SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: November 21, 1997
NEW ENGLAND POWER COMPANY
(exact name of registrant as specified in charter)
Massachusetts 1-6564 04-1663070
(state or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
(508) 389-2000
(Registrant's telephone number, including area code)
Item 5. Other Events
- --------------------
Industry Restructuring
----------------------
On November 25, 1997, legislation was signed into law by the
Governor of Massachusetts which would provide Massachusetts
utility customers with the ability to choose their electric
supplier on March 1, 1998. The legislation provides a mechanism
for the recovery by electric utilities of stranded costs resulting
from industry restructuring. The legislation further requires
electric companies to provide customers who do not choose a
competitive supplier with a transition rate (or standard offer)
which results in a 10 percent rate reduction, with the discount
increasing to 15 percent on or before September 1, 1999.
In October 1996, New England Power Company (the Company), a
subsidiary of New England Electric System (NEES), and an
affiliate, Massachusetts Electric Company (Massachusetts
Electric), reached a settlement agreement with various
governmental agencies and other interested parties, regarding
recovery of stranded costs, divestiture of the NEES companies
generating business and other issues. The Massachusetts
settlement agreement was approved by the Massachusetts Department
of Public Utilities (MDPU) earlier this year. As a result of the
Massachusetts settlement and an August 5, 1997 agreement to sell
the NEES companies nonnuclear generating business to USGen New
England, Inc. (USGen), the Company and Massachusetts Electric are
expected to be able to meet the legislation's rate reduction
targets. The legislation permits the MDPU to implement previously
approved plans that substantially comply with the legislation.
The NEES companies believe that their Massachusetts settlement is
substantially consistent with the provisions of the legislation,
and will be filing for such a finding by the MDPU.
On November 25, 1997, the Federal Energy Regulatory
Commission (FERC) approved the Massachusetts settlement but
required the NEES companies to amend the settlement within 30 days
to clarify that the settlement does not affect the rights of non-
settling parties. The FERC Order also approved, on the same basis
as the Massachusetts settlement, a settlement agreement with Rhode
Island parties regarding recovery of stranded costs from the NEES
companies' Rhode Island customers. The Rhode Island settlement
agreement is designed to implement Rhode Island's Utility
Restructuring Act of 1996. As contemplated by the Rhode Island
settlement, the Rhode Island Public Utilities Commission is
expected to accelerate retail access for all Rhode Island
customers from July 1, 1998 to the first quarter of 1998.
This Form 8-K contains statements that may be considered
forward looking statements as defined under the securities laws
regarding recovery of stranded assets, meeting rate reduction
targets, and regulatory matters. Actual results may differ
materially. While the NEES companies believe that the
Massachusetts legislation, the previously passed Rhode Island
legislation, and the sale agreement with USGen and other
developments constitute substantial progress in resolving the
uncertainty regarding the impact from industry restructuring,
significant risks remain. These include, but are not limited to:
(i) the potential that ultimately the Massachusetts and Rhode
Island settlements will not be implemented in the manner
anticipated by the Company, (ii) the possibility of federal
legislation that would increase the risks above those contained in
the settlements and Massachusetts and Rhode Island statutes, (iii)
the potential for adverse stranded cost recovery decisions
involving its affiliate, Granite State Electric Company, and the
Company's unaffiliated customers, and (iv) the failure to complete
the sale of the generating business to USGen.
Even if these risks do not materialize, the implementation of
the sale agreement and the Massachusetts and Rhode Island
settlements and statutes regarding restructuring will negatively
impact financial results for the Company starting in 1998. The
major risk factors affecting the Company relate to the possibility
of adverse regulatory or judicial decisions or legislation which
limit the level of revenues the Company is allowed to charge for
its services or affect the costs the Company incurs. The returns
on equity permitted on the unrecovered commitments in the
generating business is generally 9.4 percent before mitigation
incentives. In addition, starting in 1998, earnings would be
affected by the return on the reinvestment of the proceeds from
the sale of the generation business. Such reinvestment return is
expected, at least in the near term, to be considerably less than
has historically been earned by the generation business. The NEES
companies will also incur costs associated with the transition
after the sale is completed.
Town of Norwood Dispute
-----------------------
As previously reported in the Form 10-Q for the quarter
ending September 30, 1997, in April 1, 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 FERC. 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 Norwood. Norwood also seeks to recover treble damages of $450
million. On November 21, 1997, Norwood filed an amended complaint
making new allegations relating to the sale of the Company's
generating assets and naming as additional defendants, NEES,
USGen, and USGen's parent, PG & E Corporation. The Company
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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this Current Report on
Form 8-K to be signed on its behalf by the undersigned thereunto
duly authorized.
NEW ENGLAND POWER COMPANY
s/Michael E. Jesanis
By
Michael E. Jesanis
Treasurer
Date: December 1, 1997