1999 Annual Report

Western Massachusetts Electric Company and Subsidiary

Index

Contents Page
- -------- ----

Management's Discussion and Analysis of Financial
Condition and Results of Operations............................... 1

Report of Independent Public Accountants............................ 11

Consolidated Statements of Income................................... 13

Consolidated Statements of Comprehensive Income..................... 13

Consolidated Balance Sheets......................................... 14-15

Consolidated Statements of Common Stockholder's Equity.............. 16

Consolidated Statements of Cash Flows............................... 17

Notes to Consolidated Financial Statements.......................... 18

Selected Consolidated Financial Data................................ 41

Consolidated Quarterly Financial Data (Unaudited)................... 41

Consolidated Statistics (Unaudited)................................. 42

Preferred Stockholder and Bondholder Information.................... Back Cover

Western Massachusetts Electric Company and Subsidiary

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Condition

Overview
The financial improvement that began in 1998 continued throughout 1999 at
Western Massachusetts Electric Company (WMECO or the company), an operating
subsidiary of Northeast Utilities (NU) and part of the Northeast Utilities
system (NU system), despite a rate reduction in Massachusetts. WMECO's
results benefited from the successful restart of the Millstone 2 nuclear
unit, the strong operating performance delivered by the Millstone 3 nuclear
unit, retail sales growth, and continued control over operation and maintenance
(O&M) expenses. A rate reduction reduced the positive impacts of these items.

During 1999, WMECO resolved key industry restructuring issues by receiving
final approval of a restructuring plan in Massachusetts. The auction of
substantially all of the fossil and hydroelectric generation assets owned by
WMECO and the auction of its respective interest in the output of the Millstone
units, moved WMECO along in its transition into a purely electric transmission
and distribution company, as contemplated by restructuring legislation in
Massachusetts.

WMECO earned $2.9 million in 1999, compared with a loss of $9.6 million in
1998 and a loss of $27.5 million in 1997. The 1999 results included after-tax
write-offs associated with the settlement of nuclear related issues and
industry restructuring totaling $27.9 million. During 1998, WMECO's results
included write-offs associated with the retirement of Millstone 1 totaling
$26.7 million.

In 1999, WMECO's revenues increased to $414.2 million, up 5.3 percent from
revenues of $393.3 million in 1998. The growth was primarily due to a 3.6
percent increase in retail sales. That growth was due to weather related
factors that included a hotter than normal summer. The balance of that
increase was due to economic expansion in WMECO's service territory. A retail
rate reduction offset some of the growth in revenues. WMECO's rates were
reduced a total of 15 percent from its August 1997 rates, 11.8 percent
adjusted for inflation, between March 1998 and September 1999.

Aside from increased revenues, the primary reason for better operating
performance in 1999 was the return to service from extended outages of
Millstone 3 in July 1998 and Millstone 2 in May 1999.

WMECO's ability to continue improving financial performance in 2000 will
depend largely on continued sales growth and on successful control of O&M
expenses. WMECO also hopes to complete in 2000 the majority of restructuring
work remaining, primarily the issuance of rate reduction bonds (securitization)
to lower stranded costs, and the auction of WMECO's ownership interests in the
Millstone units.

Mergers

In 1998 and 1999, NU management concluded that the pace of deregulation was
accelerating throughout the northeastern United States and that shareholders
would benefit from NU not only remaining a major provider of electric
transmission and distribution service, but also an unregulated marketer
of both electricity and natural gas. NU management also concluded that
as a result of the changes occurring in the highly competitive electric
utility industry, increased size would be crucial to achieve its objective
of being a leading provider of energy products and services in the Northeast.

On October 13, 1999, NU announced an agreement to merge with Consolidated
Edison, Inc. (Con Edison), a financially stronger utility based in New York.
The merger will create the nation's largest electric distribution system
with more than 5 million customers and one of the 15 largest natural gas
distribution systems with 1.4 million customers.

NU and Con Edison filed with various state and federal regulatory bodies
in January 2000 to secure approval of the merger. The two companies expect
these regulatory proceedings can be completed by the end of July 2000.

Also in 1999, NU management concluded that the NU system would be stronger
and customers could be better served if NU reentered the natural gas
distribution business that it had exited in 1989 and examined several potential
businesses in New England. By adding gas to NU's energy mix, NU will be able
to broaden its services to its existing customers and NU will have additional
opportunities for long-term growth. In June 1999, NU announced an agreement
to merge with Yankee Energy System, Inc. (Yankee). The merger will return
to NU Connecticut's largest natural gas distribution system, as well as
several unregulated businesses involved in energy services, collections and
other areas. The Yankee merger received Yankee shareholder approval in
October 1999, final Connecticut Department of Public Utility Control (DPUC)
approval in December 1999 and Securities and Exchange Commission (SEC)
approval in January 2000. The merger closed on March 1, 2000.

Liquidity

Net cash flows provided by operations decreased to $2.1 million, compared
to $27.6 million in 1998 and $27.7 million in 1997. The impacts of strong
sales growth, improved nuclear performance and continued control of O&M
expenses were offset by the termination of its accounts receivable financing
arrangement.

In July 1999, WMECO sold 290 megawatts (MW) of fossil and hydroelectric
generation assets with an affiliate of Con Edison. Proceeds from the sale
were $48.5 million.

Proceeds from the generation asset sale are included in net cash flows
provided by investing activities. Including construction expenditures
and investments in nuclear decommissioning trusts, net cash flows
provided by investing activities were $22.9 million in 1999, compared
with net cash flows used in investing activities of $34.8 million in
1998 and $36.7 million in 1997.

Positive operating cash flows and the proceeds from the generation asset
sale enabled WMECO to reduce its outstanding debt. As of December 31, 1999,
WMECO's total debt level, including capital lease obligations, was $452.7
million, compared with $474.3 million as of December 31, 1998, and $458.9
million as of December 31, 1997.

The net cash flows used in financing activities were $24.1 million in 1999,
compared to net cash flows provided by financing activities of $7.2 million
in 1998 and $9.1 million in 1997. This included $102.4 million paid in 1999
to retire long-term debt and preferred stock, compared to $11.3 million in
1998 and $14.7 million in 1997. There were no cash dividends on common shares
paid in 1999 and 1998 and $15 million in 1997. Payments made for preferred
stock dividends were $3.3 million, $3 million and $3.1 million for 1999, 1998
and 1997, respectively.

WMECO's access to capital also benefited from the strong operating performance
at Millstone 2 and 3 and the announced merger with Con Edison. During 1999,
WMECO's securities received several upgrades from three credit rating agencies.
WMECO's senior secured bonds achieved investment grade ratings for the first
time since early 1997. At year end, all securities were under review for
possible upgrades, or on "credit watch" with positive implications by
Standard & Poor's, Moody's Investors Service and Fitch IBCA.

The rating agency upgrades benefited WMECO's efforts to broaden its credit
lines. On November 19, 1999, WMECO and The Connecticut Light and Power
Company (CL&P) entered into a new 364-day revolving credit facility for $500
million, replacing the previous $313.75 million facility which was to expire
on November 21, 1999. The revolving credit facility, which is secured by
second mortgages on Millstone 2 and 3, will be used to bridge gaps in working
capital and provide short-term liquidity. WMECO may draw up to $200 million
under the facility. Once WMECO receives the proceeds from securitization,
the $500 million facility will be reduced to $300 million, with a $100 million
limit for WMECO. As of December 31, 1999, WMECO had $123 million outstanding
under this facility.

For further information regarding the WMECO and CL&P revolving credit
facility, see Note 3, "Short-Term Debt," to the consolidated financial
statements.

Previously, WMECO also had arranged financing through the sale of its accounts
receivable. WMECO terminated its $40 million accounts receivable credit
facility on June 30, 1999.

During 2000, WMECO hopes to receive regulatory approval to begin the process
of securitizing its approved stranded costs. Securitization involves issuing
rate reduction bonds with interest rates lower than the company's weighted
average cost of capital. Proceeds from securitization will be used to
significantly reduce the capitalization of WMECO and buydown its remaining
purchased-power contract with a nonutility generator.

Restructuring

During 1999, Massachusetts made significant progress in resolving industry
restructuring issues. Restructuring orders issued in Massachusetts allowed
WMECO to determine the impacts of discontinuing Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types
of Regulation," for the generation portion of WMECO's business. The
transmission and distribution portion of that business will continue to be
cost-of-service regulated. In addition, the restructuring orders provided
for a transition charge which allows for the recovery of WMECO's generation-
related regulatory assets and prudently incurred stranded costs.

Massachusetts enacted electric utility restructuring legislation in
November 1997. Based on an interim order approving WMECO's restructuring
plan filed in December 1997, WMECO's customers were able to choose an
alternative retail electricity supplier beginning on March 1, 1998. In 1999,
the Massachusetts Department of Telecommunications and Energy (DTE) issued
its final decision on WMECO's restructuring plan. In that decision, the DTE
permitted WMECO to recover its generation-related regulatory asset balances
and its nuclear decommissioning costs. However, the DTE disallowed any return
on Millstone 2 and 3 starting March 1, 1998, until they returned to service
and on Millstone 1 for its remaining life. The pretax impact of these
disallowances was $41 million. The DTE also approved one-year contracts
with the winning bidders of the standard offer and default service supply
auction. For further information regarding commitments and contingencies
related to the Massachusetts restructuring order, see Note 11A, "Commitments
and Contingencies - Restructuring," to the consolidated financial statements.

Generation Asset Divestitures
The Massachusetts restructuring laws required WMECO to divest of its generation
assets and utilize substantially all of the net gains from any sales to offset
stranded costs. During 1999, WMECO sold its fossil and certain hydroelectric
generation assets resulting in a net gain of $22.4 million. A corresponding
amount of regulatory assets was amortized. Also during 1999, WMECO signed
agreements to transfer certain hydroelectric generation assets to Northeast
Generation Company, an unregulated affiliate of NU. This transaction closed
on March 14, 2000. In September 1999, NU announced that the Millstone nuclear
generation assets of its subsidiaries, WMECO and CL&P, will be put up for
auction as soon as practical. For further information regarding commitments
and contingencies related to the generation asset divestitures, see Note 11A,
"Commitments and Contingencies - Restructuring," to the consolidated financial
statements.

Nuclear Generation

Millstone Nuclear Units
Millstone 3 received the appropriate Nuclear Regulatory Commission (NRC)
approvals and resumed operation in July 1998. Millstone 2 received similar
NRC approvals and resumed operation in May 1999. Millstone 3 and 2 achieved
annual capacity factors of 81.7 percent and 57.9 percent in 1999, respectively.
After a 60-day refueling and maintenance outage, Millstone 3 returned to
service on June 29, 1999, and has achieved a 98.1 percent capacity factor
through December 31, 1999. Since returning to service in May 1999, Millstone 2
has achieved a 90.3 percent capacity factor through December 31, 1999.
NU's total share of O&M expenses associated with Millstone 3 and 2 totaled
$261.8 million in 1999, as compared to $323.2 million in 1998 and $406 million
in 1997. Millstone 1 is currently in decommissioning status.

An auction of WMECO's ownership interests in the Millstone units is expected
in 2000 with a closing in 2001. Based on regulatory decisions received in
1999, management expects to recover all of its nuclear stranded costs through
the net gains from generation asset sales and from retail customers.

Yankee Companies
On June 1, 1999, the Federal Energy Regulatory Commission accepted the offer
of settlement which was filed on January 15, 1999, by the Maine Yankee Atomic
Power Company (MYAPC). The significant aspects of the settlement allowed MYAPC
to collect $33.1 million annually to pay for decommissioning and spent fuel,
approved its return on equity of 6.5 percent, permitted full recovery of
MYAPC's unamortized investment, including fuel, and set an incentive budget
for decommissioning at $436.3 million.

On October 15, 1999, the Vermont Yankee Nuclear Power Corporation (VYNPC)
agreed to sell its unit for $22 million to an unaffiliated company. Among
other commitments, the acquiring company agreed to assume the decommissioning
cost of the unit after it is taken out of service, and the VYNPC owners have
agreed to fund the uncollected decommissioning cost to a negotiated amount at
the time of the closing of the sale. VYNPC's owners have also agreed either
to enter into a new purchased-power agreement with the acquiring company or
to buy out such future power payment obligations by making a fixed payment to
them. WMECO has elected the buyout option. The VYNPC owners' obligations
to close and pay such amounts are conditioned upon their receipt of
satisfactory regulatory approval of the transaction, including provision for
adequate recovery of these payments.

Nuclear Decommissioning
The staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear
units in their financial statements.

Currently, the Financial Accounting Standards Board plans to review the
accounting for obligations associated with the retirement of long-lived
assets, including the decommissioning of nuclear units. If current
accounting practices for nuclear decommissioning change, the annual provision
for decommissioning could increase relative to 1999, and the estimated cost
for decommissioning could be recorded as a liability with recognition of an
increase in the cost of the related nuclear unit. However, management does
not believe that such a change will have a material impact on WMECO's financial
statements due to the current and future ability to recover decommissioning
costs through rates.

Spent Nuclear Fuel Disposal Costs
The United States Department of Energy (DOE) originally was scheduled to begin
accepting delivery of spent fuel in 1998. However, delays in confirming the
suitability of a permanent storage site continually have postponed plans for
the DOE's long-term storage and disposal site. Extended delays or a default
by the DOE could lead to consideration of costly alternatives. WMECO has the
primary responsibility for the interim storage of its spent nuclear fuel.
Adequate storage capacity exists to accommodate all spent nuclear fuel at
Millstone 1. The facilities for Millstone 2 are expected to provide adequate
storage to accommodate a full-core discharge from the reactor until 2005 with
the implementation of currently planned modifications. Fuel consolidation,
which has been licensed for Millstone 2, could provide adequate storage
capacity for its projected life. The facilities for Millstone 3 are expected
to provide adequate storage for its projected life with the addition of new
storage racks. Meeting spent fuel storage requirements beyond these periods
could require new and separate storage facilities. For further information
regarding spent nuclear fuel disposal costs, see Note 11D, "Commitments and
Contingencies - Spent Nuclear Fuel Disposal Costs," to the consolidated
financial statements.

Other Matters

Environmental Matters
WMECO is subject to environmental laws and regulations structured to mitigate
or remove the effect of past operations and to improve or maintain the quality
of the environment. For further information regarding environmental matters,
see Note 11C, "Commitments and Contingencies - Environmental Matters," to the
consolidated financial statements.

Other Commitments and Contingencies
WMECO is subject to other commitments and contingencies primarily relating to
nuclear litigation, nuclear insurance contingencies, its construction program,
long-term contractual arrangements, and the New England Power Pool generation
pricing. For further information regarding these commitments and
contingencies, see Note 11, "Commitments and Contingencies," to the
consolidated financial statements.

Year 2000 Issues
The transition into the year 2000 was a success for the NU system and WMECO.
Its mission to provide safe, reliable energy to its customers and to ensure
continued operability of critical business functions was not affected by any
year 2000 related issues.

The projected total cost of the year 2000 program is estimated at $21 million
for the NU system. The total cost to date was funded through operating cash
flows. The NU system has incurred and expensed $20 million related to year
2000 readiness efforts.

Forward Looking Statements
This discussion and analysis includes forward looking statements, which are
statements of future expectations and not facts. Words such as estimates,
expects, anticipates, intends, plans, and similar expressions identify forward
looking statements. Actual results or outcomes could differ materially as a
result of further actions by state and federal regulatory bodies, competition
and industry restructuring, changes in economic conditions, changes in
historical weather patterns, changes in laws, developments in legal or public
policy doctrines, technological developments, and other presently unknown or
unforeseen factors.

RESULTS OF OPERATIONS

The components of significant income statement variances for the past two
years are provided in the table below.

Income Statement Variances
(Millions of Dollars)

1999 over/(under) 1998 1998 over/(under) 1997
---------------------- ----------------------
Amount Percent Amount Percent
------ ------- ------ -------
Operating Revenues $21 5% $(33) (8)%

Operating Expenses:
Fuel, purchased and
net interchange power 21 16 (40) (24)
Other operation and
maintenance (25) (14) (31) (15)
Depreciation (13) (32) 1 3
Amortization of regulatory
assets, net 20 (a) (1) (6)
Federal and state
income taxes 9 (a) 16 99
Taxes other than income taxes 1 5 - -
Gain on sale of utility plant (22) - - -
Operating income 22 (a) 20 (a)

Equity in earnings
regional nuclear
generating companies (1) (76) - -
Nuclear unrecoverable costs (18) - - -
Other, net (2) (90) (1) (72)
Interest charges, net (4) (12) 2 8
Net Income 12 (a) 18 65

(a) Percentage greater than 100.

Operating Revenues
Operating revenues increased by $21 million or 5 percent in 1999, due to higher
wholesale and retail revenues. Wholesale revenues increased ($17 million) due
to higher energy sales and related capacity and transmission revenues. Retail
revenues increased by $4 million due to the retail kilowatt-hour sales increase
of 3.6 percent which increased revenues by $16 million and was partially offset
by the retail rate decrease in 1998 ($12 million).

Operating revenues decreased in 1998, primarily due to a 10 percent retail
rate decrease in 1998, partially offset by higher retail sales. Retail
kilowatt-hour sales were 1.3 percent higher than 1997.

Fuel, Purchased and Net Interchange Power
Fuel, purchased and net interchange power expense increased in 1999, primarily
due to a reversal of fuel expense deferrals which were recorded in other O&M
expenses as a result of the WMECO restructuring order, partially offset by
lower replacement power costs.

Fuel, purchased and net interchange power expense decreased in 1998, primarily
due to lower replacement power costs as a result of the return to service of
Millstone 3 and lower capacity charges from the Connecticut Yankee Atomic Power
Company and MYAPC ($10 million).

Other Operation and Maintenance
Other O&M expenses decreased in 1999, primarily due to lower costs at the
Millstone units ($17 million), deferrals associated with the restructuring
order ($5 million), and lower fossil and hydroelectric O&M costs ($4 million),
partially offset by higher transmission expenses ($4 million).

Other O&M expenses decreased in 1998, primarily due to lower costs at the
Millstone units.

Depreciation
Depreciation decreased in 1999, primarily due to lower rates utilized in 1999
as a result of the 1999 restructuring orders and the retirement of Millstone 1.

The change in depreciation in 1998 was not significant.

Amortization of Regulatory Assets, Net
Amortization of regulatory assets, net increased in 1999, primarily due to
increased amortization associated with the gain on the sale of fossil and
hydroelectric generation assets ($13 million), the amortization of the
Millstone 1 investment ($5 million) and the reclassification of the
depreciation on the nuclear plants transferred to regulatory assets
($4 million).

The change in amortization of regulatory assets, net in 1998 was not
significant.

Federal and State Income Taxes
Federal and state income taxes increased in 1999, primarily due to higher
book taxable income.

Federal and state income taxes increased in 1998, primarily due to higher
book taxable income.

Gain on Sale of Utility Plant
WMECO recorded a gain on the sale of its fossil and hydroelectric generation
assets in 1999. A corresponding amount of amortization expense was recorded.

Nuclear Unrecoverable Costs
Nuclear unrecoverable costs in 1999 are comprised of one-time charges related
to the return disallowed on Millstone 1 unrecovered plant from March 1998
forward ($11 million), the settlement of Millstone 3 owner litigation, net
of insurance proceeds ($5 million) and the disallowed Millstone 1 plant per
the Massachusetts restructuring order ($2 million).

Interest Charges
Interest charges decreased in 1999, primarily due to lower interest on long-
term debt outstanding.

The change in interest charges in 1998 was not significant.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
of Western Massachusetts Electric Company:

We have audited the accompanying consolidated balance sheets of Western
Massachusetts Electric Company (a Massachusetts corporation and a wholly owned
subsidiary of Northeast Utilities) and subsidiary as of December 31, 1999 and
1998, and the related consolidated statements of income, comprehensive income,
common stockholder's equity and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Western Massachusetts Electric
Company and subsidiary as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with generally accepted
accounting principles.

/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

Hartford, Connecticut
January 25, 2000

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

- ------------------------------------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
- ------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues............................. $414,231 $393,322 $426,447
--------- --------- ---------
Operating Expenses:
Operation -
Fuel, purchased and net interchange power. 151,714 130,401 170,867
Other..................................... 101,842 117,663 123,508
Maintenance.................................. 47,586 56,622 81,466
Depreciation................................. 27,771 40,901 39,753
Amortization of regulatory assets, net....... 26,488 6,016 6,428
Federal and state income taxes............... 18,849 2,109 (15,142)
Taxes other than income taxes................ 20,677 19,756 19,316
Gain on sale of utility plant................ (22,437) - -
--------- --------- ---------
Total operating expenses............... 372,490 373,468 426,196
--------- --------- ---------
Operating Income............................... 41,741 19,854 251
--------- --------- ---------

Other (Loss)/Income:
Equity in earnings of regional nuclear
generating companies....................... 407 1,699 1,524
Nuclear unrecoverable costs.................. (18,035) - -
Other, net................................... (3,618) (1,905) (1,106)
Income taxes................................. 9,906 2,198 1,026
--------- --------- ---------
Other (loss)/income, net............... (11,340) 1,992 1,444
--------- --------- ---------
Income before interest charges......... 30,401 21,846 1,695
--------- --------- ---------

Interest Charges:
Interest on long-term debt................... 24,255 28,027 26,046
Other interest............................... 3,259 3,398 3,109
--------- --------- ---------
Interest charges, net.................. 27,514 31,425 29,155
--------- --------- ---------

Net Income/(Loss).............................. $ 2,887 $ (9,579) $(27,460)
========= ========= =========

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Net Income/(Loss).............................. $ 2,887 $ (9,579) $(27,460)
--------- --------- ---------
Other comprehensive income, net of tax:
Unrealized gains on securities................. 10 183 -
Minimum pension liability adjustments.......... - (33) -
--------- --------- ---------
Other comprehensive income, net of tax...... 10 150 -
--------- --------- ---------
Comprehensive Income/(Loss).................... $ 2,897 $ (9,429) $(27,460)
========= ========= =========

The accompanying notes are an integral part of these financial statements.

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

- ---------------------------------------------------------------------------------------
AT DECEMBER 31, 1999 1998
- ---------------------------------------------------------------------------------------
(Thousands of Dollars)

ASSETS
- ------
Utility Plant, at original cost:
Electric................................................ $ 1,175,954 $ 1,221,257

Less: Accumulated provision for depreciation......... 813,978 517,401
------------- ------------
361,976 703,856
Construction work in progress........................... 21,181 14,858
Nuclear fuel, net....................................... 18,880 19,931
------------- ------------
Total net utility plant............................. 402,037 738,645
------------- ------------

Other Property and Investments:
Nuclear decommissioning trusts, at market............... 144,567 125,598
Investments in regional nuclear generating
companies, at equity................................... 14,723 15,440
Other, at cost.......................................... 6,232 7,322
------------- ------------
165,522 148,360
------------- ------------
Current Assets:
Cash.................................................... 950 106
Investments in securitizable assets..................... - 21,865
Receivables, less the accumulated provision for
uncollectible accounts of $1,640 in 1999
and $50 in 1998....................................... 31,692 862
Accounts receivable from affiliated companies........... 3,918 4,188
Taxes receivable........................................ 1,912 14,255
Accrued utility revenues................................ 13,485 -
Fuel, materials, and supplies, at average cost.......... 3,097 5,053
Prepayments and other................................... 30,119 25,920
------------- ------------
85,173 72,249
------------- ------------

Deferred Charges:
Regulatory assets....................................... 594,800 322,435
Unamortized debt expense................................ 1,926 2,298
Other................................................... 4,146 3,695
------------- ------------
600,872 328,428
------------- ------------

Total Assets........................................ $ 1,253,604 $ 1,287,682
============= ============

The accompanying notes are an integral part of these financial statements.

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock, $25 par value - 1,072,471 shares
authorized and outstanding in 1999 and 1998............ $ 26,812 $ 26,812
Capital surplus, paid in................................ 171,691 151,431
Retained earnings....................................... 38,712 46,003
Accumulated other comprehensive income.................. 160 150
------------- ------------
Total common stockholder's equity.............. 237,375 224,396
Preferred stock not subject to mandatory redemption..... 20,000 20,000
Preferred stock subject to mandatory redemption......... 16,500 18,000
Long-term debt.......................................... 290,279 349,314
------------- ------------
Total capitalization........................... 564,154 611,710
------------- ------------
Obligations Under Capital Leases.......................... 8,106 12,129
------------- ------------
Current Liabilities:
Notes payable to banks.................................. 123,000 20,000
Notes payable to affiliated company..................... 9,400 30,900
Long-term debt and preferred stock - current portion.... 1,500 41,500
Obligations under capital leases - current portion...... 21,866 21,964
Accounts payable........................................ 12,974 17,952
Accounts payable to affiliated companies................ 3,208 12,866
Accrued taxes........................................... 589 1,264
Accrued interest........................................ 6,046 8,030
Other................................................... 14,384 6,831
------------- ------------
192,967 161,307
------------- ------------

Deferred Credits and Other Long-term Liabilities:
Accumulated deferred income taxes....................... 242,942 248,985
Accumulated deferred investment tax credits............. 19,765 21,895
Decommissioning obligation - Millstone 1................ 136,130 131,500
Deferred contractual obligations........................ 63,701 74,534
Other................................................... 25,839 25,622
------------- ------------
488,377 502,536
------------- ------------

Total Capitalization and Liabilities........... $ 1,253,604 $ 1,287,682
============= ============

The accompanying notes are an integral part of these financial statements.

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY

- --------------------------------------------------------------------------------------------------------
Accumulated
Capital Retained Other
Common Surplus, Earnings Comprehensive
Stock Paid In (a) Income Total
- --------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Balance at January 1, 1997............... $26,812 $150,911 $104,212 $ - $281,935

Net loss for 1997.................... (27,460) (27,460)
Cash dividends on preferred
stock.............................. (3,140) (3,140)
Cash dividends on common stock....... (15,004) (15,004)
Capital stock expenses, net.......... 260 260
-------- --------- --------- ------------- ---------
Balance at December 31, 1997............. 26,812 151,171 58,608 - 236,591

Net loss for 1998.................... (9,579) (9,579)
Cash dividends on preferred
stock.............................. (3,026) (3,026)
Capital stock expenses, net.......... 260 260
Other comprehensive income........... 150 150
-------- --------- --------- ------------- ---------
Balance at December 31, 1998............. 26,812 151,431 46,003 150 224,396

Net income for 1999.................. 2,887 2,887
Cash dividends on preferred
stock.............................. (3,298) (3,298)
Capital stock expenses, net.......... 260 260
Allocation of benefits - ESOP........ (6,880) (6,880)
Capital contribution from
Northeast Utilities................ 20,000 20,000
Other comprehensive income........... 10 10
-------- --------- --------- ------------- ---------
Balance at December 31, 1999............. $26,812 $171,691 $ 38,712 $ 160 $237,375
======== ========= ========= ============= =========

(a) No dividend restrictions except for appropriated retained earnings for hydro reserves
which were established in 1978 of $0.9 million.

The accompanying notes are an integral part of these financial statements.

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

- --------------------------------------------------------------------------------------------------
For the Years Ended December 31,
- --------------------------------------------------------------------------------------------------
(Thousands of Dollars) 1999 1998 1997
- --------------------------------------------------------------------------------------------------

Operating Activities:
Net income/(loss)........................................... $ 2,887 $ (9,579) $ (27,460)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation.............................................. 27,771 40,901 39,753
Deferred income taxes and investment tax credits, net..... (6,544) 7,405 (1,256)
Amortization of regulatory assets, net.................... 26,488 6,016 6,428
Nuclear unrecoverable costs............................... 18,035 - -
Allocation of ESOP benefits............................... (6,880) - -
Gain on sale of utility plant............................. (22,437) - -
Other (uses)/sources of cash.............................. (13,517) 636 796
Changes in working capital:
Receivables and accrued utility revenues.................. (44,045) 1,622 49,415
Fuel, materials and supplies.............................. 1,956 807 (543)
Accounts payable.......................................... (14,636) (20,962) 4,826
Investments in securitizable assets....................... 21,865 3,415 (25,280)
Accrued taxes............................................. (675) 742 (2,137)
Other working capital (excludes cash)..................... 11,789 (3,441) (16,882)
----------- ----------- -----------
Net cash flows provided by operating activities............... 2,057 27,562 27,660
----------- ----------- -----------
Financing Activities:
Issuance of long-term debt.................................. - - 60,000
Net increase/(decrease) in short-term debt.................. 81,500 21,550 (18,050)
Reacquisitions and retirements of long-term debt............ (100,850) (9,800) (14,700)
Reacquisitions and retirements of preferred stock........... (1,500) (1,500) -
Cash dividends on preferred stock........................... (3,298) (3,026) (3,140)
Cash dividends on common stock.............................. - - (15,004)
----------- ----------- -----------
Net cash flows (used in)/provided by financing activities..... (24,148) 7,224 9,106
----------- ----------- -----------
Investing Activities:
Investment in plant:
Electric utility plant.................................... (30,192) (19,895) (26,249)
Nuclear fuel.............................................. (5,817) (1,801) (8)
----------- ----------- -----------
Net cash flows used for investments in plant.............. (36,009) (21,696) (26,257)

Investment in nuclear decommissioning trusts................ (11,387) (12,918) (9,645)
Other investment activities, net............................ 1,807 (171) (826)
Net proceeds from the sale of utility plant................. 48,524 - -
Capital contributions from Northeast Utilities.............. 20,000 - -
----------- ----------- -----------
Net cash flows provided by/(used in) investing activities..... 22,935 (34,785) (36,728)
----------- ----------- -----------
Net increase in cash for the period........................... 844 1 38
Cash - beginning of period.................................... 106 105 67
----------- ----------- -----------
Cash - end of period.......................................... $ 950 $ 106 $ 105
=========== =========== ===========
Supplemental Cash Flow Information:
Cash paid/(refunded) during the year for:
Interest, net of amounts capitalized........................ $ 30,958 $ 22,902 $ 28,711
=========== =========== ===========
Income taxes................................................ $ (6,296) $ (2,624) $ (1,121)
=========== =========== ===========
Increase in obligations:
Niantic Bay Fuel Trust...................................... $ 1,112 $ 2,375 $ 660
=========== =========== ===========

The accompanying notes are an integral part of these financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. About Western Massachusetts Electric Company
Western Massachusetts Electric Company (WMECO or the company) along with
The Connecticut Light and Power Company (CL&P), Public Service Company
of New Hampshire (PSNH), North Atlantic Energy Corporation (NAEC), and
Holyoke Water Power Company (HWP) are the operating companies comprising
the Northeast Utilities system (NU system) and are wholly owned by
Northeast Utilities (NU). The NU system serves in excess of 30 percent
of New England's electric needs and is one of the 20 largest electric
utility systems in the country as measured by revenues. The NU system
furnishes franchised retail electric service in western Massachusetts,
Connecticut and New Hampshire through WMECO, CL&P and PSNH. NAEC sells
all of its entitlement to the capacity and output of the Seabrook
Station (Seabrook) nuclear unit to PSNH under the terms of two life-of-
unit, full cost recovery contracts. HWP, also is engaged in the
production and distribution of electric power.

NU is registered with the Securities and Exchange Commission (SEC) as a
holding company under the Public Utility Holding Company Act of 1935
(1935 Act) and the NU system, including WMECO, is subject to provisions
of the 1935 Act. Arrangements among the NU system companies, outside
agencies and other utilities covering interconnections, interchange of
electric power and sales of utility property are subject to regulation
by the Federal Energy Regulatory Commission (FERC) and/or the SEC.
WMECO is subject to further regulation for rates, accounting and other
matters by the FERC and/or applicable state regulatory commissions.

Several wholly owned subsidiaries of NU provide support services for the
NU system companies, including WMECO, and, in some cases, for other New
England utilities. Northeast Utilities Service Company (NUSCO) provides
centralized accounting, administrative, information resources,
engineering, financial, legal, operational, planning, purchasing, and
other services to the NU system companies, including WMECO. Northeast
Nuclear Energy Company acts as agent for the NU system companies and
other New England utilities in operating the Millstone nuclear units.
North Atlantic Energy Service Corporation has operational responsibility
for Seabrook. In addition, WMECO had previously established a special
purpose subsidiary whose business consisted of the purchase and resale
of receivables. This business was terminated on June 30, 1999.

On October 13, 1999, NU and Consolidated Edison, Inc. (Con Edison)
announced that they have agreed to a merger to combine the two
companies. For further information, see Note 15, "Merger Agreement
with Con Edison."

B. Presentation
The consolidated financial statements of WMECO include the accounts of
its subsidiary. Intercompany transactions have been eliminated in
consolidation.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Certain reclassifications of prior years' data have been made to conform
with the current year's presentation.

All transactions among affiliated companies are on a recovery of cost
basis which may include amounts representing a return on equity and are
subject to approval by various federal and state regulatory agencies.

C. New Accounting Standards
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative
instruments and hedging activities. This statement will require
derivative instruments to be recognized as assets or liabilities at
fair value.

In June 1999, the FASB delayed the adoption date of SFAS No. 133 to
January 1, 2001.

There may be an impact on earnings upon adoption of SFAS No. 133 which
management has not estimated at this time.

D. Investments and Jointly Owned Electric Utility Plant
Regional Nuclear Generating Companies: WMECO owns common stock in four
regional nuclear companies (Yankee Companies). WMECO's ownership
interests in the Yankee Companies at December 31, 1999 and 1998, which
are accounted for on the equity basis due to WMECO's ability to exercise
significant influence over their operating and financial policies are
9.5 percent of the Connecticut Yankee Atomic Power Company (CYAPC),
7 percent of the Yankee Atomic Electric Company (YAEC), 3 percent of
the Maine Yankee Atomic Power Company (MYAPC), and 2.5 percent of the
Vermont Yankee Nuclear Power Corporation (VYNPC). WMECO's total equity
investment in the Yankee Companies at December 31, 1999 and 1998, is
$14.7 million and $15.4 million, respectively. Each Yankee Company owns
a single nuclear generating unit. However, VYNPC is the only unit
still in operation at December 31, 1999.

Millstone: WMECO has a 19 percent joint ownership in both Millstone 1,
a 660 megawatt (MW) nuclear unit and Millstone 2, an 870 MW nuclear
generating unit. WMECO has a 12.24 percent joint ownership interest in
Millstone 3, a 1,154 MW nuclear generating unit. NU expects to auction
all three units as a single package in 2000, with a closing in 2001.
Appropriate regulatory approvals will be required to complete the
auction.

Plant-in-service and the accumulated provision for depreciation
for WMECO's share of Millstone 2 and 3 are as follows:

------------------------------------------------------------------------
At December 31, 1999 1998
------------------------------------------------------------------------
(Millions of Dollars)
Plant-in-service
Millstone 2............................... $180.4 $177.5
Millstone 3............................... 380.5 379.2
Accumulated provision for depreciation
Millstone 2............................... $166.7 $ 70.4
Millstone 3............................... 358.7 121.1
------------------------------------------------------------------------

E. Depreciation
The provision for depreciation is calculated using the straight-line
method based on estimated remaining useful lives of depreciable utility
plant-in-service, adjusted for salvage value and removal costs, as
approved by the appropriate regulatory agency, where applicable.
Except for major facilities, depreciation rates are applied to the
average plant-in-service during the period. Major facilities are
depreciated from the time they are placed in service. When plant is
retired from service, the original cost of the plant, including costs
of removal less salvage, is charged to the accumulated provision for
depreciation. The costs of closure and removal of nonnuclear facilities
are accrued over the life of the plant as a component of depreciation.
The depreciation rates for the several classes of electric plant-in-
service are equivalent to a composite rate of 2.3 percent in 1999,
2.9 percent in 1998 and 3.2 percent in 1997.

At December 31, 1999 and 1998, the accumulated provision for
depreciation included $3.2 million accrued for the cost of removal, net
of salvage, for nonnuclear generation property.

As a result of discontinuing the application of SFAS No. 71, "Accounting
for the Effects of Certain Types of Regulation," for WMECO's generation
business, the company recorded a charge to accumulated depreciation for
the nuclear plant in excess of fair market value in the amount of $330
million, and a corresponding regulatory asset was created.

F. Revenues
Revenues are based on authorized rates applied to each customer's use
of electricity. In general, rates can be changed only through a formal
proceeding before the appropriate regulatory commission. Regulatory
commissions also have authority over the terms and conditions of
nontraditional rate-making arrangements. At the end of each accounting
period, WMECO accrues a revenue estimate for the amount of energy
delivered but unbilled.

G. Regulatory Accounting and Assets
The accounting policies of WMECO and the accompanying consolidated
financial statements conform to generally accepted accounting principles
applicable to rate-regulated enterprises and historically reflect the
effects of the rate-making process in accordance with SFAS No. 71.
As a result of final restructuring orders issued in 1999, WMECO
discontinued the application of SFAS No. 71 for the generation portion
of its business.

Based on a current evaluation of the various factors and conditions that
are expected to impact future cost recovery, management continues to
believe it is probable that WMECO will recover its investments in long-
lived assets, including regulatory assets. In addition, all material
regulatory assets are earning a return. The components of WMECO's
regulatory assets are as follows:

------------------------------------------------------------------------
At December 31, 1999 1998
------------------------------------------------------------------------
(Millions of Dollars)
Recoverable nuclear costs................. $428.9 $133.7
Income taxes, net......................... 49.0 57.1
Unrecovered contractual obligations....... 63.7 74.5
Recoverable energy costs, net............. 16.3 19.0
Other..................................... 36.9 38.1
------ ------
$594.8 $322.4
====== ======
------------------------------------------------------------------------

The restructuring orders in Massachusetts provide for the transmission
and distribution business to continue to be cost-of-service based and
also provide for a transition charge which recovers stranded costs,
including the nuclear regulatory assets established below.

As a result of discontinuing the application of SFAS No. 71 for WMECO's
generation business, the company reclassified nuclear plant in excess
of its estimated fair market value from plant to regulatory assets.
As of December 31, 1999, the unamortized balance of $316.1 million is
classified as recoverable nuclear costs. Also included in that
regulatory asset component for 1999 is $112.8 million, which includes
Millstone 1 recoverable nuclear costs relating to the recoverable
portion of the undepreciated plant and related assets ($43.8 million)
and the decommissioning and closure obligation ($69 million).

H. Income Taxes
The tax effect of temporary differences (differences between the periods
in which transactions affect income in the financial statements and the
periods in which they affect the determination of taxable income) is
accounted for in accordance with the rate-making treatment of the
applicable regulatory commissions.

The tax effect of temporary differences, including timing differences
accrued under previously approved accounting standards, that give rise
to the accumulated deferred tax obligation is as follows:

Regulatory assets - income tax gross up... 19.0 29.3

Other..................................... 10.5 (8.3)
------ ------
$242.9 $249.0
====== ======

------------------------------------------------------------------------

I. Recoverable Energy Costs
Under the Energy Policy Act of 1992 (Energy Act), WMECO is assessed for
its proportionate share of the costs of decontaminating and
decommissioning uranium enrichment plants owned by the United States
Department of Energy (DOE) (D&D Assessment). The Energy Act requires
that regulators treat D&D Assessments as a reasonable and necessary
current cost of fuel, to be fully recovered in rates like any other fuel
cost. WMECO is currently recovering these costs through rates. As of
December 31, 1999 and 1998, WMECO's total D&D Assessment deferrals were
$9.6 million and $10.5 million, respectively.

J. Unrecovered Contractual Obligations
Under the terms of contracts with the Yankee Companies, the shareholder-
sponsored companies, including WMECO, are responsible for their
proportionate share of the remaining costs of the units, including
decommissioning. As management expects that WMECO will be allowed to
recover these costs from its customers, WMECO has recorded a regulatory
asset, with a corresponding obligation, on its balance sheet.

2. NUCLEAR DECOMMISSIONING AND PLANT CLOSURE COSTS
Millstone: WMECO's operating nuclear power plants, Millstone 2 and 3, have
service lives that are expected to end in 2015 and 2025, respectively, and
upon retirement, must be decommissioned. Millstone 1's expected service
life was to end in 2010, however, in July 1998, restart activities were
discontinued and preparations for decommissioning the unit began. Current
decommissioning studies conclude that complete and immediate dismantlement
as soon as practical after retirement continues to be the most viable and
economic method of decommissioning a unit. These studies are reviewed and
updated periodically to reflect changes in decommissioning requirements,
costs, technology, and inflation. Changes in requirements or technology,
the timing of funding or dismantling or adoption of a decommissioning
method other than immediate dismantlement would change decommissioning
cost estimates and the amounts required to be recovered. WMECO attempts
to recover sufficient amounts through its allowed rates to cover its
expected decommissioning costs.

WMECO's ownership share of the estimated cost of decommissioning Millstone
2 and 3, in year end 1999 dollars, is $78.5 million and $75.8 million.
Nuclear decommissioning costs are accrued over the expected service lives
of the units and are included in depreciation expense. Nuclear
decommissioning expenses for these units amounted to $3.7 million in 1999,
1998 and 1997, respectively. Nuclear decommissioning, as a cost of
removal, is included in the accumulated provision for depreciation.

A Post-Shutdown Decommissioning Activities Report for Millstone 1
was filed with the Nuclear Regulatory Commission in June 1999 which
outlines decommissioning activities, and costs, and supports the obligation
recorded by the company. Nuclear decommissioning expenses for Millstone 1
were $2.9 million in 1999 and $2.5 million in 1998 and 1997, respectively.

External decommissioning trusts have been established for the costs of
decommissioning the Millstone units. Funding of the estimated
decommissioning costs assumes levelized collections for the Millstone
units and after-tax earnings on the Millstone decommissioning funds of
5.5 percent.

As of December 31, 1999 and 1998, WMECO collected a total of $39.3 million
and $35.5 million, respectively, through rates toward the future
decommissioning costs of their shares of Millstone 2 and 3, all of
which has been transferred to external decommissioning trusts. Earnings
on the decommissioning trusts increase the decommissioning trust balances
and the accumulated reserves for depreciation. Unrealized gains and losses
associated with the decommissioning trusts and financing funds also impact
the balance of the trusts and the accumulated reserve for depreciation.
The fair values of the amounts in the external decommissioning trusts
were $77.4 million and $66.9 million at December 31, 1999 and 1998,
respectively.

Yankee Companies: VYNPC owns and operates a nuclear generating unit with
a service life that is expected to end in 2012. WMECO's ownership share
of estimated costs, in year end 1999 dollars, of decommissioning this unit
is $10.7 million. On October 15, 1999, VYNPC agreed to sell the unit for
$22 million to an unaffiliated company. Among other commitments, the
acquiring company agreed to assume the decommissioning cost of the unit
after it is taken out of service, and the VYNPC owners have agreed to fund
the uncollected decommissioning cost to a negotiated amount at the
time of the closing of the sale.

As of December 31, 1999 and 1998, WMECO's remaining estimated obligation,
including decommissioning for the units owned by CYAPC, YAEC and MYAPC,
which have been shut down was $63.7 million and $74.5 million,
respectively.

3. SHORT-TERM DEBT
Limits: The amount of short-term borrowings that may be incurred by WMECO
is subject to periodic approval by either the SEC under the 1935 Act or by
the respective state regulators. SEC authorization allowed WMECO, as of
January 1, 1999, to incur total short-term borrowings up to a maximum of
$250 million. In addition, the charter of WMECO contains preferred stock
provisions restricting the amount of unsecured debt the company may incur.
As of December 31, 1999, WMECO's charter permits WMECO to incur $132
million of unsecured debt.

Credit Agreement: On November 19, 1999, WMECO and CL&P entered into a new
364-day revolving credit facility for $500 million, replacing the previous
$313.75 million facility which was to expire on November 21, 1999. The
revolving credit facility will be used to bridge gaps in working capital
and provide short-term liquidity. WMECO may draw up to $200 million under
the facility, which is secured by second mortgages on Millstone 2 and 3.
Unless extended, the new credit facility will expire on November 17, 2000.
At December 31, 1999 and 1998, there were $123 million and $20 million,
respectively, in borrowings under these facilities.

Under the credit agreement discussed above, WMECO may borrow at fixed or
variable rates plus an applicable margin based upon the company's most
senior secured debt as rated by the lower of Standard & Poor's or Moody's
Investors Service. The weighted average interest rate on the WMECO's notes
payable to banks outstanding on December 31, 1999 and 1998, was 7.70
percent and 6.53 percent, respectively.

This credit agreement provides that WMECO must comply with certain
financial and nonfinancial covenants as are customarily included in such
agreements, including, but not limited to, common equity ratios and
interest coverage ratios.

Money Pool: Certain subsidiaries of NU, including WMECO, are members of
the Northeast Utilities System Money Pool (Pool). The Pool provides a more
efficient use of the cash resources of the NU system and reduces outside
short-term borrowings. NUSCO administers the Pool as agent for the member
companies. Short-term borrowing needs of the member companies are first
met with available funds of other member companies, including funds
borrowed by NU parent. NU parent may lend to the Pool but may not borrow.
Funds may be withdrawn from or repaid to the Pool at any time without prior
notice. Investing and borrowing subsidiaries receive or pay interest based
on the average daily federal funds rate. Borrowings based on loans from NU
parent, however, bear interest at NU parent's cost and must be repaid based
upon the terms of NU parent's original borrowing. At December 31, 1999 and
1998, WMECO had $9.4 million and $30.9 million, respectively, of borrowings
outstanding from the Pool. The interest rate on borrowings from the Pool at
December 31, 1999 and 1998, was 4.9 percent and 5.8 percent, respectively.
Maturities of short-term debt obligations were for periods of three months
or less.

4. LEASES
WMECO finances its respective shares of the nuclear fuel for Millstone 2
and 3 under the Niantic Bay Fuel Trust (NBFT) capital lease agreement.
This capital lease agreement has an expiration date of June 1, 2040. At
December 31, 1999 and 1998, the present value of WMECO's capital lease
obligation to the NBFT was $29.8 million and $33.9 million, respectively.
In connection with the planned nuclear divestiture, WMECO anticipates that
its portion of the NBFT capital lease will be terminated and WMECO's
portion of the NBFT's obligation under the $180 million Series G
Intermediate Term Note agreement will be assigned to WMECO.

WMECO makes quarterly lease payments for the cost of nuclear fuel consumed
in the reactors based on a units-of-production method at rates which
reflect estimated kilowatt-hours of energy provided plus financing costs
associated with the fuel in the reactors. Upon permanent discharge from
the reactors, WMECO's interest in the nuclear fuel transfers to WMECO.

WMECO also has entered into lease agreements, some of which are capital
leases, for the use of data processing and office equipment, vehicles,
nuclear control room simulators, and office space. The provisions of
these lease agreements generally provide for renewal options.

Capital lease rental payments charged to operating expense were $2.6
million in 1999, $4.1 million in 1998 and $1.8 million in 1997. Interest
included in capital lease rental payments was $3.1 million in 1999, $2.8
million in 1998 and $1.8 million in 1997. Operating lease rental payments
charged to expense were $4.8 million in 1999, $5.8 million in 1998 and
$6 million in 1997.

Future minimum rental payments, excluding annual nuclear fuel lease
payments and executory costs such as property taxes, state use taxes,
insurance, and maintenance, under long-term noncancelable leases, as
of December 31, 1999, are:

---------------------------------------------------------------------------
Year Capital Leases Operating Leases
---------------------------------------------------------------------------

2000.............................. $ 0.05 $ 4.3
2001.............................. 0.05 3.9
2002.............................. 0.05 3.7
2003.............................. 0.05 3.4
2004.............................. - 3.1
After 2004........................ - 15.1
------ -----
Future minimum lease payments..... 0.20 $33.5
=====
Present value of future nuclear
fuel lease payments............. 29.80
------
Present value of future
minimum lease payments.......... $30.00
======
---------------------------------------------------------------------------

5. PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION
Details of preferred stock not subject to mandatory redemption are:

---------------------------------------------------------------------------
December 31, Shares
1999 Outstanding December 31,
Redemption December 31, ------------------
Description Price 1999 1999 1998
---------------------------------------------------------------------------
(Millions of Dollars)

7.72% Series B of 1971 $103.51 200,000 $20.0 $20.0
---------------------------------------------------------------------------

6. PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
Details of preferred stock subject to mandatory redemption are:

7.60% Series of 1987 $25.38 720,000 $18.0 $19.5

Less preferred stock
to be redeemed
within one year 60,000 1.5 1.5
----- -----
$16.5 $18.0
===== =====
---------------------------------------------------------------------------

The series is subject to certain refunding limitations for the first five
years after issuance. The redemption price reduces in future years.

The minimum sinking fund requirements of the series subject to mandatory
redemption aggregate $1.5 million per year for each year for 2000 through
2004. In case of default on sinking fund payments, no payments may be
made on any junior stock by way of dividends or otherwise (other than in
shares of junior stock) so long as the default continues. If WMECO is
in arrears in the payment of dividends on any outstanding shares of
preferred stock, WMECO would be prohibited from redeeming or purchasing
less than all of the outstanding preferred stock.

7. LONG-TERM DEBT
Details of long-term debt outstanding are:

---------------------------------------------------------------------------
At December 31, 1999 1998
---------------------------------------------------------------------------
(Millions of Dollars)
First Mortgage Bonds:
6 1/4% Series X, due 1999.................... $ - $ 40.0
6 7/8% Series W, due 2000.................... - 60.0
7 3/8% Series B, due 2001.................... 60.0 60.0
7 3/4% Series V, due 2002.................... 84.2 85.0
7 3/4% Series Y, due 2024.................... 50.0 50.0
------ ------
194.2 295.0
Pollution Control Notes:
Tax Exempt 1993 Series A, 5.85% due 2028..... 53.8 53.8
Fees and interest due for spent nuclear
fuel disposal costs........................ 43.0 41.4
Less amounts due within one year............. - 40.0
Unamortized premium and discount, net........ (0.7) (0.9)
------ ------
Long-term debt, net.......................... $290.3 $349.3
====== ======
---------------------------------------------------------------------------

Long-term debt maturities and cash sinking fund requirements, excluding
fees and interest due for spent nuclear fuel disposal costs, on debt
outstanding at December 31, 1999, are $60 million and $84.2 million in
2001 and 2002, respectively. There are no long-term debt maturities or
cash sinking fund requirements for 2000, 2003 and 2004.

Essentially all utility plant of WMECO is subject to the liens of the
company's first mortgage bond indenture.

WMECO has secured $53.8 million of pollution control notes with second
mortgage liens on Millstone 1, junior to the liens of its first mortgage
bond indenture.

On October 1, 1998, the variable interest rate on WMECO's $53.8 million
principal amount pollution control notes, 1993 Series A, due 2028, was
fixed at a rate of 5.85 percent per annum.

8. INCOME TAX EXPENSE
The components of the federal and state income tax provisions were
charged/(credited) to operations as follows:

---------------------------------------------------------------------------
For the Years Ended December 31, 1999 1998 1997
---------------------------------------------------------------------------
(Millions of Dollars)
Current income taxes:
Federal............................... $13.5 $(7.4) $(14.3)
State................................. 2.0 (0.1) (0.6)
----- ----- ------
Total current....................... 15.5 (7.5) (14.9)
----- ----- ------
Deferred income taxes, net:
Federal............................... (3.5) 6.5 -
State................................. (0.9) 2.4 0.2
----- ----- ------
Total deferred...................... (4.4) 8.9 0.2
----- ----- ------
Investment tax credits, net............. (2.2) (1.5) (1.5)
----- ----- ------
Total income tax expense/(credit)....... $ 8.9 $(0.1) $(16.2)
===== ===== ======
---------------------------------------------------------------------------

The components of total income tax expense/(credit) are classified as
follows:

Income taxes charged to
operating expenses.................... $18.8 $ 2.1 $(15.2)
Other income taxes...................... (9.9) (2.2) (1.0)
----- ----- ------
Total income tax expense/(credit)....... $ 8.9 $(0.1) $(16.2)
===== ===== ======
---------------------------------------------------------------------------

Deferred income taxes are comprised of the tax effects of temporary
differences as follows:

---------------------------------------------------------------------------
For the Years Ended December 31, 1999 1998 1997
---------------------------------------------------------------------------
(Millions of Dollars)
Depreciation, leased nuclear fuel,
settlement credits, and
disposal costs........................ $(2.3) $ 5.8 $ 1.4
Regulatory deferral..................... (1.4) 1.3 -
Regulatory disallowance................. (4.2) - -
Pension accruals........................ 4.2 1.0 1.0
Other................................... (0.7) 0.8 (2.2)
----- ----- -----
Deferred income taxes, net.............. $(4.4) $ 8.9 $ 0.2
===== ===== =====
---------------------------------------------------------------------------

A reconciliation between income tax expense/(credit) and the expected
tax expense/(credit) at 35 percent of pretax income is as follows:

Expected federal income tax............. $4.1 $(3.4) $(15.3)
Tax effect of differences:
Depreciation.......................... 1.8 2.2 0.1
Amortization of regulatory assets..... 4.6 0.9 1.9
Investment tax credit amortization.... (2.2) (1.5) (1.5)
State income taxes, net of
federal benefit..................... 0.7 1.5 (0.3)
Adjustment for prior years' taxes..... - (0.4) (0.3)
Dividends received deduction.......... (0.4) (0.7) (0.4)
Other, net............................ 0.3 1.3 (0.4)
---- ----- ------
Total income tax expense/(credit)....... $8.9 $(0.1) $(16.2)
==== ===== ======
---------------------------------------------------------------------------

9. EMPLOYEE BENEFITS

A. Pension Benefits and Postretirement Benefits Other Than Pensions
The NU system companies, including WMECO, participate in a uniform
noncontributory defined benefit retirement plan covering substantially
all regular NU system employees. Benefits are based on years of service
and the employees' highest eligible compensation during 60 consecutive
months of employment. WMECO's portion of the NU system's total pension
credit, part of which was credited to utility plant, was $10.8 million
in 1999, $7.4 million in 1998 and $5.7 million in 1997.

Currently, WMECO annually funds an amount at least equal to that which
will satisfy the requirements of the Employee Retirement Income Security
Act and Internal Revenue Code (the Code).

The NU system companies, including WMECO, also provide certain health
care benefits, primarily medical and dental, and life insurance benefits
through a benefit plan to retired employees. These benefits are
available for employees retiring from WMECO who have met specified
service requirements. For current employees and certain retirees,
the total benefit is limited to two times the 1993 per retiree health
care cost. These costs are charged to expense over the future estimated
work life of the employee. WMECO annually funds postretirement costs
through external trusts with amounts that have been rate-recovered and
which also are tax deductible under the Code.

Pension and trust assets are invested primarily in domestic and
international equity securities and bonds.

The following table represents information on the plans' benefit
obligation, fair value of plan assets, and the respective plans' funded
status:

- -------------------------------------------------------------------------------
At December 31,
- -------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
(Millions of Dollars) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation
at beginning of year......... $(118.7) $(109.5) $(30.1) $(27.8)
Service cost................... (2.4) (2.2) (0.5) (0.5)
Interest cost.................. (8.5) (7.9) (2.1) (2.1)
Plan amendment................. (7.3) - - -
Transfers...................... 0.2 (3.0) - -
Actuarial gain/(loss).......... 10.2 (3.8) 0.4 (2.4)
Benefits paid.................. 7.8 7.7 2.6 2.7
Settlements.................... 0.6 - 0.2 -
- -------------------------------------------------------------------------------
Benefit obligation
at end of year............... $(118.1) $(118.7) $(29.5) $(30.1)
- -------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets
at beginning of year......... $ 201.6 $ 181.0 $ 14.6 $ 12.8
Actual return on plan assets... 29.9 25.3 1.7 1.6
Employer contribution.......... - - 2.9 2.9
Benefits paid.................. (7.8) (7.7) (2.6) (2.7)
Transfers...................... 0.2 3.0 - -
- -------------------------------------------------------------------------------
Fair value of plan assets
at end of year............... $ 223.9 $ 201.6 $ 16.6 $ 14.6
- -------------------------------------------------------------------------------
Funded status at December 31... $ 105.8 $ 82.9 $(12.9) $(15.5)
Unrecognized transition
(asset)/obligation........... (1.2) (1.5) 21.2 23.0
Unrecognized prior
service cost................. 7.6 1.1 - -
Unrecognized net gain.......... (85.7) (66.6) (8.2) (7.5)
- -------------------------------------------------------------------------------
Prepaid benefit cost........... $ 26.5 $ 15.9 $ 0.1 $ -
- -------------------------------------------------------------------------------

The following actuarial assumptions were used in calculating the plans'
year end funded status:

(a) The annual per capita cost of covered health care benefits was
assumed to decrease to 4.90 percent by 2001.

The components of net periodic benefit (credit)/cost are:

- -------------------------------------------------------------------------------
For the Years Ended December 31,
- -------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
(Millions of Dollars) 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------
Service cost............... $ 2.4 $ 2.2 $ 1.9 $ 0.5 $ 0.5 $ 0.4
Interest cost.............. 8.5 7.9 7.9 2.1 2.1 2.0
Expected return on
plan assets.............. (16.9) (14.8) (12.9) (1.0) (0.9) (0.7)
Amortization of
unrecognized net
transition (asset)/
obligation............... (0.2) (0.2) (0.2) 1.6 1.6 1.6
Amortization of prior
service cost............. 0.6 0.1 0.1 - - -
Amortization of
actuarial gain........... (3.4) (2.6) (2.0) - - -
Other amortization, net.... - - - (0.3) (0.4) (0.5)
Settlements................ (1.8) - (0.5) - - -
- -------------------------------------------------------------------------------
Net periodic benefit
(credit)/cost............. $(10.8) $ (7.4) $(5.7) $ 2.9 $ 2.9 $ 2.8
- -------------------------------------------------------------------------------

For calculating pension and postretirement benefit costs, the following
assumptions were used:

Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. The effect of changing the
assumed health care cost trend rate by one percentage point in each year
would have the following effects:

- -------------------------------------------------------------------------------
One Percentage One Percentage
(Millions of Dollars) Point Increase Point Decrease
- -------------------------------------------------------------------------------
Effect on total service and
interest cost components............ $0.1 $(0.1)
Effect on postretirement
benefit obligation.................. $1.8 $(1.7)
- -------------------------------------------------------------------------------

The trust holding the health plan assets is subject to federal income
taxes.

B. Employee Stock Ownership Plan
In June 1999, WMECO paid NU parent $6.9 million for NU shares issued
from 1992 through 1998 on behalf of its employees in accordance with
NU's 401(k) plan. WMECO charged retained earnings for this payment,
as compensation expense had already been recorded in the respective
years at the fair market value of the shares allocated.

10. SALE OF CUSTOMER RECEIVABLES
On June 30, 1999, WMECO terminated its $40 million accounts receivable
program with its respective sponsor. At December 31, 1998, WMECO had sold
accounts receivable of $20 million to a third-party purchaser.

11. COMMITMENTS AND CONTINGENCIES

A. Restructuring
In 1999, restructuring orders required WMECO to discontinue the
application of SFAS No. 71 for the generation portion of its business.
In these restructuring orders, WMECO was allowed to recover the majority
of its stranded costs through a transition charge over the 12-year
transition period beginning March 1, 1998. The decision instructed
WMECO to work with the Massachusetts attorney general regarding the
recovery of nuclear capital additions made after July 1, 1991. The
decisions also concluded that the company's deferred fuel balance should
be included as part of the company's outstanding generating unit
performance proceedings and not as part of the transition charge.
Management believes that these costs are recoverable and that there
will not be an impact on the results of operations.

In September 1999, NU announced that the Millstone nuclear generation
assets of WMECO will be put up for auction as soon as practical. The
auction is expected to begin in early 2000, provided all regulatory
approvals have been met, with a successful bidder chosen by mid 2000
and a closing in 2001. No NU system company will participate as a
bidder in the auction process. Management expects to recover all of
WMECO's nuclear stranded costs through the net proceeds of generation
asset sales and billing through a transition charge to retail customers.

B. Nuclear Litigation
The non-NU joint owners of Millstone 3 have filed demands for
arbitration with WMECO and CL&P as well as lawsuits in Massachusetts
Superior Court against NU and its current and former trustees related
to the companies' operation of Millstone 3. During 1999, NU and these
subsidiaries agreed in principle to settle with certain of the joint
owners, who own 58 percent of the non-NU ownership of Millstone 3.
The settlements provide for the payment to the claimants of $36.4
million and certain contingent payments.

Arbitration and litigation claims remain outstanding for the
remaining joint owners who have not agreed to settle. Management
cannot estimate the potential outcome of the arbitration and litigation
for the nonsettled joint owners, therefore, no liability has been
established at December 31, 1999.

C. Environmental Matters
The NU system, including WMECO, is subject to environmental laws and
regulations intended to mitigate or remove the effect of past operations
and improve or maintain the quality of our environment. As such, the
NU system and WMECO have active environmental auditing and training
programs and believe they are in compliance with the current laws and
regulations.

However, the normal course of operations may necessarily involve
activities and substances that expose WMECO to potential liabilities
of which management cannot determine the outcome. Additionally,
management cannot determine the outcome for liabilities that may be
imposed for past acts, even though such past acts may have been lawful
at the time they occurred. Management does not believe, however, that
this will have a material impact on WMECO's financial statements.

Based upon currently available information for the estimated remediation
costs at December 31, 1999 and 1998, the liability recorded by WMECO for
its estimated environmental remediation costs amounted to $4.2 million
and $1.9 million, respectively.

D. Spent Nuclear Fuel Disposal Costs
Under the Nuclear Waste Policy Act of 1982, WMECO must pay the DOE for
the disposal of spent nuclear fuel and high-level radioactive waste.
The DOE is responsible for the selection and development of repositories
for, and the disposal of, spent nuclear fuel and high-level radioactive
waste. Fees for nuclear fuel burned on or after April 7, 1983, are
billed currently to customers and paid to the DOE on a quarterly basis.
For nuclear fuel used to generate electricity prior to April 7, 1983
(Prior Period Fuel), an accrual has been recorded for the full liability
and payment must be made prior to the first delivery of spent fuel to
the DOE. Until such payment is made, the outstanding balance will
continue to accrue interest at the 3-month treasury bill yield rate.
As of December 31, 1999 and 1998, fees due to the DOE for the disposal
of WMECO's Prior Period Fuel were $43 million and $41.4 million,
respectively, including interest costs of $27.4 million and $25.5
million, respectively.

E. Nuclear Insurance Contingencies
Insurance policies covering WMECO's ownership share of the NU system's
nuclear facilities have been purchased for the primary cost of repair,
replacement or decontamination of utility property, certain extra costs
incurred in obtaining replacement power during prolonged accidental
outages and the excess cost of repair, replacement or decontamination
or premature decommissioning of utility property.

WMECO is subject to retroactive assessments if losses under those
policies exceed the accumulated funds available to the insurer. The
maximum potential assessments with respect to losses arising during the
current policy year for the primary property insurance program, the
replacement power policies and the excess property damage policies are
$1.6 million, $0.9 million and $2 million, respectively. In addition,
insurance has been purchased by the NU system in the aggregate of $200
million on an industry basis for coverage of worker claims.

Under certain circumstances, in the event of a nuclear incident at one
of the nuclear facilities covered by the federal government's
third-party liability indemnification program, the NU system, including
WMECO, could be assessed liabilities in proportion to its ownership
interest in each of its nuclear units up to $83.9 million. The NU
system's payment of this assessment would be limited to, in proportion
to its ownership interest in each of its nuclear units, $10 million in
any one year per nuclear unit. In addition, if the sum of all claims
and costs from any one nuclear incident exceeds the maximum amount of
financial protection, the NU system would be subject to an additional
5 percent or $4.2 million liability, in proportion to its ownership
interests in each of its nuclear units. Based upon its ownership
interests in the Millstone units, WMECO's maximum liability, including
any additional assessments, would be $44.3 million per incident, of
which payments would be limited to $5 million per year. In addition,
through purchased-power contracts with VYNPC, WMECO would be responsible
for up to an additional assessment of $2.2 million per incident, of
which payments would be limited to $0.3 million per year.

F. Construction Program
WMECO currently forecasts construction expenditures of $112.6 million
for the years 2000-2004, including $24.2 million for 2000. WMECO
estimates that nuclear fuel requirements, including nuclear fuel
financed through the NBFT, will be $30.8 million for the years 2000-
2003, including $10.7 million for 2000.

G. Long-Term Contractual Arrangements
Yankee Companies: The NU system companies relied on VYNPC for 1.5
percent of their capacity under long-term contracts. Under the terms
of its agreement, WMECO paid its ownership (or entitlement) shares of
costs, which included depreciation, operation and maintenance (O&M)
expenses, taxes, the estimated cost of decommissioning, and a return
on invested capital. These costs were recorded as purchased-power
expenses and recovered through WMECO's rates. WMECO's cost of purchases
under contracts with VYNPC amounted to $4.7 million in 1999, $4.4
million in 1998 and $3.9 million in 1997. VYNPC has agreed to sell its
nuclear unit. Upon completion of the sale, this long-term contract will
be terminated.

Nonutility Generators (NUGs): WMECO has entered into various
arrangements for the purchase of capacity and energy from NUGs. For
the years ended December 31, 1999 and 1998, 13 percent and for the
year ended December 31, 1997, 14 percent, of NU's system electricity
requirements were met by NUGs. WMECO's total cost of purchases under
these arrangements amounted to $28.2 million in 1999, $29.9 million in
1998 and $31.2 million in 1997. The company is in the process of
renegotiating the terms of these contracts through either a contract
buydown or buyout. The company expects any payments to the NUGs as a
result of these renegotiations to be recovered from the company's
customers.

Hydro-Quebec: Along with other New England utilities, WMECO has entered
into an agreement to support transmission and terminal facilities to
import electricity from the Hydro-Quebec system in Canada. WMECO is
obligated to pay, over a 30-year period ending in 2020, its
proportionate share of the annual O&M expenses and capital costs of
those facilities.

Estimated Annual Costs: The estimated annual costs of WMECO's
significant long-term contractual arrangements, absent the effects of
any contract terminations or buydowns are as follows:

------------------------------------------------------------------------
2000 2001 2002 2003 2004
------------------------------------------------------------------------
(Millions of Dollars)

VYNPC................. $ 4.7 $ 4.8 $ 4.8 $ 4.8 $ 4.6
NUGs.................. 28.8 29.5 30.4 31.2 31.9
Hydro-Quebec.......... 3.6 3.5 3.4 3.3 3.2
------------------------------------------------------------------------

H. New England Power Pool (NEPOOL) Generation Pricing
Disputes with respect to interpretation and implementation of the NEPOOL
market rules have arisen with respect to various competitive product
markets. In certain cases, WMECO stands to gain as a result of
resolution of such disputes. In other cases, WMECO could incur
additional costs as the result of resolution of the disputes. The
various disputes are in various stages of resolution through
alternative dispute resolution and regulatory review. It is too early
to tell the level of potential gain or loss that may result upon
resolution of these issues.

12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each of the following financial instruments:

Supplemental Executive Retirement Plan (SERP) Investments: WMECO's
portion of the investments held for the benefit of the SERP are
recorded at fair market value. These investments having a cost basis
of $0.1 million held for benefit of the SERP were recorded at their
fair market values at December 31, 1999 and 1998, of $0.4 million.

Nuclear decommissioning trusts: WMECO's portion of the investments held
in the NU system companies' nuclear decommissioning trusts were marked-
to-market by $35.4 million as of December 31, 1999, and $27.8 million as
of December 31, 1998, with corresponding offsets to the accumulated
provision for depreciation. The amounts adjusted in 1999 and 1998
represent cumulative net unrealized gains. The cumulative gross
unrealized holding losses were immaterial for both 1999 and 1998.

Preferred stock and long-term debt: The fair value of WMECO's
fixed-rate securities is based upon the quoted market price for
those issues or similar issues. Adjustable rate securities are
assumed to have a fair value equal to their carrying value. The
carrying amounts of WMECO's financial instruments and the estimated
fair values are as follows:

------------------------------------------------------------------------
At December 31, 1999
------------------------------------------------------------------------
Carrying Fair
(Millions of Dollars) Amount Value
------------------------------------------------------------------------
Preferred stock not subject
to mandatory redemption................. $ 20.0 $ 19.1

Preferred stock subject to
mandatory redemption.................... 18.0 18.0

Long-term debt -
First mortgage bonds.................... 194.2 196.3

Other long-term debt.................... 96.8 89.9
------------------------------------------------------------------------

------------------------------------------------------------------------
At December 31, 1998
------------------------------------------------------------------------
Carrying Fair
(Millions of Dollars) Amount Value
------------------------------------------------------------------------
Preferred stock not subject
to mandatory redemption................. $ 20.0 $ 19.8

Preferred stock subject to
mandatory redemption.................... 19.5 19.8

Long-term debt -
First mortgage bonds.................... 295.0 297.2

Other long-term debt...................... 95.2 95.4
------------------------------------------------------------------------

13. OTHER COMPREHENSIVE INCOME
The accumulated balance for each other comprehensive income item is as
follows:

---------------------------------------------------------------------------
Current
December 31, Period December 31,
1998 Change 1999
---------------------------------------------------------------------------
(Thousands of Dollars)
---------------------------------------------------------------------------
Unrealized gains on securities.... $183 $10 $193
Minimum pension liability
adjustments...................... (33) - (33)
---------------------------------------------------------------------------
Accumulated other
comprehensive income............ $150 $10 $160
---------------------------------------------------------------------------

---------------------------------------------------------------------------
Current
December 31, Period December 31,
1997 Change 1998
---------------------------------------------------------------------------
(Thousands of Dollars)
---------------------------------------------------------------------------
Unrealized gains on securities.... $ - $183 $183
Minimum pension liability
adjustments...................... - (33) (33)
---------------------------------------------------------------------------
Accumulated other
comprehensive income............ $ - $150 $150
--------------------------------------------------------------------------

The changes in the components of other comprehensive income are reported
net of the following income tax effects:

---------------------------------------------------------------------------
(Thousands of Dollars) 1999 1998 1997
---------------------------------------------------------------------------
Unrealized gains on securities....... $(7) $(117) $ -
Minimum pension liability
adjustments........................ - 21 -
---------------------------------------------------------------------------
Other comprehensive income........... $(7) $ (96) $ -
---------------------------------------------------------------------------

14. SEGMENT INFORMATION
Effective January 1, 1999, the NU system companies, including WMECO,
adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The NU system is organized between regulated
utilities and unregulated energy services. WMECO is included in the
regulated utilities segment of the NU system and has no other reportable
segments.

15. MERGER AGREEMENT WITH CON EDISON
On October 13, 1999, NU and Con Edison announced that they have agreed to
a merger to combine the two companies. The shareholders of NU will receive
$25 per share in a combination of cash and Con Edison common stock.

NU shareholders also have the right to receive an additional $1 per share
if a definitive agreement to sell its interests (other than that now held
by PSNH) in Millstone 2 and 3 is entered into and recommended by the
Utility Operations and Management Unit of the DPUC on or prior to the later
of December 31, 2000, or the closing of the merger. Further, the value of
the amount of cash or common stock to be received by NU shareholders is
subject to increase by an amount of $0.0034 per share per day for each day
that the transaction does not close after August 5, 2000.

Upon completion of the merger, NU will become a wholly owned subsidiary of
Con Edison. The purchase is subject to the approval of the shareholders of
both companies and several regulatory agencies. The companies anticipate
that these regulatory procedures can be completed by July 2000.

Western Massachusetts Electric Company and Subsidiary
- -----------------------------------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues..................... $ 414,231 $ 393,322 $ 426,447 $ 421,337 $ 420,434

Operating Income....................... 41,741 19,854 251 33,190 63,064

Net Income/(Loss)...................... 2,887 (9,579) (27,460) 11,089 39,133

Cash Dividends on Common Stock......... - - 15,004 16,494 30,223

Total Assets........................... 1,253,604 1,287,682 1,179,128 1,191,915 1,142,346

Long-Term Debt (a)..................... 290,279 389,314 396,649 349,442 347,470

Preferred Stock Not Subject to
Mandatory Redemption................. 20,000 20,000 20,000 20,000 53,500

Preferred Stock Subject to
Mandatory Redemption (a)............. 18,000 19,500 21,000 21,000 24,000

Obligations Under Capital Leases (a)... 29,972 34,093 32,887 32,234 36,011

- -----------------------------------------------------------------------------------------------------------
CONSOLIDATED QUARTERLY FINANCIAL DATA (Unaudited)
- -----------------------------------------------------------------------------------------------------------
Quarter Ended
- -----------------------------------------------------------------------------------------------------------
1999 March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------------------------------------
(Thousands of Dollars)

Operating Revenues..................... $ 97,686 $108,829 $107,776 $ 99,940
======== ======== ======== ========
Operating Income/(Loss)................ $ 12,205 $ 8,812 $ 22,821 $ (2,097)
======== ======== ======== ========
Net Income/(Loss)...................... $ 4,852 $ 4,183 $ 11,368 $(17,516)
======== ======== ======== ========
- -----------------------------------------------------------------------------------------------------------
1998
- -----------------------------------------------------------------------------------------------------------

Operating Revenues..................... $107,189 $ 90,649 $ 93,839 $101,645
======== ======== ======== ========
Operating Income....................... $ 7,838 $ 6,614 $ 4,301 $ 1,101
======== ======== ======== ========
Net Income/(Loss)...................... $ 1,367 $ (738) $ (3,546) $ (6,662)
======== ======== ======== ========
(a) Includes portion due within one year.

Western Massachusetts Electric Company and Subsidiary

- -------------------------------------------------------------------------------
CONSOLIDATED STATISTICS (Unaudited)
- -------------------------------------------------------------------------------
Average
Gross Electric Annual
Utility Plant Use Per
December 31, kWh Residential Electric
(Thousands of Sales Customer Customers Employees
Dollars) (Millions) (kWh) (Average) December 31,
- -------------------------------------------------------------------------------
1999 $1,216,015 4,654 7,423 198,012 482
1998 1,256,046 4,091 6,979 196,339 533
1997 1,334,233 4,300 7,121 195,324 507
1996 1,303,361 4,626 7,335 194,705 497
1995 1,285,269 4,846 7,105 (a) 193,964 533

(a) Effective January 1, 1996, the amounts shown reflect billed and unbilled
sales. The 1995 amounts have been restated to reflect this change.