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 June 30, 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 July 31, 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 - June 30, 1997 and
December 31, 1996 2
Statements of Income - Three Months and
Six Months Ended June 30, 1997 and 1996 4
Statements of Cash Flows - Six Months
Ended June 30, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 11
Part II. Other Information
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote
of Security Holders 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)
June 30, December 31,
1997 1996
------------- -------------
(Thousands of Dollars)
ASSETS
- ------
Utility Plant, at cost:
Electric................................................ $ 1,889,371 $ 1,877,955
Less: Accumulated provision for depreciation......... 568,914 552,780
------------- -------------
1,320,457 1,325,175
Unamortized acquisition costs........................... 446,997 491,709
Construction work in progress........................... 15,047 11,032
Nuclear fuel, net....................................... 1,310 1,313
------------- -------------
Total net utility plant............................. 1,783,811 1,829,229
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 3,723 3,229
Investments in regional nuclear generating
companies and subsidiary company, at equity............ 19,822 19,578
Other, at cost.......................................... 3,153 1,835
------------- -------------
26,698 24,642
------------- -------------
Current Assets:
Cash.................................................... 208 1,015
Notes receivable from affiliated companies.............. 5,150 18,250
Receivables, net........................................ 78,090 105,381
Accounts receivable from affiliated companies........... 35,123 32,452
Accrued utility revenues................................ 34,552 36,317
Fuel, materials, and supplies, at average cost.......... 46,205 44,852
Recoverable energy costs--current portion............... 25,833 -
Prepayments and other................................... 34,271 24,629
------------- -------------
259,432 262,896
------------- -------------
Deferred Charges:
Regulatory assets:
Recoverable energy costs............................... 210,620 211,236
Income taxes, net...................................... 143,569 151,431
Deferred costs, nuclear plant.......................... 279,421 269,233
Unrecovered contractual obligations.................... 44,439 50,271
Other.................................................. 2,926 2,333
Deferred receivable from affiliated company............. 33,284 33,284
Unamortized debt expense................................ 12,106 12,731
Other................................................... 4,056 3,926
------------- -------------
730,421 734,445
------------- -------------
Total Assets........................................ $ 2,800,362 $ 2,851,212
============= =============
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
(Unaudited)
June 30, 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................................ 423,422 423,058
Retained earnings....................................... 136,756 174,691
------------- -------------
Total common stockholder's equity.............. 560,179 597,750
Preferred stock subject to mandatory redemption......... 75,000 100,000
Long-term debt.......................................... 516,485 686,485
------------- -------------
Total capitalization........................... 1,151,664 1,384,235
------------- -------------
Obligations Under Seabrook Power Contracts
and Other Capital Leases................................. 850,776 871,707
------------- -------------
Current Liabilities:
Long-term debt and preferred stock--current portion..... 195,000 25,000
Obligations under Seabrook Power Contracts and other
capital leases--current portion........................ 83,211 42,910
Accounts payable........................................ 32,235 37,675
Accounts payable to affiliated companies................ 32,043 31,130
Accrued taxes........................................... 48,734 81
Accrued interest........................................ 7,800 7,992
Accrued pension benefits................................ 45,743 44,790
Other................................................... 12,074 37,516
------------- -------------
456,840 227,094
------------- -------------
Deferred Credits:
Accumulated deferred income taxes....................... 235,702 258,317
Accumulated deferred investment tax credits............. 4,242 4,511
Deferred contractual obligations........................ 44,439 50,271
Deferred revenue from affiliated company................ 33,284 33,284
Other................................................... 23,415 21,793
------------- -------------
341,082 368,176
------------- -------------
Commitments and Contingencies (Note 3)
------------- -------------
Total Capitalization and Liabilities........... $ 2,800,362 $ 2,851,212
============= =============
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Thousands of Dollars)
Operating Revenues................................. $ 257,098 $ 261,897 $ 535,419 $ 531,437
---------- ---------- ---------- ----------
Operating Expenses:
Operation --
Fuel, purchased and net interchange power..... 60,120 79,138 135,494 159,365
Other......................................... 95,854 77,627 182,086 153,084
Maintenance...................................... 9,339 7,954 17,450 15,423
Depreciation..................................... 10,865 10,420 22,107 21,366
Amortization of regulatory assets, net........... 14,141 14,301 28,282 28,602
Federal and state income taxes................... 21,370 19,108 49,128 43,225
Taxes other than income taxes.................... 11,347 11,193 21,800 23,548
---------- ---------- ---------- ----------
Total operating expenses................... 223,036 219,741 456,347 444,613
---------- ---------- ---------- ----------
Operating Income................................... 34,062 42,156 79,072 86,824
---------- ---------- ---------- ----------
Other Income:
Equity in earnings of regional nuclear
generating companies and subsidary company..... 299 515 855 1,031
Other, net....................................... 10 5,918 (130) 6,403
Income taxes..................................... (276) (3,077) (847) (2,939)
---------- ---------- ---------- ----------
Other income, net.......................... 33 3,356 (122) 4,495
---------- ---------- ---------- ----------
Income before interest charges............. 34,095 45,512 78,950 91,319
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt....................... 12,919 14,985 25,544 32,114
Other interest................................... 15 6,541 (284) 6,674
---------- ---------- ---------- ----------
Interest charges, net...................... 12,934 21,526 25,260 38,788
---------- ---------- ---------- ----------
Net Income......................................... $ 21,161 $ 23,986 $ 53,690 $ 52,531
========== ========== ========== ==========
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
-----------------------
1997 1996
----------- -----------
(Thousands of Dollars)
Operating Activities:
Net Income................................................ $ 53,690 $ 52,531
Adjustments to reconcile to net cash
from operating activities:
Depreciation............................................ 22,107 21,366
Deferred income taxes and investment tax credits, net... 19,333 46,928
Recoverable energy costs, net........................... (25,217) 6,647
Amortization of acquisition costs....................... 28,282 28,602
Other sources of cash................................... 29,753 26,934
Other uses of cash...................................... (3,300) (1,997)
Changes in working capital:
Receivables and accrued utility revenues................ 26,386 3,124
Fuel, materials, and supplies........................... (1,353) 2,905
Accounts payable........................................ (4,527) (12,629)
Accrued taxes........................................... 6,436 17,498
Other working capital (excludes cash)................... (34,323) (38,650)
----------- -----------
Net cash flows from operating activities.................... 117,267 153,259
----------- -----------
Financing Activities:
Net increase in short term debt........................... - 51,400
Reacquisitions and retirements of long-term debt.......... - (172,500)
Reacquisitions and retirements of preferred stock (25,000) -
Cash dividends on preferred stock......................... (6,625) (6,625)
Cash dividends on common stock............................ (85,000) (26,000)
----------- -----------
Net cash flows used for financing activities................ (116,625) (153,725)
----------- -----------
Investment Activities:
Investment in plant:
Electric utility plant.................................. (12,746) (17,796)
Nuclear fuel............................................ 3 133
----------- -----------
Net cash flows used for investments in plant.............. (12,743) (17,663)
NU System Money Pool...................................... 13,100 19,100
Other investment activities, net.......................... (1,806) (801)
----------- -----------
Net cash flows (used for) from investments.................. (1,449) 636
----------- -----------
Net (Decrease) Increase In Cash For The Period.............. (807) 170
Cash - beginning of period.................................. 1,015 117
----------- -----------
Cash - end of period........................................ $ 208 $ 287
=========== ===========
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), the company's Form 10-Q for the quarter ended March 31, 1997,
and the company's Form 8-K dated June 27, 1997. In the opinion of
the company, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position as
of June 30, 1997, the results of operations for the three-month and
six-month periods ended June 30, 1997 and 1996, and the statements of
cash flows for the six months ended June 30, 1997 and 1996. All
adjustments are of a normal, recurring, nature except those described
in Note 3B. The results of operations for the three-month and
six-month periods ended June 30, 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 electric
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 electric 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 two new
accounting standards during June 1997, Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income"
and SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS 130 establishes standards for the reporting and
disclosure of comprehensive income. SFAS 131 determines the standards
for reporting and disclosing qualitative and quantitative information
about a company's operating segments. Both SFAS 130 and SFAS 131 will
be effective in 1998. Management believes that the implementation of
SFAS 130 and SFAS 131 will not have a material impact on PSNH's
financial position or its results of operations.
For additional information regarding the adoption of new accounting
standards, see PSNH's Form 10-Q for the quarter ended March 31, 1997
and PSNH's 1996 Form 10-K.
C. Regulatory Accounting and Assets
For information regarding regulatory accounting and assets, see
the MD&A in this Form 10-Q, PSNH's Form 10-Q for the quarter ended
March 31, 1997 and PSNH's 1996 Form 10-K.
2. CAPITALIZATION
Rocky River Realty Company (RRR): In April 1997, the holders of
approximately $38 million of RRR notes elected to have RRR repurchase the
notes at par. On July 1, 1997, RRR received commitments from alternative
purchasers to purchase approximately $12 million of the notes that RRR had
been required to repurchase. On July 30, 1997, approximately $6 million of
the $12 million was purchased by an alternative purchaser. The remaining $6
million of the notes is expected to be purchased by another purchaser by
September 2, 1997.
RRR repurchased the remaining $26 million of the notes on July 14, 1997.
For additional information on these and other matters related to PSNH's
capitalization, see the MD&A in this Form 10-Q, PSNH's Form 10-Q for the
quarter ended March 31, 1997, and PSNH's 1996 Form 10-K.
3. COMMITMENTS AND CONTINGENCIES
A. Restructuring
On May 13, 1997, the United States District Court for Rhode Island
appointed a mediator to the pending case involving PSNH's and
affiliates' challenge to the New Hampshire Public Utilities Commission
decision on February 28, 1997. All court proceedings on the case have
been suspended during the mediation process. On June 30, 1997, the
mediator requested and received an extension of the period of
mediation to August 4, 1997. On August 4, 1997, the mediator
submitted to the court a second recommendation for the continuation of
mediation. Pursuant to the court's order initiating the mediation
process, this second extension will continue through September 2,
1997.
For further information regarding New Hampshire restructuring, see PSNH's
Form 10-Q for the quarter ended March 31, 1997, PSNH's Form 8-K dated
June 27, 1997 and PSNH's 1996 Form 10-K.
B. 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, and are on the Nuclear Regulatory Commission's (NRC)
watch list. Management has restructured its nuclear organization and
is currently implementing comprehensive plans to restart the units.
Management believes that Millstone 3 will be ready for restart by the
end of the third quarter of 1997, Millstone 2 in the fourth quarter of
1997 and Millstone 1 in the first quarter of 1998. Because of the need
for completion of independent inspections and reviews and for the 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 can return to
operation by that time. A similar schedule indicates a mid-March
meeting of the Commissioners to act upon a Millstone 2 restart
request. 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, which include
both nuclear operations and maintenance (O&M) expenditures and
associated support services and capital expenditures, will be slightly
higher than previously estimated. The 1997 nuclear O&M expenditures
are expected to increase, while 1997 projected capital expenditures
are expected to decrease. NU's share of nonfuel O&M costs for
Millstone to be expensed in 1997 are now projected to be approximately
$442 million compared to $386 million previously estimated. The 1997
projection includes $15 million of restart costs identified to date
which are expected to be incurred in 1998 and is net of $63 million of
Millstone costs reserved in 1996. NU's share of 1997 projected
capital expenditures for Millstone is expected to decrease from the
$60 million previously estimated to $43 million.
For the six months ended June 30, 1997, NU's share of nonfuel O&M
costs expensed for Millstone totaled $262 million. The actual
expenditures include $50 million reserved for future 1997 restart
costs and $15 million reserved for 1998 restart costs, and is net of
$63 million of spending against the reserve established in 1996. The
reserve balance at June 30, 1997, was approximately $65 million.
PSNH's share of these costs were not material. Nonfuel O&M costs have
been and will continue to be absorbed by NU without adjustment to its
subsidiaries' current rates. Management will continue to evaluate the
costs to be incurred for the remainder of 1997 and in 1988 to
determine whether adjustments to the existing reserves are required.
As discussed above, management cannot predict when the NRC will allow
any of the Millstone units to return to service and thus cannot
estimate the total replacement power costs the companies will
ultimately incur. Replacement power costs incurred by NU attributable
to the Millstone outages averaged approximately $28 million per month
during the first six months of 1997, and are projected to average
approximately $26 million per month for the remainder of 1997. PSNH's
share of replacement power costs is not projected to be material for
1997. Based on the current estimates of expenditures and restart
dates, management believes the system has sufficient resources to
fund the restoration of the Millstone units and related replacement
power costs.
Litigation: For information regarding litigation initiated by the
non-NU owners of Millstone 3, see Part II - Item 1 in this Form 10-Q
and PSNH's 1996 Form 10-K.
Maine Yankee Atomic Power Company (MYAPC): PSNH has a five percent
ownership interest in the Maine Yankee nuclear generating facility
(MY). At June 30, 1997, PSNH's equity investment in MYAPC was
approximately $3.7 million. The NU system companies had relied on MY
for approximately two percent of their capacity.
On August 6, 1997, the board of directors of MYAPC voted unanimously
to cease permanently the production of power at MY. MYAPC has begun
to prepare the regulatory filings intended to implement the
decommissioning and the recovery of the remaining assets of MYAPC.
During the latter part of 1997, MYAPC plans to file an amendment to
its power contracts to clarify the obligations of its purchasing
utilities following the decision to cease power production. MYAPC is
currently updating its decommissioning cost estimates. These
estimates are expected to be completed during the third quarter of
1997. At this time, the company is unable to estimate its obligation
to MYAPC. Under the terms of the contracts with MYAPC, the
shareholders-sponsor companies, including PSNH, are responsible for
their proportionate share of the costs of the unit, including
decommissioning. Management expects that PSNH will be allowed to
recover these costs from its customers.
For further information regarding nuclear performance, see the MD&A
and Part II in this Form 10-Q, PSNH's Form 10-Q for the quarter ended
March 31, 1997, PSNH's Form 8-K dated June 27, 1997, and PSNH's 1996
Form 10-K.
C. Environmental Matters
For information regarding environmental matters, see PSNH's Form 10-Q
for the quarter ended March 31, 1997 and PSNH's 1996 Form 10-K.
D. Nuclear Insurance Contingencies
For information regarding nuclear insurance contingencies, see PSNH's
1996 Form 10-K.
E. Construction Program
For information regarding PSNH's construction program, see PSNH's 1996
Form 10-K.
F. Long-Term Contractual Arrangements
For information regarding long-term contractual arrangements, see
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 First Quarter Form 10-Q, the 1996 Form 10-K, and the Form 8-K dated June 27,
1997.
FINANCIAL CONDITION
Overview
Net income was approximately $21 million for the three months ended June 30,
1997 compared to approximately $24 million for the same period in 1996. Net
income for the six months ended June 30, 1997 was essentially unchanged from the
same period in 1996. The decrease in net income for the three month period was
primarily due to higher operating expenses.
Restructuring
On May 13, 1997, the United States District Court for Rhode Island appointed a
mediator to the pending case involving PSNH's and affiliates' challenge to the
New Hampshire Public Utilities Commission (NHPUC) decision on February 28, 1997
regarding electric utility restructuring. All court proceedings on the case have
been suspended during the mediation process.
On August 4, 1997 the mediator submitted to the court a second recommendation
for the continuation of mediation. Pursuant to the court's order initiating the
mediation process, this second extension will continue through September 2,
1997.
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 ended on
May 31, 1997. The NHPUC has issued a schedule calling for temporary rate
hearings in September, 1997. Permanent rate hearings are scheduled for May,
1998. The NHPUC has initiated a management audit of PSNH which is currently
ongoing.
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. A
stipulated FPPAC credit rate of $.00481 per kWh has been in effect during the
course of mediations and will remain in effect until further ordered, subject to
reconciliation.
For further information on restructuring issues and rate matters, see PSNH's
1996 Form 10-K, the First Quarter Form 10-Q, and Form 8-K dated June 27, 1997.
Millstone Outage
PSNH has a 2.85-percent joint ownership interest in Millstone 3. Millstone 3 has
been out of service since March 30, 1996.
Millstone 3 continues to be designated by NU management as the lead unit for
restart. Management believes that Millstone 3 will be ready for restart by 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
can return to operation by that time. Management hopes that Millstone 3 can
begin operating by the end of 1997.
As management continues to proceed with its current work towards restart, the
Independent Corrective Action Verification Program for Millstone 3 began
on May 27, 1997. The program is expected to end in mid-November 1997. The NRC
Operational Safety Team Inspection for Millstone 3 is expected to begin in
October 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 results of
operations.
As a result of the nuclear situation, a number of civil lawsuits, criminal
investigations and regulatory proceedings have been initiated, including
litigation by NU's shareholders. On August 7, 1997, the non-NU owners of
Millstone 3 filed demands for arbitration with Connecticut Light & Power Company
and Western Massachusetts Electric Company as well as lawsuits in Massachusetts
Superior Court against NU and its current and former trustees. The NU companies
believe there is no legal basis for the claims and intend to defend against them
vigorously. To date, no reserves have been established for existing or potential
litigation. See Part II - Item 1 in this Form 10-Q and PSNH's 1996 Form 10-K for
further information on litigation.
For further information on the current Millstone outages, see PSNH's First
Quarter Form 10-Q, 1996 Form 10-K and the Form 8-K dated June 27, 1997.
Maine Yankee
PSNH has a 5 percent ownership interest in the Maine Yankee nuclear generating
facility (MY). On August 6, 1997, the board of directors of Maine Yankee Atomic
Power Company (MYAPC) voted to permanently close the plant after efforts to sell
the nuclear power plant were unsuccessful. MYAPC had previously announced that
it was considering permanent closure of the plant based on economic concerns and
uncertainty about the operation of the plant.
For further information on MYAPC, 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)
under the Seabrook Power Contract.
Seabrook operated at a capacity factor of 71.6 percent through the first six
months of 1997, compared to 93.0 percent for the same period in 1996. The lower
1997 capacity factor is due primarily to the 50-day scheduled refueling and
maintenance outage, which began on May 10, 1997. The plant returned to service
on June 28, 1997.
Liquidity And Capital Resources
Cash provided from operations decreased approximately $36 million in the first
six months of 1997, from 1996, primarily due to lower recoveries through the
FPPAC as a result of the credit rate and higher income taxes paid as a result of
lower utilization of net operating loss carry-forwards. Cash used for financing
activities decreased approximately $37 million in the first six months of 1997,
from 1996, due primarily to the repayment of long-term debt in 1996, partially
offset by the higher payment of cash dividends on common stock in 1997 and no
increase in short-term debt in 1997. Cash used for investments increased
approximately $2 million in the first six months of 1997, from 1996, primarily
due to a decrease in investments in the NU system Money Pool partially offset by
lower investment in plant.
All NU system securities are currently rated below investment grade by Moody's
Investors Services and Standard & Poors. These actions could 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
Income Statement Variances
Increase/(Decrease)
Millions of Dollars
Second Year
Quarter Percent to-Date Percent
Operating revenues $(5) (2)% $4 1%
Fuel, purchased and net
interchange power (19) (24) (24) (15)
Other operation and maintenance 20 23 31 18
Federal and state income taxes - - 4 10
Other income, net (6) 100 (6) (102)
Interest on long-term debt (2) (14) (6) (20)
Other interest charges (7) (100) (7) (104)
Net income (3) (12) 1 2
Comparison of the Second Quarter of 1997 to the Second Quarter of 1996
Total operating revenues decreased in the second quarter primarily due to lower
fuel recoveries, partially offset by the June 1, 1996 retail-rate increase. Fuel
recoveries decreased approximately $14 million, primarily due to the customer
refund ordered by the NHPUC.
Fuel, purchased and net interchange power expense decreased in the second
quarter primarily due to the timing in the recognition of fuel expenses under
the FPPAC.
Other operation and maintenance expense increased in the second quarter
primarily due to higher capacity charges under the Seabrook Power Contract as a
result of the scheduled May 1997 refueling and maintenance outage ($13 million),
higher capacity charges from Maine Yankee ($2 million) and higher nuclear and
fossil maintenance costs ($2 million).
Other income, net decreased in the second quarter primarily due to the deferral
in 1996 of the interest expense associated with the FPPAC refund. Interest on
long-term debt decreased in the second quarter primarily due to the repayment
of the $172.5 million Series A first-mortgage bond in May 1996.
Other interest charges decreased in the second quarter primarily due to 1996
interest expense associated with the FPPAC refund.
Comparison of the First Six Months of 1997 to the First Six Months of 1996
Total operating revenues increased in the first six months due to the June 1,
1996 retail rate increase, partially offset by lower 1997 retail sales and lower
fuel recoveries. Fuel recoveries decreased primarily due to the customer refund
ordered by the NHPUC, partially offset by the intercompany allocation of energy
costs to NU affiliated companies. Retail sales decreased 2.2 percent, primarily
due to mild weather in first quarter of 1997.
Fuel, purchased and net interchange power expense decreased in the first six
months primarily due to the timing in the recognition of fuel expenses under the
FPPAC partially offset by higher purchased power costs.
Other operation and maintenance expense increased in the first six months
primarily due to higher capacity charges under the Seabrook Power Contract as a
result of the scheduled May 1997 refueling and maintenance outage ($18 million)
and higher capacity charges from Maine Yankee ($3 million) and higher nuclear
and fossil operation and maintenance costs ($3 million).
Federal and state income taxes increased in the first six months primarily due
to higher book taxable income.
Other income, net decreased in the first six months primarily due to the
deferral in 1996 of the interest expense associated with the FPPAC refund.
Interest on long-term debt decreased in the first six months primarily due to
the repayment of the $172.5 million Series A first-mortgage bond in May 1996.
Other interest charges decreased in the first six months primarily due to 1996
interest expense associated with the FPPAC refund.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CL&P and WMECO, through NNECO, operate Millstone 3 at cost, and without
profit, under a Sharing Agreement that obligates them to utilize good utility
practice and requires the joint owners to share the risk of employee negligence
and other risks of operation and maintenance pro-rata in accordance with their
ownership shares. The Sharing Agreement also provides that CL&P and WMECO would
only be liable for damages to the non-NU owners for a deliberate violation of
the agreement pursuant to authorized corporate action.
On August 7, 1997, the non-NU owners of Millstone 3 filed demands for
arbitration with CL&P and WMECO as well as lawsuits in Massachusetts Superior
Court against Northeast Utilities and its current and former trustees. The non-
NU owners raise a number of contract, tort and statutory claims, arising out of
the operation of Millstone 3. The arbitrations and lawsuits seek to recover
compensatory damages, punitive damages, treble damages and attorneys' fees.
Owners representing approximately two-thirds of the non-NU interests in
Millstone 3 have claimed compensatory damages in excess of $200 million. In
addition, one of the lawsuits seeks to restrain NU from disposing of its shares
of the stock of WMECO and Holyoke Water Power Company, pending the outcome of
the lawsuit. The NU companies believe there is no legal basis for the claims and
intend to defend against them vigorously.
For further information on this matter, see "Item 3 - Legal Proceedings" in
PSNH's 1996 Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of PSNH held on May 5, 1997,
stockholders voted to fix the number of directors for the ensuing year at eight.
The vote fixing the number of directors at eight was 1,000 shares in favor,
representing 100 percent of the issued and outstanding shares of common stock of
PSNH.
At the Annual Meeting, the following eight directors were elected, each by
a vote of 1,000 shares in favor, to serve on the Board of Directors for the
ensuing year: John C. Collins, John H. Forsgren, Bernard M. Fox, William T.
Frain, Jr., Cheryl W. Grise, Gerald Letendre, Hugh C. MacKenzie, and Jane E.
Newman.
ITEM 5. OTHER INFORMATION
On June 27, 1997, nuclear management of NU temporarily suspended all
nuclear training programs at Millstone to address programmatic deficiencies
identified by Northeast Nuclear Energy Company (NNECO) and NRC inspectors during
reviews of the system's licensed operator training programs at the system's four
Connecticut nuclear units. Since then, a Training Restart Plan has been
established and various training programs have been restarted, including the
licensed operator training programs for Millstone. Management continues to
believe that the suspension will not affect the schedule to restart the
Millstone units.
For additional information relating to this matter, see PSNH's Current
Report on Form 8-K dated June 27, 1997 and "Item 1. Business - Nuclear Plant
Performance and Regulatory Oversight" and "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 June 27, 1997 disclosing:
* Nuclear management of NU temporarily suspended all nuclear training
programs at Millstone to address programmatic deficiencies identified
by NNECO and the NRC;
* The court appointed mediator in the industry restructuring dispute
between the State of New Hampshire and PSNH and NU filed a letter with
the U.S. District Court in Rhode Island requesting the extension of
the mediation to August 4, 1997;
* On June 28, 1997, Seabrook nuclear generating unit in New Hampshire
returned to service following a 50-day planned refueling and
maintenance outage.
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: August 12, 1997 By: /s/ John H. Forsgren
John H. Forsgren
Executive Vice President,
Chief Financial Officer and
Director
Date: August 12, 1997 By: /s/ John J. Roman
John J. Roman
Vice President and Controller