SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6564
(LOGO) NEW ENGLAND POWER COMPANY
(Exact name of registrant as specified in charter)
MASSACHUSETTS 04-1663070
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
Registrant's telephone number, including area code
(508-389-2000)
Indicate by check mark whether the registrant (1) has 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 registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes (X) No ( )
Common stock, par value $20 per share, authorized and outstanding:
6,449,896 shares at March 31, 1997.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
NEW ENGLAND POWER COMPANY
Statements of Income
Periods Ended March 31
(Unaudited)
Three Months Twelve Months
------------ -----------
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands)
Operating revenue, principally from affiliates $438,048 $400,460$1,637,897 $1,579,882
-------- -------- --------------------
Operating expenses:
Fuel for generation 103,015 80,226 365,334 299,478
Purchased electric energy 144,345 125,534 527,721 528,119
Other operation 55,849 50,024 209,281 211,740
Maintenance 19,770 19,607 79,281 82,132
Depreciation and amortization 22,018 26,520 99,707 99,345
Taxes, other than income taxes 18,205 17,721 66,900 61,136
Income taxes 24,194 25,551 90,537 97,330
-------- -------- --------------------
Total operating expenses 387,396 345,183 1,438,761 1,379,280
-------- -------- --------------------
Operating income 50,652 55,277 199,136 200,602
Other income:
Allowance for equity funds used during
construction (5) 5 5,339
Equity in income of nuclear power companies1,496 1,344 5,311 5,666
Other income (expense) - net, including
related taxes (2,090) (1,991) (1,950) (1,240)
-------- -------- --------------------
Operating and other income 50,058 54,625 202,502 210,367
-------- -------- --------------------
Interest:
Interest on long-term debt 10,832 11,705 44,238 47,264
Other interest 1,651 2,168 9,549 10,579
Allowance for borrowed funds used during
construction - credit (370) (221) (740) (8,893)
-------- -------- --------------------
Total interest 12,113 13,652 53,047 48,950
-------- -------- --------------------
Net income $ 37,945 $ 40,973 $ 149,455$ 161,417
======== ======== ====================
Statements of Retained Earnings
Retained earnings at beginning of period $400,610 $385,309 $ 396,399$ 372,250
Net income 37,945 40,973 149,455 161,417
Dividends declared on cumulative
preferred stock (519) (858) (2,235) (3,433)
Dividends declared on common stock (29,025) (29,025) (134,158) (133,835)
Premium on redemption of preferred stock (450)
-------- -------- --------------------
Retained earnings at end of period $409,011 $396,399 $ 409,011$ 396,399
======== ======== ====================
The accompanying notes are an integral part of these financial statements.
Per share data is not relevant because the Company's common stock is wholly-
owned by New England Electric System.
NEW ENGLAND POWER COMPANY
Balance Sheets
(Unaudited)
March 31, December 31,
ASSETS 1997 1996
------ ---- ----
(In Thousands)
Utility plant, at original cost $3,012,056 $2,991,797
Less accumulated provisions for depreciation
and amortization 1,138,072 1,118,340
---------- ----------
1,873,984 1,873,457
Construction work in progress 31,421 36,836
---------- ----------
Net utility plant 1,905,405 1,910,293
---------- ----------
Investments:
Nuclear power companies, at equity 48,692 47,902
Non-utility property and other investments, at cost 30,743 30,591
---------- ----------
Total investments 79,435 78,493
---------- ----------
Current assets:
Cash 3,537 3,046
Accounts receivable, principally from sales of
electric energy:
Affiliated companies 222,235 201,370
Accrued NEEI revenues 18,902 21,648
Others 26,926 23,219
Fuel, materials, and supplies, at average cost 62,117 58,709
Prepaid and other current assets 25,200 25,050
---------- ----------
Total current assets 358,917 333,042
---------- ----------
Deferred charges and other assets 315,763 325,887
---------- ----------
$2,659,520 $2,647,715
========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $20 per share,
authorized and outstanding 6,449,896 shares $ 128,998 $ 128,998
Premiums on capital stocks 86,779 86,779
Other paid-in capital 289,818 289,818
Retained earnings 409,011 400,610
---------- ----------
Total common equity 914,606 906,205
Cumulative preferred stock, par value $100 per share 39,666 39,666
Long-term debt 647,560 733,006
---------- ----------
Total capitalization 1,601,832 1,678,877
---------- ----------
Current liabilities:
Long-term debt due within one year 53,000 3,000
Short-term debt (including $4,475,000 and $5,275,000
to affiliates) 98,225 93,600
Accounts payable (including $30,914,000 and $25,301,000
to affiliates) 137,050 127,226
Accrued liabilities:
Taxes 29,689 8,158
Interest 9,290 9,668
Other accrued expenses 12,493 16,577
Dividends payable 29,025 27,412
---------- ----------
Total current liabilities 368,772 285,641
---------- ----------
Deferred federal and state income taxes 379,891 382,164
Unamortized investment tax credits 54,980 55,486
Other reserves and deferred credits 254,045 245,547
---------- ----------
$2,659,520 $2,647,715
========== ==========
The accompanying notes are an integral part of these financial statements.
NEW ENGLAND POWER COMPANY
Statements of Cash Flows
Quarters Ended March 31
(Unaudited)
1997 1996
---- ----
(In Thousands)
Operating activities:
Net income $ 37,945 $ 40,973
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 22,908 28,421
Deferred income taxes and investment tax credits, net (1,751) (1,930)
Allowance for funds used during construction (370) (216)
Decrease (increase) in accounts receivable (21,826) 9,866
Decrease (increase) in fuel, materials, and supplies (3,408) (3,471)
Decrease (increase) in prepaid and other current assets (150) (1,486)
Increase (decrease) in accounts payable 9,824 (19,949)
Increase (decrease) in other current liabilities 17,069 28,681
Other, net 15,129 3,647
-------- --------
Net cash provided by operating activities $ 75,370 $ 84,536
-------- --------
Investing activities:
Plant expenditures, excluding allowance
for funds used during construction $(15,947) $(23,676)
Other investing activities (126)
-------- --------
Net cash used in investing activities $(16,073) $(23,676)
-------- --------
Financing activities:
Dividends paid on common stock $(27,412) $(61,274)
Dividends paid on preferred stock (519) (858)
Changes in short-term debt 4,625 9,525
Long-term debt - issues 39,850
Long-term debt - retirements (35,500) (49,850)
-------- --------
Net cash used in financing activities $(58,806) $(62,607)
-------- --------
Net increase (decrease) in cash and cash equivalents $ 491 $ (1,747)
Cash and cash equivalents at beginning of period 3,046 2,607
-------- --------
Cash and cash equivalents at end of period $ 3,537 $ 860
======== ========
The accompanying notes are an integral part of these financial statements.
Note A - Investments in Nuclear Units
- -------------------------------------
A summary of combined results of operations, assets and
liabilities of the four Yankee Nuclear Power Companies in which the
Company has investments is as follows:
Quarter Ended
March 31,
----------------
1997 1996
---- ----
(In Thousands)
Operating revenue $176,027 $155,115
======== ========
Net income $ 8,379 $ 7,388
======== ========
Company's equity in net income $ 1,496 $ 1,344
======== ========
March 31, December 31,
1997 1996
---- ----
(In Thousands)
Plant $ 418,670 $ 401,049
Other assets 2,165,893 2,031,336
Liabilities and debt (2,322,901) (2,177,068)
----------- -----------
Net assets $ 261,662 $ 255,317
=========== ===========
Company's equity in net assets $ 48,692 $ 47,902
=========== ===========
At March 31, 1997, $14,743,000 of undistributed earnings of the
nuclear power companies were included in the Company's retained
earnings.
Millstone 3
The Company is a 12 percent joint owner of the Millstone 3
nuclear generating unit (Millstone 3) a 1,150 MW unit. In April
1996, the NRC ordered Millstone 3, which has experienced numerous
technical and nontechnical problems, to remain shut down pending
Note A - Investments in Nuclear Units - Continued
- -------------------------------------
verification that the unit's operations are in accordance with NRC
regulations and the unit's operating license. Millstone 3 is
operated by a subsidiary of Northeast Utilities (NU). The Company
is not an owner of Millstone 1 and 2 nuclear generating units,
which are also shut down under NRC orders.
A number of significant prerequisites must be fulfilled prior
to restart of Millstone 3, including certification by NU that the
unit adequately conforms to its design and licensing bases, an
independent verification of corrective actions taken at the unit,
an NRC assessment concluding a culture change has occurred, public
hearings, and a vote of the NRC Commissioners. NU has announced
that it expects Millstone 3 to be ready for restart around the end
of 1997, subject to review by the NRC Commissioners. The Company
cannot predict when Millstone 3 will be allowed by the NRC to
restart, but believes that the unit will remain shut down for a
very protracted period.
In 1996 the Company incurred $10 million of actual costs
related to corrective actions associated with the outage and also
accrued a liability at December 1996 of approximately $3 million
for its share of future corrective action costs. In May 1997, the
Company was informed by NU that additional costs are likely to be
incurred in 1997, of which the Company's share is approximately $10
million. There is no assurance that the Company's share of the
actual additional costs will be limited to $10 million. During the
outage, the Company is also incurring approximately $1.6 million
per month in incremental replacement power costs, which it has been
recovering from customers through its fuel clause.
Several criminal investigations related to Millstone 3 are
ongoing. The NRC has identified numerous apparent violations of its
regulations which may result in the assessment of civil penalties.
The Company and other minority owners of Millstone 3 are assessing
their legal rights with respect to NU's operation of Millstone 3.
Maine Yankee
The Company has a 20 percent equity ownership interest in Maine
Yankee Atomic Power Company (Maine Yankee) which owns an 880 MW
nuclear generating station. Over the past few years, the Maine
Yankee nuclear generating plant has experienced numerous technical
and nontechnical problems. In 1995, the plant had been shut down
Note A - Investments in Nuclear Units - Continued
- -------------------------------------
for much of the year due to the discovery of cracks in its steam
generator tubes. The plant is currently shut down due to a cable
routing problem. In addition, due to leaking nuclear fuel rods, 68
fuel assemblies will be replaced. As a result, Maine Yankee
management does not expect the unit to restart until summer of
1997.
In late 1995, allegations were made to the NRC that inadequate
analyses of the plant's emergency core cooling system had been
performed. As a result of the allegations, the NRC limited the
plant's operation to 90 percent of full capacity. In September
1996, the NRC asked the Department of Justice (DOJ) to review, for
potential criminal violations, an NRC investigatory report on the
allegations. The DOJ is not limited in its investigation to the
matters covered in that report.
During 1996, the NRC conducted an independent safety assessment
(ISA) and identified a number of weaknesses, deficiencies, and
apparent violations which could result in fines. Yankee Atomic, in
which the Company has a 30 percent equity ownership interest,
performed professional services for Maine Yankee associated with
the matters being investigated. In response to the ISA results,
Maine Yankee has indicated that it will spend more than $50 million
in 1997 on operational improvements. In addition, management has
identified approximately $34 million in additional expenditures it
proposes to make in 1997. In February 1997, Entergy Corporation,
an operator of five nuclear units, commenced providing management
services to Maine Yankee.
Under a confirmatory action letter issued by the NRC on
December 18, 1996, and supplemented on January 30, 1997, Maine
Yankee must fulfill certain commitments before its plant will be
allowed by the NRC staff to return to service. The Maine Yankee
owners are reviewing the economic viability of the plant. Because
of regulatory and other uncertainties faced by Maine Yankee, the
Company cannot predict whether or when Maine Yankee will return to
service.
During the outage, the Company is incurring approximately $1.8
million per month in incremental replacement power costs, which it
has been recovering from customers through its fuel clause.
Note A - Investments in Nuclear Units - Continued
- -------------------------------------
General
The Millstone 3 and Maine Yankee nuclear generating units are
currently shut down and have been placed on the NRC "Watch List,"
signifying that their safety performance exhibits sufficient
weakness to warrant increased NRC attention. Neither may restart
without NRC approval. At present, the Vermont Yankee and Seabrook
1 nuclear generating units appear to be operating routinely without
major problems.
On October 9, 1996, the NRC issued letters to operators of
nuclear power plants requiring them to document that the plants are
operated and maintained within their design and licensing bases,
and that any deviations are reconciled in a timely manner. The
Seabrook 1, Maine Yankee, and Vermont Yankee nuclear power plants
responded to the NRC letters in February 1997.
Uncertainties regarding the future of nuclear generating
stations, particularly older units, such as Maine Yankee and
Vermont Yankee, are increasing rapidly and could adversely affect
their service lives, availability, and costs. These uncertainties
stem from a combination of factors, including the acceleration of
competitive pressures in the power generation industry and
increased NRC scrutiny.
Note B - Hazardous Waste
- ------------------------
The Federal Comprehensive Environmental Response, Compensation
and Liability Act, more commonly known as the "Superfund" law,
imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous substances.
A number of states, including Massachusetts, have enacted similar
laws.
The electric utility industry typically utilizes and/or
generates in its operations a range of potentially hazardous
products and by-products. New England Electric System (NEES)
subsidiaries currently have in place an internal environmental
audit program and an external waste disposal vendor audit and
qualification program intended to enhance compliance with existing
federal, state, and local requirements regarding the handling of
potentially hazardous products and by-products.
Note B - Hazardous Waste - Continued
- ------------------------
The Company has been named as a potentially responsible party
(PRP) by either the United States Environmental Protection Agency
or the Massachusetts Department of Environmental Protection for six
sites at which hazardous waste is alleged to have been disposed.
Private parties have also contacted or initiated legal proceedings
against the Company regarding hazardous waste cleanup. The Company
is currently aware of other sites, and may in the future become
aware of additional sites, that it may be held responsible for
remediating.
Predicting the potential costs to investigate and remediate
hazardous waste sites continues to be difficult. There are also
significant uncertainties as to the portion, if any, of the
investigation and remediation costs of any particular hazardous
waste site that may ultimately be borne by the Company. Where
appropriate, the Company intends to seek recovery from its insurers
and from other PRPs, but it is uncertain whether, and to what
extent, such efforts will be successful. The Company believes that
hazardous waste liabilities for all sites of which it is aware are
not material to its financial position.
In October 1996, the American Institute of Certified Public
Accountants issued new accounting rules for Environmental
Remediation Liabilities which become effective in 1997. These new
rules do not have a material effect on the Company's financial
position or results of operations.
Note C - Town of Norwood Dispute
- --------------------------------
On April 14, 1997, the Town of Norwood, Massachusetts filed a
lawsuit against the Company in the United States District Court for
the District of Massachusetts. The Company is the wholesale
electric supplier for Norwood pursuant to rates approved by the
Federal Energy Regulatory Commission. Norwood alleges that the
Company's proposal to divest its power generation assets violates
the terms of a 1983 agreement settling an antitrust lawsuit brought
by Norwood against the Company. Norwood also alleges that the
Company's proposed divestiture plan and recovery of stranded
investment costs contravene Federal antitrust laws. Norwood seeks
that the Company be permanently enjoined from refusing to comply
with the terms of the 1983 settlement agreement by divesting its
generation assets or from charging unjust and unreasonable rates to
Note C - Town of Norwood Dispute - Continued
- --------------------------------
Norwood. Norwood also seeks to recover treble damages of
$450,000,000. The Company believes 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. Further, the Company believes that
Norwood's lawsuit is without merit and will move to dismiss the
lawsuit.
Note D
- ------
In the opinion of the Company, these statements reflect all
adjustments (which include normal recurring adjustments) necessary
for a fair statement of the results of its operations for the
periods presented and should be considered in conjunction with the
notes to the financial statements in the Company's 1996 Annual
Report.
Item 2. Management's Discussion and Analysis of Financial
---------------------------------------------------------
Condition and Results of Operations
-----------------------------------
This section contains management's assessment of New England
Power Company's financial condition and the principal factors
having an impact on the results of operations. This discussion
should be read in conjunction with the Company's financial
statements and footnotes and the 1996 Annual Report on Form 10-K.
Earnings
- --------
Net income decreased for the first quarter of 1997 by
approximately $3 million from the corresponding period in 1996.
This decrease is due to a decrease in sales due to milder weather
in the first quarter of 1997, increased operation and maintenance
expenses and purchased energy excluding fuel, offset by a decrease
in depreciation and amortization expense and a July 1996
transmission rate increase.
Industry Restructuring
- ----------------------
For a discussion of industry restructuring activities in
Massachusetts, Rhode Island and New Hampshire, see "Industry
Restructuring" in the Company's Form 10-K for 1996.
Divestiture of Generation Business
Under the Massachusetts settlement and thus automatically under
the Rhode Island statute, the NEES companies must complete the
divestiture of their generating business within six months of the
later of the commencement of retail choice in Massachusetts or the
receipt of all necessary regulatory approvals.
The NEES companies have received preliminary proposals for the
purchase of its generation business from 25 potential buyers. The
NEES companies have reviewed the preliminary proposals and invited
a select group to submit formal, binding bids by the end of June.
The NEES companies hope to announce a purchase and sale agreement
by mid-year. Closing would follow the receipt of regulatory
approvals, which are expected to take at least six to 12 months
following the execution of purchase and sale agreements. At
December 1996, the undepreciated book value of nonnuclear net
generating plant was approximately $1.1 billion for all of the NEES
companies.
As part of the divestiture plan, the Company will endeavor to
sell, or otherwise transfer, its minority interest in four nuclear
power plants to nonaffiliates. In addition, New England Energy
Incorporated (NEEI) is planning to sell its oil and gas properties,
the cost of which is supported by the Company through fuel purchase
contracts.
The NEES companies have reached an agreement with all three of
its unions - the Brotherhood of Utility Workers, the International
Brotherhood of Electrical Workers and the Utility Workers Union of
America - regarding benefits and other assistance to union
employees that are affected by the restructuring of the electric
utility industry and the NEES companies decision to divest its
generation business. The NEES companies anticipate that industry
restructuring and divestiture will lead to workforce reductions.
Rhode Island
- ------------
The Rhode Island legislature is considering a number of
proposed bills relating to industry restructuring. Possible
legislation dealing with securitization of stranded costs has been
discussed; however, to date no such legislation has been
introduced.
Accounting Implications
- -----------------------
Historically, electric utility rates have been based on a
utility's costs. As a result, electric utilities are subject to
certain accounting standards that are not applicable to other
business enterprises in general. Financial Accounting Standards
No. 71, Accounting for the Effects of Certain Types of Regulation
(FAS 71), requires regulated entities, in appropriate
circumstances, to establish regulatory assets, and thereby defer
the income statement impact of certain costs expected to be
recovered in future rates. At December 31, 1996, the Company had
approximately $340 million in net regulatory assets in compliance
with FAS 71. In addition, the Company's affiliate, NEEI, had a
regulatory asset of approximately $150 million at December 31,
1996, which is recoverable in its entirety from the Company.
Both the Massachusetts settlement and the Rhode Island statute
provide for full recovery of the costs of generating assets and oil
and gas related assets (including regulatory assets) not
recoverable from the proceeds of the divestiture of the Company's
generating business. Federal Energy Regulatory Commission (FERC)
approval is still required for the Massachusets and Rhode Island
stranded cost recovery filings. The costs of these assets would be
recovered as part of a contract termination charge imposed on all
distribution customers. After the proposed divestiture,
substantially all of the Company's business, including the recovery
of its stranded costs, would remain under cost-based rate
regulation. Specifically, FERC Order No. 888 enables transmission
companies, which the Company would essentially become, to recover
their specific costs of providing transmission service. The
Company believes these factors will allow it to continue to apply
FAS 71 and that no impairment of plant assets will exist under
Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of (FAS 121). Any loss from the divestiture of generating
assets and oil and gas assets will be recorded as a regulatory
asset to be recovered through the contract termination charge.
Although the Company believes that it will continue to meet the
criteria for continued application of FAS 71, the Company
understands that members of the SEC staff have raised questions
concerning the continued applicability of FAS 71 to certain other
electric utilities facing restructuring. In connection therewith,
the Emerging Issues Task Force of the Financial Accounting
Standards Board has decided to take under consideration how FAS 71
should continue to be applied in light of recent changes within the
regulated utility industry. In addition, despite the progress made
to date in Massachusetts and Rhode Island, it is possible that the
final restructuring plans ultimately ordered by regulatory bodies
would not reflect full recovery of stranded costs, including a fair
return on those costs as they are being recovered. In the event
that future circumstances should cause the application of FAS 71 to
be discontinued, a noncash write-off of previously established
regulatory assets related to the affected operations would be
required. In addition, write-downs of plant assets under FAS 121
could be required, including a write-off of any loss from the
divestiture of the generating business.
Brayton Point
- -------------
In October 1996, the Environmental Protection Agency (EPA)
announced it was beginning a process to determine whether to modify
or revoke and reissue the Company's water discharge permit for its
Brayton Point 1,576 megawatt power plant. This action came two
years before the permit expiration date. The EPA stated it took
this step in response to a request from the Rhode Island Department
of Environmental Management (RIDEM) that action be taken on the
Brayton Point permit prior to its 1998 renewal, based on concerns
raised in a final RIDEM report issued in October 1996. The report
asserted a statistical correlation between the decline in the fish
population in Mount Hope Bay and a change in operations at Brayton
Point that occurred in the mid-1980's.
In April 1997, the Company signed a memorandum of agreement
negotiated with the various federal and state environmental
agencies under which the Company will voluntarily operate under
more stringent conditions than under its existing permit. The
agreement is in lieu of any immediate action on the permit, and
will remain in effect until a renewal permit is issued. The
Company cannot predict at this time what permit changes will be
required or the impact on Brayton Point's operations and economics.
However, permit changes may substantially impact the plant's
capacity and ability to produce energy and/or require significant
capital expenditures of tens of millions of dollars to construct
equipment to address the concerns raised by the environmental
agencies.
Operating Revenue
- -----------------
The following table summarizes the changes in operating
revenue:
Increase (Decrease) in Operating Revenue
First Quarter
-------------
1997 vs 1996
-------------
(In Millions)
Fuel recovery $40
Narragansett integrated
facilities credit 1
Sales (7)
Other (including transmission revenues) 4
---
$38
===
For a discussion of fuel recovery see the fuel costs discussion
in the Operating Expenses section.
The entire output of Narragansett's generating capacity is made
available to the Company. Narragansett receives a credit on its
purchased power bill from the Company for its fuel costs and other
generation and transmission related costs.
Sales decreased due to a decrease in peak demand billing as a
result of milder weather in the first quarter of 1997.
Operating Expenses
- ------------------
The following table summarizes the changes in operating
expenses: Increase (Decrease) in Operating Expenses
First Quarter
-------------
1997 vs 1996
-------------
(In Millions)
Fuel costs $40
Purchased energy excluding fuel 2
Operation and maintenance 6
Depreciation and amortization (5)
Taxes (1)
---
$42
===
Fuel costs represent fuel for generation and the portion of
purchased electric energy permitted to be recovered through the
Company's fuel adjustment clause. The increase in fuel costs in
the first quarter of 1997 primarily reflects increased power
supply to other utilities and increased replacement power costs
due to the reduced generation from partially owned nuclear
units. See "Investments in Nuclear Units" section in the "Notes
to the Unaudited Financial Statements".
The portion of purchased electric energy costs not recovered
through the Company's fuel clause is shown as purchased energy,
excluding fuel. The increase in purchased power costs during
the first quarter of 1997 reflects overhaul and repair costs
relating to the Maine Yankee nuclear power plant and an overhaul
at the Ocean State Power gas-fired plant, partially offset by
reduced capacity purchases.
The decrease in depreciation and amortization expense
reflects the completion of the amortization of the Company's
pre-1988 investment in the Seabrook 1 nuclear unit and the
Company's investment in the cancelled Seabrook 2 nuclear unit.
In accordance with a 1995 settlement agreement, upon completion
of the amortization of Seabrook 1 and Seabrook 2, the Company
agreed to accelerate its amortization of previously deferred
costs associated with postretirement benefits other than
pensions (PBOPs).
The increase in operation and maintenance expense for the
three month period is primarily due to increased PBOP
amortization.
Utility Plant Expenditures and Financing
- ----------------------------------------
Cash expenditures for utility plant totaled $16 million for
the first three months of 1997. The funds necessary for utility
plant expenditures during the period were provided by net cash
from operating activities, after the payment of dividends.
In the first quarter of 1997, the Company retired $35 million
of mortgage bonds.
The Company has approximately $700 million of mortgage bonds
outstanding. The bond indenture terms restrict the sale of the
trust property in its entirety or substantially in its entirety.
Therefore, the proposed sale of the Company's generating
business would likely require that the Company either amend the
bond indenture terms or defease the indenture and the bonds in
connection with the proposed sale. Any defeasance of bonds is
expected to be either to maturity or at general redemption
prices.
At March 31, 1997, the Company had $98 million of short-term
debt outstanding, including $94 million of commercial paper
borrowings. At March 31, 1997, the Company had lines of credit
and standby bond purchase facilities with banks totaling $520
million which are available to provide liquidity support for
commercial paper borrowings and for $372 million of the
Company's outstanding variable rate mortgage bonds in tax-exempt
commercial paper mode and for other corporate purposes. There
were no borrowings under these lines of credit at March 31,
1997. For the twelve-month period ending March 31, 1997, the
ratio of earnings to fixed charges was 5.21.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Information concerning a lawsuit against the Company by the
Town of Norwood, Massachusetts, discussed in PART I of this report
in Note C of Notes to Unaudited Financial Statements, is
incorporated herein by reference and made a part hereof.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
The Company filed no reports on Form 8-K during the quarter.
The Company is filing the following revised exhibit for
incorporation by reference into its registration statements on Form
S-3, Commission file Nos. 33-48257, 33-48897, and 33-49193:
12 Statement re Computation of ratios
The Company is filing Financial Data Schedules.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report on Form 10-Q for
the quarter ended March 31, 1997 to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW ENGLAND POWER COMPANY
s/Michael E. Jesanis
Michael E. Jesanis, Treasurer,
Authorized Officer, and
Principal Financial Officer
Date: May 13, 1997