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, 1997
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. ( )
Securities registered pursuant to Section 12(b) of the Act:
Outstanding at Name of each exchange
Registrant Title of each class March 18, 1998 on which registered
- ---------- ------------------- -------------- ---------------------
New England Common Shares 64,161,560 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 Dividend Series Preferred Stock
Power Company
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, 1998 March 18, 1998
---------------------- ------------------------
New England $2,823,108,640 64,161,560 ($1 par value)
Electric System
New England $1,693,285 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 Parts I and II
Shareholders for the year ended
December 31, 1997 of the following
companies, as set forth in Parts I
and 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 28, 1998, 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................................ 3
Industry Restructuring................................ 3
Outlook............................................. 4
Massachusetts Legislation and Settlement Agreement.. 4
Rhode Island Legislation and Settlement Agreement... 6
New Hampshire Legislation and Settlement Agreement.. 6
Unaffiliated Customers.............................. 7
Divestiture of Generating Business.................. 7
Risk Factors........................................ 9
Other............................................... 9
Electricity Delivery Companies........................ 9
Mass. Electric
Description of Business........................... 9
Rates............................................. 10
Narragansett
Description of Business........................... 11
Rates............................................. 12
Granite State
Description of Business........................... 13
Rates............................................. 13
Nantucket
Description of Business........................... 13
Recovery of Demand-Side Management Expenditures..... 14
Transmission and Generation Business.................. 14
NEP
Description of Business........................... 14
Rates............................................. 15
Unregulated Business.................................. 16
Operating Revenues.................................... 17
Electric Utility Properties........................... 19
Transmission, Distribution, and Generation
Properties........................................ 19
Map - Electric Utility Properties................... 25
Nuclear Units....................................... 26
Divestiture of Nonnuclear Generating Business....... 31
Energy Mix.......................................... 31
Fuel for Generation................................. 31
Oil and Gas Operations.............................. 33
Nonutility Power Producer Information............... 33
Hydroelectric Project Licensing..................... 34
Ocean State Power................................... 35
PAGE
Regulatory and Environmental Matters.................. 35
Regulation.......................................... 35
Environmental Requirements.......................... 36
Construction and Financing............................ 38
Research and Development.............................. 42
EXECUTIVE OFFICERS......................................... 43
ITEM 2. PROPERTIES....................................... 47
ITEM 3. LEGAL PROCEEDINGS................................ 47
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.......................................... 48
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SECURITY HOLDER MATTERS.................. 50
ITEM 6. SELECTED FINANCIAL DATA.......................... 50
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............. 51
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK...................................... 52
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...... 52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.............. 53
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT....................................... 53
ITEM 11. EXECUTIVE COMPENSATION........................... 56
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................... 69
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS... 72
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K................. 72
INDEX TO FINANCIAL STATEMENTS.............................. 102
GLOSSARY OF TERMS
Term Meaning
---- -------
AFDC allowance for funds used during
construction
AllEnergy AllEnergy Marketing Company, LLC
Connecticut Yankee Connecticut Yankee Atomic Power Company
DOE U.S. Department of Energy
DOER Massachusetts Division of Energy
Resources
DSM demand-side management
EPA U.S. Environmental Protection Agency
Electricity Delivery Mass. Electric, Narragansett, Granite
Companies State, and Nantucket
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 80 Financial Accounting Standards No. 80,
Accounting for Futures Contracts
Firm Energy agreement between NEPOOL members and
Contract Hydro-Quebec
Granite State Granite State Electric Company
Granite State Granite State Energy, Inc.
Energy
Interconnection transmission interconnection between
participating New England utilities
and Hydro-Quebec
ISO Independent System Operator
kWh kilowatt hour
Maine Yankee Maine Yankee Atomic Power Company
Mass. Electric Massachusetts Electric Company
Mass. Hydro New England Hydro-Transmission Electric
Company, Inc.
Massachusetts settlement agreement previously reached
Settlement among the NEES companies' Massachusetts
subsidiaries
MDPU Massachusetts Department of Public
Utilities
MDTE Massachusetts Department of
Telecommunications and Energy
MW megawatts
Nantucket Nantucket Electric Company
Narragansett The Narragansett Electric Company
N.E. Hydro Finance New England Hydro Finance Company, Inc.
NEEI New England Energy Incorporated
NEES New England Electric System
NEESCom NEES Communications, Inc.
NEES companies the subsidiaries of NEES
NEES Global NEES Global Transmission, Inc.
NEET New England Electric Transmission
Corporation
NEP New England Power Company
NEES Energy NEES Energy, Inc.
NEPOOL New England Power Pool
NEUs New England Utilities
N.H. Hydro New England Hydro-Transmission
Corporation
GLOSSARY OF TERMS
Term Meaning
---- -------
NOx nitrogen oxide
NRC Nuclear Regulatory Commission
OSP Ocean State Power
OSP II Ocean State Power II
PCRBs pollution control revenue bonds
PG&E PG&E Corporation
PBOPs postretirement benefits other than
pensions
PPCA purchased power cost adjustment
Resources Narragansett Energy Resources
Company
retail choice retail customers are allowed to
choose their electricity supplier
Rhode Island Settlement settlement agreement among NEP,
Narragansett, the RIPUC and the
Rhode Island Division of Public
Utilities and Carriers to
implement the stranded cost
recovery provisions of the Rhode
Island statute
RIPUC Rhode Island Public Utilities
Commission
Samedan Samedan Oil Corporation
Seabrook 1 Seabrook Nuclear Generating Station
Unit 1
SEC Securities and Exchange Commission
Sellers NEP and Narragansett
Service Company New England Power Service Company
Service Extension rate discounts given to large
Discounts commercial and industrial
customers who agree to give a
five-year notice before they
choose to purchase power from
another supplier
SO2 sulphur dioxide
spent nuclear fuel high level radioactive waste
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
USGen USGen New England, Inc.
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
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, customer choice of power suppliers,
increased competition in the electric utility industry, and sale of
the nonnuclear generating business, as more fully set out below
under INDUSTRY RESTRUCTURING, page 3; 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 Transmission, Distribution, and
Generation Properties, page 19; and operation and decommissioning
costs associated with nuclear generating facilities, as set out
under Nuclear Units below, page 26 (see Risk Factors, page 9, for
more information).
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
NEES Communications, Inc. Mass. Telecommunications 100
(NEESCom)
NEES Energy, Inc. (NEES Energy) Mass. Marketing 100
NEES Global Transmission, Inc. Mass. Development 100
(NEES Global) (formerly New Services
England Electric Resources, Inc.)
New England Electric Transmission N.H. Electric 100
Corporation (NEET) Transmission
New England Energy Incorporated Mass. Oil and Gas 100
(NEEI)
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
New England Hydro-Transmission Mass. Electric 53.97(a)
Electric Company, Inc. Transmission
(Mass. Hydro)
* NEES Energy owns 99 percent and NEES Global owns 1 percent of the voting
securities.
** Mass. Hydro and N.H. Hydro each own 50 percent of the voting securities.
% Voting
Securities
State of Type of Owned by
Name of Company Organization Business NEES
--------------- ------------ -------- ---------
New England Power Company (NEP) Mass. Wholesale 99.71(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 23.
(b) Holders of common stock and 6% Cumulative Preferred Stock of
NEP have general voting rights. The 6% Cumulative Preferred
Stock held by nonaffiliates represents 0.29 percent of the
total voting power.
(c) For information on NEP's ownership interest in nuclear
generating units, see Nuclear Units, page 26.
The facilities of NEES' four electricity delivery companies,
Mass. Electric, Narragansett, Granite State, and Nantucket
(collectively referred to as the Electricity Delivery Companies),
and of its principal generation and transmission 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 3. See INDUSTRY
RESTRUCTURING, page 3, for information on the agreement to sell the
NEES companies' generating business.
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 99 percent interest in AllEnergy, an
energy marketing joint venture between NEES Energy and NEES Global.
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 23.
NEEI primarily participated (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 sold its oil and gas
properties in February 1998. For more information, see INDUSTRY
RESTRUCTURING, page 3, and Oil and Gas Operations, page 33.
Resources is a general partner, with a 20 percent interest, in
each of two partnerships formed in connection with the Ocean State
Power project. NEES' ownership interest in Resources is subject to
a sale agreement as part of the NEES companies' divestiture of
their generating business. For more information, see INDUSTRY
RESTRUCTURING, page 3, and Ocean State Power, page 35.
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.
NEES Global is a wholly-owned, nonutility subsidiary of NEES
which provides consulting and independent project development
services domestically and internationally to nonaffiliates.
EMPLOYEES
At December 31, 1997, NEES subsidiaries had approximately 4,665
employees. At that date, the total number of employees was
approximately 842 at NEP, 1,691 at Mass. Electric, 734 at
Narragansett, 70 at Granite State, 23 at Nantucket and 1,305 at the
Service Company. Of the 4,665 employees, approximately 2,800 are
members of labor organizations. Collective bargaining agreements
with the Brotherhood of Utility Workers of New England, Inc., the
International Brotherhood of Electrical Workers, and the Utility
Workers Union of America, AFL-CIO expire in May, 1999. The NEES
companies have reached an agreement with all three of their unions
regarding employee benefits related to industry restructuring and
divestiture, including a voluntary early retirement package and
benefits for displaced employees.
ELECTRIC UTILITY OPERATIONS
INDUSTRY RESTRUCTURING
Historically, electric utilities have provided their customers
bundled electric service within exclusive franchise service
territories. As the result of a number of trends, including a
disparity in electric rates among regions of the country and new
regulations and legislation intended to foster competition,
distribution customers are being allowed to choose their power
supplier, with incumbent utilities required to deliver that
electricity over their transmission and distribution systems.
Because of legislation enacted in the states served by the NEES
companies, most customers served by the NEES companies will have
the ability to choose their power supplier by the first quarter of
1998.
When customers are allowed to choose their power supplier,
utilities 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 such costs
exceed market prices are commonly referred to as "stranded costs."
As described below, the NEES companies have reached settlement
agreements with parties representing all of their distribution
customers. In each case, these settlements provide for recovery of
stranded costs.
Outlook
Starting in 1998, NEES earnings will be reduced by the
restructuring of the electric utility business in the states served
by the NEES companies. During the first quarter of 1998, customers
in Massachusetts and Rhode Island, representing approximately 95
percent of the NEES companies' revenues from the sale of
electricity, will have the ability to choose their power supplier.
Upon the introduction of consumer choice, settlement agreements
related to recovery of stranded costs will limit the return on
equity earned on the NEES companies' generating business to
approximately 9.4 percent, before mitigation incentives, which is
significantly lower than earned by the generating business in
recent years. (The settlement agreements also will cap earnings
for the majority of NEES' distribution business at 11.75 percent.)
Following completion of the sale of the NEES companies' nonnuclear
generating business, which is discussed in more detail below, NEES
earnings will be affected by the return on the reinvestment of the
sale proceeds, whether through retirement of debt, the repurchase
of NEES shares, investments in new ventures, or otherwise. This
reinvestment return is expected, at least in the near term, to be
considerably less than the return historically earned in the
generating business.
Massachusetts Legislation and Settlement Agreement
In November 1997, legislation was enacted which provides
customers of Massachusetts' investor-owned utilities with the
ability to choose their power supplier beginning on March 1, 1998.
The legislation requires electric companies to provide customers
who do not choose a power supplier with a transition rate (or
"standard offer service") which results in a 10 percent rate
reduction, with the discount increasing to 15 percent on or before
September 1, 1999. The legislation also provides a mechanism for
the recovery of stranded costs resulting from the introduction of
customer choice.
In December 1997, the Massachusetts Department of
Telecommunications and Energy (MDTE) (formerly the Massachusetts
Department of Public Utilities (MDPU)) found that a settlement
agreement (the Massachusetts Settlement) previously reached among
the NEES companies' Massachusetts subsidiaries (NEP, Mass.
Electric, and Nantucket) and various governmental agencies and
other interested parties substantially complies with or is
consistent with the Massachusetts statute. The Massachusetts
Settlement was also conditionally approved by the FERC in November
1997, subject to a compliance filing to clarify the impact of the
settlement on nonsettling parties.
In accordance with the Massachusetts Settlement, NEP's
wholesale contracts with Mass. Electric and Nantucket have been
amended effective March 1, 1998. The Massachusetts Settlement
provides that Mass. Electric's and Nantucket's share of NEP's
stranded costs will be recovered from distribution customers
through a transition access charge, which will be collected by
these electricity delivery companies. Under the Massachusetts
Settlement, the recovery of NEP's stranded costs is divided into
several categories. Unrecovered costs associated with generating
plants and regulatory assets would be recovered over 12 years and
would earn a return on equity of 9.4 percent. 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 was set at 2.8 cents per
kWh. The MDTE has approved a reduction of the initial transition
access charge to 2.7 cents per kWh for Mass. Electric and Nantucket
effective March 1, 1998. NEP's filing with the FERC to approve
this reduction is pending. Mass. Electric and Nantucket have
already reflected the lower transition access charge amount in
their rates. The transition access charge would be reduced further
upon completion of the sale of NEP's nonnuclear generating
business, as described below. As the transition access charge
declines, NEP would earn incentives based on successful mitigation
of its stranded costs. These incentives would supplement NEP's
return on equity.
In addition to addressing customer choice and the recovery of
stranded costs, the Massachusetts Settlement also required the NEES
companies to divest their nonnuclear generating business. In
August 1997, NEP and NEES' Rhode Island subsidiary, Narragansett,
entered into an agreement to sell substantially all of their
nonnuclear generating business to USGen New England, Inc. (USGen),
an indirect wholly owned subsidiary of PG&E Corporation (PG&E).
See "Divestiture of Generating Business" below. The net proceeds
from the sale of the nonnuclear generating business to USGen will
be used to reduce the transition access charge to approximately 1.5
cents per kWh. In addition, the FERC accepted the NEES companies'
proposal in conjunction with their divestiture filing that the
recovery of the remaining above-market nuclear generating plant
investment and regulatory assets be completed by the end of the
year 2000.
A referendum question which asks voters to repeal the
Massachusetts statute is expected to be on the ballot in November
1998. The NEES companies are unable to predict the outcome. While
by itself, repeal of the statute is not expected to materially
impair the effectiveness of the previously approved Massachusetts
Settlement, the potential exists that following repeal, there could
be legislative or regulatory actions which could be materially
adverse to the NEES companies.
Rhode Island Legislation and Settlement Agreement
In August 1996, the state of Rhode Island enacted legislation
that allows customers in that state the opportunity to choose their
power supplier. Under the Rhode Island statute, state accounts,
certain new customers, and the largest manufacturing customers were
able to choose their power supplier beginning on July 1, 1997. The
balance of Rhode Island customers gained the ability to choose
their power supplier on January 1, 1998. The Rhode Island statute
also provided utilities with the ability to recover stranded costs.
In November 1997, the FERC conditionally approved a settlement
agreement (the Rhode Island Settlement) among NEP, Narragansett,
the Rhode Island Public Utilities Commission (RIPUC) and the Rhode
Island Division of Public Utilities and Carriers to implement the
stranded cost recovery provisions of the Rhode Island statute,
subject to a compliance filing to clarify the impact of the
settlement on nonsettling parties. The terms of the Rhode Island
Settlement are substantially the same as the Massachusetts
Settlement.
The Rhode Island Settlement requires NEP to sell power to
Narragansett at specified prices for resale to distribution
customers who do not choose a power supplier (or "standard offer
service"). The total rates for customers purchasing this interim
power service from Narragansett are approximately 7 percent below
the total rates that were in effect during 1997. Pursuant to the
Rhode Island statute, the total rate for customers who do not
choose a power supplier is capped through 2009 at a level equal to
the 1996 rate adjusted upward for 80 percent of inflation and for
other factors beyond the control of Narragansett.
New Hampshire Legislation and Settlement Agreement
On February 3, 1998, NEES' New Hampshire subsidiary, Granite
State, and NEP reached a comprehensive settlement agreement with
the Governor's office of the State of New Hampshire and a number of
other interested parties on a plan to provide choice of power
supplier to its customers by no later than July 1, 1998. This
settlement agreement was reached in response to a previously
enacted New Hampshire statute which requires customer choice of
power supplier. The principle terms of the New Hampshire
settlement agreement, which require approval by state and federal
regulators, are substantially similar to the Massachusetts
Settlement and Rhode Island Settlement, including rate reductions
for customers and the ability to recover stranded costs.
On March 20, 1998, the New Hampshire Public Utilities
Commission issued an Order on Rehearing of their previously issued
Final Plan on industry restructuring. The Order on Rehearing
reaffirmed the interim recovery of stranded costs from customers
previously established in February 1997 for Granite State (1.9
cents per kWh), which reflects an assumed level of stranded cost
mitigation. The Order on Rehearing also addressed a number of
other issues, including standards of conduct of affiliates, energy
efficiency programs, and billing and metering services. The Order
on Rehearing encouraged utilities to file settlements but appears
to be inconsistent with one key aspect of the settlement filed by
Granite State concerning a separate transition service for existing
customers with back-stop pricing provided by USGen, similar to that
in place for Mass. Electric and Narragansett, after the divestiture
of NEP's and Narragansett's nonnuclear generating business to
USGen, as discussed below.
Unaffiliated Customers
Agreements have not yet been reached with certain wholesale
customers that represent less than 2 percent of the NEES companies'
stranded cost exposure. The largest of these customers, the Town
of Norwood, Massachusetts, gave notice in March 1998 of its intent
to terminate its contract with NEP, without accepting
responsibility for its share of NEP's stranded costs, and to begin
taking power from another supplier. NEP has filed with the Federal
Energy Regulatory Commission (FERC) for permission to charge
Norwood a contract termination charge for its share of NEP's
stranded costs.
Divestiture of Generating Business
As described above, in August 1997, NEP and Narragansett
(collectively, the Sellers) reached an agreement to sell their
nonnuclear generating business to USGen. The nonnuclear generating
business includes three fossil-fueled and 15 hydroelectric
generating stations, totaling approximately 4,000 megawatts (MW) of
capacity, as well as NEES' 100 percent interest in Resources, a 20
percent general partner in the Ocean State Power project, all of
which has a book value of $1.1 billion. USGen will pay the Sellers
$1.59 billion in cash, of which $225 million will be contingent
upon the introduction of customer choice of power supplier in
Massachusetts. Based on the enactment of the Massachusetts
statute, the NEES companies believe that the conditions for payment
of the full purchase price have been met. USGen will also
reimburse the NEES companies for $85 million of costs associated
with early retirement and special severance programs for employees
affected by industry restructuring. USGen will assume
responsibility for environmental conditions at the Sellers'
nonnuclear generating stations. USGen will also assume the
Sellers' obligations under long-term fuel and fuel transportation
contracts and certain collective bargaining agreements for
nonnuclear facilities.
In addition to the purchase of the nonnuclear generating
stations, USGen will purchase NEP's entitlement to approximately
1,100 MW of power procured under long-term contracts. NEP will
make a monthly fixed contribution towards the above-market cost of
the purchased power of between $12.5 million and $14.2 million per
month from closing through January 2008. USGen will be responsible
for the balance of the costs under the purchased power contracts.
The sale is subject to approval by various state and federal
regulatory agencies. Several parties have objected to the sale on
various grounds, including allegations that following the sale,
USGen would be able to exercise unlawful levels of market power.
On February 25, 1998, the FERC issued an order that rejected the
market power allegations, approved the sale, and conditionally
approved most supporting filings. On February 27, 1998, the FERC
approved the transfer of the hydroelectric generating licenses to
USGen. While the timing of receipt of final regulatory approvals
is uncertain, receipt of all approvals is unlikely before mid-1998.
Closing is contingent upon all regulatory approvals being obtained
by February 1999.
In order to meet the terms of NEP's mortgage indenture, NEP
will be required, prior to the consummation of the sale, to either
defease or call approximately $278 million of its mortgage bonds.
Any defeasance of bonds would be by deposit of cash representing
principal and interest to the maturity date, or interest,
principal, and general redemption premium to an earlier redemption
date. In addition, NEP will retire approximately $372 million of
mortgage bonds securing the issuance of a like amount of pollution
control revenue bonds (PCRBs) by various public agencies. However,
NEP expects that substantially all of the underlying PCRBs will
remain outstanding as unsecured obligations of NEP. In addition,
the long-term debt of Resources will be retired prior to the
closing.
NEP's stranded costs will be recovered from distribution
customers through a transition access charge, which will be
collected by NEP's distribution affiliates. Upon completion of the
divestiture of NEP's nonnuclear generating business, stranded costs
will be reduced from $4.5 billion to $2.1 billion.
As part of the divestiture plan, in February 1998, NEEI (a
wholly-owned subsidiary of NEES) sold its oil and gas properties
for approximately $50 million. NEEI's loss on the sale of
approximately $120 million, before tax, has been reimbursed by NEP.
NEEI retired $121 million of bank debt at the same time.
At the divestiture date, any gain or loss from the divestiture
of nonnuclear generating assets and oil and gas assets will be
recorded as a regulatory asset or liability to be recovered as part
of NEP's stranded costs, through the ongoing transition access
charge, consistent with the settlement agreements. NEP may be
required to record a liability for the monthly fixed contribution
towards the above-market cost of purchased power. In such an
event, NEP would also record a regulatory asset consistent with the
settlement agreements.
In addition, NEP will endeavor to sell, or otherwise transfer,
its minority interest in three nuclear power plants and a 60 MW
interest in a fossil-fueled generating station in Maine to
nonaffiliates. Until such time as the nuclear interests are
divested, NEP will share with customers 80 percent of the revenues
and operating costs related to the units, with shareholders
retaining the balance. In the event that NEP determines that it
has an impairment of its nuclear plant balances 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), it will record any such impairment as a
regulatory asset.
Risk Factors
While the NEES companies believe that the previously described
settlements and legislation and the sale agreement with USGen and
other developments constitute substantial progress in reducing the
impacts associated with industry restructuring, significant risks
remain. These include, but are not limited to: (i) the potential
that ultimately the settlements will not be implemented in the
manner anticipated by NEES, (ii) the possibility that a voter
referendum in November 1998 could overturn the Massachusetts
legislation, followed by materially adverse legislative or
regulatory actions, (iii) the possibility of federal legislation
that would increase the risks above those contained in the
settlements and the Massachusetts and Rhode Island statutes, (iv)
the potential for adverse stranded cost recovery decisions
involving wholesale customers with whom settlements have not yet
been reached, and (v) the failure to complete the sale of the
nonnuclear generating business to USGen. The major risk factors
affecting the Electricity Delivery Companies relate to the
possibility of adverse regulatory or judicial decisions or
legislation which limit the level of revenues the Electricity
Delivery Companies are allowed to charge for their services or
affect the costs the Electricity Delivery Companies incur.
Other
For more information on workforce reductions, accounting
implications, year 2000 computer issues, and new accounting
standards, see pages 14 through 20 of the 1997 NEES Annual Report.
ELECTRICITY DELIVERY COMPANIES
The combined service area of the Electricity Delivery Companies
constitutes the electric delivery 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 25. The largest cities served are Worcester, Mass.
(population 170,000) and Providence, Rhode Island (population
161,000). In addition, NEP's business going forward will be
primarily that of transmitting electricity. For a further
description of NEP's business, see TRANSMISSION AND GENERATION
BUSINESS, page 14.
Mass. Electric
Description of Business
Mass. Electric provides approximately 970,000 customers with
electric delivery service in an area comprising approximately 43
percent of The Commonwealth of Massachusetts. The population of
the service area is about 2,160,000 or 36 percent 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, and many
suburban communities and 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
1997, 40 percent of Mass. Electric's revenue from the sale of
electricity was derived from residential customers, 38 percent from
commercial customers, 21 percent from industrial customers, and 1
percent from others. In 1997, the 20 largest customers of Mass.
Electric accounted for approximately 7 percent of its electric
revenue. In November 1997, legislation was enacted in The
Commonwealth of Massachusetts which provides Mass. Electric's
customers with choice of power supplier beginning on March 1, 1998
(see INDUSTRY RESTRUCTURING, page 3).
Rates
Rate schedules applicable to electric services rendered by
Mass. Electric are on file with the MDTE.
The Massachusetts Settlement establishes distribution rates for
Mass. Electric. On March 1, 1998, Mass. Electric's distribution
rates were set at a level approximately $45 million above the level
embedded in its previously 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 approximately $1 million over six years. The
Massachusetts restructuring legislation also expanded the
eligibility for certain rate discount programs, the cost of which
is uncertain at this time. From 1998 through 2000, Mass. Electric's
return on equity will be subject to a floor of 6 percent and a
ceiling of 11 percent. Earnings over the ceiling will be shared
equally between customers and shareholders up to a maximum of 12.5
percent. This sharing results in an effective cap on Mass.
Electric's return on equity of 11.75 percent, excluding certain
limited incentive opportunities. To the extent that earnings fall
below the floor, Mass. Electric will be authorized to surcharge
customers for the shortfall. The statute also imposes an inflation
cap through March 1, 2005 on the total rates for customers who have
not chosen a power supplier. If this inflation cap is triggered,
under the Massachusetts Settlement the recovery of stranded
investment costs would be deferred. This inflation cap does not
apply to any surcharge triggered by the rate of return floor.
The Massachusetts Settlement also eliminated Mass. Electric's
purchased power cost adjustment (PPCA) mechanism as of July 31,
1996. This mechanism allowed Mass. Electric to recover purchased
power rate changes from NEP and the effects of NEP's seasonal
rates. The Massachusetts Settlement required that Mass. Electric's
net $18 million PPCA refund liability balance at July 31, 1996 be
transferred on its books to establish a storm contingency fund
account of $3 million initially, with the remainder applied to
reduce regulatory assets for hazardous waste costs.
Historically, Mass. Electric's rates were periodically adjusted
by rate cases, including:
1995 - The MDPU approved a $31 million increase to base
rates, effective October 1, 1995.
1993 - The MDPU approved the following:
- an 11-month, $26 million general rate decrease
effective December 1, 1993;
- recognition of $35 million of unbilled revenues
as of September 30, 1993, amortized into income
over a 13-month period, ended December 1994; and
- rate discounts for large commercial and
industrial customers who agreed to give a five-
year notice to Mass. Electric before they chose
to purchase power from another supplier (Service
Extension Discounts). These Service Extension
Discounts ended effective March 1, 1998.
The rates of Mass. Electric in 1997 contained fuel adjustment
clauses that allowed the rates to be adjusted to reflect changes in
the cost of fuel. Mass. Electric's fuel clause will terminate
during the first quarter of 1998, subject to a final reconciliation
and refund or surcharge of any excess or deficiency in fuel cost
recovery.
Narragansett
Description of Business
Narragansett provides approximately 330,000 customers with
electric delivery service. Its service territory, which includes
urban, suburban, and rural areas, covers about 839 square miles or
80 percent 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 percent 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, silverware, and chemical
products. In addition, a broad range of professional, banking,
medical, and educational institutions is served. During 1997, 43
percent of Narragansett's revenue from the sale of electricity was
derived from residential customers, 41 percent from commercial
customers, 14 percent from industrial customers, and 2 percent from
others. In 1997, the 20 largest customers of Narragansett
accounted for approximately 9 percent of its electric revenue. In
1996, legislation was enacted in the state of Rhode Island which
provided certain customers with choice of supplier on July 1, 1997,
with the balance of customers gaining such choice on January 1,
1998 (see INDUSTRY RESTRUCTURING, page 3).
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.
Under the Rhode Island statute, Narragansett increased
distribution rates by approximately $11 million in January 1997 and
another $7 million in January 1998. The statute also provides that
Narragansett may request increased distribution rates which would
take effect no earlier than 1999.
Effective January 1998, the RIPUC approved a $3.1 million
decrease in rates for Narragansett, reflecting a corresponding
decrease in expense associated with postretirement benefits other
than pensions (PBOPs). The RIPUC also approved a refund of
approximately $800,000 resulting from a past overcollection of PBOP
costs. This refund obligation was reflected on Narragansett's
books at December 31, 1997.
Historically, Narragansett's rates were periodically adjusted
by rate cases, including:
1995 - The RIPUC approved a $15 million base rate increase,
effective December 1, 1995, and $3 million in new
discounts for manufacturing customers, which ended in
1997.
- The FERC approved a rate agreement increasing credits
received from NEP to approximately $50 million for
ownership and operating costs related to Narragansett's
10 percent investment in the Manchester Street plant,
which went back into service in 1995, as well as
Narragansett's costs associated with its integrated
transmission facilities.
1994 - The RIPUC approved a rate agreement that provided for
the recognition of $14 million of unbilled revenues
over a 21-month period, which ended December 1995, and
provided for rate discounts for large commercial and
industrial customers who agreed to give a five-year
notice to Narragansett before they chose to purchase
power from another supplier (Service Extension
Discounts). These Service Extension Discounts ended
effective January 1, 1998.
1993 - The RIPUC approved a $1.5 million rate increase as part
of the three-year phase-in of Narragansett's PBOP cost
recovery. Similar increases took effect in January 1994
and 1995.
The rates of Narragansett in 1997 contained fuel adjustment
clauses that allowed the rates to be adjusted to reflect changes in
the cost of fuel. Narragansett's fuel clause terminated at the end
of 1997, subject to a final reconciliation.
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 of
the decision, the RIPUC monitors Narragansett's earnings on a
regular basis.
Granite State
Description of Business
Granite State provides approximately 36,000 customers in 21 New
Hampshire communities with electric delivery service in the State
of New Hampshire in an area having a population of about 73,000
(1990 Census), including the Salem area of Southern New Hampshire
as well as several communities located along the Connecticut River,
primarily in the Lebanon and Walpole areas. During 1997, 48
percent of Granite State's revenue from the sale of electricity was
derived from commercial customers, 38 percent from residential
customers, 13 percent from industrial customers, and 1 percent from
others. In 1997, the 10 largest customers of Granite State
accounted for about 19 percent 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 small. Information on Granite State is provided herein
solely for the purpose of furnishing a more complete description of
System operations. In February 1998, Granite State and its
generation and transmission affiliate, NEP, reached a settlement
agreement with the Governor's office of the State of New Hampshire
and a number of other interested parties. This settlement
agreement provides for a distribution rate surcharge for storm
costs and pilot program costs. This settlement is subject to
federal and state regulatory approval. If approved, the settlement
provides for choice of power supplier by New Hampshire customers no
later than July 1, 1998 (see INDUSTRY RESTRUCTURING, page 3).
Rates
The rates of Granite State in 1997 contained fuel adjustment
clauses that allowed the rates to be adjusted to reflect changes in
the cost of fuel. Fuel costs billed by 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.
Nantucket
Description of Business
In March 1996, NEES acquired Nantucket for $3.5 million.
Nantucket provides electric delivery service to approximately
10,000 customers on Nantucket Island which has a year-round
population of approximately 6,000 (1990 Census) and a seasonal
tourist population which peaks at approximately 40,000 during the
summer. Nantucket's service area covers the entire island. In
November 1997, legislation was enacted in The Commonwealth of
Massachusetts which provided Nantucket's customers with choice of
power supplier beginning on March 1, 1998 (see INDUSTRY
RESTRUCTURING, page 3). During 1997, 61 percent of Nantucket's
revenue from the sale of electricity was derived from residential
customers, 37 percent from commercial customers, and 2 percent 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 small. Information on Nantucket
is provided herein solely for the purpose of furnishing a more
complete description of System operations.
Recovery of Demand-Side Management Expenditures
The Electricity Delivery 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 Electricity Delivery 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 through 1997. Mass. Electric's expenditures were
$53 million, $48 million, and $51 million in 1995, 1996, and 1997,
respectively. Narragansett's expenditures were $9 million, $10
million, and $10 million, in 1995, 1996, and 1997, respectively.
Narragansett and Granite State have received approvals from their
respective state regulatory agencies to recover substantially all
of their 1998 DSM program expenditures. The Massachusetts
Settlement and statute provide for recovery of DSM-related costs.
Mass. Electric and Nantucket have filed DSM program expenditure
recovery plans with the MDTE for the period 1998 through 2002 and
have received interim MDTE approval, subject to further MDTE review
and modification based on comments by the Massachusetts Division of
Energy Resources (DOER) and other parties. Mass. Electric and
Nantucket subsequently filed a comprehensive Offer of Settlement
with the MDTE resolving all issues raised by the DOER and other
settling parties relating to Mass. Electric and Nantucket's DSM
program for the period 1998 to 2002. Since 1990, the Electricity
Delivery Companies have been allowed to earn incentives based on
the results of their DSM programs. The Electricity Delivery
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
$5.1 million, $5.7 million, and $7.0 million of before-tax
incentives in 1995, 1996, and 1997, respectively. Narragansett
recorded $0.5 million, $0.2 million, and $0.3 million of before-tax
incentives in 1995, 1996, and 1997, respectively.
TRANSMISSION AND GENERATION BUSINESS
NEP
Description of Business
NEP's business has been principally generating, purchasing,
transmitting, and selling electric energy in wholesale quantities.
In 1997, 91 percent of NEP's all-requirement revenue from the sale
of electricity was derived from sales for resale to affiliated
companies and 9 percent from sales for resale to municipal and
other utilities. NEP was the wholesale supplier of the electric
energy requirements of the Electricity Delivery Companies under
contracts that required seven years' notice of termination. NEP's
contracts with Mass. Electric, Nantucket, and Narragansett have
been amended. Mass. Electric and Nantucket conducted a competitive
solicitation among power suppliers in February 1998. No other
supplier bid to supply power to these companies. Narragansett will
conduct a similar competitive solicitation in April 1998. If bids
are received in response to this solicitation, Narragansett may
begin to purchase its electric energy requirements from other
suppliers. NEP retains the backstop obligation to supply the
electric energy requirements of Mass. Electric, Nantucket, and
Narragansett for retail customers eligible to continue to buy
electricity from their electricity delivery company at regulated
prices, so-called "standard offer service." Upon the completion of
the sale of NEP's nonnuclear generating business to USGen, USGen
will have the backstop obligation. 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 a discussion of electric utility operations in
a more competitive environment, see INDUSTRY RESTRUCTURING, page 3,
and for a discussion of the sale of NEP's nonnuclear generating
business, see Divestiture of Generating Business, page 7.) In
addition to NEP's nonnuclear and nuclear generation, it is involved
in the transmission of electricity and owns a system of
transmission lines and substations (see Map - Electric Utility
Properties, page 25). As discussed above, NEP has agreed to sell
its nonnuclear generating business and to attempt to sell the
nuclear assets. NEP will retain its transmission business.
Rates
Since January 1995, NEP has collected the majority of its
generation and transmission revenues pursuant to the rates under
Tariff No. 1 established in the FERC approved W-95 settlement
agreement, including the revenues from the Electricity Delivery
Companies. Under Tariff No. 1, NEP is obligated to sell to its
customers, and its customers are obligated to purchase from NEP,
the requirements of its retail service territory, and they may only
terminate those mutual obligations upon seven years' notice. In
addition, NEP established an open access transmission Tariff No. 9
applicable to non-Tariff No. 1 customers in July 1996.
As customers of NEP and the Electricity Delivery Companies
become eligible to chose their own power supplier in accordance
with industry restructuring, it is necessary to amend Tariff No. 1.
The settlement agreements between NEP and the Electricity Delivery
Companies include an amendment to the Tariff No. 1 service
agreement which reforms the contractual relationship to allow for
the early termination of the Electricity Delivery Companies'
obligation to purchase wholesale all-requirements service from NEP,
in consideration for the payment of the contract termination
charge. The Electricity Delivery Companies will recover the
contract termination charge through a transition access charge.
(see INDUSTRY RESTRUCTURING, page 3) NEP has also reached a
similar agreement with an unaffiliated wholesale customer. These
agreements amend the provisions of Tariff No. 1 and allow for the
provision of unbundled service by NEP.
NEP's unbundled rates going forward will consist of the
contract termination charge, transmission charges, standard offer
charges where applicable, and market revenues where applicable.
The contract termination charge initially equals 2.8 cents per
kilowatthour. The MDTE has approved a reduction of the initial
contract termination charge to 2.7 cents per kWh for Mass. Electric
and Nantucket, effective March 1, 1998. NEP's filing with the FERC
to approve this reduction is pending. Upon divestiture, the
contract termination charge declines to approximately 1.5 cents per
kWh (see INDUSTRY RESTRUCTURING, page 3). The transmission rate
pursuant to the open access Tariff No. 9 is a formula rate which
recovers NEP's actual costs plus a return on actual capital
investment and will equal approximately 0.4 cents per kWh. The
standard offer revenues will equal 3.2 cents per kWh in 1998 and
escalate in the years thereafter and are recovered by NEP until the
completion of the divestiture. Revenues from sale in the
marketplace will vary. The settlement agreements also provide for
recovery of lost revenue due to differences between what NEP would
have collected under Tariff No. 1 and what it actually collects
under the unbundled tariffs for the time period between the time
customers can choose their electricity supplier and divestiture of
NEP's nonnuclear generating business.
The electric utility business of NEP and the Electricity
Delivery Companies (except Nantucket) is not highly seasonal. For
NEP and the Electricity Delivery Companies, industrial customers
are broadly distributed among standardized industrial
classifications. No single industrial classification exceeds 3
percent of operating revenue, and no single customer of the System
contributes more than 1 percent of operating revenue.
UNREGULATED BUSINESS
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 1997, AllEnergy became a wholly-
owned indirect subsidiary of NEES when Eastern Enterprises' 50
percent interest in the joint venture was purchased by NEES.
NEESCom was established in August 1996 to allow the NEES
companies to participate in the growing telecommunications
industry. This subsidiary (an exempt telecommunications company)
is not regulated under the Public Utility Holding Company Act of
1935 and has a license from the Federal Communications Commission.
It will focus on the fiber optics, cable, and infrastructure
sectors of the telecommunications industry.
NEES Global is a wholly-owned nonutility subsidiary of NEES.
Its principal purpose is to provide consulting and independent
project development services for transmission projects.
Secondarily, NEES Global also provides consulting services to
unaffiliated utilities in the areas of electric industry
restructuring and customer choice.
NEES and the NEES companies have from time to time considered,
and expect to consider in the future, various strategies designed
to enhance NEES' 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 changes to
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' 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' or any NEES company's results of
operations, financial condition or competitive position. See
Divestiture of Generating Business, page 7.
OPERATING REVENUES
The following is the detail of consolidated kWh sales and
deliveries, revenue from sales of electricity by the System, and
System operating income for the last three years.
Sales and Deliveries of Electricity
(in thousands of kWh)
------------------------------------
Classification 1997 1996 1995
- -------------- ---- ---- ----
Residential 7,992,677 7,993,375 7,837,527
Commercial 8,731,976 8,559,082 8,378,580
Industrial 4,928,622 4,892,524 4,952,217
Other 134,499 137,378 142,848
---------- ---------- ----------
Total Sales
to Ultimate
Customers 21,787,774 21,582,359 21,311,172
Sales for
Resale 4,034,345 3,611,643 1,592,577
---------- ---------- ----------
Total Sales 25,822,119 25,194,002 22,903,749
Deliveries 334,780 101,402
---------- ---------- ----------
Total Sales
and Deliveries 26,156,899 25,295,404 22,903,749
========== ========== ==========
Revenues from Sales of Electricity
(in thousands of dollars)
----------------------------------
Classification 1997 1996 1995
- -------------- ---- ---- ----
Residential $877,447 $ 849,070 $ 841,433
Commercial 840,671 792,380 773,138
Industrial 403,868 383,659 393,174
Other 28,040 26,902 25,836
---------- ---------- ----------
Total Sales to
Ultimate
Customers 2,150,026 2,052,011 2,033,581
Amortization
of Unbilled
Revenues 8,209
Sales for Resale 149,339 140,110 79,452
---------- ---------- ----------
Total 2,299,365 2,192,121 2,121,242
Other Operating
Revenue 203,226 158,577 150,470
---------- ---------- ----------
Total Operating
Revenue $2,502,591 $2,350,698 $2,271,712
========== ========== ==========
Operating Income $ 366,861 $ 348,118 $ 323,428
========== ========== ==========
Operating revenue increased in 1997 and reflects higher kWh
deliveries, rate increases, increased revenues related to rate
adjustment mechanisms, and increased fuel revenues.
In 1997, kWh deliveries to ultimate customers increased 2.0
percent, reflecting the effects of an improving regional economy.
In 1997, 73 percent 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. For a discussion of 1998 rates, see ELECTRICITY
DELIVERY COMPANIES, page 9 and TRANSMISSION AND GENERATION
BUSINESS, page 14.
ELECTRIC UTILITY PROPERTIES
Transmission, Distribution, and Generation 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, and portions of fossil fuel and nuclear generating units.
On August 5, 1997, NEP and Narragansett entered into an agreement
to sell their nonnuclear generating assets. See Divestiture of
Generating Business, page 7. NEP also plans to seek offers to sell
its nuclear generating business. The properties of the System also
include 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 25.
NEP's integrated system consists of 2,266 circuit miles of
transmission lines, 118 substations with an aggregate capacity of
15,697,624 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, 1997, Mass. Electric owned 253 substations, which had
an aggregate capacity of 2,984,429 kVA, 148,718 line transformers
with the capacity of 8,398,146 kVA, and 16,919 pole or conduit
miles of distribution lines. Mass. Electric also owns 83 circuit
miles of transmission lines. At December 31, 1997, Narragansett
owned 243 substations, which had an aggregate capacity of 3,055,065
kVA, 48,653 line transformers with the capacity of 2,102,894 kVA,
and 4,553 pole or conduit miles of distribution lines.
Narragansett, in addition, owns 326 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. In order to meet the
terms of NEP's mortgage indenture, NEP will be required, prior to
the consummation of the sale of its nonnuclear generating business,
to either defease or call approximately $278 million of its
mortgage bonds (see Divestiture of Generating Business, page 7).
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 1997 annual reports. The properties of
NEET are subject to a mortgage under its financing arrangements.
The net capability at December 31, 1997, and the net generation for the
twelve months ended December 31, 1997, 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) 1,135 8,383
Unit 4 Mass. 1974 Oil-Gas 446 543
Salem Harbor
Station
Units 1,2 & 3 Salem, 1952-1958 Coal-Oil(a) 314 2,188
Unit 4 Mass. 1972 Oil 400 1,718
Manchester St. Prov., 1995 Gas-Oil 495 3,553
Station(b) R.I.
Other System Me., Mass. 1963-1978 Oil 93 90
Units(c)
Hydroelectric Units(d)
Conventional Mass.,N.H. 1909-1987 Water 576 1,487
& Vt.
Pumped Storage
Bear Swamp Rowe, Mass. 1974 Water 585 (154)
Other(e) - - - 927 4,523
----- ------
Subtotal 4,971 22,331
Nuclear Units(f)
Vermont Yankee Vt. 1972 Nuclear 95 767
Millstone 3 Waterford, 1986 Nuclear 0 0
Conn.
Seabrook 1 Seabrook, 1990 Nuclear 116 791
N.H.
----- ------
Subtotal 211 1,558
----- -----
Total 5,182 23,889
===== ======
(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, Rhode
Island. 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 34.
(e) Capability includes contracted purchases (1,095 MW) less
contract sales (168 MW). Net generation includes the effects
of the above contracted purchases and economy interchanges
through the New England Power Exchange (including a 115 MW
capacity credit associated with purchases from Hydro-Quebec and
purchases from nonutility generation). For further information
see Nonutility Power Producer Information, page 33.
(f) See Nuclear Units, page 26.
NEP, Narragansett, and AllEnergy 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 by the
Independent System Operator (ISO). 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 ISO, that will operate the bulk
power system and administer the regional tariff and power exchange.
Since the initial filing, the FERC has conditionally accepted a
number of NEPOOL's proposals including the Regional Open Access
Tariff, the ISO, and the NEPOOL governance restructuring. NEPOOL
is awaiting a final order on its market proposal. The NEES
companies support the NEPOOL restructuring proposal because they
believe it will facilitate the development of robust competition in
the wholesale electricity markets in New England and facilitate
retail access. A number of parties intervened in the proceeding.
The 1997 NEPOOL peak demand of 20,569 MW occurred on July 14,
1997. This was a new all-time NEPOOL peak demand which surpassed
the previous all time NEPOOL peak demand of 20,519 MW set on July
21, 1994.
The 1997 summer peak for the System of 4,326 MW occurred on
July 17, 1997. The previous all-time peak load of 4,385 MW
occurred on July 21, 1994. The 1997-1998 winter peak of 3,901 MW
occurred on December 15, 1997.
NEPOOL currently projects a capacity shortfall of approximately
500 MW from long-range planning criteria for the summer of 1998,
assuming normal summer weather. This projection further assumes
that the three Millstone nuclear units 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. A new spot market for capacity, which is expected to
become effective on April 1, 1998, may create sufficient economic
incentives for the NEPOOL participants to meet the increased
capacity requirements in the aggregate. NEPOOL participants will
coordinate with adjacent control areas to arrange for import power
and will make use of voluntary interruptible load options to meet
the projected capacity shortfall.
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 currently rated at
1,800 MW. Operating limits implemented by adjacent Power Pools
covering New York, New Jersey, Pennsylvania, and Maryland often
restrict the effective transfer capability to levels of 1,200 MW to
1,400 MW. Participants in the Interconnection purchase from and
sell energy to Hydro-Quebec pursuant to several agreements. The
principal agreement calls for New England Utilities (NEUs) to
purchase 7 billion kWh of energy each year for ten years (the Firm
Energy Contract). Purchases under the Firm Energy Contract totaled
over 5.5 billion kWh in 1997. Net energy deliveries from Hydro-
Quebec over the Interconnection totaled more than 7.3 billion kWh
in 1997. 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 percent. 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 $65 million in utility plant at
December 31, 1997. Under the support agreements, NEP has agreed
to guarantee its share of debt financing for the second phase. At
December 31, 1997, NEP had guaranteed approximately $25 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. NEP's rights and obligations under its
support agreements will be transferred to USGen upon completion of
the sale of NEP's nonnuclear generating business (see Divestiture
of Generating Business, page 7).
For information regarding a dispute between the NEUs and Hydro-
Quebec regarding their Firm Energy Contract, see Item 3 herein.
Map - Electric Utility Properties
(Displays electric utility properties of NEES subsidiaries)
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
Vermont Yankee nuclear electric generating plant in the same
percentage as its stock ownership, less small entitlements taken by
municipal utilities. Yankee Atomic, Connecticut Yankee, and Maine
Yankee have permanently ceased operations. 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.
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 Northeast Utilities. The Millstone 3
unit is currently shut down. NEP pays its proportionate share of
costs and receives its proportionate share of output from Vermont
Yankee, Millstone 3, and Seabrook 1. Listed below is information
on each operating nuclear plant in which NEP has an ownership
interest.
Operating Nuclear Units
NEP's Share of
NEP's Net Plant
Ownership Assets
Unit Interest (%) ($ in millions)
---- ------------ ---------------
Vermont Yankee 20 35
Millstone 3 12 366
Seabrook 1 10 54
Nuclear Units Permanently Shut Down
Three of the four regional nuclear generating companies in
which NEP has a minority interest own nuclear generating units
which have been permanently shut down. These three units are as
follows:
NEP's Investment Future Estimated
------------------- Date Billings to NEP
Unit % $(millions) Retired $(millions)
---- --- ----------- ------------ ----------------
Yankee Atomic 30 7 February 1992 44
Connecticut Yankee 15 17 December 1996 92
Maine Yankee 20 16 August 1997 164
Operating Nuclear Plants - Decommissioning Estimates
NEP's share of
($ in millions)
--------------------------------
Estimated Decommissioning
Decommissioning Fund
Costs Balances (1) License
Unit (in 1997 $) (12/31/97) Expiration
---- --------------- --------------- ----------
Vermont Yankee $77 $34 2012
Millstone 3 $66 $18 2025
Seabrook 1 (2) $47 $ 9 2026
(1) Certain additional amounts are anticipated to be
available through tax deductions.
(2) Proposed legislation in New Hampshire would make owners of
Seabrook 1 proportional guarantors for decommissioning costs in
the event that an owner without a franchise service territory
fails to fund its share of decommissioning costs.
For a discussion of NEP's investment in both operating and
retired nuclear units, the Millstone 3 unit, nuclear
decommissioning costs and nuclear insurance issues, see pages 35 to
38 of the 1997 NEES Annual Report.
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.
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, Millstone 3 will have sufficient spent fuel pool
capacity to support plant operation through the expiration of their
respective current Nuclear Regulatory Commission (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,
Connecticut Yankee and Maine Yankee all have adequate on-site
storage capacity for all their 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.
Currently there is legislation before Congress that would create an
interim spent fuel storage site to be used until the Yucca Mountain
permanent storage site becomes available. Separate bills passed
the Senate and House in 1997 and are awaiting action by a joint
House-Senate conference committee. Although the measures had
strong bipartisan support in both chambers, their future is
uncertain due to the threat of a Presidential veto.
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.
In January 1997, 36 utilities and 33 states filed lawsuits
against the DOE in the U.S. Court of Appeals for the District of
Columbia Circuit. The plaintiffs sought 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.
In November 1997, the U.S. District Court of Appeals for the
District of Columbia Circuit ruled that the lack of an interim
storage facility does not excuse the DOE from meeting its
contractual obligation to begin accepting spent nuclear fuel no
later than January 31, 1998. The Court did not require the DOE to
develop a plan for meeting the January 1998 deadline.
The DOE did not begin accepting spent nuclear fuel by January
31, 1998.
In February and March 1998, Yankee Atomic and Connecticut
Yankee, respectively, filed separate suits in the United States
Court of Federal Claims against the DOE for monetary damages for
breach of contract arising from the DOE's refusal to accept nuclear
fuel from the plants. Vermont Yankee, Maine Yankee, Millstone 3
and Seabrook 1 have joined with others in separate legal actions
against the DOE.
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 1, and Yankee Atomic are currently shipping
low-level waste to these sites. Chem-Nuclear Systems, as operator
of the Barnwell facility, is obligated to make certain payments to
the State of South Carolina. Chem-Nuclear has indicated that
projected revenues from its disposal activities at Barnwell are not
likely to be sufficient to reimburse it for these payments, and is
exploring alternatives to increase revenues from utilities
disposing waste at Barnwell. NEP cannot predict what impact, if
any, this situation will have on the continued availability of the
Barnwell site.
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. In 1997, the House approved
the compact agreement and it is under review by the Senate. If
Congress approves, the site is expected to begin accepting waste
during 1999. 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, although a shipment was made to Barnwell
in 1997. The compact relieves 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 Fuel Supply
The utilities responsible for the fuel supply for these
operating nuclear units are not experiencing any difficulty in
obtaining commitments for the supply of each element of the nuclear
fuel cycle.
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.
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 Electricity Delivery Companies cannot determine, at
this time, the constitutionality, applicability, or effect of this
statute. If NEP or the Electricity Delivery Companies were
required to make payments under this statute, they would assess
their legal remedies at that time. In any event, NEP and the
Electricity Delivery 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.
Divestiture of Nonnuclear Generating Business
On August 5, 1997, the NEES companies reached an agreement to
sell their nonnuclear generating business to USGen. For more
information, see INDUSTRY RESTRUCTURING, page 3.
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
1998:
% of Net Generation
------------------------------
Estimated Actual
--------- -------------------
1998 1997 1996 1995
---- ---- ---- ----
Coal 39 44 42 38
Nuclear 7 5 14 14
Gas (1) 28 29 24 22
Oil 7 4 1 10
Hydroelectric 7 6 7 5
Hydro-Quebec 6 6 6 5
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.
Fuel for Generation
NEP burned the following amounts of coal, residual oil, and
gas during the past three years:
1997 1996 1995
---- ---- ----
Coal (in millions of tons) 4.1 3.8 3.4
Oil (in millions of barrels) 3.3 2.2 1.7
Natural Gas (in billions of cubic feet) 31.1 28.6 16.2
Coal Procurement Program
Depending on coal-fired generating unit availability and the
degree to which the units are dispatched, NEP's 1998 coal
requirements should range between 3.8 and 4.2 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 25 to 50 days.
To meet environmental requirements, NEP uses coal with a
relatively low sulphur content. NEP's average price for coal
burned, including transportation costs, was $42.25 per ton in 1995,
$42.03 in 1996, and $42.39 in 1997. Based on a 42 gallon barrel of
oil producing 6.3 million Btu's, these coal prices were equivalent
to approximately $10.25 per barrel of oil in 1995, $10.20 in 1996,
and $10.28 in 1997.
Oil Procurement Program
Depending on unit availability, dispatch, and the relationship
of oil and gas prices, the System's 1998 oil requirements are
expected to be approximately 3.0 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 $14.46 in 1995, $17.19 in 1996, and $16.60 in
1997.
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 $59 million to $62 million
per year from 1998 to 2002. Remaining fixed payments from 2003
through 2014 total approximately $501 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 $71 million, $50.2 million,
and $41 million in 1995, 1996, and 1997, respectively, have been
passed on to customers through NEP's fuel clause. These contracts
will be assumed by USGen upon completion of the sale of the NEES
companies' nonnuclear generating business to USGen (see Divestiture
of Generating Business, page 7).
Oil and Gas Operations
NEEI participated in a rate-regulated domestic oil and gas
exploration, development, and production program through a
partnership with a nonaffiliated oil company. Losses from this
program, calculated under the full cost method of accounting, have
been charged to NEP, and ultimately to distribution customers, in
accordance with Securities and Exchange Commission (SEC) and FERC
approvals. Such losses were $11 million, $22 million, and $44
million in 1997, 1996, and 1995, respectively. In February 1998,
after a competitive bidding process, NEEI sold all of its remaining
oil and gas properties held as of December 31, 1997 to Samedan Oil
Corporation for $50 million. The loss on such disposition,
approximately $120 million, before tax, has been charged to NEP.
The settlements provide for the recovery of the NEEI loss as part
of NEP's stranded costs. See INDUSTRY RESTRUCTURING, page 3, and
Divestiture of Generating Business, page 7.
Nonutility Power Producer Information
The System companies purchase a portion of the electricity
generated by, or provide backup or standard service to, 140 small
power producers, cogenerators, or independent power producers (a
total of 5,286,228 MWh of purchases in 1997). As of December 31,
1997, these nonutility generation sources include 24 low-head
hydroelectric plants, 49 wind or solar generators, 13 waste to
energy facilities, 51 cogenerators, and 3 independent power
producers. The total capacity of these sources is as follows:
Source MW at 12/31/97
------ --------------
Hydro 37
Waste to Energy 182
Cogeneration 306
Independent Power Producers 393
----
Total 918
These amounts include 758 MW of long-term capacity, 16 MW of
short-term capacity, and 144 MW treated as load reductions and
includes the Ocean State Power contracts discussed below. NEP's
entitlements under these contracts are subject to a sale agreement
with USGen. For information on the sale of the NEES companies'
nonnuclear generating business including entitlements to power
procured under long-term contracts, see Divestiture of Generating
Business, page 7.
Hydroelectric Project Licensing
NEP is the largest operator of conventional hydroelectric
facilities in New England. NEP has entered into an agreement to
sell its hydroelectric facilities to USGen (see Divestiture of
Generating Business, page 7). All 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 plants in service was $237
million as of December 31, 1997.
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
nongovernmental organizations, a Settlement Agreement which
embodies operational, environmental and recreational conditions
acceptable to the parties. In 1996, FERC issued a final
environmental impact statement which supports the Settlement
Agreement. 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. NEP filed a
Petition for Rehearing in May 1997. The FERC ruled on that
Petition, in terms generally favorable to NEP.
The next NEP project to require a new license will be the 369
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.
NEP has conducted relicensing studies and engaged in a cooperative
settlement process with 17 stakeholder parties. That process
culminated in a Settlement Agreement signed in August 1997,
enabling NEP to participate in what will likely result in an
alternative relicensing process which results in an Applicant
Prepared Environmental Assessment filed with the relicense
application. This alternative process will, NEP believes, result
in a cost-effective and streamlined regulatory option before the
FERC. NEP applied for this alternative process in March 1998. NEP
must file its relicense application before July 31, 1999.
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.
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, Rhode Island.
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 percent 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 percent interest in
both OSP and OSP II and had an equity investment of approximately
$35 million at December 31, 1997. Upon completion of the sale of
the nonnuclear generating business, which includes Resources, to
USGen in 1998, $29 million of Resources' debt will be retired (see
Divestiture of Generating Business, page 7).
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.
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 3;
Mass. Electric, Narragansett, Granite State, and NEP Rates, pages
10 through 15; Nuclear Units, page 26; Fuel for Generation, page
31; Oil and Gas Operations, page 33; and Environmental
Requirements, page 36.
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 major
transmission facilities. Connecticut, Maine, Massachusetts, New
Hampshire, and Rhode Island also have programs of coastal zone
management that might restrict construction of electrical
facilities in, or potentially affecting, coastal areas. 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.
Environmental Expenditures
Total System capital expenditures for environmental protection
facilities have been substantial. System capital expenditures for
such facilities amounted to approximately $39 million in 1995, $9
million in 1996, and $7 million in 1997, including expenditures by
NEP of $32 million, $3 million, and $5 million, respectively, for
those years. The System estimates that capital expenditures for
environmental protection facilities in 1998 and 1999 will not be
material to the System.
Hazardous Substances
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. For more information regarding sites for
which NEES and/or its subsidiaries have been named as potentially
responsible parties, other sites, a settlement agreement covering
rate recovery of certain remediation costs, and reserves, see pages
20 and 34 of the NEES 1997 Annual Report, Note D of the Notes to
the Financial Statements of the NEP 1997 Annual Report, and
Financial Review and Note D of the Notes to the Financial
Statements of both the Mass. Electric 1997 Annual Report and the
Narragansett 1997 Annual Report.
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 26.
Air
Approximately 45 percent 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).
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
Massachusetts requirements (which took effect in 1995) will satisfy
the Phase 2 acid rain regulations.
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
percent below 1990 levels by 2000. Climate Challenge is a
component of President Clinton's Climate Change Action Plan.
In connection with the federal ozone emission requirements,
state environmental agencies in The Ozone Transport Region have
developed a second phase of NOx reduction regulations that were
scheduled to be fully implemented by NEP in the summer of 1999.
For more information on NEP's planned divestiture of its nonnuclear
generating business, see Divestiture of Generating Business, page
7.
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.
For information regarding NEP's water discharge permit for its
Brayton Point power plant, see pages 19 to 20 of the NEES 1997
Annual Report.
CONSTRUCTION AND FINANCING
Estimated construction expenditures (including nuclear fuel)
for the System's electric utility companies are shown below for
1998 through 2000.
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
-----------------------------------
1998 1999 2000 Total
---- ---- ---- -----
($ in Millions - excluding AFDC)
NEP
- ---
Generation (1)(2)
Nonnuclear 10 0 0 10
Nuclear 10 10 10 30
Transmission 45 45 45 135
---- ---- ---- ----
Total NEP 65 55 55 175
---- ---- ---- ----
Mass. Electric
- --------------
Distribution 90 90 90 270
Narragansett
- ------------
Transmission 5 5 5 15
Distribution 30 25 25 80
---- ---- ---- ----
Total Narragansett 35 30 30 95
---- ---- ---- ----
Granite State
- -------------
Distribution 3 4 4 11
---- ---- ---- ----
Nantucket
- ---------
Distribution 3 1 1 5
---- ---- ---- ----
Combined Total
- --------------
Generation (1)(2) 20 10 10 40
Transmission 50 50 50 150
Distribution 126 120 120 366
---- ---- ---- ----
Grand Total 196 180 180 556
---- ---- ---- ----
<FN>
(1) Includes nuclear fuel.
(2) For more information, see INDUSTRY RESTRUCTURING, page 3.
</FN>
Financing
All of NEP's construction expenditures during the period from
1998 to 2000 will be financed by internally generated funds. The
proportion of the Electricity Delivery Companies' construction
expenditures estimated to be financed by internally generated funds
during the period from 1998 to 2000 is:
Mass. Electric 75%
Narragansett 100%
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 Electricity Delivery Companies to
issue short-term debt is limited by regulatory restrictions. The
following table summarizes the short-term debt limits at
December 31, 1997, 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 375 111 580
Mass. Electric 150 35 65
Narragansett 100 16 31
Granite State 10 4 7
Nantucket 5 .025 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, 1997, NEP, Mass.
Electric, Narragansett, and Granite State each had money pool
borrowings of approximately $3 million, $5 million, $4 million, and
$4 million, respectively.
In order to issue additional long-term debt and preferred
stock, NEP and the Electricity Delivery 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 Electricity Delivery 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
-----------------------
1997 1996 1995
---- ---- ----
NEP
- ---
General and Refunding Mortgage Bonds 4.09 4.16 4.05
Preferred Stock 2.48 2.47 2.45
Mass. Electric
- --------------
First Mortgage Bonds 5.09 3.25 2.82
Preferred Stock 2.89 1.93 1.71
Narragansett
- ------------
First Mortgage Bonds 3.98 3.22 3.10
Preferred Stock 2.61 2.04 2.01
Granite State
- -------------
Notes (1) 3.39 2.82 2.38
(1) As defined under the most restrictive note agreement.
RESEARCH AND DEVELOPMENT
Expenditures for the System's research and development
activities totaled $7.5 million, $5.5 million, and $6.2 million in
1995, 1996, and 1997, respectively. Total expenditures are
expected to be about $2.6 million in 1998.
About 31 percent 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 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.
Richard P. Sergel - Age: 48 - Elected President and Chief
Executive Officer in 1998 - Senior Vice President from 1996 to
1998 - Vice President from 1992 to 1995 -Chairman of Mass.
Electric and Narragansett from 1993 to 1997.
Alfred D. Houston - Age: 57 - Executive Vice President since
1994 - Senior Vice President from 1987 to 1994 - Chief
Financial Officer from 1984 to 1998 - Elected Chairman of NEP
in 1998 - Vice President of NEP from 1987 to 1994 - Vice
President of Narragansett from 1976 to 1998 - Treasurer of
Narragansett from 1977 to 1998.
Cheryl A. LaFleur - Age: 43 - Elected Senior Vice President in
1998 - Vice President from 1995 to 1998 - 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 - Vice President of NEP since 1995.
Michael E. Jesanis - Age: 41 - Elected Senior Vice President
and Chief Financial Officer in 1998 - Vice President from 1997
to 1998 - Treasurer from 1992 to 1998 - Elected Vice President
of Mass. Electric and NEP in 1998 - Treasurer of Mass. Electric
and NEP from 1992 to 1998.
David C. Kennedy - Age: 49 - Elected Vice President in 1998 -
Vice President of the Service Company since 1985.
John G. Cochrane - Age: 40 - Elected Treasurer in 1998 - Vice
President of the Service Company since 1993.
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.
Alfred D. Houston* - Elected Chairman in 1998.
Lawrence E. Bailey - Age: 54 - Elected President in 1997 - Vice
President from 1989 to 1997.
Andrew H. Aitken - Age: 53 - 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.
Michael E. Hachey - Age: 44 - Elected Vice President in 1997 -
Manager of Generation Marketing since 1994 - Manager of
Independent Power Projects from 1989 to 1993.
Michael E. Jesanis* - Elected Vice President in 1998 -
Treasurer from 1992 to 1998.
Cheryl A. LaFleur* - Vice President since 1995.
John F. Malley - Age: 49 - Vice President since 1992.
Masheed H. Rosenqvist - Age: 43 - Elected Vice President
effective April 1, 1998 - Manager, Transmission Tariffs and
Contracts for NEP or Service Company since 1997 - Consulting
Engineer for the Service Company from 1995 to 1997. Principal
Engineer for the Service Company from 1993 to 1995.
Arnold H. Turner - Age: 57 - Vice President since 1989 -
Director of Transmission Marketing since 1993. Mr. Turner
plans to retire effective April 1, 1998.
Jeffrey W. VanSant - Age: 44 - 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.
John G. Cochrane* - Elected Treasurer in 1998.
Howard W. McDowell - Age: 54 - Elected Assistant Treasurer in
1998 - 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.
Robert L. McCabe - Age: 56 - Elected Chairman in 1997 -
President of Narragansett from 1986 to 1997.
Lawrence J. Reilly - Age: 42 - President since 1996 - Vice
President for the Service Company from 1993 to 1996 - Director
of Rates for the Service Company from 1990 to 1996.
Lydia M. Pastuszek - Age: 44 - Elected Senior Vice President
in 1997 - Vice President from 1993 to 1997 - Vice President of
NEP from 1990 to 1993 - President of Granite State from 1990
to 1996.
Christopher E. Root - Age: 39 - Elected Senior Vice President
in 1997 - Vice President from 1995 to 1997 - Director, Retail
Distribution Services for the Service Company from 1993 to 1995
- Chief of Division Engineering for the Service Company from
1992 to 1993.
Dennis E. Snay - Age: 56 - Elected Senior Vice President in
1997 - Vice President from 1990 to 1997.
John C. Amoroso - Age: 59 - Vice President since 1993 -
District Manager, Southeast District from 1992 to 1993.
William J. Flaherty - Age: 40 - Elected Vice President in 1997
- Account Manager from 1993 to 1997.
Andrea Foley-Stapleford - Age: 52 - Elected Vice President in
1997 - Director of Human Resources for the Service Company from
1996 to 1997 - Director of Labor Relations for the Service
Company from 1993 to 1996 - Division Personnel Manager from
1990 to 1993.
Richard W. Frost - Age: 58 - Elected Vice President in 1997 -
Vice President of Narragansett since 1993.
Michael E. Jesanis* - Elected Vice President in 1998 -
Treasurer from 1992 to 1998.
Charles H. Moser - Age: 57 - Vice President since 1993 - Chief
Protection and Planning Engineer for the Service Company from
1984 to 1993.
Joseph P. Newman - Age: 42 - Elected Vice President effective
April 1, 1998 - Director of Government Affairs for the Service
Company from 1996 to 1998.
Kwong O. Nuey, Jr. - Age: 49 - Elected Vice President in 1997 -
Director of Retail Information Services for the Service Company
from 1993 to 1997.
Nancy H. Sala - Age: 46 - Vice President since 1992.
John G. Upham II - Age: 40 - Elected Vice President in 1997 -
Municipal Account Manager from 1993 to 1997.
John G. Cochrane* - Elected Treasurer in 1998.
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.
Robert L. McCabe* - Elected Chairman in 1997 - President from
1986 to 1997.
Lawrence J. Reilly* - Elected President in 1997.
Lydia M. Pastuszek* - Elected Senior Vice President in 1997.
Christopher E. Root* - Elected Senior Vice President in 1997.
Richard W. Frost* - Vice President since 1993 - District
Manager - Southern District from 1990 to 1993.
Shannon M. Larson** - Age: 40 - Vice President since 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: 62 - Vice President since 1994 - Director
of Customer Service since 1993 - Assistant to the President
from 1990 to 1993.
Michael F. Ryan - Age: 46 - Vice President since 1994 - Rhode
Island Director for U.S. Senator John H. Chafee from 1986 to
1994.
Peter T. Zschokke - Age: 40 - Elected Vice President effective
April 1, 1998 - Manager of Retail Rates for the Service Company
from 1992 to 1998.
John G. Cochrane** - Elected Treasurer in 1998.
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 - Mass. Electric for other information regarding these
officers.
**Mr. Reilly and Ms. Larson are married to each other. Ms. Larson
intends to resign effective April 1, 1998.
ITEM 2. PROPERTIES
See ITEM 1. Business - Transmission, Distribution, and
Generation Properties, page 19.
ITEM 3. LEGAL PROCEEDINGS
See Item 1. BUSINESS - Divestiture of Generation Business,
page 7; Nuclear Units, page 26.
In April 1997, the Town of Norwood, Massachusetts filed a
lawsuit against NEP in the United States District Court for the
District of Massachusetts. NEP is the wholesale power supplier for
Norwood pursuant to rates approved by the FERC. Norwood alleges
that NEP's proposed divestiture of its power generation assets
would violate the terms of a 1983 power contract which settled an
antitrust lawsuit brought by Norwood against NEP. Norwood also
alleges that NEP's proposed divestiture plan and recovery of
stranded investment costs contravene federal antitrust laws.
Norwood seeks an injunction enjoining the divestiture and an
unspecified amount of treble damages (a specific claim for $450
million was withdrawn). Norwood's motion for a preliminary
injunction of the divestiture was denied on September 8, 1997. On
November 21, 1997, Norwood filed an amended complaint making new
allegations relating to the sale of NEP's generating assets and
naming as additional defendants, NEES, USGen, and USGen's
affiliate, PG & E. NEP continues to believe that its divestiture
plan will promote competition in the wholesale power generation
market and that it has met and will continue to meet its
contractual commitments to Norwood. On January 9, 1998, the
defendants, including NEES and NEP, filed motions to dismiss the
lawsuit. In March 1998, Norwood gave notice of its intent to
terminate its contract with NEP, without accepting responsibility
for its share of NEP's stranded costs, and to begin taking power
from another supplier. NEP has filed with the FERC for permission
to charge Norwood a contract termination charge for its share of
NEP's stranded costs.
In August 1997, NEP filed suit against Northeast Utilities in
Massachusetts Superior Court for damages resulting from the
tortious conduct of NU relating to the Millstone 3 nuclear unit.
NEP is seeking compensation for the losses it has suffered,
including the costs of lost power and costs necessary to assure
that Millstone 3 can safely return to operation. NEP also seeks
punitive damages. NU has filed for dismissal of the suit and
sought to consolidate it with suits filed by other joint owners in
Massachusetts Superior Court.
NEP also sent a demand for arbitration to Connecticut Light &
Power Company and Western Massachusetts Electric Company, both
subsidiaries of NU, seeking damages resulting from the breach of
obligations under an agreement with NEP and others regarding the
operation and ownership of Millstone 3.
In the 1970s, NEP and several other shareholders (Sponsors) of
Maine Yankee Atomic Power Company entered into 27 contracts
(Secondary Purchase Agreements) under which they sold portions of
their entitlement to Maine Yankee power output through 2002 to
various entities, primarily municipal and cooperative systems in
New England (Secondary Purchasers). Virtually all of the Secondary
Purchasers have ceased making payments under the Secondary Purchase
Agreements and have demanded arbitration, claiming that such
agreements excuse further payments upon plant shutdown. NEP has
notified the Secondary Purchasers that the shutdown does not
relieve them of their obligation to make payments under the
Secondary Purchase Agreements and that they are in default of such
agreements. NEP has asked the FERC to enforce NEP's rights under
the agreements. In the event that no further payments are
forthcoming from Secondary Purchasers, NEP, as a primary obligor to
Maine Yankee, would be required to pay an additional $9 million of
shutdown costs.
In 1996, various New England utilities which are members of the
New England Power Pool, including NEP, submitted a dispute to
arbitration regarding their Firm Energy Purchased Power Contract
with Hydro-Quebec. In June 1997, Hydro-Quebec presented a damage
claim of approximately $37 million for past damages, of which NEP's
share would have been approximately $6 to $9 million. The claims
involved a dispute over the components of a pricing formula and
additional costs under the contract. With respect to ongoing
claims, NEP had been paying Hydro-Quebec the higher amount
(additional costs of approximately $3 million per year) since July
1996 under protest and subject to refund. In October 1997, an
arbitrator ruled in favor of the New England utilities in all
respects. NEP has made a demand for refund. Hydro-Quebec has not
yet refunded any monies and has appealed the decision. On November
9, 1997, NEP and the other utilities began a second arbitration to
enforce the first decision.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NEES
----
No matters were submitted to a vote of NEES shareholders during
the last quarter of 1997.
NEP
---
On December 12, 1997, a Special Meeting of Stockholders was
held.
It was voted to amend NEP's (i) Articles of Organization and
(ii) By-laws to delete restrictions on the issuance of unsecured
indebtedness, each by a vote of 292,542 shares of the Dividend
Series Preferred Stock "For", no votes "Against", and 1,633 shares
of the Dividend Series Preferred Stock "Abstaining", and by a
separate vote of 6,449,896 shares of the Common Stock "For".
Mass. Electric
--------------
Special Meetings of the Stockholders were held on December 12,
1997 and December 29, 1997.
It was voted to amend Mass. Electric's (i) Articles of
Organization and (ii) By-laws to delete restrictions on the
issuance of unsecured indebtedness, each by a vote of 465,970.75
shares of the Preferred Stock "For", 7,177 shares of the Preferred
Stock "Against", and 1,765 shares of the Preferred Stock
"Abstaining", and by a separate class vote of 2,398,111 shares of
the Common Stock "For".
The following actions were taken by the unanimous vote of the
2,398,111 shares having general voting rights represented at the
meeting:
The composition of the board of directors was changed as of
December 31, 1997 to consist of the following:
Cheryl A. LaFleur
Robert L. McCabe
Lydia M. Pastuszek
Lawrence J. Reilly
Christopher E. Root
Richard P. Sergel
Dennis E. Snay
The number of directors was fixed at seven.
Narragansett
------------
Special Meetings of the Stockholders were held on December 12,
1997 and December 29, 1997.
It was voted to amend Narragansett's Preferred Stock Preference
Provisions to delete restrictions on the issuance of unsecured
indebtedness, by a vote of 668,313 shares of the Preferred Stock
"For", 690 shares of the Preferred Stock "Against", and 400 shares
of the Preferred Stock "Abstaining", and by a separate class vote
of 1,132,487 shares of the Common Stock "For".
The following actions were taken by the unanimous vote of the
1,132,487 shares having general voting rights represented at the
meeting:
The composition of the board of directors was changed as of
December 31, 1997 to consist of the following:
Richard W. Frost
Cheryl A. LaFleur
Robert L. McCabe
Lawrence J. Reilly
Michael F. Ryan
Richard P. Sergel
Ronald L. Thomas
The number of directors was fixed at seven.
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 1997
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 1997 Annual
Report.
ITEM 6. SELECTED FINANCIAL DATA
NEES
----
The information required by this item is incorporated herein
by reference to page 22 of the NEES 1997 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to Selected Financial Information, Note K of the NEP
1997 Annual Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to Selected Financial Information, Note K of the Mass.
Electric 1997 Annual Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to Selected Financial Information, Note L of the
Narragansett 1997 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 10 through 21 of the NEES 1997 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to the Financial Review section of the NEP 1997 Annual
Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to the Financial Review section of the Mass. Electric
1997 Annual Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to the Financial Review section of the Narragansett
1997 Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
NEES
----
NEES, through its wholly-owned indirect subsidiary, AllEnergy,
uses derivative instruments to manage exposure in fluctuations in
commodity prices. At this time, AllEnergy has only held exchange-
traded futures contracts to manage risks associated with natural
gas, propane, and heating oil price risks. Hedge criteria used and
accounting for hedge transactions are in accordance with Statement
of Financial Accounting Standards No. 80, Accounting for Futures
Contracts (FAS 80). FAS 80 states that in order to qualify as a
hedge, price movements in commodity derivatives must be highly
correlated with the underlying hedged commodity and must reduce
exposure to market fluctuations throughout the hedged period. Any
gain or loss on a derivative which qualifies as a hedge under FAS
80 is deferred until recognized in the income statement in the same
period as the hedged item is recognized in the income statement.
As of December 31, 1997, all of AllEnergy's existing futures
contracts qualified as hedges.
NEP
---
None.
Mass. Electric
--------------
None.
Narragansett
------------
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
NEES
----
The information required by this item is incorporated herein
by reference to pages 22 through 46 of the NEES 1997 Annual Report.
NEP
---
The information required by this item is incorporated herein
by reference to the financial statements and Notes to Financial
Statements in the NEP 1997 Annual Report.
Mass. Electric
--------------
The information required by this item is incorporated herein
by reference to the financial statements and Notes to Financial
Statements in the Mass. Electric 1997 Annual Report.
Narragansett
------------
The information required by this item is incorporated herein
by reference to the financial statements and Notes to Financial
Statements in the Narragansett 1997 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
9, 1998, for the 1998 Annual Meeting of Shareholders, provided that
the information under the headings "Report of the Compensation
Committee 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.
Lawrence E. Bailey* - Elected Director in 1997.
Alfred D. Houston* - Director since 1984. Directorships of
NEES System companies: Granite State Energy, Inc.,
Narragansett Energy Resources Company, NEES Communications,
Inc., NEES Energy, Inc., NEES Global Transmission, Inc., New
England Electric System, 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 Global Transmission,
Inc. on the Member's Committee of AllEnergy Marketing Co., LLC.
Cheryl A. LaFleur* - Director since 1995. Directorships of
NEES System companies: 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., NEES Global Transmission, 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.
Richard P. Sergel* - Elected a Director in 1998. Directorships
of NEES System companies: Granite State Electric Company,
Massachusetts Electric Company, Nantucket Electric Company, The
Narragansett Electric Company, NEES Communications, Inc., NEES
Global Transmission, Inc., New England Electric System, New
England Electric Transmission Corporation, 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. Sergel also
serves as a member representative for NEES Energy, Inc. on the
Member's Committee of AllEnergy Marketing Co., Inc.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES and/or EXECUTIVE OFFICERS - NEP in
Part I of this report for other information regarding these
directors.
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.
Cheryl A. LaFleur* - Elected Director in 1997.
Robert L. McCabe* - Elected Director in 1997. Directorships
of NEES System affiliates: Granite State Electric Company,
Nantucket Electric Company, and The Narragansett Electric
Company. Other directorship: Citizens Savings Bank.
Lydia M. Pastuszek* - Elected Director in 1997. Directorships
of NEES System affiliates: Granite State Electric Company.
Lawrence J. Reilly* - Director since 1996 - Directorships of
NEES System affiliates: Granite State Electric Company,
Nantucket Electric Company, and The Narragansett Electric
Company.
Christopher E. Root* - Elected Director in 1997. Directorships
of NEES System affiliates: Granite State Electric Company and
Nantucket Electric Company.
Richard P. Sergel* - Director since 1993.
Dennis E. Snay* - Elected Director in 1997.
*Please refer to the material supplied under the caption
EXECUTIVE OFFICERS - NEES and/or Mass. Electric 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.
Richard W. Frost* - Director since 1997.
Cheryl A. LaFleur* - Director since 1997.
Robert L. McCabe* - Director since 1986.
Lawrence J. Reilly* - Director since 1997.
Michael F. Ryan* - Director since 1997.
Richard P. Sergel* - Director since 1993.
Ronald L. Thomas - Age: 61 - Director since 1997 - Manager of
Labor Relations since 1997 - Human Resources Manager from 1979
to 1997.
*Please refer to the material supplied under the caption
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - NEP and/or
Mass. Electric in this Item for other information regarding
this director.
Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires
the System's officers and directors, and persons who own more than
10 percent 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 1997, all filing requirements
applicable to its officers, directors, and 10 percent 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 OR TERMINATION OF EMPLOYMENT, PLAN SUMMARIES, LONG TERM
INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR, and RETIREMENT PLANS
in the definitive proxy statement of NEES, dated March 9, 1998, for
the 1998 Annual Meeting of Shareholders, provided that the
information under the headings "Report of the Compensation
Committee 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
1995 through 1997 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)
- ---------- ---- ------- ------ --------- ---------- ---------
Lawrence E. 1997 156,516 188,214 3,316 0 600
Bailey 1996 151,956 101,667 116 0 3,776
President 1995 144,720 92,328 116 0 3,598
John W. 1997 217,987 104,212 4,596 55,520 928
Rowe(g) 1996 180,096 96,445 3,046 124,047 1,638
Former 1995 157,070 124,818 2,795 0 1,387
Chairman
Jeffrey D. 1997 154,433 133,560 8,274 0 1,077,143(h)
Tranen 1996 200,684 100,548 5,002 125,836 3,358
Former 1995 188,884 135,224 4,972 0 3,377
President
Andrew H. 1997 122,580 78,193 2,231 0 416
Aitken 1996 119,004 75,370 116 0 2,568
Vice 1995 107,081 66,683 108 0 2,243
President
John F. 1997 140,280 96,072 2,922 0 375
Malley 1996 133,394 104,885 116 0 3,141
Vice 1995 127,236 96,261 116 0 2,907
President
Arnold H. 1997 132,012 81,953 2,228 0 628
Turner 1996 128,172 89,185 116 0 2,849
Vice 1995 128,172 65,439 116 0 2,276
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 on
certain noncash benefits and contributions to the incentive
thrift plan by NEP that are not bonus contributions including
related deferred compensation plan match. See description
under Plan Summaries.
(e) The incentive share awards for the named executives who are
also NEES executives made for 1996 and 1997 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. As cash dividends are
declared, the number of deferred share equivalents will be
increased as if the dividends were reinvested in shares. The
shares awarded for the other named executives and for all
executives for 1995 were not restricted and the value of the
awards is included in the bonus column.
As of December 31, 1997, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Bailey 3,892 shares, $166,383 value; Mr. Rowe
28,380 shares, $1,213,245 value; Mr. Aitken 3,044 shares,
$130,131 value; Mr. Malley 3,759 shares, $160,697 value; and
Mr. Turner 2,625 shares, $112,218 value. The value was
calculated by multiplying the closing market price on December
31, 1997 by the number of shares.
No awards vested during 1997 under the Long-Term Performance
Share Award Plan.
(f) Includes NEP contributions to life insurance. 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. Prior to
1997, this column also included contributions by NEP to the
incentive thrift plan that are not bonus contributions. These
figures are now included in the Other Annual Compensation
column.
(g) Mr. Rowe resigned effective February 6, 1998.
(h) Mr. Tranen resigned effective September 12, 1997. All Other
Compensation includes: $830 for contributions to life
insurance as described in footnote (f) above, $28,452 as
accrued vacation pay, $621,081 as a severance payment, and
$426,780 in pension related benefits.
MASS. ELECTRIC
SUMMARY COMPENSATION TABLE
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compen- Share Compensa-
Position Year Salary Bonus sation Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ -------- ---------- ---------
Lawrence J. 1997 160,515 168,637 6,910 0 448
Reilly 1996 96,163 70,177 2,467 46,082 2,250
President 1995 38,561 34,985 37 0 986
Richard P. 1997 149,549 147,794 5,352 31,170 477
Sergel 1996 135,213 70,388 3,411 87,965 2,247
Former 1995 123,480 93,047 3,256 0 2,285
Chairman
Lydia M. 1997 125,481 81,944 2,544 0 241
Pastuszek 1996 86,068 52,017 69 22,115 1,893
Senior Vice 1995 86,597 53,204 72 0 2,403
President
Christopher E. 1997 98,421 103,890 2,067 0 147
Root 1996 92,055 67,050 99 0 2,032
Senior Vice 1995 84,173 37,158 89 0 1,537
President
Nancy H. 1997 124,344 60,661 2,603 0 283
Sala 1996 118,251 65,493 116 0 2,730
Vice 1995 115,524 59,932 116 0 2,498
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 on certain noncash benefits and contributions to the
incentive thrift plan by Mass. Electric that are not bonus
contributions including related deferred compensation plan
match. See description under Plan Summaries.
(e) The incentive share awards for the named executives who are
also NEES executives made for 1996 and 1997 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. As cash dividends are
declared, the number of deferred share equivalents will be
increased as if the dividends were reinvested in shares. In
1996, certain named officers also received special share
awards in the form of deferred share equivalents. The shares
awarded for the other named officers and for all executives
for 1995 were not restricted and the value of the awards is
included in the bonus column.
As of December 31, 1997, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. Reilly 6,320 shares, $270,180 value; Mr.
Sergel 8,698 shares, $371,840 value; Ms. Pastuszek 2,886
shares, $123,377 value; Mr. Root 2,632 shares, $112,518 value;
and Ms. Sala 1,989 shares, $85,030 value. The value was
calculated by multiplying the closing market price on December
31, 1997 by the number of shares.
No awards vested during 1997 under the Long-Term Performance
Share Award Plan.
(f) Includes Mass. Electric contributions to life insurance. See
description under Plan Summaries. The life insurance
contribution is calculated based on the value of term life
insurance for the named individuals. The premium costs for
most of these policies have been or will be recovered by Mass.
Electric. Prior to 1997, this column also included
contributions by Mass. Electric to the incentive thrift plan
that are not bonus contributions. These figures are now
included in the Other Annual Compensation column.
NARRAGANSETT
SUMMARY COMPENSATION TABLE
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
Robert L. 1997 179,460 148,868 9,881 0 1,528
McCabe 1996 127,388 88,905 4,819 50,308 3,424
Chairman 1995 152,407 111,785 4,206 0 4,851
and Former
President
Lawrence J. 1997 679 452 29 0 1
Reilly 1996 16,329 11,916 419 7,825 382
President(g) 1995 30,322 26,625 29 0 622
William 1997 135,972 84,924 2,839 0 88,885(h)
Watkins, 1996 132,012 84,081 119 0 4,509
Jr. 1995 128,172 77,967 119 0 4,054
Executive
Vice
President
Richard W. 1997 113,856 52,347 2,396 0 596
Frost 1996 108,432 57,680 119 0 2,888
Vice 1995 103,272 48,972 119 0 2,787
President
Shannon M. 1997 105,012 51,259 2,220 0 330
Larson 1996 81,293 21,879 116 0 1,808
Vice 1995 68,432 2,908 132 0 1,809
President
Michael F. 1997 103,983 52,060 2,197 0 220
Ryan 1996 64,555 18,397 77 0 1,473
Vice 1995 74,917 14,499 94 0 231
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 on certain noncash benefits and contributions to the
incentive thrift plan by Narragansett that are not bonus
contributions including related deferred compensation plan
match. See description under Plan Summaries.
(e) The incentive share awards for the named executives made for
1996 and 1997 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. As cash dividends are declared, the number of
deferred share equivalents will be increased as if the
dividends were reinvested in shares. The shares awarded for
1995 were not restricted and the value of the awards is
included in the bonus column.
As of December 31, 1997, the following executive officers held
the amount of restricted and deferred shares with the value
indicated: Mr. McCabe 6,725 shares, $287,493 value; Mr.
Reilly 6,320 shares, $270,180 value; Mr. Watkins 353 shares,
$15,091 value; Mr. Frost 798 shares, $34,115 value; Ms. Larson
6,320 shares, $270,180 value; and Mr. Ryan 10 shares, $428
value. The value was calculated by multiplying the closing
market price on December 31, 1997 by the number of shares.
Mr. Reilly and Ms. Larson are married and both of their
restricted shares are included in the others total.
No awards vested during 1997 under the Long-Term Performance
Share Award Plan.
(f) Includes Narragansett contributions to life insurance. 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. Prior to 1997, this column also included
contributions by Narragansett to the incentive thrift plan
that are not bonus contributions. These figures are now
included in the Other Annual Compensation column.
(g) Elected President effective October 1, 1997.
(h) Retired effective January 1, 1998. All Other Compensation
includes $1,528 contributions to life insurance as described
in footnote (f) and a payment of $87,357 as a special
retirement payment.
Directors' Compensation
Members of the Mass. Electric and Narragansett Boards of
Directors, except employees of NEES System companies, received 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. Effective
December 31, 1997, the composition of all three boards was changed
to include only employees of NEES System companies.
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 agreed to waive the normal fees
and annual retainers otherwise payable for services by
nonemployees on NEES subsidiary boards and received in lieu thereof
a single annual stipend of $60,000. During 1997, Mrs. Bok also
served as a consultant to NEES. Under the terms of her contract,
she received an annual retainer of $100,000.
Other
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
1998.
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 18,926 29,276 39,626 49,976 60,326 70,676
$150,000 29,276 42,414 57,439 72,464 87,489 102,514
$200,000 39,626 57,439 75,251 94,951 114,651 134,351
$250,000 49,976 72,464 94,951 116,814 141,064 165,314
$300,000 60,326 87,489 114,651 141,064 167,477 184,123
$350,000 70,676 102,514 134,351 165,314 196,277 215,865
$400,000 81,026 117,539 154,051 189,564 225,077 241,590
$450,000 91,376 132,564 173,751 213,814 253,877 279,315
$500,000 101,726 147,589 193,451 238,064 282,677 311,040
For purposes of the retirement plans, Messrs. Bailey, Rowe,
Tranen, Aitken, Malley, and Turner currently have 29, 20, 28, 25,
26, and 32 credited years of service, respectively. Mr. Reilly,
Mr. Sergel, Ms. Pastuszek, Mr. Root, and Ms. Sala currently have
16, 19, 17, 15, and 28 credited years of service, respectively.
Mr. McCabe, Mr. Reilly, Mr. Watkins, Mr. Frost, Ms. Larson, and Mr.
Ryan currently have 29, 16, 25, 35, 18, and 3 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 percent joint
and survivor benefit with a spouse of the same age, the benefit
shown would be reduced by approximately 16 percent.
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.
In December 1997, the NEES companies announced a voluntary
early retirement program available to all nonunion employees over
age 55 with ten or more years of service. Messrs. Amoroso, Frost,
McCabe, Nadeau, Snay, and Turner were all eligible for the offer.
The program offered either an annuity or a lump sum equal to the
greater of either one week's base pay times the number of years of
service or an additional five years service and five years of age
toward their pension. The offer also included certain health care
and bridging of social security benefits. The program is
conditioned upon consummation of the divestiture of the nonnuclear
generating business to USGen. Mr. McCabe also has an employment
agreement which provides that if he remains in the employ of the
NEES companies until December 31, 1998, or the retirement effective
date under the offer, he will receive an annuity or a lump sum
equal to an additional five years of service and five years of age
toward his pension plus $225,000, subject to an offset for any
benefits under the general offer. The value of Messrs. Amoroso,
Frost, McCabe, Nadeau, Snay, and Turner's benefits under the offer
and the contract cannot be determined until their retirement
following the divestiture.
The System contributes the full cost of post-retirement health
benefits for senior executives.
NEP, MASS. ELECTRIC, AND NARRAGANSETT PAYMENTS UPON A CHANGE OF
CONTROL OR TERMINATION OF EMPLOYMENT
NEES has an agreement with Mr. Sergel which provides severance
benefits in the event of certain terminations of employment
following a Change in Control of NEES (as defined below). The term
of the agreement is for three years with automatic annual
extensions, unless terminated by NEES. If, following a Change in
Control, Mr. Sergel's employment is terminated other than for cause
(as defined) or if Mr. Sergel terminates employment for good reason
(as defined), NEES will pay to Mr. Sergel a lump sum cash payment
equal to three times the sum of Mr. Sergel's most recent annual
base compensation and the average of his bonus amounts for the
prior three years. If Mr. Sergel 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 Mr. Sergel for three years, provide such post-
retirement health and welfare benefits as Mr. Sergel would have
earned within such three years, and grant three additional years of
pension credit.
Change in Control, including potential change of control,
occurs (1) when any person becomes the beneficial owner of 20
percent 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.
Upon a change in control a participant in the deferred
compensation plan has the option of receiving a full distribution
of the participant's cash and share accounts and the actuarial
value of future benefits from the insurance related benefits under
a prior plan, all less 10 percent.
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. These payments
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 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), any restrictions on
shares and account balances would cease.
Under a retention agreement between Mr. Aitken and NEP, he has
agreed to remain in NEP's employ, at the sole option of NEP, until
the earlier of February 1999 or the closing date of the sale of the
generation assets to USGen in return for a lump sum payment of
$47,345. In August 1998, NEP will pay an additional amount equal
to 4-1/2 months' base salary if it has not released Mr. Aitken from
this obligation by July 6, 1998.
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 establishes goals annually. For 1997, 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 percent
to 4-1/2 percent of their compensation.
Incentive Thrift Plan
The incentive thrift plan (a 401(k) program) provides for a
match of 40 percent of up to the first 5 percent of base
compensation contributed to the System's incentive thrift plan
(shown under Other Annual Compensation in the Summary Compensation
Tables) and, based on an incentive formula tied, in 1997, to
earnings per share, may fully match the first 5 percent 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 1997, 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 $160,000 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, and Sergel 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
percent of final annual salary. In that event, the life insurance
is reduced over 15 years to an amount equal to the participant's
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 percent of the
approximately 80 electric utilities in the national utility group
(the national grouping) or in the top 50 percent 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.
In 1998, this plan will be replaced because the System is
shifting from a vertically integrated utility to being primarily a
transmission and distribution system and the System's strategic
plan calls for new business development in competitive new areas.
Comparative return on equity and cost per kWh measurements will
become increasingly less representative as the prime measures of
success as different utilities proceed through competitive
transitions at different times and at different rates. Under the
new plan, bonuses are tied to achievement of core business
operating income and strategic objectives. Annual income targets
will be established prior to or early in the plan year. In
addition, strategic objectives will be established for each year.
For 1998, those objectives are: achieving recovery of stranded
investments; maximizing the return on the sale of the generation
business; running the best wires business in the Northeast;
increasing the size of the energy delivery business; and profiting
from growth in unregulated ventures.
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.
LONG-TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
-----------------------------------------------------
The Long-Term Performance Share Award 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 performance targets for
each cycle are set by the Compensation Committee of the NEES Board.
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 percent to 50
percent) of base pay. At the end of the three-year cycle, the
participant receives NEES shares based upon the performance against
the various factors.
The measures of performance for the cycle commencing January
1, 1997 are as follows: total shareholder return compared to the
national group (60th-75th percentile); total shareholder return
compared to the regional group (50th-75th percentile); maintenance
or improvement of bond ratings; new business development; growth of
transmission and distribution business; and system service levels,
measured by system reliability and regulatory compliance. The
national grouping is composed of approximately 80 electric
utilities. The regional grouping is composed of New England/New
York regional utilities.
The following tables show the potential awards, for those
executive officers named in the Summary Compensation Tables, under
the Long-Term Performance Share Award Plan for the performance
cycle commencing January 1, 1997. The NEES System's performance
will be measured over the three-year period ending December 31,
1999.
NEP
---
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
Lawrence E. Bailey 1,128 3 years 7 1,128
John W. Rowe(d) 8,617 3 years 0 0
Jeffrey D. Tranen(d) 3,333 3 years 0 0
Andrew H. Aitken 884 3 years 5 884
John F. Malley 1,011 3 years 6 1,011
Arnold H. Turner 952 3 years 6 952
Mass. Electric
--------------
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
Lawrence J. Reilly 1,179 3 years 7 1,179
Richard P. Sergel 3,266 3 years 20 3,266
Lydia M. Pastuszek 1,019 3 years 6 1,019
Christopher E. Root 832 3 years 5 832
Nancy H. Sala 538 3 years 3 538
Narragansett
------------
ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
Robert L. McCabe 1,311 3 years 8 1,311
Lawrence J. Reilly 1,179 3 years 7 1,179
William Watkins, Jr. 980 3 years 6 980
Richard W. Frost 493 3 years 3 493
Shannon M. Larson 454 3 years 3 454
Michael F. Ryan 459 3 years 3 459
(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.
(d) Upon Mr. Tranen's resignation in September 1997 and Mr. Rowe's
resignation in February 1998, they became ineligible to
receive any award under the Long-Term Performance Share Award
Plan.
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 9, 1998, for the 1998 Annual Meeting of Shareholders,
provided that the information under the headings "Report of the
Compensation Committee on Executive Compensation" and "Corporate
Performance" are not so incorporated.
NEP, Mass. Electric, and Narragansett
-------------------------------------
NEES owns 100 percent of the voting securities of Mass.
Electric and Narragansett. NEES owns 98.85 percent of the voting
securities of NEP.
SECURITY OWNERSHIP
The following tables list the holdings of NEES common shares
as of March 2, 1998 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) Total
---- ------------ --------------- -----
Andrew H. Aitken 6,606 2,572 9,178
Lawrence E. Bailey 5,153 3,330 8,483
Alfred D. Houston 13,688 11,558 25,246
Cheryl A. LaFleur 3,191 5,787 8,978
John F. Malley 2,506 3,364 5,870
John W. Rowe 14,823 25,355 40,178
Jeffrey D. Tranen 107 107
Arnold H. Turner 4,914 2,112 7,026
All directors and
executive officers,
as a group (11 persons) 64,846 (c) 61,994 126,840
Mass. Electric
--------------
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b) Total
---- ------------ --------------- -----
Cheryl A. LaFleur 3,191 5,787 8,978
Robert L. McCabe 10,156 6,054 16,210
Lydia M. Pastuszek 7,185 2,446 9,631
Lawrence J. Reilly 3,656 5,959 9,615
Christopher E. Root 2,036 2,304 4,340
Nancy H. Sala 4,153 (d) 1,636 5,789
Richard P. Sergel 8,086 8,313 16,399
Dennis E. Snay 4,608 535 5,143
All directors and
executive officers,
as a group (17 persons) 84,854 (c) 42,610 127,464
Narragansett
------------
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b) Total
---- ------------ --------------- -----
Richard W. Frost 7,677 502 8,179
Cheryl A. LaFleur 3,191 5,787 8,978
Shannon M. Larson 3,656 5,959 9,615
Robert L. McCabe 10,156 6,054 16,210
Lawrence J. Reilly 3,656 5,959 9,615
Michael F. Ryan 829 10 839
Richard P. Sergel 8,086 8,313 16,399
Ronald L. Thomas 1,405 1,405
William Watkins, Jr. 1,113 1,113
All directors and
executive officers,
as a group (14 persons) 73,070 (c) 49,848 122,918
(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 is paid out in the
same form, cash or NEES shares, as was deferred. 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 percent of the total number of shares of
NEES outstanding.
(d) Ms. Sala disclaims a beneficial ownership interest in 281
shares held in custodial accounts.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 December 15, 1997
(filed herewith).
(d) New England Power Company Indentures General and
Refunding Mortgage Indenture and Deed of Trust
dated as of January 1, 1977 and twenty
supplementsthereto (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).
(i) Boston Edison Company et al. and New England
Power Company: REMVEC II Agreement dated on
or about July 1, 1994 (filed herewith).
(ii) Boston Edison Company et al. and New England
Power Company: Security Analysis Service
Agreement dated on or about July 1, 1994
(filed herewith).
(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
(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.
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); 1997 Amendatory
Agreement dated as of August 6, 1997 (filed
herewith).
(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 (Exhibit
10(e)(i) to 1996 Form 10-K, File No. 1-3446).
(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 (Exhibit
10(e)(ii) to 1996 Form 10-K, File No. 1-3446).
(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 (Exhibit 10(e)(vi) to 1996 Form 10-K,
File No. 1-3446).
(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 (Exhibit 10(i) to 1996 Form
10-K, File No. 1-3446); Amendment dated as of
September 1, 1997 (filed herewith); Amendment dated
as of November 15, 1997 (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 (Exhibit 10(m) to 1996 Form 10-K, File No. 1-
3446).
*(n) New England Electric System Companies Retirement
Supplement Plan as amended through June 1, 1996
(Exhibit 10(n) to 1996 Form 10-K, File No. 1-3446).
*(o) New England Electric Companies' Executive
Supplemental Retirement Plan I as amended through
May 20, 1996 (Exhibit 10(o) to 1996 Form 10-K, File
No. 1-3446).
*(p) New England Electric Companies' Executive
Supplemental Retirement Plan II as amended through
October 25, 1995 (Exhibit 10(p) to 1996 Form 10-K,
File No. 1-3446).
*(q) New England Electric Companies' Incentive
Compensation Plan I as amended through October 24,
1995 (Exhibit 10(q) to 1996 Form 10-K, File No. 1-
3446).
*(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 (Exhibit 10(s) to 1996 Form 10-K, File No.
1-3446).
*(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 (Exhibit 10(u) to 1996 Form 10-K, File No. 1-
3446).
*(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 (Exhibit
10(w) to 1996 Form 10-K, File No. 1-3446).
*(x) New England Electric Companies' Long-Term
Performance Share Award Plan amended through
February 24, 1997 (Exhibit 10(x) to 1996 Form 10-K,
File No. 1-3446).
*(y) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10(y) to 1996 Form
10-K, File No. 1-3446).
*(z) Forms of Severance Protection Agreement (Exhibit
10(z) to 1996 Form 10-K, File No. 1-3446).
*(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) 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).
(dd) 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).
(ee) 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).
(ff) 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).
(gg) 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).
(hh) 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).
(ii) 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).
(jj) 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); Amendment No.
1 to Limited Liability Company Agreement dated as
of December 3, 1997 (filed herewith).
(kk) USGen, New England Energy, Inc. and New England
Power Company and The Narragansett Electric
Company: Asset Purchase Agreement dated as of
August 5, 1997 (Exhibit 2 to Form 10-Q for period
ended September 30, 1997, File No. 1-3446).
*(ll) New England Power Service Company and Robert L.
McCabe: Employment Agreement entered into as of
March 11, 1998 (filed herewith).
* Compensation related plan, contract, or arrangement.
(13) 1997 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 December 12, 1997
(filed herewith).
(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).
(i) Boston Edison Company et al. and the Company:
REMVEC II Agreement dated on or about July 1,
1997 (Exhibit 10(a)(i) to NEES' 1997 Form 10-
K, File No. 1-3446).
(ii) Boston Edison Company et al. and the Company:
Security Analysis Services Agreement dated on
or about July 1, 1997 (Exhibit 10(a)(ii) to
NEES' 1997 Form 10-K, File No. 1-3446).
(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); 1997 Amendatory Agreement
dated as of August 6, 1997 (Exhibit 10(d) to NEES'
1997 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); Amendment of Service
Agreement effective July 1, 1996 (filed herewith);
Amendment to Service Agreement dated as of February
1, 1997 (filed herewith).
(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);
Amendment of Service Agreement effective October
30, 1995 (filed herewith); Amendment to Service
Agreement dated as of February 1, 1997 (filed
herewith).
(g) 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).
(h) 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).
(i) 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).
(j) 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). Amendment dated as of
September 1, 1997 and Amendment dated as of
November 15, 1997 (Exhibit 10(i) to 1997 NEES Form
10-K, File No. 1-3446).
(k) New England Power Service Company and the Company:
Specimen of Service Contract (Exhibit 10(l) to 1994
Form 10-K, File No. 0-1229).
(l) Massachusetts Electric Company, et al. and the
Company: Form of Mutual Assistance Agreement
(Exhibit 10(n) to 1996 Form 10-K, File No. 0-1229).
(m) Massachusetts Electric Company, et al. and the
Company: Restructuring Settlement Agreement
approved by the Massachusetts Department of Public
Utilities (Exhibit 10(o) to 1996 Form 10-K, File
No. 0-1229).
(n) 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).
(o) 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).
(p) 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).
*(q) 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).
*(r) 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).
*(s) 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).
*(t) 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).
*(u) 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).
*(v) 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).
*(w) 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).
*(x) 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).
*(y) 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).
*(z) 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).
*(aa) New England Electric System Directors' Retirement
Plan dated May 1, 1994 (Exhibit 10(y) to 1996 NEES
Form 10-K, File No. 1-3446.
*(bb) Forms of Severance Protection Agreement (Exhibit 10
(z) to NEES' 1996 Form 10-K, File No. 1-3446).
*(cc) 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).
(dd) 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).
(ee) 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).
(ff) 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).
(gg) USGen New England Contracts
(i) Asset Purchase Agreement between the Company
and The Narragansett Electric Company: dated
as of August 5, 1997 (Exhibit 2 to NEES' Form
10-Q for period ended September 30, 1997,
File No. 1-3446).
(ii) Wholesale Sales Agreement between the Company
and USGen New England, Inc. dated as of
August 5, 1997 (filed herewith).
(iii) PPA Transfer Agreement between the Company
and USGen New England, Inc. dated as of
August 5, 1997 (filed herewith).
(iv) Form of PSA Performance Support Agreement
between the Company, USGen New England, Inc.,
and each of the following; North Attleboro
Electric Department, Groton Electric Light
Department, Middleton Municipal Electric
Department, Hingham Municipal Lighting Plant,
Town of Holden Municipal Light Department,
Unitil Power Corp. (Salem Harbor), Unitil
Power Corp. (Ocean State), Bangor Hydro-
Electric Company, Montaup Electric Company,
Central Vermont Public Service Corporation,
Braintree Electric Light Department,
Littleton Electric Light Department,
Massachusetts Government Land Bank, Reading
(MA) Municipal Light Department, Shrewsbury
Electric Light Plant, Taunton Municipal Light
Plant, and Vermont Electric Company, dated as
of August 5, 1997 (filed herewith).
*(hh) New England Power Company and Andrew H. Aitken:
Employment Agreement entered into as of December 9,
1997 (filed herewith).
* Compensation related plan, contract, or arrangement.
(13) 1997 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 December 12, 1997
(filed herewith).
(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).
(i) Boston Edison Company et al. and Company:
REMVEC II Agreement dated on or about July 1,
1997 (Exhibit 10(a)(i) to NEES' 1997 Form 10-
K, File No. 1-3446).
(ii) Boston Edison Company et al. and Company:
Security Analysis Services Agreement dated on
or about July 1, 1997 (Exhibit 10(a)(ii) to
NEES' 1997 Form 10- K, File No. 1-3446).
(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); Amendment of Service Agreement
effective July 1, 1996 (Exhibit 10(e) to 1997 NEP
Form 10-K, File No. 0-1229); Amendment to Service
Agreement dated as of February 1, 1997 (Exhibit
10(e) to 1997 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); Amendment dated as of November 28, 1997
(Exhibit 10(i) to 1997 NEES Form 10-K, File No. 1-
3446); Amendment dated as of September 1, 1997 and
Amendment dated as of November 15, 1997 (Exhibit
10(i) to 1997 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).
(w) Amended and Restated Wholesale Standard Offer
Service Agreement among the Company, Nantucket
Electric Company, and USGen New England, Inc. dated
as of October 29, 1997 (filed herewith).
* 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. 333-46431 (filed
herewith).
(13) 1997 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 December 15, 1997
(Exhibit 4(c) to 1997 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).
(i) Boston Edison Company et al. and the Company:
REMVEC II Agreement dated on or about July 1,
1997 (Exhibit 10(a)(i) to NEES' 1997 Form 10-
K, File No. 1-3446).
(ii) Boston Edison Company et al. and the Company:
Security Analysis Services Agreement dated on
or about July 1, 1997 (Exhibit 10(a)(ii) to
NEES' 1997 Form 10-K, File No. 1-3446).
(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); Amendment of
Service Agreement effective October 30, 1995,
Amendment of Service Agreement dated as of February
1, 1997 (Exhibit 10(f) to 1997 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);
Amendment dated as of September 1, 1997 and
Amendment dated as of November 15, 1997 (Exhibit
10(i) to 1997 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).
(v) USGen New England, Inc. Contracts
(i) Asset Purchase Agreement between the Company
and New England Power Company dated as of
August 5, 1997 (Exhibit 2 to NEES' Form 10-Q
for the period ended September 30, 1997, File
No. 1-3446).
(ii) Amended and Restated Wholesale Standard Offer
Service Agreement between the Company and
USGen New England, Inc. dated as of October
29, 1997 (filed herewith).
* 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) 1997 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 November 21, 1997,
December 3, 1997, December 12, 1997, and December 23, 1997, all of
which contained ITEM 5.
NEP
---
NEP filed reports on Form 8-K dated November 21, 1997, December
12, 1997, and December 23, 1997, all of which contained ITEM 5.
Mass. Electric
--------------
Mass. Electric filed reports on Form 8-K dated November 25,
1997, December 12, 1997, and December 23, 1997, all of which
contained ITEM 5.
Narragansett
------------
Narragansett filed reports on Form 8-K dated November 25, 1997
and December 12, 1997, both 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/Richard P. Sergel
Richard P. Sergel
President and
Chief Executive Officer
March 31, 1998
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/Richard P. Sergel
Richard P. Sergel
President and
Chief Executive Officer
Principal Financial Officer
s/Michael E. Jesanis
Michael E. Jesanis
Senior Vice President and
Chief Financial Officer
Principal Accounting Officer
s/John G. Cochrane
John G. Cochrane
Treasurer
Directors (a majority)
Joan T. Bok
William M. Bulger
Alfred D. Houston
Paul L. Joskow
John M. Kucharski
Edward H. Ladd
Joshua A. McClure
George M. Sage s/John G. Cochrane
Richard P. Sergel 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 31, 1998
*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/Lawrence E. Bailey
Lawrence E. Bailey
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 E. Bailey
Lawrence E. Bailey
President
Principal Financial Officer
s/John G. Cochrane
John G. Cochrane
Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Lawrence E. Bailey
Alfred D. Houston
Cheryl A. LaFleur s/John G. Cochrane
All by:
John G. Cochrane
Attorney-in-fact
Date (as to all signatures on this page)
March 31, 1998
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/John G. Cochrane
John G. Cochrane
Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
Cheryl A. LaFleur
Robert L. McCabe
Lydia M. Pastuszek
Lawrence J. Reilly
Christopher E. Root s/John G. Cochrane
Richard P. Sergel All by:
Dennis E. Snay John G. Cochrane
Attorney-in-fact
Date (as to all signatures on this page)
March 31, 1998
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/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/John G. Cochrane
John G. Cochrane
Treasurer
Principal Accounting Officer
s/Howard W. McDowell
Howard W. McDowell
Controller
Directors (a majority)
s/John G. Cochrane
Cheryl A. LaFleur All by:
Robert L. McCabe John G. Cochrane
Lawrence J. Reilly Attorney-in-fact
Michael F. Ryan
Richard P. Sergel
Ronald L. Thomas
Date (as to all signatures on this page)
March 31, 1998
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
References (Page)
-----------------------
1997 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 45
Statements of Consolidated Income,
Year Ended December 31, 1997, 1996 and 1995............. 23
Statements of Consolidated Retained Earnings,
Year Ended December 31, 1997, 1996 and 1995............. 23
Consolidated Balance Sheets, December 31, 1997 and 1996... 24
Consolidated Statements of Cash Flows,
Year Ended December 31, 1997, 1996 and 1995............. 25
Consolidated Statements of Capitalization,
December 31, 1997 and 1996.............................. 26
Notes to Financial Statements............................... 27-44
For the Year Ended December 31, 1997, 1996 and 1995:
Consent of Independent Accountants........................ 103
* 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 March
2, 1998 on our audits of the consolidated financial statements of New
England Electric System and subsidiaries as of December 31, 1997 and 1996
and for each of the three years in the period ended December 31, 1997,
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 Electric System on Form S-4 (File No. 333-
47383), Massachusetts Electric Company on Form S-3 (File No. 333-46431)
and The Narragansett Electric Company on Form S-3 (File No. 33-61131) of
our reports dated March 2, 1998 on our audits of the financial statements
of New England Electric System, Massachusetts Electric Company and The
Narragansett Electric Company, respectively, as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31,
1997, 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 30, 1998
NEW ENGLAND POWER COMPANY
INDEX TO FINANCIAL STATEMENTS
References (Page)
----------------------
1997 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 1
Statements of Income,
Year Ended December 31, 1997, 1996 and 1995............... 12
Statements of Retained Earnings,
Year Ended December 31, 1997, 1996 and 1995............... 12
Balance Sheets, December 31, 1997 and 1996.................. 13
Statements of Cash Flows,
Year Ended December 31, 1997, 1996 and 1995............... 14
Notes to Financial Statements............................... 15-35
For the Year Ended December 31, 1997, 1996 and 1995:
Consent of Independent Accountants....................... 103
* Incorporated by Reference.
MASSACHUSETTS ELECTRIC COMPANY
INDEX TO FINANCIAL STATEMENTS
References (Page)
----------------------
1997 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 1
Statements of Income,
Year Ended December 31, 1997, 1996 and 1995............... 8
Statements of Retained Earnings,
Year Ended December 31, 1997, 1996 and 1995............... 8
Balance Sheets, December 31, 1997 and 1996.................. 9
Statements of Cash Flows,
Year Ended December 31, 1997, 1996 and 1995............... 10
Notes to Financial Statements............................... 11-25
For the Year Ended December 31, 1997, 1996 and 1995:
Consent of Independent Accountants........................ 103
* Incorporated by Reference.
THE NARRAGANSETT ELECTRIC COMPANY
INDEX TO FINANCIAL STATEMENTS
References (Page)
----------------------
1997 Annual
Form Report to
10-K Shareholders*
---- -------------
Report of Independent Accountants........................... 1
Statements of Income,
Year Ended December 31, 1997, 1996 and 1995............... 8
Statements of Retained Earnings,
Year Ended December 31, 1997, 1996 and 1995............... 8
Balance Sheets, December 31, 1997 and 1996.................. 9
Statements of Cash Flows,
Year Ended December 31, 1997, 1996 and 1995............... 10
Notes to Financial Statements............................... 11-24
For the Year Ended December 31, 1997, 1996 and 1995:
Consent of Independent Accountants........................ 103
* Incorporated by Reference.