FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6392
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 02-018150
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 ELM STREET, MANCHESTER, NEW HAMPSHIRE 03105
(Address of principal executive offices) (Zip Code)
(603) 669-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1997
Common Shares, $10.00 par value 1,000 shares
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets - March 31, 1997 and
December 31, 1996 2
Statements of Income - Three Months
Ended March 31, 1997 and 1996 4
Statements of Cash Flows - Three Months
Ended March 31, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 12
Part II. Other Information
Item 1. Legal Proceedings 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
PART I. FINANCIAL INFORMATION
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
------------- -------------
(Thousands of Dollars)
ASSETS
- ------
Utility Plant, at cost:
Electric................................................ $ 1,889,994 $ 1,877,955
Less: Accumulated provision for depreciation......... 559,757 552,780
------------- -------------
1,330,237 1,325,175
Unamortized acquisition costs........................... 469,353 491,709
Construction work in progress........................... 12,562 11,032
Nuclear fuel, net....................................... 1,311 1,313
------------- -------------
Total net utility plant............................. 1,813,463 1,829,229
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 3,432 3,229
Investments in regional nuclear generating
companies and subsidiary company, at equity............ 19,978 19,578
Other, at cost.......................................... 1,852 1,835
------------- -------------
25,262 24,642
------------- -------------
Current Assets:
Cash.................................................... 7,618 1,015
Notes receivable from affiliated companies.............. - 18,250
Receivables, net........................................ 90,641 105,381
Accounts receivable from affiliated companies........... 33,512 32,452
Accrued utility revenues................................ 32,456 36,317
Fuel, materials, and supplies, at average cost.......... 43,867 44,852
Prepayments and other................................... 8,875 24,629
------------- -------------
216,969 262,896
------------- -------------
Deferred Charges:
Regulatory assets:
Recoverable energy costs............................... 212,389 211,236
Income taxes, net...................................... 147,088 151,431
Deferred costs, nuclear plant.......................... 274,250 269,233
Unrecovered contractual obligations (Note 2)........... 47,261 50,271
Other.................................................. 2,291 2,333
Deferred receivable from affiliated company............. 33,284 33,284
Unamortized debt expense................................ 12,377 12,731
Other................................................... 3,543 3,926
------------- -------------
732,483 734,445
------------- -------------
Total Assets........................................ $ 2,788,177 $ 2,851,212
============= =============
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
------------- -------------
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock--$1 par value.
Authorized and outstanding 1,000 shares................ $ 1 $ 1
Capital surplus, paid in................................ 423,240 423,058
Retained earnings....................................... 118,908 174,691
------------- -------------
Total common stockholder's equity.............. 542,149 597,750
Preferred stock subject to mandatory redemption......... 100,000 100,000
Long-term debt.......................................... 686,485 686,485
------------- -------------
Total capitalization........................... 1,328,634 1,384,235
------------- -------------
Obligations Under Seabrook Power Contracts
and Other Capital Leases................................. 885,598 871,707
------------- -------------
Current Liabilities:
Notes payable to affiliated company..................... 250 -
Preferred stock--current portion........................ 25,000 25,000
Obligations under Seabrook Power Contracts and other
capital leases--current portion........................ 46,393 42,910
Accounts payable........................................ 28,156 37,675
Accounts payable to affiliated companies................ 23,358 31,130
Accrued taxes........................................... 10,381 81
Accrued interest........................................ 16,564 7,992
Accrued pension benefits................................ 45,166 44,790
Other................................................... 14,572 37,516
------------- -------------
209,840 227,094
------------- -------------
Deferred Credits:
Accumulated deferred income taxes....................... 257,769 258,317
Accumulated deferred investment tax credits............. 4,377 4,511
Deferred contractual obligations........................ 47,261 50,271
Deferred revenue from affiliated company................ 33,284 33,284
Other................................................... 21,414 21,793
------------- -------------
364,105 368,176
------------- -------------
Commitments and Contingencies (Note 4)
------------- -------------
Total Capitalization and Liabilities........... $ 2,788,177 $ 2,851,212
============= =============
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
--------------------------
1997 1996
----------- -----------
(Thousands of Dollars)
Operating Revenues.................................... $ 278,321 $ 269,540
----------- -----------
Operating Expenses:
Operation --
Fuel, purchased and net interchange power........ 75,374 80,227
Other............................................ 86,232 75,457
Maintenance......................................... 8,111 7,469
Depreciation........................................ 11,242 10,946
Amortization of regulatory assets, net.............. 14,141 14,301
Federal and state income taxes...................... 27,758 24,117
Taxes other than income taxes....................... 10,453 12,355
----------- -----------
Total operating expenses...................... 233,311 224,872
----------- -----------
Operating Income...................................... 45,010 44,668
----------- -----------
Other Income:
Equity in earnings of regional nuclear generating
companies and subsidiary company.................. 556 516
Other, net.......................................... (140) 485
Income taxes........................................ (571) 138
----------- -----------
Other income, net............................. (155) 1,139
----------- -----------
Income before interest charges................ 44,855 45,807
----------- -----------
Interest Charges:
Interest on long-term debt.......................... 12,625 17,129
Other interest...................................... (299) 133
----------- -----------
Interest charges, net......................... 12,326 17,262
----------- -----------
Net Income............................................ $ 32,529 $ 28,545
=========== ===========
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-----------------------
1997 1996
----------- -----------
(Thousands of Dollars)
Operating Activities:
Net Income................................................ $ 32,529 $ 28,545
Adjustments to reconcile to net cash
from operating activities:
Depreciation............................................ 11,242 10,946
Deferred income taxes and investment tax credits, net... 28,289 23,735
Recoverable energy costs, net........................... (1,153) (6,040)
Amortization of acquisition costs....................... 14,141 14,301
Other sources of cash................................... 8,579 11,022
Other uses of cash...................................... (11,910) (1,302)
Changes in working capital:
Receivables and accrued utility revenues................ 17,910 2,699
Fuel, materials, and supplies........................... 985 (1,836)
Accounts payable........................................ (17,291) (22,432)
Accrued taxes........................................... 357 1,769
Other working capital (excludes cash)................... 1,389 18,549
----------- -----------
Net cash flows from operating activities.................... 85,067 79,956
----------- -----------
Financing Activities:
Net increase in short term debt........................... 250 -
Cash dividends on preferred stock......................... (3,312) (3,312)
Cash dividends on common stock............................ (85,000) -
----------- -----------
Net cash flows used for financing activities................ (88,062) (3,312)
----------- -----------
Investment Activities:
Investment in plant:
Electric utility plant.................................. (8,119) (8,741)
Nuclear fuel............................................ 1 1
----------- -----------
Net cash flows used for investments in plant.............. (8,118) (8,740)
NU System Money Pool...................................... 18,250 (67,750)
Other investment activities, net.......................... (534) (49)
----------- -----------
Net cash flows from (used for) investments.................. 9,598 (76,539)
----------- -----------
Net Increase In Cash For The Period......................... 6,603 105
Cash - beginning of period.................................. 1,015 117
----------- -----------
Cash - end of period........................................ $ 7,618 $ 222
=========== ===========
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Presentation
The accompanying unaudited financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) in this Form 10-Q, the
Annual Report of Public Service Company of New Hampshire (the company
or PSNH) on Form 10-K for the year ended December 31, 1996 (1996 Form
10-K) and the company's Form 8-K dated March 19, 1997. In the opinion
of the company, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position as of
March 31, 1997, the results of operations for the three-month periods
ended March 31, 1997 and 1996, and the statements of cash flows for
the three-month periods ended March 31, 1997 and 1996. All
adjustments are of a normal, recurring, nature except those described
in Note 4A. The results of operations for the three-month periods
ended March 31, 1997 and 1996 are not necessarily indicative of the
results expected for a full year.
Northeast Utilities (NU) is the parent company of the Northeast
Utilities system (the system). The system furnishes franchised retail
electric service in Connecticut, New Hampshire, and western
Massachusetts through four wholly- owned subsidiaries: The
Connecticut Light and Power Company (CL&P), PSNH, Western
Massachusetts Electric Company (WMECO), and Holyoke Water Power
Company. A fifth wholly- owned subsidiary, North Atlantic Energy
Corporation (NAEC), sells all of its entitlement to the capacity and
output of the Seabrook nuclear power plant to PSNH. In addition to
its franchised retail service, the system furnishes firm and other
wholesale electric services to various municipalities and other
utilities and on a pilot basis pursuant to state regulatory
experiments, provides off-system retail service. The system serves
about 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 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 disclosures 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 period data have been made to
conform with the current period presentation.
B. New Accounting Standards
The Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 129, "Disclosure of
Information about Capital Structure" in February 1997. SFAS 129 will
be effective for 1997 year-end reporting. Management believes that
the implementation of SFAS 129 will not have a material impact on the
company's financial position or its results of operations.
For information regarding the adoption of a new accounting standard,
see Note 4B, "Commitments and Contingencies - Environmental Matters,"
in this Form 10-Q and PSNH's 1996 Form 10-K.
C. Regulatory Accounting and Assets
The accounting policies of the company and the accompanying financial
statements conform to generally accepted accounting principles
applicable to rate regulated enterprises and reflect the effects of
SFAS 71, "Accounting for the Effects of Certain Types of Regulation."
Recently, the Securities and Exchange Commission (SEC) has questioned
the ability of certain utilities to remain on SFAS 71 in light of
state legislation regarding the transition to retail competition. The
industry expects guidance on this issue from FASB's Emerging Issues
Task Force in the near future.
While there are restructuring initiatives pending in the NU system
companies' respective jurisdictions, PSNH is not yet subject to a
transition plan. Management continues to believe that its use of SFAS
71 accounting is appropriate.
For additional information regarding regulatory accounting and assets,
see Note 5, "New Hampshire Restructuring" and Note 6, "New Hampshire
Rates" in this Form 10-Q and PSNH's 1996 Form 10-K.
2. CONNECTICUT YANKEE ATOMIC POWER COMPANY (CY)
CY, in which the PSNH has a 5 percent ownership interest, owns a nuclear-
powered electric generating plant which was taken out of service on July
22, 1996. On December 4, 1996, the board of directors of CY voted
unanimously to cease permanently the production of power at the plant. In
late December 1996, CY filed amendments to its power contracts with the
Federal Energy Regulatory Commission (FERC) to clarify any obligations of
its purchasing utilities, including PSNH. This filing estimated the
unrecovered obligations, including the funding of decommissioning, to be
approximately $762.8 million.
On February 27, 1997, FERC approved an order for hearing which, among other
things, accepted CY's contract amendments for filing and suspended the new
rates for a nominal period. The new rates became effective March 1, 1997,
subject to refund. At March 31, 1997, PSNH's share of the CY unrecovered
contractual obligation, which has also been recorded as a regulatory asset,
was $36 million.
For further information regarding CY, see PSNH's 1996 Form 10-K.
3. CAPITALIZATION
Rocky River Realty Company (RRR): On April 17, 1997, the holders of $38.4
million of RRR's notes elected to have RRR repurchase the notes at par.
RRR is obligated to find an alternative purchaser for the notes by
approximately July 1, 1997 and has 60 more days to consummate the
repurchase should a purchaser be found. For additional information
regarding RRR's obligations, see PSNH's 1996 Form 10-K.
4. COMMITMENTS AND CONTINGENCIES
A. Nuclear Performance
Millstone: PSNH has a 2.85-percent joint ownership interest in
Millstone 3. Millstone units 1, 2, and 3 (Millstone) have been out
of service since November 4, 1995, February 21, 1996, and March 30,
1996, respectively.
Millstone 3 has been designated as the lead unit for restart.
Millstone 2 remains on a schedule to be ready for restart shortly
after Millstone 3. To provide the resources and focus for Millstone
3, the work on the restart of Millstone 1 will be reduced until late
in 1997 then the full work effort will be resumed.
Management believes that Millstone 3 will be ready for restart around
the end of the third quarter of 1997. Because of the need for
completion of independent inspections and reviews and for the Nuclear
Regulatory Commission (NRC) to complete its processes before the NRC
Commissioners can vote on permitting a unit to restart, the actual
beginning of operations is expected to take several months beyond the
time when a unit is declared ready for restart. The NRC's internal
schedules at present indicate that a meeting of the Commissioners to
act upon a Millstone 3 restart request could occur by mid-December if
NU, the independent review teams and NRC staff concur that the unit
is ready for restart by that time. Management hopes that Millstone 3
can begin operating by the end of 1997.
Based on a recent review of the work efforts and budgets, management
believes that the overall 1997 nuclear spending levels - both nuclear
operations and maintenance (O&M) expenditures and associated support
services and capital expenditures - will be approximately the same as
previously estimated. However, 1997 nuclear O&M expenditures and
related support services are expected to increase slightly, while
1997 capital expenditures are expected to decrease. Management also
believes that it is possible that 1997 nuclear spending will increase
somewhat as the detailed work needed to restore the units to service
progresses.
The total cost to restart the units cannot be estimated at this time.
Management will continue to evaluate the costs to be incurred for the
remainder of 1997 and in 1998 to determine whether adjustments to the
existing reserves are required.
NU expensed approximately $87 million of non-fuel nuclear operation
and maintenance costs in the first quarter of 1997. An additional
$28.3 million was expended in the first quarter of 1997 and charged
against the reserve established in 1996. The balance of the reserve
at March 31, 1997 was $38 million. PSNH's share of these costs was
not material.
Replacement power costs attributable to the Millstone outages averaged
approximately $35 million per month during the first quarter of 1997
and are projected to average approximately $30 million per month for
the remainder of 1997. PSNH's share of replacement power costs is not
projected to be material for 1997.
Maine Yankee Atomic Power Company (MY): MY owns a nuclear-powered
electric generating unit which has been out of service since December
6, 1996 and is currently on the NRC's watch list. MY is projected to
incur substantially increased costs over the balance of 1997 while the
unit is not operating. The owners of MY are evaluating a range of
options with respect to MY's future operations. NU's monthly
replacement power costs attributable to MY being out of service are
projected to average approximately $2 million. PSNH's share of
replacement power costs is not projected to be material.
For further information regarding nuclear performance, see the MD&A in
this Form 10-Q and PSNH's 1996 Form 10-K.
B. Environmental Matters
In October 1996, the American Institute of Certified Public
Accountants issued Statement of Position 96-1, "Environmental
Remediation Liabilities" (SOP). The principal objective of the SOP
is to improve the manner in which existing authoritative accounting
literature is applied by entities to specific situations of
recognizing, measuring, and disclosing environmental remediation
liabilities. The SOP became effective January 1, 1997. The adoption
of the SOP did not have a material impact on the company's financial
position or results of operations.
At March 31, 1997, PSNH's net liability for its estimated remediation
costs, excluding recoveries from insurance companies and other third
parties was approximately $4.7 million, which management has
determined to be the most probable amount within a range of $4.7
million to $6.5 million.
For additional information regarding environmental matters, see PSNH's
1996 Form 10-K.
C. Nuclear Insurance Contingencies
For information regarding nuclear insurance contingencies, see PSNH's
1996 Form 10-K.
D. Construction Program
For information regarding PSNH's construction program, see PSNH's 1996
Form 10-K.
E. Long-Term Contractual Arrangements
For information regarding long-term contractual arrange-ments, see
PSNH's 1996 Form 10-K.
5. NEW HAMPSHIRE RESTRUCTURING
On March 19, 1997, the New Hampshire Public Utilities Commission (NHPUC)
issued a stay of its February 28, 1997 restructuring orders (Restructuring
Orders) pending conclusion of rehearings on portions of the Restructuring
Orders. On April 28, 1997, the United States District Court for Rhode
Island (the Court), sitting for the District Court for New Hampshire,
determined that it would not abstain from deciding PSNH's and affiliates'
challenge to the NHPUC decision. The Court is scheduled to begin hearings
on the merits of the case in June.
For further information regarding New Hampshire restructuring, see PSNH's
Form 8-K dated March 19, 1997 and PSNH's 1996 Form 10-K.
6. NEW HAMPSHIRE RATES
On May 2, 1997, PSNH filed a rate case with the NHPUC requesting base rates
to remain at their current level after PSNH's seven-year fixed-rate period
ends on May 31, 1997.
In a separate filing, PSNH requested an increase in the Fuel and Purchased
Power Adjustment Clause (FPPAC), based on the fact that as of June 1, 1997,
PSNH will no longer be able to defer for future collection any of the
payments it makes to independent power producers. If approved, the
proposed increase in the FPPAC charge would result in a 6 percent increase
in customers' bills as of June 1, 1997.
For further information on New Hampshire Rates, see the MD&A in this Form
10-Q and PSNH's 1996 Form 10-K.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This section contains management's assessment of Public Service Company of New
Hampshire's (PSNH or the company) financial condition and the principal factors
having an impact on the results of operations. The company is a wholly-owned
subsidiary of Northeast Utilities (NU). This discussion should be read in
conjunction with PSNH's financial statements and footnotes in this Form 10-Q,
the 1996 Form 10-K and the Form 8-K dated March 19, 1997.
FINANCIAL CONDITION
Overview
Net income was approximately $33 million for the three months ended March 31,
1997 compared to net income of approximately $29 million in the first quarter of
1996. The increase in net income was primarily due to the June 1, 1996 retail-
rate increase and lower interest on long-term debt. First quarter 1997 earnings
were negatively affected by a much milder winter. Retail sales for the first
quarter of 1997 decreased 4.5 percent from 1997.
Restructuring
On March 19, 1997, the New Hampshire Public Utilities Commission (NHPUC) issued
a stay of its February 28, 1997 restructuring orders (Restructuring Orders)
pending conclusion of rehearings on portions of the Restructuring Orders. On
April 28, 1997, the United States District Court for Rhode Island (the Court),
sitting for the District Court of New Hampshire, determined that it would not
abstain from deciding PSNH's and affiliates' challenge to the NHPUC's
Restructuring Orders. The Court is scheduled to begin hearings on the merits of
the case in June.
On May 2, 1997, PSNH filed a retail rate case with the NHPUC. PSNH is not
requesting an increase in base rates but has asked the NHPUC to maintain its
current base rate level. The fixed rate period under the Rate Agreement ends on
May 31, 1997.
In a separate filing, PSNH requested a 6 percent increase in its Fuel and
Purchased Power Adjustment Clause (FPPAC) billings, effective June 1, 1997. This
increase is primarily the result of recognizing currently costs associated with
independent power producer payments, which had been previously deferred for
collection. The FPPAC will continue to operate until the year 2000.
For further information on restructuring issues and rate matters, see PSNH's
1996 Form 10-K and Form 8-K dated March 19, 1997.
Potential Accounting Impacts
PSNH follows accounting principles in accordance with the Statement of Financial
Accounting Standards (SFAS) 71 "Accounting for the Effects of Certain Types of
Regulation," which allows the economic effects of rate regulation to be
reflected. Recently, the Securities and Exchange Commission has questioned the
ability of certain utilities to remain on SFAS 71 in light of state legislation
regarding the transition to retail competition. The industry expects guidance on
this issue from the Financial Accounting Standards Board's Emerging Issues Task
Force in the near future. While there are restructuring initiatives pending in
New Hampshire, PSNH is not yet subject to transition plans. Management continues
to believe that the application of SFAS 71 accounting is appropriate.
For further information on restructuring, see PSNH's 1996 Form 10-K.
Millstone Outage
PSNH has a 2.85-percent ownership interest in Millstone 3. Millstone 3 has been
out of service March 30, 1996.
Millstone 3 has been designated as the lead unit for restart. Millstone 2
remains on a schedule to be ready for restart shortly after Millstone 3. To
provide the resources and focus for Millstone 3, the work on the restart of
Millstone 1 will be reduced until late in 1997 when the full work effort will
be resumed.
Management believes that Millstone 3 will be ready for restart around the end of
the third quarter of 1997. Because of the need for completion of independent
inspections and reviews and for the Nuclear Regulatory Commission (NRC) to
complete its processes before the NRC Commissioners can vote on permitting
Millstone 3 to restart, the actual beginning of operations is expected to take
several months beyond the time when the unit is declared ready for restart. The
NRC's internal schedules at present indicate that a meeting of the Commissioners
to act upon a Millstone 3 restart request could occur by mid-December if NU, the
independent review teams and NRC staff concur that the unit is ready for restart
by that time. Management hopes that Millstone 3 can begin operating by the end
of 1997.
To date, PSNH's costs related to the Millstone 3 outage have not had a material
impact on the company's financial position or results of operations. Management
expects that, under its current planning assumptions, Millstone 3's outage-
related costs will continue to be immaterial to the company's financial
statements.
For further information on the current Millstone 3 outage, see PSNH's 1996 Form
10-K.
Maine Yankee
PSNH has a 5-percent ownership interest in Maine Yankee Atomic Power Company
(MY). MY is projected to incur substantially increased costs over the balance of
1997 while the unit is not operating. The owners of MY are evaluating a range of
options with respect to MY's future operations. PSNH's monthly replacement-power
costs while MY is out of service are not projected to be significant. For
further information on MY, see PSNH's 1996 Form 10-K.
Seabrook
PSNH is obligated to purchase North Atlantic Energy Corporation's (NAEC) 35.98-
percent share of the capacity and output generated by Seabrook 1(Seabrook).
Seabrook operated at a capacity factor of 100.3 percent through for the first
quarter of 1997, compared to 86.7 percent for the same period in 1996. As of May
9, 1997, Seabrook had operated for 463 consecutive days. On May 10, 1997, the
plant began a scheduled 49-day refueling outage.
Liquidity And Capital Resources
Cash provided from operations increased approximately $5 million in the first
three months of 1997, from 1996, primarily due to the June 1, 1996 retail-rate
increase, partially offset by the negative impact of lower retail sales. Cash
used for financing activities increased approximately $85 million in the first
three months of 1997, from 1996, due to the payment of cash dividends on common
stock in 1997. Cash used for investments decreased approximately $86 million in
the first three months of 1997, from 1996, primarily due to a reduction in
investments in the NU system Money Pool.
All NU system securities are currently rated below investment grade by Moody's.
Moody's is no longer reviewing The Connecticut Light and Power Company (CL&P)
and Western Massachusetts Electric Company (WMECO) for further downgrades,
however, NU, PSNH and NAEC remain under review. This action will adversely
affect the availability and cost of funds for the NU system companies.
Each major company in the NU system finances its own needs. Neither CL&P nor
WMECO have any agreements containing cross defaults based on events or
occurrences involving NU, PSNH or NAEC. Similarly, neither PSNH nor NAEC have
any agreements containing cross defaults based on events or occurrences
involving NU, CL&P or WMECO. Nevertheless, it is possible that investors will
take negative operating results or regulatory developments at one company in the
NU system into account when evaluating other companies in the NU system. That
could, as a practical matter and despite the contractual and legal separations
among the NU companies, negatively affect each company's access to the financial
markets.
RESULTS OF OPERATIONS
Comparison of the First Quarter of 1997 to the First Quarter of 1996
Income Statement Variances
Increase/(Decrease)
Millions of Dollars
Amount Percent
Operating revenues $9 3%
Fuel, purchased and net
interchange power (5) (6)
Other operation 11 14
Federal and state income taxes 4 18
Taxes other than income taxes (2) (15)
Interest on long-term debt (5) (26)
Net income 4 (14)
Total operating revenues increased due to higher fuel recoveries and the June 1,
1996 retail rate increase ($9 million), partially offset by lower 1997 retail
sales. Fuel recoveries increased approximately $7 million, primarily due to the
intercompany allocation of energy costs to NU affiliated companies, partially
offset by lower FPPAC recoveries as a result lower 1997 retail sales and a
customer refund ordered by the NHPUC. Retail sales decreased 4.5 percent ($6
million), primarily due to milder weather in 1997.
Fuel, purchased, and net interchange power expense decreased primarily due to
the timing in the recognition of fuel expenses under the FPPAC, partially offset
by higher purchased power costs.
Other operation expense increased primarily due to higher capacity charges under
the Seabrook Contracts in preparation for the scheduled May 1997 refueling and
maintenance outage and higher purchased-power capacity costs.
Federal and state income taxes increased primarily due to higher book taxable
income.
Taxes other than income taxes decreased primarily due to property tax refunds as
a result of settlement efforts for the tax year ended March 31, 1997.
Interest on long-term debt decreased primarily due to the repayment of the
$172.5 million Series A first-mortgage bond in May 1996.
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
1. The Connecticut Department of Environmental Protection has referred to the
Connecticut Attorney General a series of alleged environmental violations at
Millstone for a possible civil penalty action. Management does not believe that
this action will have a material adverse impact on PSNH.
For additional information regarding a criminal investigation related to
this matter, see "Item 3 - Legal Proceedings" in PSNH's 1996 Form 10-K.
2. On May 9, 1997, the Town of Haddam (Town) and CY reached an agreement
regarding the repayment of property taxes due CY for the tax years beginning
October 1, 1991 through October 1, 1995. The Town will repay to CY an amount
totaling $13,990,000 which is inclusive of taxes and interest for those years.
As part of this negotiated settlement, the Town has paid CY $2,000,000 and may
bond all or part of the remaining $11,990,000. This settlement results from the
decision of a Connecticut court on September 5, 1996 in which the court found
that the Town had overassessed the property owned by CY.
For additional information regarding this matter, see "Item 3 - Legal
Proceedings" in PSNH's 1996 Form 10-K.
ITEM 5. OTHER INFORMATION
1. In March 1997, an additional Section 2.206 petition was filed with the
Nuclear Regulatory Commission (NRC). The petition seeks enforcement action and
the placement of certain restrictions on the decommissioning activities at the
CY nuclear power plant. Specifically, the petitioners requested that the NRC
issue a civil monetary penalty to assure compliance with radiation protection
requirements, and that CY's license be modified to prohibit any decommissioning
activities for a six month period following any radiological contamination
event. In addition, petitioners requested that CY be placed on the NRC's "watch
list." Management is currently evaluating whether and how to respond to this
petition.
For additional information relating to other Section 2.206 petitions, see
"Item 3 - Legal Proceedings" in PSNH's 1996 Form 10-K.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Listing of Exhibits:
Exhibit Number Description
27 Financial Data Schedule
(b) Report on Form 8-K:
1. PSNH filed a Form 8-K dated March 19, 1997 disclosing that:
* On March 19, 1997, the NHPUC issued a stay of its February 28, 1997
restructuring orders pending conclusions of a rehearing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
Registrant
Date: May 9, 1997 By: /s/ John H. Forsgren
John H. Forsgren
Executive Vice President,
Chief Financial Officer and
Director
Date: May 9, 1997 By: /s/ John J. Roman
John J. Roman
Vice President and Controller