual meeting of shareholders, or the special meeting of
shareholders held in lieu of such annual meeting, and until their
successors are chosen and qualified. The executive officers also
serve as officers and/or directors of various subsidiary companies.
John W. Rowe - Age: 51 - President and Chief Executive Officer
since 1989 - Elected Chairman of NEP in 1993 - President of NEP
from 1991 to 1993 - Chairman of NEP from 1989 to 1991.
Alfred D. Houston - Age: 56 - Executive Vice President since
1994 - Senior Vice President-Finance from 1987 to 1994 - Vice
President of NEP from 1987 to 1994 - Vice President of
Narragansett since 1976 - Treasurer of Narragansett since 1977.
Richard P. Sergel - Age: 47 - Elected Senior Vice President in
1996 - Vice President from 1992 to 1995 - Treasurer from 1990
to 1991 - Chairman of Mass. Electric and Narragansett since
1993 - Treasurer of NEP and Mass. Electric from 1990 to 1991
- Vice President of the Service Company from 1988 to 1993.
Jeffrey D. Tranen - Age: 50 - Elected Senior Vice President in
1996 - Vice President from 1991 to 1995 - President of NEP
since 1993 - Vice President of NEP from 1984 to 1993 -
President of Mass. Hydro, N.H. Hydro, and NEET since 1991.
Cheryl A. LaFleur - Age: 42 - Vice President, Secretary, and
General Counsel since 1995 - Vice President of Mass. Electric
from 1993 to 1995 - Vice President of the Service Company -
1992-1993 and since 1995 - Senior Counsel for the Service
Company from 1989 to 1991 - Elected Vice President of NEP in
1995.
Michael E. Jesanis - Age: 40 - Elected Vice President in 1997 -
Treasurer since 1992 - Director of Corporate Finance from 1990
to 1991.
NEP
- ---
The Treasurer is elected by the stockholders to hold office
until the next annual meeting of stockholders and until the
successor is duly chosen and qualified. The other executive
officers are elected by the Board of Directors to hold office
subject to the pleasure of the directors and until the first
meeting of directors after the next annual meeting of stockholders
and until their successors are duly chosen and qualified. Certain
officers of NEP are, or at various times in the past have been,
officers and/or directors of the System companies with which NEP
has entered into contracts and had other business relations.
John W. Rowe* - Chairman since 1993 - President from 1991 to
1993 - Chairman from 1989 to 1991.
Jeffrey D. Tranen* - President since 1993 - Vice President from
1984 to 1993.
Andrew H. Aitken - Age: 52 - Vice President since 1995 -
Director of Environmental and Safety for the Service Company
since 1993 - Director, Environmental Affairs for the Service
Company from 1981 to 1993.
Lawrence E. Bailey - Age: 53 - Vice President since 1989 -
Plant Manager of Brayton Point Station from 1987 to 1991.
Jeffrey A. Donahue - Age: 38 - Vice President since 1993 -
Elected President of NEERI in 1996 - various engineering
positions with the Service Company since 1983 - Director of
Construction since 1992 - Chief Electrical Engineer since 1991.
Michael E. Hachey - Age: 43 - Elected Vice President in 1997 -
Manager of Generation Marketing from 1994 to present - Manager
of Independent Power Projects from 1989 to 1993.
Cheryl A. LaFleur* - Vice President since 1995.
John L. Levett - Age: 47 - Elected Vice President in 1996 -
Elected President of NEERI International in 1996 - President
of NEERI from 1994 to 1996 - Manager of Generation Marketing
for the Service Company from 1992 to 1993.
John F. Malley - Age: 48 - Vice President since 1992 - Manager
of Generation Planning for the Service Company from 1986 to
1991.
Arnold H. Turner - Age: 56 - Vice President since 1989 -
Director of Transmission Marketing since 1993.
Jeffrey W. VanSant - Age: 43 - Vice President since 1993 -
Manager of Oil and Gas Exploration and Development for the
Service Company from 1985 to 1993 - Manager of Oil and Gas
Procurement from 1992 to 1993 - Manager of Natural Gas Supply
from 1989 to 1992.
Michael E. Jesanis* - Treasurer since 1992.
Howard W. McDowell - Age: 53 - Controller since 1987 -
Controller of Mass. Electric and Narragansett since 1987 -
Treasurer of Granite State since 1984.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES for other information regarding this
officer.
Mass. Electric
- --------------
The Treasurer is elected by the stockholders to hold office
until the next annual meeting of stockholders and until the
successor is duly chosen and qualified. The other executive
officers are elected by the board of directors to hold office
subject to the pleasure of the directors and until the first
meeting of the directors after the next annual meeting of
stockholders. Certain officers of Mass. Electric are, or at
various times in the past have been, officers and directors of
System companies with which Mass. Electric has entered into
contracts and had other business relations.
Richard P. Sergel* - Chairman since 1993.
Lawrence J. Reilly - Age: 41 - Elected President in 1996 -
Elected President of Granite State in 1997 - Elected President
of Nantucket in 1996 - Vice President for the Service Company
from 1993 to 1996 - Director of Rates for the Service Company
from 1990 to 1996.
John C. Amoroso - Age: 58 - Vice President since 1993 -
District Manager, Southeast District from 1992 to 1993 -
Manager, Southeast District from 1985 to 1992.
Eric P. Cody - Age: 46 - Vice President since 1995 - Vice
President and Director, Information Services for the Service
Company from 1991 to 1995.
Charles H. Moser - Age: 56 - Vice President since 1993 - Chief
Protection and Planning Engineer for the Service Company from
1984 to 1993.
Lydia M. Pastuszek - Age: 43 - Vice President since 1993 - Vice
President of NEP from 1990 to 1993 - President of Granite State
from 1990 to 1996.
Anthony C. Pini - Age: 44 - Vice President since 1993 -
Assistant Controller for the Service Company from 1985 to 1993.
Christopher E. Root - Age: 38 - Vice President since 1995 -
Director, Retail Distribution Services for the Service Company
from 1993 to 1995 - Chief of Division Engineering for the
Service Company from 1992 to 1993 - Manager, Distribution
Engineering for Narragansett from 1990 to 1992.
Nancy H. Sala - Age: 45 - Vice President since 1992 - Assistant
to the President of Mass. Electric from 1990 to 1992.
Dennis E. Snay - Age: 55 - Vice President since 1990.
Michael E. Jesanis* - Treasurer since 1992.
Howard W. McDowell - Controller since 1987 and Assistant
Treasurer since 1977 - Reference is made to the material
supplied under the caption EXECUTIVE OFFICERS - NEP for other
information regarding Mr. McDowell.
*Please refer to the material supplied under the caption EXECUTIVE
OFFICERS - NEES for other information regarding this officer.
Narragansett
- ------------
Officers are elected by the board of directors or appointed,
as appropriate, to serve until the meeting of directors following
the annual meeting of stockholders, and until their successors are
chosen and qualified. Officers other than the President,
Treasurer, and Secretary, serve also at the pleasure of the
directors. Certain officers of Narragansett are, or at various
times in the past have been, officers and directors of System
companies with which Narragansett has entered into contracts and
had other business relations.
Richard P. Sergel* - Chairman since 1993.
Robert L. McCabe - Age: 55 - President since 1986.
William Watkins, Jr. - Age: 64 - Executive Vice President since
1992 - Vice President of the Service Company from 1980 to 1992.
Richard W. Frost - Age: 57 - Vice President since 1993 -
District Manager - Southern District from 1990 to 1993.
Alfred D. Houston* - Vice President since 1976 - Treasurer
since 1977.
Shannon M. Larson - Age: 39 - Elected Vice President in 1996 -
Manager of Retail Marketing from 1995 to 1996 - Coordinator of
Emerging Markets from 1994 to 1995 - Manager of Conservation
and Load Management from 1990 to 1993 - Principal Analyst for
the Service Company from 1993 to 1994.
Richard Nadeau - Age: 61 - Vice President since 1994 - Director
of Customer Service since 1993 - Assistant to the President
from 1990 to 1993.
Michael F. Ryan - Age: 45 - Vice President since 1994 - Rhode
Island Director for U.S. Senator John H. Chafee from 1986 to
1994.
Howard W. McDowell - Controller since 1987 - Reference is made
to the material supplied under the caption EXECUTIVE OFFICERS
- NEP for other information regarding Mr. McDowell.
*Please refer to the material supplied under the caption EXECUTIVE
OFFICERS - NEES for other information regarding this officer.
Item 2. PROPERTIES
See Item 1. Business - Generation, Transmission, and
Distribution Properties, page 24.
Item 3. LEGAL PROCEEDINGS
In August 1995, the Massachusetts Superior Court dismissed a
lawsuit filed against NEP in May 1995 by Keystone Shipping Company
(Keystone), which had challenged NEP's right to terminate NEP's
charter of a ship owned by Keystone's affiliate, Intercoastal Bulk
Carriers (IBC), and to purchase the ship from IBC. In addition,
that month an arbitration panel unanimously ruled against IBC,
holding that NEP had such rights under the charter. Keystone and
IBC challenged both rulings, but in September 1995, the parties
entered into a settlement in which Keystone and IBC dismissed their
claims against NEP. Thereafter, the ship was sold to an affiliate
of International Shipholding Corporation, with whom NEP had entered
into a new charter, and was sent to dry dock for inspection and
routine maintenance. The inspection revealed that further work was
needed to make the ship seaworthy. Under NEP's charter with IBC,
these costs, which are estimated to be in excess of $10 million,
are IBC's responsibility. NEP therefore initiated arbitration
against both IBC and Keystone before the same panel. Keystone has
filed suit in federal district court seeking to stay the
arbitration as to Keystone.
The federal district court denied Keystone's motion to have the
arbitration stayed with respect to Keystone. Keystone has appealed
the denial to the First Circuit Court of Appeals. The First
Circuit heard argument on the matter early in the year; a decision
is awaited. Hearings before the arbitration panel are under way.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the last quarter of 1996.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTERS
NEES information in response to the disclosure requirements
specified by this Item 5. appears under the captions in the NEES
Annual Report indicated below:
Required Information Annual Report Caption
-------------------- ---------------------
(a) Market Information Shareholder Information
(b) Holders Shareholder Information
(c) Dividends Financial Results
The information referred to above is incorporated by reference
in this Item 5.
NEP, Mass. Electric, and Narragansett - The information
required by this item is not applicable as the common stock of all
these companies is held solely by NEES. Information pertaining to
payment of dividends and restrictions on payment of dividends is
incorporated herein by reference to each company's 1996 Annual
Report.
Item 6. SELECTED FINANCIAL DATA
NEES
----
The information required by this item is incorporated herein
by reference to page 26 of the NEES 1996 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to page 46 of the NEP 1996 Annual Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to page 30 of the Mass. Electric 1996 Annual Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to page 29 of the Narragansett 1996 Annual Report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
NEES
----
The information required by this item is incorporated herein
by reference to pages 16 through 25 of the NEES 1996 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to pages 3 through 16 of the NEP 1996 Annual Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to pages 3 through 9 of the Mass. Electric 1996 Annual
Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to pages 3 through 9 of the Narragansett 1996 Annual
Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NEES
----
The information required by this item is incorporated herein
by reference to pages 26 through 46 of the NEES 1996 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to pages 1, 16 through 44, and 46 of the NEP 1996
Annual Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to pages 1, 10 through 28, and 30 of the Mass.
Electric 1996 Annual Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to pages 1, 10 through 27, and 29 of the Narragansett
1996 Annual Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NEES, NEP, Mass. Electric, and Narragansett - None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
NEES
----
The information required by this item is incorporated herein
by reference to the material under the caption ELECTION OF
DIRECTORS in the definitive proxy statement of NEES, dated
March 10, 1997, for the 1997 Annual Meeting of Shareholders,
provided that the information under the headings "Compensation
Committee Report on Executive Compensation" and "Corporate
Performance" are not so incorporated. Reference is also made to
the information under the caption EXECUTIVE OFFICERS - NEES in Part
I of this report.
NEP
---
The names of the directors of NEP, their ages, and a brief
account of their business experience during the past five years
appear below. Information required by this item for Executive
Officers is provided under the caption EXECUTIVE OFFICERS - NEP in
Part I of this report.
Directors are elected to hold office until the next annual
meeting of stockholders or special meeting held in lieu thereof and
until their respective successors are chosen and qualified.
Joan T. Bok - Director since 1979 - Age: 67 - Chairman of the
Board of NEES - Chairman or Vice Chairman of the Company from
1988 to 1994 - Chairman of NEES from 1984 to 1994 (Chairman,
President, and Chief Executive Officer from July 26, 1988 until
February 13, 1989). Directorships of NEES System companies:
New England Electric System, Granite State Electric Company,
Granite State Energy, Inc., Massachusetts Electric Company,
Nantucket Electric Company, The Narragansett Electric Company,
Narragansett Energy Resources Company, NEES Communications,
Inc., NEES Energy, Inc., New England Electric Resources, Inc.,
New England Electric Transmission Corporation, New England
Energy Incorporated, New England Hydro Finance Company, Inc.,
New England Hydro-Transmission Corporation, New England
Hydro-Transmission Electric Company, Inc., and New England
Power Service Company. Other directorships: Avery Dennison
Corporation, John Hancock Mutual Life Insurance Company, and
Monsanto Company.
Alfred D. Houston* - Director since 1984. Directorships of
NEES System companies: Granite State Energy, Inc., Nantucket
Electric Company, Narragansett Energy Resources Company, NEERI
International, NEES Communications, Inc., NEES Energy, Inc.,
New England Electric Resources, Inc., New England Electric
Transmission Corporation, New England Energy Incorporated, New
England Hydro Finance Company, Inc., New England
Hydro-Transmission Corporation, New England Hydro-Transmission
Electric Company, Inc., and New England Power Service Company.
Mr. Houston also serves as a member representative for NEES
Energy, Inc. on the Member's Committee of AllEnergy Marketing
Co., LLC.
Cheryl A. LaFleur* - Director since December 31, 1995.
Directorships of NEES System companies: Granite State Energy,
Inc., Narragansett Energy Resources Company, NEES
Communications, Inc., NEES Energy, Inc., New England Electric
Resources, Inc., New England Electric Transmission Corporation,
New England Energy Incorporated, New England Hydro Finance
Company, Inc., New England Hydro-Transmission Corporation, New
England Hydro- Transmission Electric Company, Inc., and New
England Power Service Company. Ms. LaFleur also serves as a
member representative for NEES Energy, Inc. on the Member's
Committee of AllEnergy Marketing Co., LLC.
John W. Rowe* - Director since 1989. Directorships of NEES
System companies and affiliates: Granite State Energy, Inc.,
New England Electric System, Massachusetts Electric Company,
The Narragansett Electric Company, Narragansett Energy
Resources Company, NEES Communications, Inc., NEES Energy,
Inc., New England Electric Resources, Inc., New England
Electric Transmission Corporation, New England Energy
Incorporated, New England Hydro Finance Company, Inc., New
England Hydro-Transmission Corporation, New England
Hydro-Transmission Electric Company, Inc., New England Power
Service Company, and Maine Yankee Atomic Power Company. Other
directorships: Bank of Boston Corporation and UNUM
Corporation. Mr. Rowe also serves as a member representative
for NEES Energy, Inc. on the Member's Committee of AllEnergy
Marketing Co., LLC.
Jeffrey D. Tranen* - Director since 1991. Directorships of
NEES System affiliates: Granite State Energy, Inc.,
Narragansett Energy Resources Company, NEES Energy, Inc., New
England Electric Resources, Inc., New England Electric
Transmission Corporation, New England Energy Incorporated, New
England Hydro Finance Company, Inc., New England Hydro-
Transmission Corporation, New England Hydro-Transmission
Electric Company, Inc., and New England Power Service Company.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES and EXECUTIVE OFFICERS - NEP in Part
I of this report for other information regarding this director.
Mass. Electric
--------------
The names of the directors of Mass. Electric, their ages, and
a brief account of their business experience during the past five
years appear below. Information required by this item for
Executive Officers is provided under the caption EXECUTIVE OFFICERS
- - Mass. Electric in Part I of this report.
Directors are elected to hold office until the next annual
meeting of stockholders or special meeting held in lieu thereof and
until their respective successors are chosen and qualified.
Urville J. Beaumont - Director since 1984 - Age: 65 -
Treasurer and Director, law firm of Beaumont & Campbell, P.A.
Joan T. Bok* - Director since 1979.
Sally L. Collins - Director since 1976 - Age: 61 - Director of
Workplace Health Services since 1993 - Health Services
Administrator at Kollmorgen Corporation EOD from 1985 to 1993.
Kalyan K. Ghosh - Director since 1995 - Age: 59 - President of
Worcester State College since 1992 - CEO and Acting President,
Worcester State College from 1990 to 1992.
Charles B. Housen - Director since 1979 - Age: 64 - Chairman,
President, and Director of Erving Industries, Inc., Erving,
Mass.
Patricia McGovern - Director since 1994 - Age: 55 - Director
of law firm of Goulston & Storrs, P.C. since 1995 - Counsel to
Goulston & Storrs, P.C. from 1993 to 1995 - Massachusetts State
Senator and Chair of the Senate Ways and Means Committee from
1985 to 1992.
John F. Reilly - Director since 1988 - Age: 64 - President,
Director, and CEO of Fred C. Church, Inc., Lowell, Mass. -
Other directorships: Colonial Gas Company, Family Bank, and
New England Insurance Co., Ltd.
Lawrence J. Reilly - Elected Director in 1996 - Reference is
made to material supplied under the caption EXECUTIVE OFFICERS
- Mass. Electric for other information regarding Mr. Reilly.
John W. Rowe* - Director since 1989.
Richard P. Sergel* - Director since 1993.
Roslyn M. Watson - Director since 1992 - Age: 47 - President
of Watson Ventures (commercial real estate development and
management) Boston, Mass. since 1993 - Vice President of the
Gunwyn Company (commercial real estate development) Cambridge,
Mass. from 1986 - 1993 - Other directorships: The Dreyfus
Laurel Funds and American Express Centurion Bank.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES in Part I of this report and/or the
material supplied under the caption DIRECTORS AND OFFICERS OF
THE REGISTRANT - NEP in this Item for other information
regarding this director.
Narragansett
------------
The names of the directors of Narragansett, their ages, and a
brief account of their business experience during the past five
years appear below. Information required by this item for
Executive Officers is provided under the caption EXECUTIVE OFFICERS
- - Narragansett in Part I of this report.
Directors are elected to hold office until the next annual
meeting of stockholders or special meeting held in lieu thereof and
until their respective successors are chosen and qualified.
Joan T. Bok* - Director since 1979.
Stephen A. Cardi - Director since 1979 - Age: 55 - Treasurer
of Cardi Corporation (construction), Warwick, R.I.
Frances H. Gammell - Director since 1992 - Age: 47 - Director,
Senior Vice President, Chief Financial Officer, Treasurer, and
Secretary of Original Bradford Soap Works, Inc.
Joseph J. Kirby - Director since 1988 - Age: 65 - Chairman and
Chief Executive Officer of Washington Trust Bancorp, Inc.,
Westerly, R.I. and Chairman and Chief Executive Officer of the
Washington Trust Company.
Robert L. McCabe - President and Director of Narragansett since
1986 - Other directorship: Citizens Savings Bank - Please refer
to the material supplied under the caption EXECUTIVE OFFICERS
- Narragansett in Part I of this report for other information
regarding Mr. McCabe.
John W. Rowe* - Director since 1989.
Richard P. Sergel* - Chairman and Director since 1993.
William E. Trueheart - Director since 1989 - Age: 54 - Visiting
Scholar, Harvard University Graduate School of Education since
1996 - President of Bryant College, Smithfield, Rhode Island
from 1989 to 1996.
John A. Wilson, Jr. - Director since 1971 - Age: 67 -
Consultant to and former President of Wanskuck Co., Providence,
R.I., - Consultant to Hinckley, Allen, Tobin & Silverstein
(attorneys), Providence, R.I.
*Please refer to the material supplied under the caption
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - NEP in
this Item for other information regarding this director.
Section 16(a) of the Securities Exchange Act of 1934 requires
the System's officers and directors, and persons who own more than
10% of a registered class of the System's equity securities, to
file reports on Forms 3, 4, and 5 of share ownership and changes in
share ownership with the SEC and the New York Stock Exchange and to
furnish the System with copies of all Section 16(a) forms they
file.
Based solely on NEP's, Mass. Electric's, and Narragansett's
review of the copies of such forms received by them, or written
representations from certain reporting persons that such forms were
not required for those persons, NEP, Mass. Electric, and
Narragansett believe that, during 1995, all filing requirements
applicable to its officers, directors, and 10% beneficial owners
were complied with.
Item 11. EXECUTIVE COMPENSATION
NEES
----
The information required by this item is incorporated herein
by reference to the material under the captions BOARD STRUCTURE AND
COMPENSATION, EXECUTIVE COMPENSATION, PAYMENTS UPON A CHANGE IN
CONTROL, PLAN SUMMARIES, LONG TERM INCENTIVE PLAN - AWARDS IN LAST
FISCAL YEAR, and RETIREMENT PLANS in the definitive proxy statement
of NEES, dated March 10, 1997, for the 1997 Annual Meeting of
Shareholders, provided that the information under the headings
"Compensation Committee Report on Executive Compensation" and
"Corporate Performance" are not so incorporated.
NEP, MASS. ELECTRIC, AND NARRAGANSETT
-------------------------------------
EXECUTIVE COMPENSATION
The following tables give information with respect to all
compensation (whether paid directly by NEP, Mass. Electric, or
Narragansett or billed to it as hourly charges) for services in all
capacities for NEP, Mass. Electric, or Narragansett for the years
1994 through 1996 to or for the benefit of the Chief Executive
Officer and the four other most highly compensated executive
officers for each company.
NEP
SUMMARY COMPENSATION TABLE
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
John W. 1996 180,096 96,445 3,046 124,047 1,638(g)
Rowe 1995 157,070 124,818 2,795 0 1,387
Chairman 1994 211,598 119,716 4,018 67,966 1,911
Jeffrey D. 1996 200,684 100,548 5,002 125,836 3,358(h)
Tranen 1995 188,884 135,224 4,972 0 3,377
President 1994 187,356 98,357 5,049 45,804 3,466
Lawrence E. 1996 151,956 101,667 116 0 3,776(i)
Bailey 1995 144,720 92,328 116 0 3,598
Vice 1994 140,471 66,510 116 27,484 3,952
President
John F. 1996 133,394 104,885 116 0 3,141(j)
Malley 1995 127,236 96,261 116 0 2,907
Vice 1994 117,169 65,474 116 27,469 2,996
President
Arnold H. 1996 128,172 89,185 116 0 2,849(k)
Turner 1995 128,172 65,439 116 0 2,276
Vice 1994 124,428 52,888 116 21,747 2,849
President
(a) Certain officers of NEP are also officers of NEES and various
other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the
variable match of the incentive thrift plan, including related
deferred compensation plan matches, special cash bonuses, and
unrestricted shares under the incentive share plan. See
descriptions under Plan Summaries.
(d) Includes amounts reimbursed by NEP for the payment of taxes.
(e) Special share bonuses were made to a limited number of
executives in 1996. Under the terms of those awards, the
share values were mandatorily deferred until the executives'
termination of employment.
No awards vested during 1996 under the Long-Term Performance
Share Award Plan.
The incentive share awards for the named executives made for
1994 were in the form of restricted shares (with a five-year
restriction) or deferred share equivalents, deferred for
receipt for at least five years, at the executive's option.
In 1996 awards for NEES officers were similarly restricted.
As cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995
were restricted.
As of December 31, 1996, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Rowe 27,022 shares, $942,392 value; Mr. Tranen
7,719 shares, $269,200 value; Mr. Bailey 3,220 shares,
$112,298 value; Mr. Malley 2,834 shares, $98,836 value; and
Mr. Turner 2,774 shares, $96,743 value. The value was
calculated by multiplying the closing market price on December
31, 1996 by the number of shares.
(f) Includes NEP contributions to life insurance and the incentive
thrift plan that are not bonus contributions, including any
related deferred compensation plan match. See description
under Plan Summaries. The life insurance contribution is
calculated based on the value of term life insurance for the
named individuals. The premium costs for most of these
policies have been or will be recovered by NEP.
(g) For Mr. Rowe, the amount and type of compensation in 1996 is
as follows: $1,005 for contributions to the thrift plan and
$633 for life insurance.
(h) For Mr. Tranen, the amount and type of compensation in 1996 is
as follows: $2,735 for contributions to the thrift plan and
$623 for life insurance.
(i) From Mr. Bailey, the amount and type of compensation in 1996
is as follows: $3,000 for contributions to the thrift plan
and $776 for life insurance.
(j) For Mr. Malley, the amount and type of compensation in 1996 is
as follows: $2,668 for contributions to the thrift plan, and
$474 for life insurance.
(k) For Mr. Turner, the amount and type of compensation in 1996 is
as follows: $2,051 for contributions to the thrift plan and
$798 for life insurance.
MASS. ELECTRIC
SUMMARY COMPENSATION TABLE
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
Richard P. 1996 135,213 70,388 3,411 87,965 2,247(g)
Sergel 1995 123,480 93,047 3,256 0 2,285
Chairman 1994 113,021 63,550 3,307 29,731 2,228
Lawrence J. 1996 96,163 70,177 2,467 46,082 2,250(h)
Reilly 1995 38,561 34,985 37 0 986
President 1994 25,576 16,917 26 6,136 563
Eric P. 1996 124,186 79,124 116 0 2,876(i)
Cody 1995 67,714 40,590 70 0 1,548
Vice 1994 74,318 37,144 74 15,371 1,726
President
Nancy H. 1996 118,251 65,493 116 0 2,730(j)
Sala 1995 115,524 59,932 116 0 2,498
Vice 1994 107,621 39,318 116 16,129 2,493
President
Anthony C. 1996 114,058 66,117 113 17,258 2,580(k)
Pini 1995 111,300 59,993 116 0 2,403
Vice 1994 105,884 43,465 116 17,688 2,454
President
(a) Certain officers of Mass. Electric are also officers of NEES
and various other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the
variable match of the incentive thrift plan, and unrestricted
shares under the incentive share plan or special share
bonuses. See descriptions under Plan Summaries.
(d) Includes amounts reimbursed by Mass. Electric for the payment
of taxes.
(e) Special share bonuses were made to a limited number of
executives in 1996. Under the terms of those awards, the
share values were mandatorily deferred until the executives'
termination of employment.
No awards vested during 1996 under the Long-Term Performance
Share Award Plan.
The incentive share awards for the named executives made for
1994 were in the form of restricted shares (with a five-year
restriction) or deferred share equivalents, deferred for
receipt for at least five years, at the executive's option.
In 1996 awards for NEES officers were similarly restricted.
As cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995
were restricted.
As of December 31, 1996, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Sergel 7,471 shares, $260,551 value; Mr.
Reilly 4,677 shares, $163,110 value; Mr. Cody 2,714 shares,
$94,651 value; Ms. Sala 1,639 shares, $57,160 value; and Mr.
Pini 1,640 shares, $57,195 value. The value was calculated by
multiplying the closing market price on December 31, 1996 by
the number of shares.
(f) Includes Mass. Electric contributions to life insurance and
the incentive thrift plan that are not bonus contributions,
including any related deferred compensation plan match. See
description under Plan Summaries. The life insurance
contribution is calculated based on the value of term life
insurance for the named individuals. The premium costs for
most of these policies have been or will be recovered by Mass.
Electric.
(g) For Mr. Sergel, the type and amount of compensation in 1996 is
as follows: $1,907 for contributions to the thrift plan and
$340 for life insurance.
(h) For Mr. Reilly, the type and amount of compensation in 1996 is
as follows: $1,923 for contributions to the thrift plan and
$327 for life insurance.
(i) For Mr. Cody, the type and amount of compensation in 1996 is
as follows: $2,484 for contributions to the thrift plan and
$392 for life insurance.
(j) For Ms. Sala, the type and amount of compensation in 1996 is
as follows: $2,365 for contributions to the thrift plan and
$365 for life insurance.
(k) For Mr. Pini, the type and amount of compensation in 1996 is
as follows: $2,281 for contributions to the thrift plan and
$299 for life insurance.
NARRAGANSETT
SUMMARY COMPENSATION TABLE
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
Richard P. 1996 70,998 36,959 1,791 46,188 1,180(g)
Sergel 1995 54,821 41,310 1,446 0 1,015
Chairman 1994 50,319 26,293 1,472 13,237 992
Robert L. 1996 127,388 88,905 4,819 50,308 3,424(h)
McCabe 1995 152,407 111,785 4,206 0 4,851
President 1994 140,785 68,784 4,457 28,576 4,256
William 1996 132,012 84,081 119 0 4,509(i)
Watkins, 1995 128,172 77,967 119 0 4,054
Jr. 1994 124,428 62,799 115 26,136 6,186
Executive
Vice
President
Richard W. 1996 108,432 57,680 119 0 2,888(j)
Frost 1995 103,272 48,972 119 0 2,787
Vice 1994 99,300 34,269 115 13,629 2,706
President
Richard 1996 100,884 24,830 119 0 3,004(k)
Nadeau 1995 95,838 15,500 119 0 2,902
Vice 1994 91,572 11,272 115 3,267 3,037
President
(a) Certain officers of Narragansett are also officers of NEES and
various other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the
variable match of the incentive thrift plan, and unrestricted
shares under the incentive share plan or special share
bonuses. See descriptions under Plan Summaries.
(d) Includes amounts reimbursed by Narragansett for the payment of
taxes.
(e) Special share bonuses were made to a limited number of
executives in 1996. Under the terms of those awards, the
share values were mandatorily deferred until the executives'
termination of employment.
No awards vested during 1996 under the Long-Term Performance
Share Award Plan.
The incentive share awards for the named executives made for
1994 were in the form of restricted shares (with a five-year
restriction) or deferred share equivalents, deferred for
receipt for at least five years, at the executive's option.
In 1996 awards for NEES officers were similarly restricted.
As cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995
were restricted.
As of December 31, 1996, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Sergel 7,471 shares, $260,551 value; Mr.
McCabe 6,027 shares, $210,192 value; Mr. Watkins 2,490 shares,
$86,839 value; Mr. Frost 895 shares, $31,213 value; and Mr.
Nadeau 201 shares, $7,010 value. The value was calculated by
multiplying the closing market price on December 31, 1996 by
the number of shares.
(f) Includes Narragansett contributions to life insurance and the
incentive thrift plan that are not bonus contributions,
including any related deferred compensation plan match. See
description under Plan Summaries. The life insurance
contribution is calculated based on the value of term life
insurance for the named individuals. The premium costs for
most of these policies have been or will be recovered by
Narragansett.
(g) For Mr. Sergel, the type and amount of compensation in 1996 is
as follows: $1,001 for contributions to the thrift plan and
$179 for life insurance.
(h) For Mr. McCabe, the type and amount of compensation in 1996 is
as follows: $2,165 for contributions to the thrift plan and
$1,259 for life insurance.
(i) For Mr. Watkins, the type and amount of compensation in 1996
is as follows: $2,640 for contributions to the thrift plan
and $1,869 for life insurance.
(j) For Mr. Frost, the type and amount of compensation in 1996 is
as follows: $2,169 for contributions to the thrift plan and
$719 for life insurance.
(k) For Mr. Nadeau, the type and amount of compensation in 1996 is
as follows: $2,018 for contributions to the thrift plan and
$986 for life insurance.
Directors' Compensation
Members of the Mass. Electric and Narragansett Boards of
Directors, except employees of NEES System companies, i.e., Messrs.
McCabe, L. J. Reilly, Rowe, and Sergel, receive a quarterly
retainer of $1,500, a meeting fee of $600 plus expenses, and 50
NEES common shares each year. Since all members of the NEP Board
are employees of NEES System companies, no fees are paid for
service on the Board except as noted below for Mrs. Bok.
Mrs. Bok retired as an employee of the System on January 1,
1994 (remaining as Chairman of the Board of NEES and a director for
NEES subsidiaries). Mrs. Bok has agreed to waive the normal fees
and annual retainers otherwise payable for services by
nonemployees on NEES subsidiary boards and receives in lieu thereof
a single annual stipend of $60,000. Mrs. Bok also serves as a
consultant to NEES. Under the terms of her contract, she receives
an annual retainer of $100,000.
Mass. Electric and Narragansett permit directors to defer all
or a portion of any cash retainers, meeting fees, and retainer
shares under a deferred compensation plan. A director may elect
to defer to a NEES Share Account or a Prime Rate Account. While
deferred, the shares do not have voting rights or other rights
associated with ownership. At the time of electing to defer
compensation, the director also elects whether to receive payment
after ten years or upon retirement, and, if upon retirement,
whether in ten payments or a lump sum. Special accounts are
maintained on Mass. Electric's and Narragansett's books showing the
amounts deferred and the interest or dividends accrued thereon.
Director contributions to qualified charities are matched by the
Company under a matching gift program, which has a maximum limit of
$3,500.
Other
NEP, Mass. Electric, and Narragansett do not have any share
option plans.
The NEES Compensation Committee administers certain of the
incentive compensation plans, and the Management Committee
administers the others (including the incentive share plan).
Retirement Plans
The following table shows estimated annual benefits payable to
executive officers under the qualified pension plan and the
supplemental retirement plan, assuming retirement at age 65 in
1997.
PENSION TABLE
Five-Year
Average 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
Compensa- of of of of of of
tion Service Service Service Service Service Service
- --------- -------- -------- -------- -------- -------- --------
$100,000 19,000 27,500 36,100 44,300 52,600 57,600
$150,000 29,400 42,600 55,800 68,600 81,400 89,300
$200,000 39,700 57,600 75,500 92,800 110,200 121,100
$250,000 50,100 72,600 95,200 117,100 139,000 152,800
$300,000 60,400 87,600 114,900 141,300 167,800 184,500
$350,000 70,800 102,700 134,600 165,600 196,600 216,200
$400,000 81,100 117,700 154,300 189,800 225,400 248,000
$500,000 101,800 147,700 193,700 238,300 283,000 311,400
For purposes of the retirement plans, Messrs. Rowe, Tranen,
Bailey, Malley, and Turner currently have 19, 27, 28, 25, and 31
credited years of service, respectively. Mr. Sergel, Mr. Reilly,
Mr. Cody, Ms. Sala, and Mr. Pini currently have 18, 15, 13, 27, and
18 credited years of service, respectively. Messrs. Sergel,
McCabe, Watkins, Frost, and Nadeau currently have 18, 28, 24, 34,
and 41 credited years of service, respectively.
Benefits under the pension plans are computed using formulae
based on percentages of highest average compensation computed over
five consecutive years. The compensation covered by the pension
plan includes salary, bonus, and incentive share awards. The
benefits listed in the pension table are not subject to deduction
for Social Security and are shown without any joint and survivor
benefits. If the participant elected at age 65 a 100% joint and
survivor benefit with a spouse of the same age, the benefit shown
would be reduced by approximately 16%.
The Pension Table above does not include annuity payments to
be received in lieu of life insurance for Messrs. Rowe and Houston.
The policies are described below under Plan Summaries.
Under the Retirement Supplement Plan, participants receive an
annual adjustment to their pension benefits. The amount of the
adjustment is equal to the rate of interest on AAA bonds for the
prior year less two percent (but in no case more than the increase
in the cost of living). Mr. Rowe is the only active employee now
participating in this plan.
The System contributes the full amount toward post-retirement
health benefits for senior executives.
NEP, MASS. ELECTRIC, AND NARRAGANSETT PAYMENTS UPON A CHANGE OF
CONTROL
NEES has agreements with certain of its executives, including
Messrs. Rowe, Sergel, and Tranen, which provide severance benefits
in the event of certain terminations of employment following a
Change in Control of NEES (as defined below). (Mr. Tranen's
contracts also provide severance benefits in the event of a
divestiture of all or a substantial portion of the System's fossil
fuel generating assets.) If, following a Change in Control, the
executive's employment is terminated other than for cause (as
defined) or if the executive terminates employment for good reason
(as defined), NEES will pay to the executive a lump sum cash
payment equal to three times (two times for some executives) the
sum of the executive's most recent annual base compensation and the
average of his or her bonus amounts for the prior three years. If
Mr. Rowe receives payments under his severance agreement that would
subject him to any federal excise tax due under section 280G of the
Internal Revenue Code, he will receive a cash "gross-up" payment so
he would be in the same net after-tax position he would have been
in had such excise tax not been applied. In addition, NEES will
provide disability and health benefits to the executive for two to
three years, provide such post-retirement health and welfare
benefits as the executive would have earned within such two to
three years, and grant two or three additional years of pension
credit. Mr. Rowe would become eligible for benefits under the
Retirement Supplement Plan described above prior to the five-year
vesting term.
Change in Control, including potential change of control,
occurs (1) when any person becomes the beneficial owner of 20% of
the voting securities of NEES, (2) when the prior members of the
Board of NEES no longer constitute a 2/3 majority of the Board, or
(3) NEES enters into an agreement that could result in a Change in
Control.
The terms of the agreements are for three years with automatic
annual extensions, unless terminated by NEES.
The System's bonus plans, including the incentive compensation
plans, the Incentive Thrift Plan, and the Goals Program, provide
for payments equal to the average of the bonuses for the three
prior years in the event of a Change of Control. This payment
would be made in lieu of the regular bonuses for the year in which
the Change in Control occurs. The Long-Term Performance Share
Award Plan provides for a cash payment equal to the value of the
performance shares in the participants' account times the average
target achievement percentage for the Incentive Thrift Plan for the
three prior years. The System's Retirees Health and Life Insurance
Plan I has provisions preventing changes in benefits adverse to the
participants for three years following a Change in Control. The
Incentive Share Plan and the related Incentive Share Deferral
Agreements provide that, upon the occurrence of a change in control
(defined more narrowly than in other plans), restrictions on all
shares and account balances would cease.
In light of the changes in the utility industry, NEES
determined that executive officers, including those listed in the
Summary Compensation Tables, but excluding Mr. Rowe, would receive
a benefit equal to either 1 or 1-1/2 times annual compensation, for
a severance other than one for cause or following a change in
control.
NEP, MASS. ELECTRIC, AND NARRAGANSETT PLAN SUMMARIES
A brief description of the various plans through which
compensation and benefits are provided to the named executive
officers is presented below to better enable shareholders to
understand the information presented in the tables shown earlier.
The amounts of compensation and benefits provided to the named
executive officers under the plans described below (and charged to
NEP, Mass. Electric, or Narragansett) are presented in the Summary
Compensation Tables.
Goals Program
The goals program covers all employees who have completed one
year of service with any NEES subsidiary. Goals are established
annually. For 1996, these goals related to earnings per share,
customer costs, safety, absenteeism, demand-side management
results, generating station availability, transmission reliability,
environmental and OSHA compliance, and customer satisfaction. Some
goals apply to all employees, while others apply to particular
functional groups. Depending upon the number of goals met, and
provided the minimum earnings goal is met, employees may earn a
cash bonus of 1% to 4-1/2% of their compensation.
Incentive Thrift Plan
The incentive thrift plan (a 401(k) program) provides for a
match of 40% of up to the first 5% of base compensation contributed
to the System's incentive thrift plan (shown under All Other
Compensation in the Summary Compensation Tables) and, based on an
incentive formula tied to earnings per share, may fully match the
first 5% of base compensation contributed (the additional amount,
if any, is shown under Bonus in the Summary Compensation Tables).
Under Federal law, contributions to these plans are limited. In
1996, the salary reduction amount was limited to $9,500.
Deferred Compensation Plan
The Deferred Compensation Plan offers executives the
opportunity to defer base pay and bonuses. The plan offers the
option of investing at the prime rate or in NEES shares; however,
share bonuses may only be deferred in a share account. Under
Federal law, the Incentive Thrift Plan, described above, is
required to limit participant base compensation to $150,000 in
calculating the NEES match. Under the Deferred Compensation Plan,
NEES will make a contribution to an executive's share account
equivalent to the resultant reduction in his or her match under the
Incentive Thrift Plan.
Life Insurance
NEES has established for certain senior executives life
insurance plans funded by individual policies. The combined death
benefit under these insurance plans is three times the
participant's annual salary. These plans are structured so that,
over time, NEES should recover the cost of the insurance premiums.
Messrs. McCabe, Reilly, Rowe, Sergel, and Tranen are participants
in these plans. After termination of employment, Mr. Rowe may
elect, commencing at age 55 or later, to receive an annuity income
equal to 40% of annual salary. In that event, his life insurance
would be reduced over 15 years to an amount equal to his final
annual salary.
Incentive Compensation Plan
The System bonus plan for certain senior employees provides
that in order for cash bonuses to be awarded, NEES must achieve a
return on equity that places NEES in the top 50% of the
approximately 90 electric utilities listed in the utility group
formerly tracked by Duff & Phelps (the National Grouping) or in
the top 50% of the New England/New York regional utilities (the
Regional Grouping). Bonuses are also dependent upon the
achievement of individual goals. In order to provide a long-term
component to the incentive compensation plan, participants may also
be awarded NEES common shares. An individual's award of shares
under the incentive share plan is a fixed percentage of her or his
cash bonus for that year. If no cash award is made, no shares are
distributed.
Long-Term Performance Share Award Plan
This plan was established in 1996. There will be no payments
under the plan until the Spring of 1999. Awards under the plan are
based upon various measures of NEES performance over a three-year
period. Each award factor or measurement functions independently.
The factors include financial and operating performance.
Performance is rated on rolling three-year periods, with a new
cycle beginning each year. An individual's potential award under
the plan is a fixed percentage (ranging from 15% to 50%) of base
pay. At the end of the three-year cycle, the participant receives
NEES shares based upon the performance against the various factors.
Financial Counseling
NEP, Mass. Electric, and Narragansett pay for personal
financial counseling for certain executives. As required by the
IRS, a portion of the amount paid is reported as taxable income for
the executive. Financial counseling is also offered to other
employees through seminars conducted at various locations each
year.
Other
The NEES companies do not have any share option plans.
NEP
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The following table shows the potential awards, for those
executive officers named in the Summary Compensation Table, under
the Long-Term Performance Share Award Plan for the performance
cycle commencing January 1, 1996. The NEES System's performance
will be measured over the three-year period ending December 31,
1998.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
John W. Rowe 6,747 3 years 169 6,747
Jeffrey D. Tranen 2,763 3 years 69 2,763
Lawrence E. Bailey 954 3 years 24 954
John F. Malley 839 3 years 21 839
Arnold H. Turner 805 3 years 21 805
(a) Amounts are denominated in common share units. No dividends
are attributable to share units. At the end of the cycle,
awards are paid either in shares or in cash (valued at the
five-day average price prior to the January 15 following the
close of the performance cycle).
(b) The awards in this column represent the threshold number of
shares that could be earned if the minimum attainment level is
reached for one factor. The minimum payout upon failure to
achieve any of the goals would be zero.
(c) The awards in this column represent the target (and maximum)
number of shares that could be earned if the maximum
performance is achieved for all factors.
The Long-Term Performance Share Award Plan provides awards
based on various measures of System performance over a three-year
period. Each award factor functions independently. The
performance targets for each cycle are set by the Compensation
Committee of the NEES Board. All participants share the same
factors and factor weights. Performance is rated on rolling three-
year periods, with a new cycle beginning each year. An
individual's potential award under the plan is a fixed percentage
of her or his base salary on January 1 of the first year of the
plan measurement period. The percentage ranges from 15% to 50%.
No dividends accrue on the allocated shares until awarded. At the
end of the three-year cycle, the participant receives actual shares
based upon the performance against the various factors.
The measures of performance for this cycle are as follows:
return on equity compared to the national group (60th-75th
percentile); kilowatt-hour cost compared to regional group (67th-
90th percentile); total shareholder return compared to the regional
group (60th-75th percentile); maintenance or improvement of bond
ratings; and system service levels, measured by customer
satisfaction, system reliability, system availability, and
regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is
composed of New England/New York regional utilities.
MASS. ELECTRIC
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The following table shows the potential awards, for those
executive officers named in the Summary Compensation Table, under
the Long-Term Performance Share Award Plan for the performance
cycle commencing January 1, 1996. The NEES System's performance
will be measured over the three-year period ending December 31,
1998.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
Richard P. Sergel 2,670 3 years 67 2,670
Lawrence J. Reilly 804 3 years 21 804
Eric P. Cody 782 3 years 20 782
Nancy H. Sala 448 3 years 12 448
Anthony C. Pini 442 3 years 11 442
(a) Amounts are denominated in common share units. No dividends
are attributable to share units. At the end of the cycle,
awards are paid either in shares or in cash (valued at the
five-day average price prior to the January 15 following the
close of the performance cycle).
(b) The awards in this column represent the threshold number of
shares that could be earned if the minimum attainment level is
reached for one factor. The minimum payout upon failure to
achieve any of the goals would be zero.
(c) The awards in this column represent the target (and maximum)
number of shares that could be earned if the maximum
performance is achieved for all factors.
The Long-Term Performance Share Award Plan provides awards
based on various measures of System performance over a three-year
period. Each award factor functions independently. The
performance targets for each cycle are set by the Compensation
Committee of the NEES Board. All participants share the same
factors and factor weights. Performance is rated on rolling three-
year periods, with a new cycle beginning each year. An
individual's potential award under the plan is a fixed percentage
of her or his base salary on January 1 of the first year of the
plan measurement period. The percentage ranges from 15% to 50%.
No dividends accrue on the allocated shares until awarded. At the
end of the three-year cycle, the participant receives actual shares
based upon the performance against the various factors.
The measures of performance for this cycle are as follows:
return on equity compared to the national group (60th-75th
percentile); kilowatt-hour cost compared to regional group (67th-
90th percentile); total shareholder return compared to the regional
group (60th-75th percentile); maintenance or improvement of bond
ratings; and system service levels, measured by customer
satisfaction, system reliability, system availability, and
regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is
composed of New England/New York regional utilities.
NARRAGANSETT
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The following table shows the potential awards, for those
executive officers named in the Summary Compensation Table who
participate in the plan, under the Long-Term Performance Share
Award Plan for the performance cycle commencing January 1, 1996.
The NEES System's performance will be measured over the three-year
period ending December 31, 1998.
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
Richard P. Sergel 2,670 3 years 67 2,670
Robert L. McCabe 1,108 3 years 28 1,108
William Watkins, Jr. 829 3 years 21 829
Richard W. Frost 409 3 years 11 409
(a) Amounts are denominated in common share units. No dividends
are attributable to share units. At the end of the cycle,
awards are paid either in shares or in cash (valued at the
five-day average price prior to the January 15 following the
close of the performance cycle).
(b) The awards in this column represent the threshold number of
shares that could be earned if the minimum attainment level is
reached for one factor. The minimum payout upon failure to
achieve any of the goals would be zero.
(c) The awards in this column represent the target (and maximum)
number of shares that could be earned if the maximum
performance is achieved for all factors.
The Long-Term Performance Share Award Plan provides awards
based on various measures of System performance over a three-year
period. Each award factor functions independently. The
performance targets for each cycle are set by the Compensation
Committee of the NEES Board. All participants share the same
factors and factor weights. Performance is rated on rolling three-
year periods, with a new cycle beginning each year. An
individual's potential award under the plan is a fixed percentage
of her or his base salary on January 1 of the first year of the
plan measurement period. The percentage ranges from 15% to 50%.
No dividends accrue on the allocated shares until awarded. At the
end of the three-year cycle, the participant receives actual shares
based upon the performance against the various factors.
The measures of performance for this cycle are as follows:
return on equity compared to the national group (60th-75th
percentile); kilowatt-hour cost compared to regional group (67th-
90th percentile); total shareholder return compared to the regional
group (60th-75th percentile); maintenance or improvement of bond
ratings; and system service levels, measured by customer
satisfaction, system reliability, system availability, and
regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is
composed of New England/New York regional utilities.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
NEES
----
The information required by this item is incorporated herein
by reference to the material under the caption TOTAL COMMON EQUITY
BASED HOLDINGS in the definitive proxy statement of NEES, dated
March 10, 1997, for the 1997 Annual Meeting of Shareholders,
provided that the information under the headings "Compensation
Committee Report on Executive Compensation" and "Corporate
Performance" are not so incorporated.
NEP, Mass. Electric, and Narragansett
-------------------------------------
NEES owns 100% of the voting securities of Mass. Electric and
Narragansett. NEES owns 98.85% of the voting securities of NEP.
SECURITY OWNERSHIP
The following tables list the holdings of NEES common shares
as of March 1, 1997 by NEP, Mass. Electric, and Narragansett
directors, the executive officers named in the Summary Compensation
Tables, and all directors and executive officers, as a group.
NEP
---
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b)
---- ------------ --------------
Lawrence E. Bailey 5,200 2,485
Joan T. Bok 17,111
Alfred D. Houston 13,235 8,892
Cheryl A. LaFleur 2,543 4,603
John F. Malley 4,988 2,566
John W. Rowe 22,677 20,419
Jeffrey D. Tranen 8,141 6,764
Arnold H. Turner 4,048 1,985
All directors and
executive officers,
as a group (13 persons) 99,156 (c) 56,370
Mass. Electric
--------------
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b)
---- ------------ -------------
Urville J. Beaumont 293
Joan T. Bok 17,111
Eric P. Cody 2,435 2,044
Sally L. Collins 295
Kalyan K. Ghosh 51 242
Charles B. Housen 18
Cheryl A. LaFleur 2,543 4,603
Patricia McGovern 161
Anthony C. Pini 8,413 1,113
John F. Reilly 296
Lawrence J. Reilly 2,738 4,469
John W. Rowe 22,677 20,419
Nancy H. Sala 7,749 (d) 1,538
Richard P. Sergel 8,413 6,692
Roslyn M. Watson 296 181
All directors and
executive officers,
as a group (21 persons) 105,521 (c) 50,319
Narragansett
------------
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b)
---- ------------ -------------
Joan T. Bok 17,111
Stephen A. Cardi 294
Richard W. Frost 6,805 472
Frances H. Gammell 296 292
Joseph J. Kirby 295
Robert L. McCabe 9,532 5,022
Richard Nadeau 4,115
John W. Rowe 22,677 20,419
Richard P. Sergel 8,413 6,692
William E. Trueheart 296 702
William Watkins, Jr. 5,512 2,185
John A. Wilson, Jr. 658
All directors and
executive officers,
as a group (15 persons) 90,110 (c) 44,841
(a) Number of shares beneficially owned includes: (i) shares
directly owned by certain relatives with whom directors or
officers share voting or investment power; (ii) shares held of
record individually by a director or officer or jointly with
others or held in the name of a bank, broker, or nominee for
such individual's account; (iii) shares in which certain
directors or officers maintain exclusive or shared investment
or voting power whether or not the securities are held for
their benefit; and (iv) with respect to the executive officers,
allocated shares in the Incentive Thrift Plan described above.
(b) Deferred share equivalents are held under the Deferred
Compensation Plan or pursuant to individual deferral
agreements. Under the Plan or deferral agreements, executives
may elect to defer cash compensation and share awards. There
are various deferral periods available under the plans. At the
end of the deferral period, the compensation may be paid out
in NEES common shares, cash, or a combination thereof. The
rights of the executives to payment are those of general,
unsecured creditors. While deferred, the shares do not have
voting rights or other rights associated with ownership. As
cash dividends are declared, the number of deferred share
equivalents will be increased as if the dividends were
reinvested in NEES common shares.
(c) Amount is less than 1% of the total number of shares of NEES
outstanding.
(d) Ms. Sala disclaims a beneficial ownership interest in 260
shares held under the Uniform Gift to Minors Act.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The construction company of Mr. Stephen A. Cardi, a director
of Narragansett, was paid approximately $138,000 in 1996 pursuant
to a contract to provide gravel to Narragansett and approximately
$2 million by NEP in 1996 pursuant to a contract to construct
Collier Point Park at Manchester Street Station.
Mr. John A. Wilson, Jr., a director of Narragansett, is a
consultant to Hinckley, Allen, Snyder & Comen (Attorneys).
Hinckley, Allen, Snyder & Comen was retained by Narragansett and
its affiliates in 1996.
Reference is made to Item 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT and Item 11. EXECUTIVE COMPENSATION.
PART IV
Item 14. EXHIBITS AND REPORTS ON FORM 8-K
List of Exhibits
Unless otherwise indicated, the exhibits listed below are
incorporated by reference to the appropriate exhibit numbers and
the Commission file numbers indicated in parentheses.
NEES
----
(3) Agreement and Declaration of Trust dated January 2, 1926,
as amended through April 28, 1992 (Exhibit 3 to 1994 NEES
Form 10-K, File No. 1-3446).
(4) Instruments Defining the Rights of Security Holders
(a) Massachusetts Electric Company First Mortgage
Indenture and Deed of Trust, dated as of July 1,
1949, and twenty-one supplements thereto (Exhibit
7-A, File No. 1-8019; Exhibit 7-B, File No. 2-8836;
Exhibit 4-C, File No. 2-9593; Exhibit 4 to 1980
Form 10-K, File No. 2-8019; Exhibit 4 to 1982 Form
10-K, File No. 0-5464; Exhibit 4 to 1986 Form 10-K,
File No. 0-5464; Exhibit 4(a) to 1988 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1989 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1992 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1993 Form 10-K,
File No. 1-3446; Exhibit 4(a) to 1995 Form 10-K,
File No. 1-3446).
(b) The Narragansett Electric Company First Mortgage
Indenture and Deed of Trust, dated as of September
1, 1944, and twenty-two supplements thereto
(Exhibit 7-1, File No. 2-7042; Exhibit 7-B, File
No. 2-7490; Exhibit 4-C, File No. 2-9423; Exhibit
4-D, File No. 2-10056; Exhibit 4 to 1980 Form 10-K,
File No. 0-898; Exhibit 4 to 1982 Form 10-K, File
No. 0-898; Exhibit 4 to 1983 Form 10-K, File No.
0-898; Exhibit 4 to 1985 Form 10-K, File No. 0-898;
Exhibit 4 to 1986 Form 10-K, File No. 0-898;
Exhibit 4 to 1987 Form 10-K, File No. 0-898;
Exhibit 4 to 1991 Form 10-K, File No. 0-898;
Exhibit 4(b) to 1992 Form 10-K, File No. 1-3446;
Exhibit 4(b) to 1993 Form 10-K, File No. 1-3446;
Exhibit 4(b) to 1995 Form 10-K, File No. 1-3446).
(c) The Narragansett Electric Company Preference
Provisions, as amended, dated March 23, 1993
(Exhibit 4(c) to 1993 NEES Form 10-K, File No. 1-
3446).
(d) New England Power Company Indentures General and
Refunding Mortgage Indenture and Deed of Trust
dated as of January 1, 1977 and twenty supplements
thereto (Exhibit 4(b) to 1980 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1982 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1983 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1985 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1986 Form 10-K, File No.
0-1229; Exhibit 4(c)(ii) to 1988 Form 10-K, File
No. 1-3446; Exhibit 4(c)(ii) to 1989 Form 10-K,
File No. 1-3446; Exhibit 4(c)(ii) to 1990 Form
10-K, File No. 1-3446; Exhibit 4(c)(ii) to 1991
Form 10-K, File No. 1-3446; Exhibit 4(c)(ii) to
1992 Form 10-K, File No. 1-3446; Exhibit 4(d) to
1993 Form 10-K, File No. 1-3446; Exhibit 4(d) to
1995 Form 10-K, File No. 1-3446).
(10) Material Contracts
(a) Boston Edison Company et al. and New England Power
Company: Amended REMVEC Agreement dated August 12,
1977 (Exhibit 5-4(d), File No. 2-61881).
(b) The Connecticut Light and Power Company et al. and
New England Power Company: Sharing Agreement for
Joint Ownership, Construction and Operation of
Millstone Unit No. 3 dated as of September 1, 1973,
and Amendment dated as of August 1, 1974 (Exhibit
10-5, File No. 2-52820); Amendments dated as of
December 15, 1975 and April 1, 1986; (Exhibit
10(b), to 1990 Form 10-K, File No. 1-3446).
Transmission Support Agreement dated August 9,
1974; Instrument of Transfer to NEP with respect to
the 1979 Connecticut Nuclear Unit, and Assumption
of Obligations, dated December 17, 1975 (Exhibit
10-6(b), File No. 2-57831).
(c) Connecticut Yankee Atomic Power Company et al. and
New England Power Company: Stockholders Agreement
dated July 1, 1964 (Exhibit 13-9-A, File No.
2-23006); Power Purchase Contract dated July 1,
1964 (Exhibit 13-9-B, File No. 2-23006); Additional
Power Contract dated as of April 30, 1984 and 1996
Amendatory Agreement dated as of December 4, 1996
(filed herewith); Supplementary Power Contract
dated as of April 1, 1987 (Exhibit 10(c) to 1987
Form 10-K, File No. 1-3446); Capital Funds
Agreement dated September 1, 1964 (Exhibit 13-9-C,
File No. 2-23006); Transmission Agreement dated
October 1, 1964 (Exhibit 13-9-D, File No. 2-23006);
Agreement revising Transmission Agreement dated
July 1, 1979 (Exhibit to 1979 Form 10-K, File No.
1-3446); Amendment revising Transmission Agreement
dated as of January 19, 1994 (Exhibit 10(c) to 1995
Form 10-K, File No. 1-3446).
(d) Maine Yankee Atomic Power Company et al. and New
England Power Company: Capital Funds Agreement
dated May 20, 1968 and Power Purchase Contract
dated May 20, 1968 (Exhibit 4-5, File No. 2-29145);
Amendments dated as of January 1, 1984, March 1,
1984 (Exhibit 10(d) to 1983 Form 10-K, File No.
1-3446), October 1, 1984, and August 1, 1985
(Exhibit 10(d) to 1985 Form 10-K, File No. 1-3446);
Stockholders Agreement dated May 20, 1968 (Exhibit
10-20, File No. 2-34267); Additional Power Contract
dated as of February 1, 1984 (Exhibit 10(d) to 1985
Form 10-K, File No. 1-3446).
(e) New England Energy Incorporated Contracts
(i) Capital Funds Agreement with NEES dated
November 1, 1974 (Exhibit 10-29(b), File No.
2-52969); Amendment dated July 1, 1976, and
Amendment dated July 26, 1979 (Exhibit
10(g)(i) to 1980 Form 10-K, File No. 1-3446);
Amendment dated August 26, 1981 (Exhibit
10(f)(i) to 1981 Form 10-K, File No. 1-3446);
Amendment dated March 26, 1985 (Exhibit
10(e)(i) to 1985 Form 10-K, File No. 1-3446);
Amendment dated as of April 28, 1989 (Exhibit
10(e)(i) to 1989 Form 10-K, File No. 1-3446);
Amendment dated as of June 1, 1990 (Exhibit
10(e)(i) to 1990 Form 10-K, File No. 1-3446);
Amendment dated as of April 13, 1995 (filed
herewith).
(ii) Loan Agreement with NEES dated July 19, 1978
and effective November 1, 1974, and Amendment
dated July 26, 1979 (Exhibit 10(g)(iii) to
1980 Form 10-K, File No. 1-3446); Amendment
dated August 26, 1981 (Exhibit 10(f)(ii) to
1981 Form 10-K, File No. 1-3446); Amendment
dated March 26, 1985 (Exhibit 10(e)(ii) to
1985 Form 10-K, File No. 1-3446); Amendment
dated as of April 28, 1989 (Exhibit 10(e)(ii)
to 1989 Form 10-K, File No. 1-3446);
Amendment dated as of June 1, 1990 (Exhibit
10(e)(ii) to 1990 Form 10-K, File No.
1-3446); Amendment dated as of April 13, 1995
(filed herewith).
(iii) Fuel Purchase Contract with New England Power
Company dated July 26, 1979, and Amendment
dated August 26, 1981 (Exhibit 10(f)(iii) to
1981 Form 10-K, File No. 1-3446); Amendment
dated March 26, 1985, and Amendment effective
January 1, 1984 (Exhibit 10(e)(iii) to 1985
Form 10-K, File No. 1-3446); Amendment dated
as of April 28, 1989 (Exhibit 10(e)(iii) to
1989 Form 10-K, File No. 1-3446).
(iv) Partnership Agreement with Samedan Oil
Corporation as Amended and Restated on
February 5, 1985 (Exhibit 10(e)(iv) to 1984
Form 10-K, File No. 1-3446); Amendment dated
as of January 14, 1992 (Exhibit 10(e)(iv) to
1991 Form 10-K, File No. 1- 3446).
(v) Credit Agreement dated as of April 13, 1995
(Exhibit 10(e)(iv) to 1995 Form 10-K, File
No. 1-3446).
(vi) Capital Maintenance Agreement dated November
15, 1985, and Assignment and Security
Agreement dated November 15, 1985 (Exhibit
10(e)(vi) to 1985 Form 10-K, File No.
1-3446); Amendment dated as of April 28, 1989
(Exhibit 10(e)(vi) to 1989 Form 10-K, File
No. 1-3446); Amendment dated as of April 13,
1995 (filed herewith).
(f) New England Power Company and New England Electric
Transmission Corporation et al.: Phase I Terminal
Facility Support Agreement dated as of December 1,
1981 (Exhibit 10(g) to 1981 Form 10-K, File No.
1-3446); Amendments dated as of June 1, 1982, and
November 1, 1982 (Exhibit 10(f) to 1982 Form 10-K,
File No. 1-3446); Agreement with respect to Use of
the Quebec Interconnection dated as of December 1,
1981 (Exhibit 10(g) to 1981 Form 10-K, File No.
1-3446); Amendments dated as of May 1, 1982, and
November 1, 1982 (Exhibit 10(f) to 1982 Form 10-K,
File No. 1-3446); Amendment dated as of January 1,
1986 (Exhibit (10)(f) 1986 Form 10-K, File No.
1-3446); Agreement for Reinforcement and
Improvement of New England Power Company's
Transmission System dated as of April 1, 1983
(Exhibit 10(f) to 1983 Form 10-K, File No. 1-3446);
Lease dated as of May 16, 1983 (Exhibit 10(f) to
1983 Form 10-K, File No. 1-3446); Upper Development
- Lower Development Transmission Line Support
Agreement dated as of May 16, 1983 (Exhibit 10(f)
to 1983 Form 10-K, File No. 1-3446).
(g) New England Electric Transmission Corporation and
PruCapital Management, Inc. et al: Note Agreement
dated as of September 1, 1986 (Exhibit 10(g) to
1986 Form 10-K, File No. 1-3446); Mortgage, Deed of
Trust and Security Agreement dated as of September
1, 1986 (Exhibit 10(g) to 1986 Form 10-K, File No.
1-3446); Equity Funding Agreement with New England
Electric System dated as of December 1, 1985
(Exhibit 10(g) to 1991 Form 10-K, File No. 1-3446).
(h) Vermont Electric Transmission Company, Inc. et al.
and New England Power Company: Phase I Vermont
Transmission Line Support Agreement dated as of
December 1, 1981; Amendments dated as of June 1,
1982, and November 1, 1982 (Exhibit 10(g) to 1982
Form 10-K, File No. 1-3446); Amendment dated as of
January 1, 1986 (Exhibit 10(h) to 1986 Form 10-K,
File No. 1-3446).
(i) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
and March 1, 1973 (Exhibit 10-15, File No.
2-48543); Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
(Exhibit 10-3, File No. 2-68283); Amendment dated
September 1, 1981 (Exhibit 10(h) to 1981 Form 10-K,
File No. 1-3446); Amendment dated as of December 1,
1981 (Exhibit 10(h) to 1982 Form 10-K, File No.
1-3446); Amendments dated June 1, 1982, June 15,
1983, and October 1, 1983 (Exhibit 10(i) to 1983
Form 10-K, File No. 1-3446); Amendments dated
August 1, 1985, August 15, 1985, September 1, 1985,
and January 1, 1986 (Exhibit 10(i) to 1985 Form
10-K, File No. 1-3446); Amendment dated
September 1, 1986 (Exhibit 10(i) to 1986 Form 10-K,
File No. 1-3446); Amendment dated April 30, 1987
(Exhibit 10(i) to 1987 Form 10-K, File No. 1-3446);
Amendments dated March 1, 1988 and May 1, 1988
(Exhibit 10(i) to 1988 Form 10-K, File No. 1-3446);
Amendment dated March 15, 1989 (Exhibit 10(i) to
1989 Form 10-K, File No. 1-3446); Amendment dated
October 1, 1990 (Exhibit 10(i) to 1990 Form 10-K,
File No. 1-3446); Amendment dated as of September
15, 1992 (Exhibit 10(i) to 1992 Form 10-K, File No.
1-3446); Amendments dated as of June 1, 1993, July
1, 1995, and September 1, 1995 (Exhibit 10(i) to
1995 Form 10-K, File No. 1-3446); Amendment dated
as of December 1, 1996 (filed herewith).
(j) Public Service Company of New Hampshire et al. and
New England Power Company: Agreement for Joint
Ownership, Construction and Operation of New
Hampshire Nuclear Units dated as of May 1, 1973;
Amendments dated May 24, 1974, June 21, 1974,
September 25, 1974 and October 25, 1974 (Exhibit
10-18(b), File No. 2-52820); Amendment dated
January 31, 1975 (Exhibit 10-16(b), File No.
2-57831); Amendments dated April 18, 1979,
April 25, 1979, June 8, 1979, October 11, 1979,
December 15, 1979, June 16, 1980, December 31, 1980
(Exhibit 10(i) to 1980 Form 10-K, File No. 1-3446);
Amendments dated June 1, 1982, April 27, 1984,
June 15, 1984 (Exhibit 10(j) to 1984 Form 10-K,
File No. 1-3446); Amendments dated March 8, 1985,
March 14, 1986, May 1, 1986 and September 19, 1986
(Exhibit 10(j) to 1986 Form 10-K, File No. 1-3446);
Amendment dated November 12, 1987 (Exhibit 10(j) to
1987 Form 10-K, File No. 1-3446); Amendment dated
January 13, 1989 (Exhibit 10(j) to 1989 Form 10-K,
File No. 1-3446); Amendment dated as of November 1,
1990 (Exhibit 10(j) to 1991 Form 10-K, File No. 1-
3446). Transmission Support Agreement dated as of
May 1, 1973 (Exhibit 10-23, File No. 2-49184);
Instrument of Transfer to NEP with respect to the
New Hampshire Nuclear Units and Assumptions of
Obligations dated December 17, 1975 and Agreement
Among Participants in New Hampshire Nuclear Units,
certain Massachusetts Municipal Systems and
Massachusetts Municipal Wholesale Electric Company
dated May 28, 1976 (Exhibit 10-16(c), File No.
2-57831); Seventh Amendment To and Restated
Agreement for Seabrook Project Disbursing Agent
(Exhibit 10(j) to 1991 Form 10-K, File No. 1-
3446); Amendments dated as of June 29, 1992
(Exhibit 10(j) to 1992 Form 10-K, File No. 1-
3446); Seabrook Project Managing Agent Operating
Agreement dated as of June 29, 1992, and amendment
to Seabrook Project Managing Agent Agreement dated
as of June 29, 1992 (Exhibit 10(j) to 1992 Form 10-
K, File No. 1-3446).
(k) Vermont Yankee Nuclear Power Corporation et al. and
New England Power Company: Capital Funds Agreement
dated February 1, 1968, Amendment dated March 12,
1968, and Power Purchase Contract dated February 1,
1968 (Exhibit 4-6, File No. 2-29145); Amendments
dated as of June 1, 1972 and April 15, 1983
(Exhibit 10(k) to 1983 Form 10-K, File No. 1-3446)
and April 24, 1985 (Exhibit 10(k) to 1985 Form
10-K, File No. 1-3446); Amendment dated as of June
1, 1985 (Exhibit 10(k) to 1987 Form 10-K, File No.
1-3446); Amendments dated as of May 6, 1988
(Exhibit 10(k) to 1988 Form 10-K, File No. 1-3446);
Amendment dated as of June 15, 1989 (Exhibit 10(k)
to 1989 Form 10-K, File No. 1-3446); Additional
Power Contract dated as of February 1, 1984
(Exhibit 10(k) to 1983 Form 10-K, File No. 1-3446);
Guarantee Agreement dated as of November 5, 1981
(Exhibit 10(j) to 1981 Form 10-K, File No. 1-3446).
(l) Yankee Atomic Electric Company et al. and New
England Power Company: Amended and Restated Power
Contract dated April 1, 1985 (Exhibit 10(l) to 1985
Form 10-K, File No. 1-3446); Amendment dated May 6,
1988 (Exhibit 10(l) to 1988 Form 10-K, File No.
1-3446); Amendments dated as of June 26, 1989 and
July 1, 1989 (Exhibit 10(l) to 1989 Form 10-K, File
No. 1-3446); Amendment dated as of February 1, 1992
(Exhibit 10(l) to 1992 Form 10-K, File No. 1-3446).
*(m) New England Electric Companies' Deferred
Compensation Plan as amended through November 26,
1996 (filed herewith).
*(n) New England Electric System Companies Retirement
Supplement Plan as amended through June 1, 1996
(filed herewith).
*(o) New England Electric Companies' Executive
Supplemental Retirement Plan I as amended through
May 20, 1996 (filed herewith).
*(p) New England Electric Companies' Executive
Supplemental Retirement Plan II as amended through
October 25, 1995 (filed herewith).
*(q) New England Electric Companies' Incentive
Compensation Plan I as amended through October 24,
1995 (filed herewith).
*(r) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to 1995 Form 10-K, File No. 1-
3446).
*(s) New England Electric Companies' Incentive
Compensation Plan III as amended through January
1, 1996 (filed herewith).
*(t) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to 1995 Form 10-K, File No. 1-
3446).
*(u) New England Electric System Directors Deferred
Compensation Plan as amended through December 1,
1996 (filed herewith).
*(v) Forms of Life Insurance Program (Exhibit 10(s) to
1986 Form 10-K, File No. 1-3446); and Form of Life
Insurance (Collateral Assignment) (Exhibit 10(t) to
1991 Form 10-K, File No. 1-3446).
*(w) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (filed
herewith).
*(x) New England Electric Companies' Long-Term
Performance Share Award Plan amended through
February 24, 1997 (filed herewith).
*(y) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (filed herewith).
*(z) Forms of Severance Protection Agreement (filed
herewith).
*(aa) New England Power Service Company and Joan T. Bok:
Service Credit Letter dated October 21, 1982
(Exhibit 10(cc) to 1992 Form 10-K, File No.
1-3446).
*(bb) New England Electric System and John W. Rowe:
Service Credit Letter dated December 5, 1988
(Exhibit 10(dd) to 1992 Form 10-K, File No.
1-3446).
*(cc) Agreement between New England Electric System and
John W. Rowe dated February 28, 1995 (filed
herewith).
*(dd) New England Power Service Company and the Company:
Form of Supplemental Pension Service Credit
Agreement (Exhibit 10(ee) to 1992 Form 10-K, File
No. 1-3446).
(ee) New England Power Company and New England
Hydro-Transmission Electric Company, Inc. et al:
Phase II Massachusetts Transmission Facilities
Support Agreement dated as of June 1, 1985 (Exhibit
10(t) to 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(t) to
1986 Form 10-K, File No. 1-3446); Amendments dated
as of February 1, 1987, June 1, 1987, September 1,
1987, and October 1, 1987 (Exhibit 10(u) to 1987
Form 10-K, File No. 1-3446); Amendment dated as of
August 1, 1988 (Exhibit 10(u) to 1988 Form 10-K,
File No. 1-3446); Amendment dated January 1, 1989
(Exhibit 10(u) to 1990 Form 10-K, File No. 1-3446).
(ff) New England Power Company and New England
Hydro-Transmission Corporation et al: Phase II New
Hampshire Transmission Facilities Support Agreement
dated as of June 1, 1985 (Exhibit 10(u) to 1986
Form 10-K, File No. 1-3446); Amendment dated as of
May 1, 1986 (Exhibit 10(u) to 1986 Form 10-K, File
No. 1-3446); Amendments dated as of February 1,
1987, June 1, 1987, September 1, 1987, and
October 1, 1987 (Exhibit 10(v) to 1987 Form 10-K,
File No. 1-3446); Amendment dated as of August
1,1988 (Exhibit 10(v) to 1988 Form 10-K, File No.
1-3446); Amendments dated January 1, 1989 and
January 1, 1990 (Exhibit 10(v) to 1990 Form 10-K,
File No. 1-3446).
(gg) New England Power Company et al: Phase II New
England Power AC Facilities Support Agreement dated
as of June 1, 1985 (Exhibit 10(v) to 1986 Form
10-K, File No. 1-3446); Amendment dated as of May
1, 1986 (Exhibit 10(v) to 1986 Form 10-K, File No.
1-3446); Amendments dated as of February 1, 1987,
June 1, 1987, and September 1, 1987 (Exhibit 10(w)
to 1987 Form 10-K, File No. 1-3446); Amendment
dated as of August 1, 1988 (Exhibit 10(w) to 1988
Form 10-K, File No. 1-3446).
(hh) New England Hydro-Transmission Electric Company,
Inc. and New England Electric System et al: Equity
Funding Agreement dated as of June 1, 1985 (Exhibit
10(w) to 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(w) to
1986 Form 10-K, File No. 1-3446); Amendment dated
as of September 1, 1987 (Exhibit 10(x) to 1987
Form 10-K, File No. 1-3446); Amendment dated as of
August 1, 1988 (Exhibit 10(x) to 1988 Form 10-K,
File No. 1-3446).
(ii) New England Hydro-Transmission Corporation and New
England Electric System et al: Equity Funding
Agreement dated as of June 1, 1985 (Exhibit 10(x)
to 1986 Form 10-K, File No. 1-3446); Amendment
dated as of May 1, 1986 (Exhibit 10(x) to 1986 Form
10-K, File No. 1-3446); Amendment dated as of
September 1, 1987 (Exhibit 10(y) to 1987 Form 10-K,
File No. 1-3446); Amendment dated as of August 1,
1988 (Exhibit 10(y) to 1988 Form 10-K, File No.
1-3446).
(jj) Ocean State Power, et al., and Narragansett Energy
Resources Company: Equity Contribution Agreement
dated as of December 29, 1988 (Exhibit 10(aa) to
1988 Form 10-K, File No. 1-3446); Amendment dated
as of September 29, 1989 (Exhibit 10(aa) to 1989
Form 10-K File No. 1-3446); Ocean State Power, et
al., and New England Electric System: Equity
Contribution Support Agreement dated as of
December 29, 1988 (Exhibit 10(aa) to 1988 Form
10-K, File No. 1-3446); Amendment dated as of
September 29, 1989 (Exhibit 10(aa) to 1989 Form
10-K, File No. 1-3446); Ocean State Power II, et
al., and Narragansett Energy Resources Company:
Equity Contribution Agreement dated as of September
29, 1989 (Exhibit 10(aa) to 1989 Form 10-K File No.
1-3446); Ocean State Power II, et al., and New
England Electric System: Equity Contribution
Support Agreement dated as of September 29, 1989
(Exhibit 10(aa) to 1989 Form 10-K File No. 1-3446).
(kk) NEES Energy, Inc./AllEnergy Marketing Company,
L.L.C.: Limited Liability Company Agreement dated
as of September 18, 1996 (Exhibit B-1 to Amendment
No. 1 to Form U-1, File No. 70-8921).
* Compensation related plan, contract, or arrangement.
(13) 1996 Annual Report to Shareholders (filed herewith).
(21) Subsidiary list appears in Part I of this document.
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
NEP
---
(3) (a) Articles of Organization as amended through June
27, 1987 (Exhibit 3(a) to 1988 Form 10-K, File No.
0-1229).
(b) By-laws of the Company as amended May 10, 1995
(Exhibit 3(b) to 1995 Form 10-K, File No. 0-1229).
(4) General and Refunding Mortgage Indenture and Deed of Trust
dated as of January 1, 1977 and twenty supplements thereto
(Exhibit 4(b) to 1980 Form 10-K, File No. 0-1229; Exhibit
4(b) to 1982 Form 10-K, File No. 0-1229; Exhibit 4(b) to
1983 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1985 Form
10-K, File No. 0-1229; Exhibit 4(b) to 1986 Form 10-K,
File No. 0-1229; Exhibit 4(b) to 1986 Form 10-K, File No.
0-1229; Exhibit 4(b) to 1988 Form 10-K, File No. 0-1229;
Exhibit 4(c)(ii) to 1989 NEES Form 10-K, File No. 1-3446;
Exhibit 4(c)(ii) to 1990 NEES Form 10-K, File No. 1-3446;
Exhibit 4(c)(ii) to 1991 NEES Form 10-K, File No. 1-3446;
Exhibit 4(c)(ii) to 1992 NEES Form 10-K, File No. 1-3446;
Exhibit 4(d) to 1993 NEES Form 10-K, File No. 1-3446;
Exhibit 4(d) to 1995 NEES Form 10-K, File No. 1-3446).
(10) Material Contracts
(a) Boston Edison Company et al. and the Company:
Amended REMVEC Agreement dated August 12, 1977
(Exhibit 5-4(d), File No. 2-61881).
(b) The Connecticut Light and Power Company et al. and
the Company: Sharing Agreement for Joint
Ownership, Construction and Operation of Millstone
Unit No. 3 dated as of September 1, 1973, and
Amendment dated as of August 1, 1974 (Exhibit 10-5,
File No. 2-52820); Amendments dated as of December
15, 1975 and April 1, 1986 (Exhibit 10(b) to NEES'
1990 Form 10-K File No. 1-3446). Transmission
Support Agreement dated August 9, 1974; Instrument
of Transfer to the Company with respect to the 1979
Connecticut Nuclear Unit, and Assumption of
Obligations, dated December 17, 1975 (Exhibit
10-6(b), File No. 2-57831).
(c) Connecticut Yankee Atomic Power Company et al. and
the Company: Stockholders Agreement dated July 1,
1964 (Exhibit 13-9-A, File No. 2-2006); Power
Purchase Contract dated July 1, 1964 (Exhibit
13-9-B, File No. 2-23006); Additional Power
Contract dated as of April 30, 1984 and 1996
Amendatory Agreement dated as of December 4, 1996
(Exhibit 10(c) to 1996 Form 10-K, File No. 1-3446);
Supplementary Power Contract dated as of April 1,
1987 (Exhibit 10(c) to 1987 Form 10-K, File No.
0-1229); Capital Funds Agreement dated September 1,
1964 (Exhibit 13-9-C, File No. 2-23006);
Transmission Agreement dated October 1, 1964
(Exhibit 13-9-D, File No. 2-23006); Agreement
revising Transmission Agreement dated July 1, 1979
(Exhibit to NEES' 1979 Form 10-K, File No. 1-3446);
Amendment revising Transmission Agreement dated as
of January 19, 1994 (Exhibit 10(c) to NEES' 1995
Form 10-K, File No. 1-3446; Five Year Capital
Contribution Agreement dated November 1, 1980
(Exhibit 10(e) to NEES' 1980 Form 10-K, File No.
1-3446).
(d) Maine Yankee Atomic Power Company et al. and the
Company: Capital Funds Agreement dated May 20,
1968 and Power Purchase Contract dated May 20, 1968
(Exhibit 4-5, File No. 2-29145); Amendments dated
as of January 1, 1984, March 1, 1984 (Exhibit 10(d)
to NEES' 1983 Form 10-K, File No. 1-3446); October
1, 1984, and August 1, 1985 (Exhibit 10(d) to NEES'
1985 Form 10-K, File No. 1-3446); Stockholders
Agreement dated May 20, 1968 (Exhibit 10-20; File
No. 2-34267); Additional Power Contract dated as of
February 1, 1984 (Exhibit 10(d) to NEES' 1985 Form
10-K, File No. 1-3446).
(e) Mass. Electric and the Company: Primary Service
for Resale dated February 15, 1974 (Exhibit
5-17(a), File No. 2-52969); Amendment of Service
Agreement dated June 22, 1983 (Exhibit 10(b) to
Mass. Electric's 1986 Form 10-K, File No. 0-5464);
Amendment of Service Agreement effective
November 1, 1993 (Exhibit 10(e) to 1993 Form 10-K,
File No. 0-1229); Memorandum of Understanding
effective May 22, 1994 (Exhibit 10(e) to 1994 Form
10-K, File No. 0-1229).
(f) The Narragansett Electric Company and the Company:
Primary Service for Resale dated February 15, 1974
(Exhibit 4-1(b), File No. 2-51292); Amendment of
Service Agreement dated July 26, 1990 (Exhibit 4(f)
to New England Power Company's 1990 Form 10-K, File
No. 0-1229). Amendment of Service Agreement dated
July 24, 1991 (Exhibit 10(f) to 1991 Form 10-K,
File No. 0-1229); Amendment of Service Agreement
effective November 1, 1993 (Exhibit 10(f) to 1993
Form 10-K, File No. 0- 1229); Memorandum of
Understanding effective May 22, 1994 (Exhibit 10(e)
to 1994 Form 10-K, File No. 0-1229); Amendment of
Service Agreement effective January 1, 1995
(Exhibit 10(f) to 1995 Form 10-K, File No. 0-1229).
(g) Time Charter between International Shipholding
Corp., and New England Power Company dated as of
October 27, 1994; Amendments dated as of September
22, 1995 (Exhibit 10(g) to 1995 Form 10-K, File No.
0-1229).
(h) Consent and Agreement among New England Power
Company, Central Gulf Lines, Inc., Enterprise Ship
Company, Inc., and The Bank of New York dated as of
September 28, 1995 (Exhibit 10(h) to 1995 Form 10-
K, File No. 0-1229).
(i) New England Electric Transmission Corporation et
al. and the Company: Phase I Terminal Facility
Support Agreement dated as of December 1, 1981
(Exhibit 10(g) to NEES' 1981 Form 10-K, File No.
1-3446); Amendments dated as of June 1, 1982 and
November 1, 1982 (Exhibit 10(f) to NEES' 1982 Form
10-K, File No. 1-3446); Agreement with respect to
Use of the Quebec Interconnection dated as of
December 1, 1981 (Exhibit 10(g) to NEES' 1981 Form
10-K, File No. 1-3446); Amendments dated as of May
1, 1982 and November 1, 1982 (Exhibit 10(f) to
NEES' 1982 Form 10-K, File No. 1-3446); Amendment
dated as of January 1, 1986 (Exhibit 10(f) to NEES'
1986 Form 10-K, File No. 1-3446); Agreement for
Reinforcement and Improvement of the Company's
Transmission System dated as of April 1, 1983
(Exhibit 10(f) to NEES' 1983 Form 10-K, File No.
1-3446); Lease dated as of May 16, 1983 (Exhibit
10(f) to NEES' 1983 Form 10-K, File No. 1-3446);
Upper Development-Lower Development Transmission
Line Support Agreement dated as of May 16, 1983
(Exhibit 10(f) to NEES' 1983 Form 10-K, File No.
1-3446).
(j) Vermont Electric Transmission Company, Inc. et al.
and the Company: Phase I Vermont Transmission Line
Support Agreement dated as of December 1, 1981;
Amendments dated as of June 1, 1982 and November 1,
1982 (Exhibit 10(g) to NEES' 1982 Form 10-K, File
No. 1-3446); Amendment dated as of January 1, 1986
(Exhibit 10(h) to NEES' 1986 Form 10-K, File No.
1-3446).
(k) New England Energy Incorporated and the Company:
Fuel Purchase Contract dated July 26, 1979, and
Amendment dated August 26, 1981 (Exhibit 10(f)(iii)
to NEES' 1981 Form 10-K, File No. 1-3446);
Amendment dated March 26, 1985, and Amendment
effective January 1, 1984 (Exhibit 10(e)(iii) to
NEES' 1985 Form 10-K, File No. 1-3446); Amendment
dated as of April 28, 1989 (Exhibit 10(e)(iii) to
1989 NEES Form 10-K, File No. 1-3446).
(l) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
March 1, 1973 (Exhibit 10-15, File No.
2-48543);Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
(Exhibit 10-3, File No. 2-68283); Amendment dated
September 1, 1981 (Exhibit 10(h) to NEES' 1981 Form
10-K, File No. 1-3446); Amendment dated December 1,
1981 (Exhibit 10(h) to NEES' 1982 Form 10-K, File
No. 1-3446); Amendments dated June 1, 1982,
June 15, 1983, and October 1, 1983 (Exhibit 10(i)
to NEES' 1983 Form 10-K, File 1-3446); Amendments
dated August 1, 1985, August 15, 1985, September 1,
1985, and January 1, 1986 (Exhibit 10(i) to NEES'
1985 Form 10-K, File No. 1-3446); Amendment dated
September 1, 1986 (Exhibit 10(i) to NEES' 1986 Form
10-K, File No. 1-3446); Amendment dated April 30,
1987 (Exhibit 10(i) to NEES' 1987 Form 10-K, File
No. 1-3446); Amendments dated March 1, 1988 and May
1, 1988 (Exhibit 10(i) to NEES' 1988 Form 10-K,
File No. 1-3446); Amendment dated March 15, 1989
(Exhibit 10(i) to 1989 NEES Form 10-K, File No.
1-3446); Amendment dated October 1, 1990 (Exhibit
10(i) to 1990 NEES Form 10-K, File No. 1-3446);
Amendment dated October 1, 1990 Exhibit 10(i) to
1990 NEES Form 10-K, File No. 1-3446); Amendment
dated as of September 15, 1992 (Exhibit 10(i) to
1992 NEES Form 10-K, File No. 1-3446); Amendments
dated as of June 1, 1993, July 1, 1995, and
September 1, 1995 (Exhibit 10(i) to 1995 NEES Form
10-K, File No. 1-3446); Amendment dated as of
December 1, 1996 (Exhibit 10(i) to 1996 NEES Form
10-K, File No. 1-3446).
(m) New England Power Service Company and the Company:
Specimen of Service Contract (Exhibit 10(l) to 1994
Form 10-K, File No. 0-1229).
(n) Massachusetts Electric Company, et al. and the
Company: Form of Mutual Assistance Agreement (filed
herewith).
(o) Massachusetts Electric Company, et al. and the
Company: Restructuring Settlement Agreement
approved by the Massachusetts Department of Public
Utilities (filed herewith).
(p) Public Service Company of New Hampshire et al. and
the Company: Agreement for Joint Ownership,
Construction and Operation of New Hampshire Nuclear
Units dated as of May 1, 1973; Amendments dated May
24, 1974, June 21, 1974, September 25, 1974 and
October 25, 1974 (Exhibit 10-18(b), File No.
2-52820); Amendment dated January 31, 1975 (Exhibit
10-16(b), File No. 2-57831); Amendments dated April
18, 1979, April 25, 1979, June 8, 1979, October 11,
1979, December 15, 1979, June 16, 1980, and
December 31, 1980 (Exhibit 10(i) to NEES' 1980 Form
10-K, File No. 1-3446); Amendments dated June 1,
1982, April 27, 1984, and June 15, 1984 (Exhibit
10(j) to NEES' 1984 Form 10-K, File No. 1-3446);
Amendments dated March 8, 1985, March 14, 1986,
May 1, 1986, and September 19, 1986 (Exhibit 10(j)
to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated November 12, 1987 (Exhibit 10(j) to
NEES' 1987 Form 10-K, File No. 1-3446); Amendment
dated January 13, 1989 (Exhibit 10(j) to NEES' 1990
Form 10-K, File No. 1-3446); Seventh Amendment as
of November 1, 1990 (Exhibit 10(m) to NEES' 1991
Form 10-K, File No. 1-3446). Transmission Support
Agreement dated as of May 1, 1973 (Exhibit 10-23,
File No. 2-49184); Instrument of Transfer to the
Company with respect to the New Hampshire Nuclear
Units and Assumptions of Obligations dated December
17, 1975 and Agreement Among Participants in New
Hampshire Nuclear Units, certain Massachusetts
Municipal Systems and Massachusetts Municipal
Wholesale Electric Company dated May 28, 1976
(Exhibit 16(c), File No. 2-57831); Seventh
Amendment To and Restated Agreement for Seabrook
Project Disbursing Agent dated as of November 1,
1990 (Exhibit 10(m) to NEES' 1991 Form 10-K, File
No. 1-3446); Amendments dated as of June 29, 1992
(Exhibit 10(j) to NEES' 1992 Form 10-K, File No. 1-
3446). Settlement Agreement dated as of July 19,
1990 between Northeast Utilities Service Company
and the Company (Exhibit 10(m) to NEES' 1991 Form
10-K, File No. 1-3446). Seabrook Project Managing
Agent Operating Agreement dated as of June 29,
1992, Amendment to Seabrook Project Managing Agent
Operating Agreement dated as of June 29, 1992
(Exhibit 10(j) to NEES' 1992 Form 10-K, File No. 1-
3446).
(q) Vermont Yankee Nuclear Power Corporation et al. and
the Company: Capital Funds Agreement dated
February 1, 1968, Amendment dated March 12, 1968
and Power Purchase Contract dated February 1, 1968
(Exhibit 4-6, File No. 2-29145); Amendments dated
as of June 1, 1972, April 15, 1983 (Exhibit 10(k)
to NEES' 1983 Form 10-K, File No. 0-1229) and
April 24, 1985 (Exhibit 10(n) to NEES' 1985 Form
10-K, File No. 1-3446); Amendment dated as of
June 1, 1985 (Exhibit 10(n) to 1988 Form 10-K, File
No. 0-1229); Amendments dated May 6, 1988 (Exhibit
10(n) to 1988 Form 10-K, File No. 0-1229);
Amendment dated as of June 15, 1989 (Exhibit 10(k)
to 1989 NEES Form 10-K, File No. 1-3446);
Additional Power Contract dated as of February 1,
1984 (Exhibit 10(k) to NEES' 1983 Form 10-K, File
No. 1-3446); Guarantee Agreement dated as of
November 5, 1981 (Exhibit 10(j) to NEES' 1981 Form
10-K, File No. 1-3446).
(r) Yankee Atomic Electric Company et al. and the
Company: Amended and Restated Power Contract dated
April 1, 1985 (Exhibit 10(l) to NEES' 1985 Form
10-K, File No. 1-3446); Amendment dated May 6, 1988
(Exhibit 10(l) to NEES' 1988 Form 10-K, File No.
1-3446); Amendments dated as of June 26, 1989 and
July 1, 1989 (Exhibit 10(l) to 1989 NEES Form 10-K,
File No. 1-3446); Amendment dated as of February 1,
1992 (Exhibit 10(l) to 1992 NEES Form 10-K, File
No. 1-3446).
*(s) New England Electric Companies' Deferred
Compensation Plan as amended through November 26,
1996 (Exhibit 10(m) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(t) New England Electric System Companies Retirement
Supplement Plan as amended through June 1, 1996
(Exhibit 10(n) to NEES' 1996 Form 10-K, File No.
1-3446).
*(u) New England Electric Companies' Executive
Supplemental Retirement Plan I as amended through
May 20, 1996 (Exhibit 10(o) to NEES' 1996 Form
10-K, File No. 1-3446).
*(v) New England Electric Companies Executive
Supplemental Retirement Plan II as amended through
October 25, 1995 (Exhibit 10(p) to NEES' 1996 Form
10-K, File No. 1-3446).
*(w) New England Electric Companies' Incentive
Compensation Plan I as amended through October 24,
1995 (Exhibit 10(p) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(x) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(y) New England Electric Companies' Incentive
Compensation Plan III as amended through January 1,
1996 (Exhibit 10(s) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(z) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(aa) Forms of Life Insurance Program: (Exhibit 10(s) to
NEES' 1986 Form 10-K, File No. 1-3446); and Form of
Life Insurance (Collateral Assignment) (Exhibit
10(t) to NEES' 1991 Form 10-K, File No. 1-3446).
*(bb) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (Exhibit
10 (w) to NEES 1996 Form 10-K, File No. 1-3446).
*(cc) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10(y) to 1996 NEES
Form 10-K, File No. 1-3446.
*(dd) Forms of Severance Protection Agreement (Exhibit 10
(z) to NEES' 1996 Form 10-K, File No. 1-3446).
*(ee) New England Electric Companies' Long-Term
Performance Share Award Plan amended through
February 24, 1997 (Exhibit 10(x) to NEES' 1996 Form
10-K, File No. 1-3446).
(ff) New England Hydro-Transmission Electric Company,
Inc. et al. and the Company: Phase II
Massachusetts Transmission Facilities Support
Agreement dated as of June 1, 1985 (Exhibit 10(t)
to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(t) to
NEES' 1986 Form 10-K, File No. 1-3446); Amendments
dated as of February 1, 1987, June 1, 1987,
September 1, 1987, and October 1, 1987 (Exhibit
10(u) to NEES' 1987 Form 10-K, File No. 1-3446);
Amendment dated as of August 1, 1988 (Exhibit 10(u)
to NEES' 1988 Form 10-K, File No. 1-3446);
Amendment dated January 1, 1989 (Exhibit 10(u) to
NEES' 1990 Form 10-K, File No. 1-3446).
(gg) New England Hydro-Transmission Corporation et al.
and the Company: Phase II New Hampshire
Transmission Facilities Support Agreement dated as
of June 1, 1985 (Exhibit 10(u) to NEES' 1986 Form
10-K, File No. 1-3446); Amendment dated as of
May 1, 1986 (Exhibit 10(u) to NEES' 1986 Form 10-K,
File No. 1-3446); Amendments dated as of February
1, 1987, June 1, 1987, September 1, 1987, and
October 1, 1987 (Exhibit 10(v) to NEES' 1987 Form
10-K, File No. 1-3446). Amendment dated as of
August 1, 1988 (Exhibit 10(v) to NEES' 1988 Form
10-K, File No. 1-3446); Amendments dated January 1,
1989 and January 1, 1990 (Exhibit 10 (v) to NEES'
1990 Form 10-K, File No. 1-3446).
(hh) Vermont Electric Power Company et al. and the
Company: Phase II New England Power AC Facilities
Support Agreement dated as of June 1, 1985 (Exhibit
10(v) to NEES' 1986 Form 10-K, File No. 1-3446);
Amendment dated as of May 1, 1986 (Exhibit 10(v) to
NEES' 1986 Form 10-K, File No. 1-3446). Amendments
dated as of February 1, 1987, June 1, 1987, and
September 1, 1987 (Exhibit 10(w) to NEES' 1987 Form
10-K, File No. 1-3446); Amendment dated as of
August 1, 1988 (Exhibit 10(w) to NEES' 1988 Form
10-K, File No. 1-3446).
* Compensation related plan, contract, or arrangement.
(13) 1996 Annual Report to Stockholders (filed herewith).
(21) Subsidiary list (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
Mass. Electric
--------------
(3) (a) Articles of Organization of the Company as amended
March 5, 1993, August 11, 1993, September 20, 1993,
and November 15, 1993 (Exhibit 3(a) to 1993 Form
10-K, File No. 0-5464).
(b) By-Laws of the Company as amended February 4, 1993,
July 30, 1993, and September 15, 1993 (Exhibit 3(b)
to 1993 Form 10-K, File No. 0-5464).
(4) First Mortgage Indenture and Deed of Trust, dated as of
July 1, 1949, and twenty-one supplements thereto (Exhibit
7-A, File No. 1-8019; Exhibit 7-B, File No. 2-8836;
Exhibit 4-C, File No. 2-9593; Exhibit 4 to 1980 Form 10-K,
File No. 2-8019; Exhibit 4 to 1982 Form 10-K, File No.
0-5464; Exhibit 4 to 1986 Form 10-K, File No. 0-5464);
Exhibit 4 to 1988 Form 10-K, File No. 0-5464; Exhibit 4(a)
to 1989 NEES Form 10-K, File No. 1-3446; Exhibit 4(a) to
1992 NEES Form 10-K, File No. 1-3446; Exhibit 4(a) to 1993
NEES Form 10-K, File No. 1-3446; Exhibit 4(a) to 1995 NEES
Form 10-K, File No. 1-3446).
(10) Material Contracts
(a) Boston Edison Company et al. and Company: Amended
REMVEC Agreement dated August 12, 1977 (Exhibit
5-4(d), File No. 2-61881).
(b) New England Power Company and the Company: Primary
Service for Resale dated February 15, 1974 (Exhibit
5-17(a), File No. 2-52969); Amendment of Service
Agreement dated July 22, 1983 (Exhibit 10(b) to
1986 Form 10-K, File No. 0-5464); Amendment of
Service Agreement effective November 1, 1993
(Exhibit 10(e) to 1993 NEP Form 10-K, File No. 0-
1229); Memorandum of Understanding effective May
22, 1994 (Exhibit 10(e) to 1994 NEP Form 10-K, File
No. 0-1229).
(c) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
and March 1, 1973 (Exhibit 10-15, File No.
2-48543); Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
(Exhibit 10-3, File No. 2-68283); Amendment dated
September 1, 1981 (Exhibit 10(h) to NEES' 1981 Form
10-K, File No. 1-3446); Amendment dated as of
December 1, 1981 (Exhibit 10(h) to NEES' 1982 Form
10-K, File No. 1-3446); Amendments dated June 1,
1982, June 15, 1983, and October 1, 1983 (Exhibit
10(i) to NEES' 1983 Form 10-K, File No. 1-3446);
Amendments dated August 1, 1985, August 15, 1985,
September 1, 1985, and January 1, 1986 (Exhibit
10(i) to NEES' 1985 Form 10-K, File No. 1-3446);
Amendment dated September 1, 1986 (Exhibit 10(i) to
NEES' 1986 Form 10-K, File No. 1-3446); Amendments
dated April 30, 1987 (Exhibit 10(i) to NEES' 1987
Form 10-K, File No. 1-3446); Amendments dated
March 1, 1988 and May 1, 1988 (Exhibit 10(i) to
NEES' 1988 Form 10-K, File No. 1-3446); Amendment
dated March 15, 1989 (Exhibit 10(i) to 1989 NEES
Form 10-K, File No. 1-3446). Amendment dated
October 1, 1990 (Exhibit 10(i) to 1990 NEES Form
10-K, File No. 1-3446); Amendment dated as of
September 15, 1992 (Exhibit 10(i) to 1992 NEES Form
10-K, File No. 1-3446). Amendments dated as of
June 1, 1993, July 1, 1995, and September 1, 1995
(Exhibit 10(i) to 1995 NEES Form 10-K, File No. 1-
3446); Amendment dated as of December 1, 1996
(Exhibit 10(i) to 1996 NEES Form 10-K, File No. 1-
3446).
(d) New England Power Service Company and the Company:
Specimen of Service Contract (Exhibit 10(l) to 1994
NEP Form 10-K, File No. 0-1229).
(e) New England Power Company et al. and the Company:
Form of Mutual Assistance Agreement (Exhibit 10(n)
to 1996 NEP Form 10-K, File No. 0-1229).
(f) New England Power Company et al. and the Company:
Restructuring Settlement Agreement approved by the
Massachusetts Department of Public Utilities
February 26, 1997 (Exhibit 10(o) to 1996 Form 10-K,
File No. 0-1229).
(g) New England Telephone and Telegraph Company and the
Company: Specimen of Joint Ownership Agreement for
Wood Poles (Exhibit 4(e), File No. 2-24458).
*(h) New England Electric Companies' Deferred
Compensation Plan as amended through November 26,
1996 (Exhibit 10(m) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(i) New England Electric System Companies Retirement
Supplement Plan as amended through June 1, 1996
(Exhibit 10(n) to NEES' 1996 Form 10-K, File No.
1-3446).
*(j) New England Electric Companies' Executive
Supplemental Retirement Plan I as amended through
May 20, 1996 (Exhibit 10(o) to NEES' 1996 Form
10-K, File No. 1-3446).
*(k) New England Electric Companies' Executive
Supplemental Retirement Plan II as amended through
October 25, 1995 (Exhibit 10(p) to NEES' 1996 Form
10-K, File No. 1-3446).
*(l) New England Electric Companies' Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(p) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(m) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(n) New England Electric Companies' Incentive
Compensation Plan III as amended through January 1,
1996 (Exhibit 10(s) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(o) New England Electric Companies' Form of Deferred
Compensation Agreement for Directors (Exhibit 10(p)
to NEES' 1980 Form 10-K, File No. 1-3446).
*(p) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(q) Forms of Life Insurance Program: (Exhibit 10(s) to
NEES' 1986 Form 10-K, File No. 1-3446); and Form of
Life Insurance (Collateral Assignment) (Exhibit
10(t) to NEES' 1991 Form 10-K, File No. 1-3446).
*(r) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (Exhibit
10(w) to NEES' 1996 Form 10-K, File No. 1-3446).
*(s) New England Electric Companies' Long-Term
Performance Share Award Plan amended through
February 24, 1997 (Exhibit 10 (x) to NEES' 1996
Form 10-K, File No. 1-3446).
*(t) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10(y) to NEES' 1996
Form 10-K, File No. 1-3446.
*(u) Forms of Severance Protection Agreement (Exhibit 10
(z) to NEES' 1996 Form 10-K, File No. 1-3446).
*(v) New England Power Service Company and the Company:
Form of Supplemental Pension Service Credit
Agreement (Exhibit 10(ee) to 1992 NEES Form 10-K,
File No. 1-3446).
* Compensation related plan, contract, or arrangement.
(12) Statement re computation of ratios for incorporation by
reference into the Mass. Electric registration statement
on Form S-3, Commission File No. 33-59145 (filed
herewith).
(13) 1996 Annual Report to Stockholders (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
Narragansett
------------
(3) (a) Articles of Incorporation as amended June 9, 1988
(Exhibit 3(a) to 1988 Form 10-K, File No. 0-898).
(b) By-Laws of the Company (Exhibit 3 to 1980 Form
10-K, File No. 0-898).
(4) (a) First Mortgage Indenture and Deed of Trust, dated
as of September 1, 1944, and twenty-two supplements
thereto (Exhibit 7-1, File No. 2-7042; Exhibit 7-B,
File No. 2-7490; Exhibit 4-C, File No. 2-9423;
Exhibit 4-D, File No. 2-10056; Exhibit 4 to 1980
Form 10-K, File No. 0-898; Exhibit 4 to 1982 Form
10-K, File No. 0-898; Exhibit 4 to 1983 Form 10-K,
File No. 0-898; Exhibit 4 to 1985 Form 10-K, File
No. 0-898; Exhibit 4 to 1986 Form 10-K, File No.
0-898; Exhibit 4 to 1987 Form 10-K, File No. 0-898;
Exhibit 4(b) to 1991 NEES Form 10-K, File No.
1-3446; Exhibit 4(b) to 1992 NEES Form 10-K, File
No. 1-3446; Exhibit 4(b) to 1993 NEES Form 10-K,
File No. 1-3446; Exhibit 4(b) to 1995 NEES Form 10-
K, File No. 1-3446).
(b) The Narragansett Electric Company Preference
Provisions, as amended, dated March 23, 1993
(Exhibit 4(c) to 1993 NEES Form 10-K, File No. 1-
3446).
(10) Material Contracts
(a) Boston Edison Company et al. and the Company:
Amended REMVEC Agreement dated August 12, 1977
(Exhibit 5-4(d), File No. 2-61881).
(b) New England Power Company and the Company: Primary
Service for Resale dated February 15, 1974 (Exhibit
4-1(b), File No. 2-51292); Amendment of Service
Agreement dated July 26, 1990 (Exhibit 10(f) to
1990 NEP Form 10-K, File No. 0-1229); Amendment of
Service Agreement dated July 24, 1991 (Exhibit 4(f)
to 1991 NEP Form 10-K, File No. 0-1229); Amendment
of Service Agreement effective November 1, 1993
(Exhibit 10(f) to 1993 NEP Form 10-K, File No. 0-
1229); Memorandum of Understanding effective May
22, 1994 (Exhibit 10(f) to 1994 NEP Form 10-K, File
No. 0-1229); Amendment of Service Agreement
effective January 1, 1995 (Exhibit 10(f) to 1995
NEP Form 10-K, File No. 0-1229).
(c) New England Power Pool Agreement: (Exhibit 4(e),
File No. 2-43025); Amendments dated July 1, 1972,
and March 1, 1973 (Exhibit 10-15, File No.
2-48543); Amendment dated March 15, 1974 (Exhibit
10-5, File No. 2-52775); Amendment dated June 1,
1975 (Exhibit 10-14, File No. 2-57831); Amendment
dated September 1, 1975 (Exhibit 10-13, File No.
2-59182); Amendments dated December 31, 1976,
January 31, 1977, July 1, 1977, and August 1, 1977
(Exhibit 10-16, File No. 2-61881); Amendments dated
August 15, 1978, January 3, 1980, and February 1980
(Exhibit 10-3, File No. 2-68283); Amendment dated
September 1, 1981 (Exhibit 10(h) to NEES' 1981 Form
10-K, File No. 1-3446); Amendment dated December 1,
1981 (Exhibit 10(h) to NEES' 1982 Form 10-K, File
No. 1-3446); Amendments dated June 1, 1982,
June 15, 1983, and October 1, 1983 (Exhibit 10(i)
to NEES' 1983 Form 10-K, File No. 1-3446);
Amendments dated August 1, 1985, August 15, 1985,
September 1, 1985, and January 1, 1986 (Exhibit 10
(i) to NEES' 1985 Form 10-K, File No. 1-3446);
Amendment dated September 1, 1986 (Exhibit 10(i) to
NEES' 1986 Form 10-K, File No. 1-3446); Amendment
dated April 30, 1987 (Exhibit 10(i) to NEES' 1987
Form 10-K, File No. 1-3446); Amendments dated March
1, 1988 and May 1, 1988 (Exhibit 10(i) to NEES'
1988 Form 10-K, File No. 1-3446); Amendment dated
March 15, 1989 (Exhibit 10(i) to 1989 NEES Form
10-K, File No. 1-3446). Amendment dated October 1,
1990 (Exhibit 10(i) to 1990 NEES' Form 10-K, File
No. 1-3446); Amendment dated as of September 15,
1992 (Exhibit 10(i) to NEES' 1992 Form 10-K, File
No. 1-3446); Amendments dated as of June 1, 1993,
July 1, 1995, and September 1, 1995 (Exhibit 10(i)
to NEES' 1995 Form 10-K, File No. 1-3446);
Amendment dated as of December 1, 1996 (Exhibit
10(i) to 1996 NEES Form 10-K, File No. 1-3446).
(d) New England Power Service Company and the Company:
Specimen of Service Contract (Exhibit 4(l) to 1994
NEP Form 10-K, File No. 0-1229).
(e) New England Power Company et al. and the Company:
Form of Mutual Assistance Agreement (Exhibit 10 (n)
to 1996 Form 10-K, File No. 0-1229).
(f) New England Telephone and Telegraph Company and the
Company: Specimen of Joint Ownership Agreement for
Wood Poles (Exhibit 3(d), File No. 2-24458).
*(g) New England Electric Companies' Deferred
Compensation Plan, as amended through November 26,
1996 (Exhibit 10(m) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(h) New England Electric System Companies Retirement
Supplement Plan, as amended through June 1, 1996
(Exhibit 10(n) to NEES' 1996 Form 10-K, File No.
1-3446).
*(i) New England Electric Companies' Executive
Supplemental Retirement Plan I, as amended through
May 20, 1996 (Exhibit 10(o) to NEES' 1996
Form 10-K, File No. 1-3446).
*(j) New England Electric Companies' Executive
Supplemental Retirement Plan II, as amended through
October 25, 1995 (Exhibit 10(p) to NEES' 1996
Form 10-K, File No. 1-3446).
*(k) New England Companies' Incentive Compensation Plan,
as amended through January 1, 1995 (Exhibit 10(p)
to NEES' 1995 Form 10-K, File No. 1-3446).
*(l) New England Electric Companies' Incentive
Compensation Plan II as amended through January 1,
1995 (Exhibit 10(r) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(m) New England Electric Companies' Incentive
Compensation Plan III as amended through January 1,
1996 (Exhibit 10(s) to NEES' 1996 Form 10-K, File
No. 1-3446).
*(n) New England Electric Companies' Form of Deferred
Compensation Agreement for Directors (Exhibit 10(p)
to NEES' 1980 Form 10-K, File No. 1-3446).
*(o) New England Electric Companies' Senior Incentive
Compensation Plan as amended through January 1,
1995 (Exhibit 10(q) to NEES' 1995 Form 10-K, File
No. 1-3446).
*(p) Forms of Life Insurance Program (Exhibit 10(s) to
NEES' 1986 Form 10-K, File No. 1-3446); and Form of
Life Insurance (Collateral Assignment) (Exhibit
10(t) to NEES' 1991 Form 10-K, File No. 1-3446).
*(q) New England Electric Companies' Incentive Share
Plan as amended through February 24, 1997 (Exhibit
10(u) to NEES' 1995 Form 10-K, File No. 1-3446).
*(r) New England Power Service Company and the Company:
Form of Supplemental Pension Service Credit
Agreement (Exhibit 10(ee) to 1992 NEES Form 10-K,
File No. 1-3446).
*(s) New England Electric Companies Long-Term
Performance Share Award Plan amended through
February 24, 1997 (Exhibit 10 (x) to NEES' 1996
Form 10-K, File No. 1-3446).
*(t) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10 (y) to NEES 1996
Form 10-K, File No. 1-3446).
*(u) Forms of Severance Protection Agreement (Exhibit
10(z) to NEES' 1996 Form 10-K, File No. 1-3446).
* Compensation related plan, contract, or arrangement.
(12) Statement re computation of ratios for incorporation by
reference into the Narragansett registration statement on
Form S-3, Commission File No. 33-61131 (filed herewith).
(13) 1996 Annual Report to Stockholders (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (filed herewith).
Reports on Form 8-K
NEES
----
NEES filed reports on Form 8-K dated February 1, 1996, February
16, 1996, May 30, 1996, September 12, 1996, September 18, 1996, and
October 1, 1996, all of which contained Item 5.
NEP
---
NEP filed reports on Form 8-K dated February 1, 1996, February
16, 1996, May 30, 1996, September 12, 1996, and October 1, 1996,
all of which contained Item 5.
Mass. Electric
--------------
Mass. Electric filed reports on Form 8-K dated February 16,
1996, September 12, 1996, and October 1, 1996, all of which
contained Item 5.
Narragansett
------------
Narragansett filed reports on Form 8-K dated February 7, 1996,
May 30, 1996, and October 1, 1996, all of which contained Item 5.
NEW ENGLAND ELECTRIC SYSTEM
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.
NEW ENGLAND ELECTRIC SYSTEM*
s/John W. Rowe
John W. Rowe
President and
Chief Executive Officer
March 28, 1997
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 date indicated.
(Signature and Title)
Principal Executive Officer
s/John W. Rowe
John W. Rowe
President and
Chief Executive Officer
Principal Financial Officer
s/Alfred D. Houston
Alfred D. Houston
Executive Vice President and
Chief Financial Officer
Principal Accounting Officer
s/Michael E. Jesanis
Michael E. Jesanis
Vice President and Treasurer
Directors (a majority)
Joan T. Bok
William M. Bulger
Paul L. Joskow
Edward H. Ladd
Joshua A. McClure
John W. Rowe s/John G. Cochrane
George M. Sage All by:
Charles E. Soule John G. Cochrane
Anne Wexler Attorney-in-fact
James Q. Wilson
James R. Winoker
Date (as to all signatures on this page)
March 28, 1997
*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.
NEW ENGLAND POWER COMPANY
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. The signature
of the undersigned company shall be deemed to relate only to matters having
reference to such company.
NEW ENGLAND POWER COMPANY
s/Jeffrey D. Tranen
Jeffrey D. Tranen
President
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 date indicated. The signature of
each of the undersigned shall be deemed to relate only to matters having
reference to the above-named company.
(Signature and Title)
Principal Executive Officer
s/Jeffrey D. Tranen
Jeffrey D. Tranen
President
Principal Financial Officer
s/Michael E. Jesanis
Michael E. Jesanis
Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Joan T. Bok
Alfred D. Houston s/John G. Cochrane
Cheryl A. LaFleur
John W. Rowe All by:
Jeffrey D. Tranen John G. Cochrane
Attorney-in-fact
Date (as to all signatures on this page)
March 28, 1997
MASSACHUSETTS ELECTRIC COMPANY
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. The signature
of the undersigned company shall be deemed to relate only to matters having
reference to such company.
MASSACHUSETTS ELECTRIC COMPANY
s/Lawrence J. Reilly
Lawrence J. Reilly
President
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 date indicated. The signature of
each of the undersigned shall be deemed to relate only to matters having
reference to the above-named company.
(Signature and Title)
Principal Executive Officer
s/Lawrence J. Reilly
Lawrence J. Reilly
President
Principal Financial Officer
s/Michael E. Jesanis
Michael E. Jesanis
Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Urville J. Beaumont
Joan T. Bok
Sally L. Collins
Kalyan K. Ghosh
Patricia McGovern s/John G. Cochrane
John F. Reilly, Jr. All by:
Lawrence J. Reilly John G. Cochrane
John W. Rowe Attorney-in-fact
Richard P. Sergel
Roslyn M. Watson
Date (as to all signatures on this page)
March 28, 1997
THE NARRAGANSETT ELECTRIC COMPANY
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. The signature
of the undersigned company shall be deemed to relate only to matters having
reference to such company.
THE NARRAGANSETT ELECTRIC COMPANY
s/Robert L. McCabe
Robert L. McCabe
President
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 date indicated. The signature of
each of the undersigned shall be deemed to relate only to matters having
reference to the above-named company.
(Signature and Title)
Principal Executive Officer
s/Robert L. McCabe
Robert L. McCabe
President
Principal Financial Officer
s/Alfred D. Houston
Alfred D. Houston
Vice President and Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Joan T. Bok
Stephen A. Cardi s/John G. Cochrane
Richard W. Frost All by:
Frances H. Gammell
Joseph J. Kirby John G. Cochrane
Robert L. McCabe Attorney-in-fact
Willliam E. Trueheart
Date (as to all signatures on this page)
March 28, 1997
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
References (Page)
-----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 46
Statements of Consolidated Income,
Year Ended December 31, 1996, 1995 and 1994............. 27
Statements of Consolidated Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............. 27
Consolidated Balance Sheets, December 31, 1996 and 1995... 28
Consolidated Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............. 29
Consolidated Statements of Capitalization,
December 31, 1996 and 1995.............................. 30
Notes to Financial Statements............................... 31-45
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants........................ 115
* Incorporated by Reference
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the registration
statements of New England Electric System on Form S-3 of the Dividend
Reinvestment and Common Share Purchase Plan (File No. 33-12313) and on
Forms S-8 of the New England Electric System Companies Incentive Thrift
Plan (File No. 33-26066), the New England Electric System Companies
Incentive Thrift Plan II (File No. 33-35470) and the Yankee Atomic
Electric Company Thrift Plan (File No. 2-67531) of our report dated
February 28, 1997 on our audits of the consolidated financial statements
of New England Electric System and subsidiaries as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31,
1996, which report is incorporated by reference in this Annual Report on
Form 10-K.
We also consent to the incorporation by reference in the registration
statements of New England Power Company on Forms S-3 (File Nos. 33-48257,
33-48897, and 33-49193) Massachusetts Electric Company on Form S-3 (File
No. 33-59145) and The Narragansett Electric Company on Form S-3 (File No.
33-61131) of our reports dated February 28, 1997 on our audits of the
financial statements of New England Power Company, Massachusetts Electric
Company and The Narragansett Electric Company, respectively, as of
December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, which reports are incorporated by reference in
this Annual Report on Form 10-K.
s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
March 28, 1997
NEW ENGLAND POWER COMPANY
INDEX TO FINANCIAL STATEMENTS
References (Page)
----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 2
Statements of Income,
Year Ended December 31, 1996, 1995 and 1994............... 17
Statements of Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............... 17
Balance Sheets, December 31, 1996 and 1995.................. 18
Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............... 19
Notes to Financial Statements............................... 20-44
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants....................... 115
* Incorporated by Reference
MASSACHUSETTS ELECTRIC COMPANY
INDEX TO FINANCIAL STATEMENTS
References (Page)
----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 2
Statements of Income,
Year Ended December 31, 1996, 1995 and 1994............... 10
Statements of Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............... 10
Balance Sheets, December 31, 1996 and 1995.................. 11
Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............... 12
Notes to Financial Statements............................... 13-28
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants........................ 115
* Incorporated by Reference
THE NARRAGANSETT ELECTRIC COMPANY
INDEX TO FINANCIAL STATEMENTS
References (Page)
----------------------
1996 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 2
Statements of Income,
Year Ended December 31, 1996, 1995 and 1994............... 10
Statements of Retained Earnings,
Year Ended December 31, 1996, 1995 and 1994............... 10
Balance Sheets, December 31, 1996 and 1995.................. 11
Statements of Cash Flows,
Year Ended December 31, 1996, 1995 and 1994............... 12
Notes to Financial Statements............................... 13-27
For the Year Ended December 31, 1996, 1995 and 1994:
Consent of Independent Accountants........................ 115
* Incorporated by Reference