FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ________
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
1-5324 NORTHEAST UTILITIES 04-2147929
(a Massachusetts voluntary association)
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-2010
Telephone: (413) 785-5871
0-11419 THE CONNECTICUT LIGHT AND POWER COMPANY 06-0303850
(a Connecticut corporation)
107 Selden Street
Berlin, Connecticut 06037-1616
Telephone: (860) 665-5000
1-6392 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE 02-0181050
(a New Hampshire corporation)
1000 Elm Street
Manchester, New Hampshire 03105-0330
Telephone: (603) 669-4000
0-7624 WESTERN MASSACHUSETTS ELECTRIC COMPANY 04-1961130
(a Massachusetts corporation)
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-2010
Telephone: (413) 785-5871
33-43508 NORTH ATLANTIC ENERGY CORPORATION 06-1339460
(a New Hampshire corporation)
1000 Elm Street
Manchester, New Hampshire 03105-0330
Telephone: (603) 669-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Registrant Title of Each Class on Which Registered
Northeast Utilities Common Shares, New York Stock Exchange, Inc.
$5.00 par value
The Connecticut Light 9.3% Cumulative Monthly New York Stock Exchange, Inc.
and Power Company Income Preferred
Securities Series A (1)
(1) Issued by CL&P Capital, L.P., a wholly owned subsidiary of The Connecticut
Light and Power Company ("CL&P"), and guaranteed by CL&P.
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Each Class
The Connecticut Light Preferred Stock, par value $50.00 per share,
and Power Company issuable in series, of which the following series
are outstanding:
$1.90 Series of 1947 4.96% Series of 1958
$2.00 Series of 1947 4.50% Series of 1963
$2.04 Series of 1949 5.28% Series of 1967
$2.20 Series of 1949 6.56% Series of 1968
3.90% Series of 1949 $3.24 Series G of 1968
$2.06 Series E of 1954 7.23% Series of 1992
$2.09 Series F of 1955 5.30% Series of 1993
4.50% Series of 1956
Public Service Company Preferred Stock, par value $25.00 per share, issuable
of New Hampshire in series, of which the following series is outstanding:
10.60% Series A of 1991
Western Massachusetts Preferred Stock, par value $100.00 per share, issuable
Electric Company in series, of which the following series is outstanding:
7.72% Series B of 1971
Class A Preferred Stock, par value $25.00 per share,
issuable in series, of which the following series is
outstanding:
7.60% Series of 1987
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of Northeast Utilities' Common Share, $5.00 Par
Value, held by nonaffiliates, was $2,056,807,290 based on a closing sales
price of $15.00 per share for the 137,120,486 common shares outstanding on
February 26, 1999. Northeast Utilities holds all of the 12,222,930 shares,
1,000 shares, 1,072,471 shares and 1,000 shares of the outstanding common
stock of The Connecticut Light and Power Company, Public Service Company of
New Hampshire, Western Massachusetts Electric Company, and North Atlantic
Energy Corporation, respectively.
Documents Incorporated by Reference:
Part of Form 10-K
into Which Document
Description is Incorporated
Portions of Annual Reports to Shareholders of
the following companies for the year ended
December 31, 1998:
Northeast Utilities Part II
The Connecticut Light and Power Company Part II
Public Service Company of New Hampshire Part II
Western Massachusetts Electric Company Part II
North Atlantic Energy Corporation Part II
Portions of the Northeast Utilities Proxy
Statement dated March 31, 1999 Part III
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or
acronyms that are found throughout this report:
COMPANIES
NU............................... Northeast Utilities
CL&P............................. The Connecticut Light and Power Company
Charter Oak or COE............... Charter Oak Energy, Inc.
WMECO............................ Western Massachusetts Electric Company
HWP.............................. Holyoke Water Power Company
NUSCO or the Service Company..... Northeast Utilities Service Company
NNECO............................ Northeast Nuclear Energy Company
NAEC............................. North Atlantic Energy Corporation
NAESCO or North Atlantic......... North Atlantic Energy Service Corporation
PSNH............................. Public Service Company of New Hampshire
RRR.............................. The Rocky River Realty Company
Select Energy.................... Select Energy, Inc.
Mode 1........................... Mode 1 Communications, Inc.
HEC.............................. HEC Inc.
Quinnehtuk....................... The Quinnehtuk Company
the System....................... The Northeast Utilities System
CYAPC............................ Connecticut Yankee Atomic Power Company
MYAPC............................ Maine Yankee Atomic Power Company
VYNPC............................ Vermont Yankee Nuclear Power Corporation
YAEC............................. Yankee Atomic Electric Company
the Yankee Companies............. CYAPC, MYAPC, VYNPC and YAEC
GENERATING UNITS
Millstone 1...................... Millstone Unit No. 1, a 660-MW nuclear
generating unit completed in 1970
Millstone 2...................... Millstone Unit No. 2, an 870-MW nuclear
electric generating unit completed in 1975
Millstone 3...................... Millstone Unit No. 3, a 1,154-MW nuclear
electric generating unit completed in 1986
Seabrook or Seabrook 1........... Seabrook Unit No. 1, a 1,148-MW nuclear
electric generating unit completed in 1986.
Seabrook 1 went into service in 1990.
REGULATORS
DOE.............................. U.S. Department of Energy
DTE.............................. Massachusetts Department of
Telecommunications and Energy
DPUC............................. Connecticut Department of Public Utility
Control
MDEP............................. Massachusetts Department of Environmental
Protection
GLOSSARY OF TERMS
REGULATORS (Continued)
CDEP............................. Connecticut Department of Environmental
Protection
EPA.............................. U.S. Environmental Protection Agency
FERC............................. Federal Energy Regulatory Commission
NHDES............................ New Hampshire Department of Environmental
Services
NHPUC............................ New Hampshire Public Utilities Commission
NRC.............................. Nuclear Regulatory Commission
SEC.............................. Securities and Exchange Commission
OTHER
1935 Act......................... Public Utility Holding Company Act of 1935
CAAA............................. Clean Air Act Amendments of 1990
DSM.............................. Demand-Side Management
Energy Act....................... Energy Policy Act of 1992
EWG.............................. Exempt wholesale generator
EAC.............................. Energy Adjustment Clause (CL&P)
FAC.............................. Fuel Adjustment Clause (CL&P)
FPPAC............................ Fuel and purchased power adjustment
clause (PSNH)
FUCO............................. Foreign utility company
GUAC............................. Generation Utilization Adjustment Clause
(CL&P)
IRM.............................. Integrated resource management
kWh.............................. Kilowatt-hour
MW............................... Megawatt
NBFT............................. Niantic Bay Fuel Trust, lessor of nuclear
fuel used by CL&P and WMECO
NEPOOL........................... New England Power Pool
NUGs............................. Nonutility generators
NUG&T............................ Northeast Utilities Generation and
Transmission Agreement
QF............................... Qualifying facility
NORTHEAST UTILITIES
THE CONNECTICUT LIGHT AND POWER COMPANY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
WESTERN MASSACHUSETTS ELECTRIC COMPANY
NORTH ATLANTIC ENERGY CORPORATION
1998 Form 10-K Annual Report
Table of Contents
PART I
Page
Item 1. Business............................................... 1
The Northeast Utilities System......................... 1
Safe Harbor Statement.................................. 2
Electric Industry Restructuring........................ 3
General........................................... 3
Connecticut Restructuring......................... 4
Massachusetts Restructuring....................... 5
New Hampshire Restructuring....................... 6
Rates.................................................. 7
Connecticut Retail Rates.......................... 7
New Hampshire Retail Rates........................ 8
Massachusetts Retail Rates........................ 10
Competitive System Businesses.......................... 11
Energy-Related Products and Services.............. 11
Energy Management Services........................ 11
Telecommunications................................ 11
Financing Program...................................... 12
1998 Financings................................... 12
1999 Financing Requirements....................... 13
1999 Financing Plans.............................. 14
Financing Limitations............................. 14
Construction Program................................... 18
Electric Operations.................................... 20
Distribution and Sales............................ 20
Regional and System Coordination.................. 21
Transmission Access and FERC Regulatory Changes... 21
Nuclear Generation..................................... 22
General........................................... 22
Nuclear Plant Performance and Regulatory Oversight 24
Nuclear Insurance................................. 25
Nuclear Fuel...................................... 25
Decommissioning................................... 27
Other Regulatory and Environmental Matters............. 31
Environmental Regulation.......................... 31
Electric and Magnetic Fields...................... 34
FERC Hydro Project Licensing...................... 35
Employees.............................................. 36
Year 2000.............................................. 36
Item 2. Properties............................................. 37
Item 3. Legal Proceedings...................................... 42
Item 4. Submission of Matters to a Vote of Security Holders.... 47
PART II
Item 5. Market for Registrants' Common Equity and Related
Shareholder Matters.................................... 47
Item 6. Selected Financial Data................................ 47
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 48
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk............................................ 48
Item 8. Financial Statements and Supplementary Data............ 49
Item 9. Changes in Disagreements with Accountants on
Accounting and Financial Disclosure.................... 49
PART III
Item 10. Directors and Executive Officers of the Registrants.... 50
Item 11. Executive Compensation................................. 54
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 66
Item 13. Certain Relationships and Related Transactions......... 69
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.................................... 7
NORTHEAST UTILITIES
THE CONNECTICUT LIGHT AND POWER COMPANY
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
WESTERN MASSACHUSETTS ELECTRIC COMPANY
NORTH ATLANTIC ENERGY CORPORATION
PART I
ITEM 1. BUSINESS
THE NORTHEAST UTILITIES SYSTEM
Northeast Utilities (NU) is the parent of a number of companies
comprising the Northeast Utilities system (the System) and is not itself an
operating company. The System has traditionally furnished franchised retail
electric service in Connecticut, New Hampshire and western Massachusetts
through three of NU's wholly owned subsidiaries (The Connecticut Light and
Power Company [CL&P], Public Service Company of New Hampshire [PSNH] and
Western Massachusetts Electric Company [WMECO]) and has additionally
furnished retail electric service to a limited number of customers through
another wholly owned subsidiary, Holyoke Water Power Company [HWP]. In
addition to their retail electric service, CL&P, PSNH, WMECO and HWP
(including its wholly owned subsidiary, Holyoke Power and Electric Company)
together furnish wholesale electric service to various municipalities and
other utilities and participate in limited retail access programs, providing
off-system retail service. The System serves in excess of 30 percent of New
England's electric needs is and one of the 24 largest electric utility
systems in the country as measured by revenues.
As of January 4, 1999, NU added three new corporations to the System:
NU Enterprises, Inc. (NUEI), Northeast Generation Company (NGC) and
Northeast Generation Services Company (NGS). NUEI, a direct subsidiary of
NU, will act as the new holding company for the System's unregulated
businesses. NGC, a subsidiary of NUEI, will acquire and manage generating
facilities. NGS, another subsidiary of NUEI, will provide services to the
electric generation market as well as to large commercial and industrial
customers in the Northeast. Also, as of January 4, 1999, NU transferred
three subsidiaries, Select Energy, Inc. (Select Energy), HEC Inc. (HEC)
and Mode 1 Communications, Inc. (Mode 1) to NUEI. These companies engage,
either directly or indirectly through subsidiaries, in a variety of energy-
related and telecommunications activities, as applicable. For information
regarding the energy-related activities of these subsidiaries, see
"Competitive System Businesses."
North Atlantic Energy Corporation (NAEC) is a special-purpose operating
subsidiary of NU that owns a 35.98 percent interest in the Seabrook nuclear
generating facility (Seabrook) in Seabrook, New Hampshire, and sells its
share of the capacity and output from Seabrook to PSNH under two life-of-
unit, full-cost recovery contracts.
Several wholly owned subsidiaries of NU provide support services for
the System companies 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 System
companies. North Atlantic Energy Service Corporation (NAESCO) has
operational responsibility for Seabrook. Northeast Nuclear Energy Company
(NNECO) acts as agent for the System companies and other New England
utilities in operating the Millstone nuclear generating facilities
(Millstone) in Waterford, Connecticut. Three other subsidiaries construct,
acquire or lease some of the property and facilities used by the System
companies.
The System is regulated in virtually all aspects of its business by
various federal and state agencies, including the Securities and Exchange
Commission (SEC), the Federal Energy Regulatory Commission (FERC), the
Nuclear Regulatory Commission (NRC) and various state and/or local
regulatory authorities with jurisdiction over the industry and the service
areas in which each company operates, including the Connecticut Department
of Public Utility Control (DPUC), the New Hampshire Public Utilities
Commission (NHPUC) and the Massachusetts Department of Telecommunications
and Energy (DTE). In recent years, there has been significant activity at
both the legislative and regulatory levels, particularly in New England,
to change the nature of regulation of the industry. For more information
regarding these restructuring initiatives, see "Electric Utility
Restructuring," "Rates," and "Electric Operations."
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (Reform Act), NU and its reporting
subsidiaries are hereby filing cautionary statements identifying important
factors that could cause NU or its subsidiaries' actual results to differ
materially from those projected in forward-looking statements (as such term
is defined in the Reform Act) made by or on behalf of NU or its subsidiaries
in this combined Form 10-K, in any subsequent filings with the SEC, in
presentations, in response to questions or otherwise. Any statements
that express or involve discussions as to expectations, beliefs, plans,
objectives, assumptions or future events or performance (often, but not
always, through the use of words or phrases such as will likely result, are
expected to, will continue, is anticipated, estimated, projection, outlook)
are not statements of historical facts and may be forward-looking. Forward-
looking statements involve estimates, assumptions and uncertainties that
could cause actual results to differ materially from those expressed in the
forward-looking statements. Accordingly, any such statements are qualified
in their entirety by reference to, and are accompanied by, the following
important factors that could cause NU or its subsidiaries' actual results
to differ materially from those contained in forward-looking statements of
NU or its subsidiaries made by or on behalf of NU or its subsidiaries.
Any forward-looking statement speaks only as of the date on which such
statement is made, and NU and its subsidiaries undertake no obligation to
update any forward-looking statement or statements to reflect events or
circumstances after the date on which such statement is made or to reflect
the occurrence of unanticipated events. New factors emerge from time to
time and it is not possible for management to predict all of such factors,
nor can it assess the impact of each such factor on the business or the
extent to which any factor, or combination of factors may cause actual
results to differ materially from those contained in any forward-looking
statements.
Some important factors that could cause actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include prevailing governmental policies and regulatory actions, including
those of the SEC, the NRC, the FERC and state regulatory agencies, with
respect to allowed rates of return, industry and rate structure, operation
of nuclear power facilities, acquisition and disposal of assets and
facilities, operation and construction of plant facilities, recovery of
purchased-power costs, stranded costs, decommissioning costs and present
or prospective wholesale and retail competition (including but not limited
to retail wheeling and transmission costs).
The business and profitability of NU and its subsidiaries are also
influenced by economic and geographic factors including political and
economic risks, changes with environmental and safety laws and policies,
weather conditions (including natural disasters), population growth rates
and demographic patterns, competition for retail and wholesale customers,
pricing and transportation of commodities, market demand for energy from
plants or facilities, changes in tax rates or policies or in rates of
inflation, changes in project costs, unanticipated changes in certain
expenses and capital expenditures, capital market conditions, competition
for new energy development opportunities, and legal and administrative
proceedings (whether, civil or criminal) and settlements.
All such factors are difficult to predict, contain uncertainties which
may materially affect actual results and are beyond the control of NU or its
subsidiaries.
ELECTRIC INDUSTRY RESTRUCTURING
GENERAL
Competition in the energy industry continues to grow as a result of
legislative and regulatory action, technological advances, relatively high
electric rates in certain regions of the country, including New England,
and the increased availability of natural gas. These competitive pressures
are particularly strong in New England, where legislatures and regulatory
agencies in these states have been at the forefront of restructuring of the
electric industry. Changes in this industry are expected to place downward
pressure on prices and to increase customer choice through competition.
Restructuring initiatives in the System companies' service territories
have created uncertainty with respect to future rates and the recovery of
"stranded costs." Stranded costs are expenditures incurred, or commitments
for future expenditures made, on behalf of customers with the expectation
such expenditures would continue to be recoverable in the future through
rates. However, under certain circumstances these costs might not be
recoverable from customers in a fully competitive electric utility industry
(i.e., the costs may result in above-market energy prices). The System is
particularly vulnerable to stranded costs because of (i) the System's
relatively high investment in nuclear generating capacity, which has a
high cost to build and maintain, (ii) significant regulatory assets, which
are those costs that have been deferred by state regulators for future
collection from customers, and (iii) state and federal government mandated
purchased-power contracts priced above market.
As of December 31, 1998, the System operating companies' net investment
in nuclear generating capacity, excluding its investment in certain regional
nuclear companies, was approximately $2.9 billion ($ 1.9 billion for CL&P,
$83 million for PSNH, $591 million for NAEC and $365 million for WMECO) and
its regulatory assets were approximately $2.3 billion ($1.4 billion for
CL&P, $610.2 million for PSNH, and $322.4 million for WMECO). In addition,
based on current market prices, the System companies have above-market
purchase power obligations, the combined net present value of which is in
excess of a billion dollars. The bulk of these purchase power obligations
are held by CL&P and PSNH.
The System's financial strength and resulting ability to compete in a
restructured environment will be negatively affected if the System companies
are unable to recover their past investments and commitments. Even if the
NU System companies are given the opportunity to recover a large portion of
their stranded costs, earnings prospects in a restructured environment will
be affected in ways which cannot be estimated at this time.
As discussed more fully below, Connecticut and Massachusetts have
enacted restructuring legislation that permits CL&P and WMECO to recover
their prudently incurred stranded costs. PSNH's ability to recover its
stranded costs is currently the subject of litigation.
CONNECTICUT RESTRUCTURING
In April 1998, Connecticut enacted comprehensive electric utility
restructuring legislation. The legislation provides a clear path to
competition in the state, while permitting, subject to mitigation
requirements, utilities to recover their stranded costs. CL&P is subject
to this legislation.
In particular, the bill provides, among other things, that:
(i) Retail choice will occur in two phases: beginning in January
2000, up to 35 percent of CL&P's customers will be able to choose their
electric supplier; and in July 2000, 100 percent of CL&P's customers will
have this ability; rates will be capped at December 31, 1996 levels from
July 1, 1998 until December 31, 1999;
(ii) Customers who do not choose an alternate supplier may take
standard offer service from CL&P beginning January 1, 2000 until January
2004, at a rate which must initially be at least 10 percent less than rates
in effect on December 31, 1996;
(iii) Rates will be unbundled into several components, including
charges for transmission, distribution, generation, the recovery of stranded
costs, public policy costs and new conservation and renewable programs;
CL&P will be permitted to recover stranded costs through a competitive
transition assessment (CTA);
(iv) CL&P will be required to divest its non-nuclear generating
assets by January 2000 and its nuclear generating assets by January 2004
in order to recover its stranded costs; affiliates of CL&P will be allowed
to bid at both auctions; if CL&P cannot sell its nuclear plants above the
minimum price set by the DPUC then it must transfer them to an affiliate at
a value determined by the DPUC; in this circumstance, CL&P will be entitled
to recover nuclear stranded costs equal to the difference between the book
value of its nuclear assets and the minimum price set by the DPUC; until
CL&P's nuclear assets can be sold, CL&P plans, subject to DPUC approval,
to maintain them in a separate corporate division; and
(v) "Securitization" is allowed for generation-related regulatory
assets (other than nuclear assets) and the costs associated with renegotiated
above-market purchased-power contracts; securitization is the refinancing of
stranded costs through the sale of debt securities by an independent entity,
collateralized by the System companies' interests in their stranded cost
recoveries; the above-market portion of purchased-power contracts that have
not been renegotiated can be collected through the CTA.
On October 1, 1998, CL&P filed a plan with the DPUC to auction its
non-nuclear generating assets and purchased-power contracts and a plan
to functionally unbundle its operations. On January 8, 1999, the DPUC
authorized CL&P to proceed with the sale of approximately 3500 MW of
fossil-fueled and hydroelectric plants. The DPUC also imposed a March 15,
1999 deadline on any buyout, buydown or renegotiation of all of its above-
market purchased-power contracts, aggregating approximately 435 MW. Those
contracts as to which no agreement is reached will be auctioned off in a
parallel but separate auction this year. The sale of the non-nuclear
generating plants and the purchased-power contracts is expected to close
before January 1, 2000, the date when CL&P's customer bills are unbundled
and a segment of its customers can choose alternative suppliers for generation
services. Any sale proceeds above book value will be applied to offset CL&P's
stranded costs. The first phase of the auction was launched on February 10,
1999. Certain intervening parties have appealed this order with respect to
the auction of CL&P's above-market purchased-power contracts.
Additional restructuring proceedings, including the determination of the
standard offer rate, the CTA and securitization, are ongoing, or expected to
commence, before the DPUC in early 1999.
Following divestiture and unbundling, CL&P will continue to operate and
maintain its transmission and distribution network and deliver electricity
to its customers.
MASSACHUSETTS RESTRUCTURING
Massachusetts enacted comprehensive electric utility industry
restructuring legislation in November 1997. Pursuant to the legislation,
on March 1, 1998, WMECO decreased its rates by 10 percent from August 1997
levels net of a 2.4 percent rate increase that was scheduled to take effect
on March 1, 1998 and allowed its customers to choose an alternative retail
electricity supplier. The statute requires a further five percent rate
reduction, adjusted for inflation, by September 1, 1999. In addition, the
legislation provides, among other things, for: (i) recovery of stranded
costs through a "transition charge" to customers, subject to review by the
DTE; (ii) a possible limitation on WMECO's return on equity should its
stranded cost charge go above a certain level; (iii) securitization of
allowed stranded costs; and (iv) divestiture of non-nuclear generation.
The statute also provides that an electric company must transfer or
separate ownership of generation, transmission and distribution facilities
into independent affiliates or "functionally separate such facilities within
30 business days of federal approval." Additionally, marketing companies
formed by an electric company are to be separate from the electric company
and separate from generation, transmission or distribution affiliates.
On December 31, 1997, WMECO filed a comprehensive restructuring plan with
the DTE. On February 20, 1998 the DTE issued an interim order approving in
all material respects WMECO's restructuring plan with the DTE, including
the 10 percent reduction in permanent rates and customer choice of supplier,
effective March 1, 1998. Effective July 1, 1998, the DTE approved an additional
reduction in rates of approximately 2.4 percent to make permanent a temporary
rate credit that expired in February 1998. The DTE is currently reviewing
WMECO's restructuring plan and a final decision is expected in 1999.
On January 22, 1999, WMECO announced an agreement to sell 290 MW of
fossil-fired and hydroelectric generation to Consolidated Edison Energy,
Inc., a New York Company, for $47 million. Various federal and state
regulatory approvals are needed before the transaction can be finalized;
these are expected by mid-1999. The current sale does not include WMECO's
interests in Millstone 1, 2 and 3, WMECO's 19 percent interest in the 1,120
MW Northfield Mountain pumped storage project and related hydroelectric
facilities or any purchased-power contracts. These assets will be auctioned
in connection with CL&P's non-nuclear and nuclear auctions, discussed above.
WMECO has also requested authorization in its restructuring filing to
securitize approximately $500 million of stranded costs. A portion of the
proceeds from the asset sales discussed above will be used to lower the
total amount of stranded costs that WMECO will need to recover.
Following divestiture and unbundling, WMECO will continue to operate
and maintain its transmission and distribution network and deliver electricity
to its customers.
NEW HAMPSHIRE RESTRUCTURING
The State of New Hampshire's attempts to restructure the electric utility
industry in that state have resulted in extensive litigation in various federal
and state courts. In 1996, New Hampshire enacted legislation requiring a
competitive electric industry beginning in 1997. In February 1997, the NHPUC
issued restructuring orders that would have forced PSNH and NAEC to write
off all of their regulatory assets and possibly seek protection under
Chapter 11 of the bankruptcy laws. Following the issuance of these orders,
PSNH immediately sought declaratory and injunctive relief on various grounds
in federal district court and has received a preliminary injunction that
freezes implementation of the NHPUC's restructuring orders. The trial in
the federal district court is expected to begin in mid- to late-1999, subject
to the court's ruling on summary judgment motions.
On December 23, 1998, the New Hampshire Supreme Court issued a decision
which addresses issues transferred to it by the NHPUC concerning PSNH's
ability to recover all of its stranded costs under the New Hampshire
restructuring legislation. The court ruled that under the restructuring
statute, the NHPUC can implement a stranded cost recovery charge that
collects less than 100 percent of PSNH's stranded costs, but left open for
the federal court the issue of whether PSNH and NU can assert contractual
and constitutional claims against the State of New Hampshire to the extent
that a stranded cost recovery charge provides less than full recovery.
In January 1999, the NHPUC issued an order stating that it intends to
reopen restructuring hearings. PSNH has requested the federal court to
enforce its preliminary injunction barring the NHPUC from proceeding with
restructuring efforts pending the court's decision on the merits after
trial. The NHPUC has agreed to delay this new proceeding until the federal
court has had an opportunity to rule on PSNH's enforcement motion.
PSNH continues to be involved in settlement discussions with
representatives from the State of New Hampshire. PSNH hopes to reach a
settlement that would include, among other things, substantial rate
reductions, customer choice, an auction of PSNH's generating units and
securitization of PSNH's stranded costs.
RATES
CONNECTICUT RETAIL RATES
GENERAL
As of December 31, 1998, approximately 63 percent of System revenues
was derived from CL&P, and 58 percent of the book value of the System's
electric utility assets was owned by CL&P.
CL&P's retail rates are subject to the jurisdiction of the DPUC.
On February 25, 1998, the DPUC issued a decision in CL&P's interim
rate case, which set rates for CL&P from March 1, 1998 through September 27,
1998. CL&P's rates, effective September 28, 1998 through December 31, 1999
were set according to its base rate case discussed below. The interim
rate case decision required a $30.5 million credit to customer bills
(representing a 1.39 percent rate decrease) to reflect the removal of
Millstone 1 from rates. CL&P rates had been set prior to the interim rate
decision pursuant to a rate settlement approved by the DPUC in 1996. The
interim rate case decision also required CL&P to accelerate the amortization
of regulatory assets by approximately $110.5 million. The interim rates were
effective as of March 1, 1998.
On April 29, 1998, the DPUC issued a decision to remove Millstone 2 from
CL&P's rate base, effective May 1, 1998. The decision further concluded
that the DPUC would remove Millstone 3 from CL&P's rate base, effective
July 1, 1998 if the unit had not been operating for 100 continuous hours at
95 percent capacity by that date. On July 18, 1998, Millstone 3 returned to
rate base after meeting the operating requirements set forth in the DPUC
order.
The removal of Millstone 2 from rate base between May 1, 1998 and
September 27, 1998 resulted in a reduction of CL&P's annual revenues of
about $3.1 million a month. This reduction reflects the removal from rates
of the O&M, depreciation, and investment return related to the unit, net of
costs incurred for power purchased to replace Millstone 2 power, which CL&P
has been allowed to recover. The net reduction of revenue requirements
associated with the removal of Millstone 3 from rates was approximately
$7.4 million for the period July 1, 1998 through July 18, 1998. The DPUC
allowed these reductions to be offset against the potential ratepayer
liability for deferred replacement power costs associated with the shutdown
of the Connecticut Yankee nuclear plant (CY). As a result, there was no
incremental change in rates. CL&P has accounted for these reductions as
a reserve against revenues until the regulatory asset balances are reduced.
Management currently estimates that Millstone 2 will return to service in the
spring of 1999. For more information regarding the outages at Millstone, see
"Electric Operations--Nuclear Generation."
On February 5, 1999, the DPUC issued its final decision in CL&P's rate
case. The DPUC concluded that CL&P's annual revenue requirements should
be reduced by approximately $232 million or 9.68 percent. The revenue
requirement reduction will be achieved through a combination of a $96
million or 4 percent reduction to CL&P's base rates; and accelerated
amortization of approximately $136 million of its deferred tax regulatory
asset. The decision is retroactive to September 28, 1998, with the revenue
requirement reductions for the period from September 28, 1998 to February 5,
1999 being applied to accelerate recovery of the deferred tax regulatory
asset. The rate order allowed CL&P to earn a return on equity of 10.3
percent.
The DPUC also determined that CL&P will be allowed to recover $126
million of its investment in Millstone 1 over a three year period commencing
in October 1998. The portion to be collected in the years 2000 - 2001 will
be collected through CL&P's CTA. See "Electric Utility Restructuring-
Connecticut Restructuring," above. The DPUC, however, disallowed recovery
of $116 million of CL&P's investment in Millstone 1 based upon the benefits
that the DPUC determined customers would have received if the unit had
continued to operate for 1999 and 2000, rather than being retired in 1998.
The DPUC also ordered CL&P to continue the non-cash accrual related
to the Millstone 2 out-of-rate-base disallowance at a revised rate of $6.6
million per month, beginning September 28, 1999, with the accrual being
applied to reduce the CY replacement power cost deferral. Millstone 2 will
be considered in-service when the unit has operated at no less than 75
percent for 100 continuous hours.
For information regarding the financial impact of the February 5, 1999
rate decision on CL&P's ability to meet certain financial covenants, see
"Financial Program-Financing Limitations," below. For information regarding
decommissioning matters, including the decommissioning of Millstone 1, see
"Electric Operations-Nuclear Generation-Decommissioning." For information
regarding CL&P's appeal of the DPUC's 1997 rulings related to the deferral
of certain CY replacement power costs, see "Item 3. Legal Proceedings."
ENERGY ADJUSTMENT CLAUSE
CL&P is subject to an Energy Adjustment Clause (EAC), which is designed
to reconcile and adjust every six months the difference between actual fuel
costs and the fuel revenue collected through base rates.
For more information regarding this matter see "Recoverable Energy
Costs," in the notes to NU's and CL&P's financial statements.
NEW HAMPSHIRE RETAIL RATES
GENERAL
As of December 31, 1998, approximately 25 percent of System revenues
was derived from PSNH, and 18 percent of the book value of the System's
electric utility assets was owned by PSNH.
PSNH's rate agreement (Rate Agreement) between NU, PSNH and the State
of New Hampshire, entered into in 1989 in connection with NU's reorganization
plan to resolve PSNH's bankruptcy, provided for seven base rate increases of
5.5 percent per year beginning in 1990 and a comprehensive fuel and purchased-
power adjustment clause (FPPAC). The final base rate increase went into effect
on June 1, 1996. The Rate Agreement contemplates that PSNH's rates are subject
to traditional rate regulation after the fixed rate period, which expired on
May 31, 1997. The FPPAC, however, would continue through May 31, 2001, and the
Rate Agreement continues in place concerning recovery of various regulatory
assets.
A PSNH base rate case has been pending at the NHPUC since May 1997, but
an order has been delayed due to the restructuring proceedings discussed
above. The base rate proceedings were reopened in late October 1998. A final
decision, which will be reconciled to July 1, 1997, is currently expected to
be issued by June 1, 1999. PSNH's ongoing settlement negotiations with the
State of New Hampshire could resolve this matter and the FPPAC proceedings
discussed below.
FPPAC
The FPPAC provides for the recovery or refund by PSNH, for the ten-year
period beginning on May 16, 1991, of the difference between its actual
prudently incurred energy and purchased-power costs and the estimated amounts
of such costs included in base rates established by the Rate Agreement. The
FPPAC amount is calculated for a six-month period based on forecasted data and
is reconciled to actual data in subsequent FPPAC billing periods.
On May 29, 1998, the NHPUC approved an FPPAC rate of $.00725 per kWh
for the period June 1, 1998 through November 30, 1998, which resulted in an
overall rate increase of approximately 1 percent. This rate includes, among
other things, an offset of the reduced PSNH acquisition premium amortization
with the Seabrook deferred returns that were scheduled to come into rates.
On December 1, 1998, the NHPUC approved a settlement agreement that
recommended that PSNH's FPPAC rate discussed above be continued for another
six month FPPAC period - December 1, 1998 through May 31, 1999. The FPPAC
rate currently in effect will produce an estimated $80 million underrecovery
as of May 31, 1999, comprised of $64 million of underrecovery that existed
as of November 30, 1998, $9 million of "light loading" costs which are
subject to an open docket before the NHPUC, and $7 million of Seabrook
refueling outage costs (to spread the cost of the refueling over 12 months
instead of six months). All other FPPAC costs, including certain purchased-
power obligations discussed below, are being recovered on a current basis.
For more information regarding this matter see "Recoverable Energy
Costs" and "Rate Matters" in the notes to NU's and PSNH's financial statements.
For more information regarding deferred-PSNH acquisition costs and Seabrook
costs, see "PSNH Acquisition Costs" and "Deferred Costs-Nuclear Plants" in
the notes to NU's financial statements and "Acquisition Costs" and "Deferred
Costs-Nuclear Plants" in the notes to PSNH's financial statements.
PURCHASED-POWER CONTRACTS
The costs associated with purchases by PSNH from certain NUGs at prices
above the level assumed in base rates were deferred during the fixed rate
period and are recovered through the FPPAC. As of December 31, 1998, NUG
deferrals, including previously approved buy-out costs, totaled approximately
$156 million, compared to approximately $191.7 million as of December 31, 1997.
Under the Rate Agreement, PSNH and the State of New Hampshire have an
obligation to use their best efforts to renegotiate burdensome purchased-
power arrangements with certain specified hydroelectric and wood-burning
NUGs that were selling their output to PSNH under long-term NHPUC rate
orders. The NHPUC reopened a proceeding in late January 1999 to review
whether PSNH has met its obligations to use its "best efforts" to renegotiate
these arrangements. As part of its restructuring-related litigation, PSNH has
requested the federal court to enforce its preliminary injunction barring
the NHPUC from proceeding with efforts to adjudicate provisions of the Rate
Agreement, including "best efforts" pending the court's decision on the merits
after trial.
PSNH had reached agreements with the six remaining wood-fired NUGs.
The NHPUC conditionally approved one of these agreements, but due to the
uncertainties of PSNH's recovery of the costs to be incurred, it was
determined that the agreement could not be financed. The five remaining
agreements were rejected by the NHPUC in 1998. PSNH hopes to resolve this
issue in connection with a restructuring settlement.
The New Hampshire Legislature is also considering a number of proposals
that could impact PSNH's ability to renegotiate and refinance NUGs rate
orders.
MASSACHUSETTS RETAIL RATES
As of December 31, 1998, approximately 10 percent of System revenues
was derived from WMECO, and 12 percent of the book value of the System's
electric utility assets was owned by WMECO.
WMECO's retail rates are subject to the jurisdiction of the DTE. The
DTE has stated that, pursuant to the restructuring legislation, distribution
rates for WMECO and all other Massachusetts utilities will be "performance-
based" rates (PBR). That is, instead of rate recovery based solely on
cost-of-service, recovery will be based, in part, upon achieving certain
performance levels (for example, a certain level of reliability and customer
satisfaction). The DTE has announced no timetable for the implementation
of PBR.
In accordance with DTE approval, on January 1, 1999, WMECO implemented
changes to components of its rates to increase its standard offer energy
charge in accordance with its restructuring plan and to reduce its transition
charge in a manner that did not change overall rates. During 1999, WMECO is
authorized by the restructuring legislation to apply an inflation adjustment
to its overall rates in March and to implement an additional five percent
reduction, adjusted for inflation, by September 1, 1999.
The rates charged under HWP's contracts with its industrial customers,
which produced revenues in 1998 of approximately $6 million, are not subject
to the ratemaking jurisdiction of any state or federal regulatory agency.
COMPETITIVE SYSTEM BUSINESSES
ENERGY-RELATED PRODUCTS AND SERVICES
Select Energy was created to participate in retail pilot programs and
open-access retail electric markets in the Northeast and other appropriate
areas of the country. Select Energy also recently received FERC approval to
sell electricity at wholesale at market-based rates.
In June 1998, Select Energy won the right to supply the retail electric
service to an organization, NEChoice LLC, that represents an aggregation of
certain commercial and industrial businesses in Massachusetts and Rhode
Island. This aggregation is expected to yield approximately $100 million in
contracted revenue over a five-year period. In November 1998, Select Energy
was awarded through a competitive bid process, the right to supply wholesale
power for all Boston Edison Company (BECO) customers who remain on "standard
offer" service, as well as BECO's existing wholesale power customers. Standard
offer service is for those BECO customers who have not chosen an alternative
competitive energy supplier and are allowing BECO to arrange a power supply
for them. These wholesale power arrangements are estimated to be worth more
than $300 million in revenues to Select Energy over an aggregate 13-month
period, which ends December 31, 1999. In November 1998, Select Energy was
awarded a three-year, $17 million power contract by Shaw's Supermarkets for
approximately 60 locations in Massachusetts and Rhode Island.
In addition, Select Energy also markets natural gas and develops and
markets energy-related products and services. These include energy services,
productivity services, business and financial services, and residential
services. Select Energy continues to take steps to establish strategic
alliances with other companies in various energy-related fields including
fuel supply and management, power quality, energy efficiency and load
management services. In 1998, Select Energy contracted with several chambers
of commerce and business organizations in Connecticut and Massachusetts to
provide their members (approximately 10,000) with comprehensive educational,
energy and energy services packages. NU's aggregate equity investment in
Select Energy was approximately $5 million as of December 31, 1998.
ENERGY MANAGEMENT SERVICES
In general, HEC contracts to reduce its customers' energy costs and/or
conserve energy and other resources. HEC's energy management and consulting
services have primarily been directed to the commercial, industrial and
institutional markets and utilities in New England and New York. In 1998,
HEC was awarded energy-saving contracts for certain federal installations
throughout the United States. NU's aggregate equity investment in HEC was
approximately $3 million as of December 31, 1998.
TELECOMMUNICATIONS
Mode 1 was established in 1996 to participate in a wide range of
telecommunications activities both within and outside New England. NU's
total investment in Mode 1 was approximately $13.8 million as of December
31, 1998.
Mode 1 currently owns approximately 27 percent of the outstanding
common shares, fully diluted, of NorthEast Optic Network, Inc.("NEON"), which
is constructing an approximately 900 mile fiber optic communications network
through New England and New York, including over the System's transmission
facilities. An officer of NU and an officer of NUSCO are members of the
Board of Directors of NEON. In addition, NU is a party to an agreement with
Central Maine Power Company (CMP), an owner of approximately 33 percent of
NEON's common shares, fully diluted, wherein NU and CMP each agree that, as
long as NU owns at least 10 percent of the outstanding common stock of NEON,
fully diluted, and the cumulative holdings of NU and CMP are at least 33 1/3
percent, fully diluted, neither NU nor CMP will take any action which will
allow NEON to merge, consolidate, liquidate or sell, lease or transfer
substantially all of its assets or commence or acquiesce any action or
proceeding under any bankruptcy laws.
FINANCING PROGRAM
1998 FINANCINGS
NU entered into a $25 million, 364-day revolving credit facility on
February 10, 1998 (NU Credit Agreement), which was extended to September 9,
1999.
On April 23, 1998, PSNH entered into a $75 million revolving credit
agreement that will expire in April 1999. PSNH's borrowings under this
agreement are secured, per dollar of borrowing, by $75 million of first
mortgage bonds and substantially all of PSNH's accounts receivable.
On April 23, 1998, PSNH amended and extended letters of credit and
reimbursement agreements that provide credit support for $39.5 million
principal amount of taxable Pollution Control Refunding Revenue Bonds
(PCRB), 1991 Series D, due May 1, 2021, and $69.7 million principal amount
of taxable PCRB, 1991 Series E, due 2021. The Series D and E taxable PCRB's
are special limited obligations of the Business Finance Authority of the
State of New Hampshire (BFA) and are payable solely by PSNH under the
applicable loan and trust agreements. PSNH's obligations to make payments
under the loan and trust agreements, letters of credit and reimbursement
agreements are secured by approximately $110 million of first mortgage
bonds and substantially all of PSNH's accounts receivable.
On May 1, 1998, the $75 million principal amount of tax-exempt PCRB,
1992 Series D, due May 1, 2021, and $44.8 million principal amount of tax-
exempt PCRB, 1993 Series E, due May 1, 2021, which were previously issued by
the BFA on PSNH's behalf as variable rate bonds, were converted to fixed
rate bonds bearing interest at 6 percent per annum. These bonds are special
limited obligations of the BFA and are payable solely by PSNH under the
applicable loan and trust agreement.
CL&P and WMECO utilize the Niantic Bay Fuel Trust (NBFT) to finance
their nuclear fuel requirements for the Millstone units. On June 5, 1998,
the NBFT issued $180 million of Series G intermediate term notes (ITNs) to
refinance the $80 million Series F ITNs which matured on June 5, 1998, to
repay outstanding advances and interest under the NBFT Credit Agreement,
which expired in July 1998 and to be used as cash collateral for future
purchases of nuclear fuel. The Series G ITNs are secured by $72.9 million
and $17.3 million of first mortgage bonds of CL&P and WMECO, respectively.
For information regarding proposed amendments related to this transaction,
see "1999 Financing Plans," below.
In the fall of 1998, CL&P and WMECO completed the conversion of $415.7
million of tax-exempt pollution control revenue refunding bonds from floating
to fixed interest rates. CL&P converted $315.5 million of 30-year bonds, which
carry interest rates ranging from 5.85 percent to 5.95 percent. CL&P also
converted $21 million of such bonds, which mature December 1, 2022, at an
interest rate of 5.85 percent, as well as $25.4 million of 5.9 percent bonds,
some of which will mature November 1, 2016 and others on August 1, 2018.
WMECO converted $53.8 million of tax-exempt pollution control bonds that
mature September 1, 2028 to a fixed rate of 5.85 percent. All of the bonds
had been issued previously on behalf of CL&P and WMECO by the Connecticut
Development Authority and the Business Finance Authority of the State of
New Hampshire. The proceeds from the original issuances were used primarily
to finance pollution control equipment at Millstone 3 and Seabrook.
On November 30, 1998, Select Energy obtained a $50 million letter
of credit to satisfy the credit assurance requirements of two power
supply agreements with BECO (BECO Agreements). The letter of credit was
collateralized by a pledge of all the rights, claims and proceeds from
the BECO Agreements. In addition, NU guaranteed Select Energy's repayment
obligations under the letter of credit. NU also guaranteed Select Energy's
performance obligations under the BECO Agreements.
Total System debt, including short-term and capitalized lease obligations,
was $3.87 billion as of December 31, 1998, compared with $4.15 billion as
of December 31, 1997 and $4.15 billion as of December 31, 1996. For more
information regarding System financing, see "Notes to Consolidated Statements
of Capitalization" in NU's financial statements, other footnotes related
to long-term debt, short-term debt and the sale of accounts receivables, as
applicable, in the notes to NU's, CL&P's, PSNH's, WMECO's and NAEC's financial
statements and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
1999 FINANCING REQUIREMENTS
The System's aggregate capital requirements for 1999 are approximately
as follows:
CL&P PSNH WMECO NAEC Other System
(Millions)
Construction $230.9 $67.9 $33.6 $ 8.2 $23.1 $363.7
Nuclear Fuel 25.2 1.4 5.8 1.6 - 34.0
Maturities 214.0 - 40.0 - - 254.0
Cash Sinking Funds 19.8 25.0 1.5 70.0 26.9 143.2
Total $489.9 $94.3 $80.9 $79.8 $50.0 $794.9
For further information on the System's 1999 and five-year financing
requirements, see "Notes to Consolidated Statements of Capitalization" in
NU's financial statements, "Long-Term Debt" in the notes to CL&P's, PSNH's,
WMECO's and NAEC's financial statements and "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
1999 FINANCING PLANS
The System companies generally propose to finance their 1999
requirements through internally generated funds and short-term borrowings.
PSNH's revolving credit agreement expires on April 22, 1999 and
the company currently does not intend to renew it, instead funding its
needs through operating cash flows or through other short term credit
arrangements. PSNH is attempting to renew the bank letters of credit that
support nearly $110 million of taxable variable-rate pollution control
bonds. Those letters of credit also expire April 22, 1999. NU, CL&P and
WMECO's $313.75 million revolving credit line, discussed more fully below,
will expire on November 21, 1999. The NU Credit Agreement has been extended
to September 9, 1999. Select Energy and other NU unregulated businesses are
likely to require additional financial support as they expand their business
in 1999. Management also hopes in 1999 to begin the process of securitizing
CL&P and WMECO's stranded costs.
The permanent shutdown of Millstone 1 in July 1998 afforded the NBFT
ITN holders the right to seek repurchase of a pro rata share of their notes
based upon the stipulated loss value of the Millstone 1 fuel compared to
the stipulated loss value of all fuel then under the NBFT, approximately
$80 million. The shutdown also obligates CL&P and WMECO to pay such amount
to the NBFT under the NBFT lease whether or not any ITN holders request
repurchase. The companies are seeking consents from the ITN holders to
amend this lease provision so that they will not be obligated to make this
payment, but instead expect to issue an additional $80 million of collateral
first mortgage bonds in mid-1999.
On July 14, 1998, the NU Board of Trustees authorized the repurchase
of up to 10 million NU common shares through July 1, 2000 in connection
with the implementation of utility restructuring in New England. Share
repurchases may be accomplished through a variety of means, including
open market purchases and possibly the use of certain derivative financial
instruments or agreements. To date, no shares have been repurchased.
FINANCING LIMITATIONS
Many of the System companies' charters and borrowing facilities contain
financial limitations that must be satisfied before borrowings can be made
and for outstanding borrowings to remain outstanding.
CL&P and WMECO are parties to a revolving credit agreement (Revolving
Credit Agreement) which expires in November 1999 and allows borrowings on
a consolidated basis of $313.75 million. NU had been a party to this
agreement from its inception but withdrew from it in March 1999. In
September 1998 and again in March 1999, the agreement was amended to
adjust certain financial covenants. Under the agreement, as amended
through September 1998, NU, CL&P and WMECO were required to maintain
a ratio of common equity to total capitalization of at least 31 percent.
At December 31, 1998, CL&P'S and WMECO's common equity ratios were 29.86
percent and 32.20 percent, respectively, while NU's common equity ratio
was 33.27 percent.
The Revolving Credit Agreement, as amended through September 1998,
also required, beginning in the fourth quarter of 1998, each of CL&P and
WMECO to maintain a quarterly ratio of operating income to interest expense
(interest coverage ratio) of at least 1.35 to 1 through December 31, 1998;
1.75 to 1 for the quarter ended March 31, 1999 and 2.00 to 1 at the end of
each quarter thereafter. NU was required to maintain a quarterly interest
coverage ratio of 2.0 to 1. For the quarter ended December 31, 1998,
CL&P's and WMECO's interest coverage ratios were 2.21 to 1 and 1.40 to
1, respectively while NU's consolidated interest coverage ratio was 2.58
to 1 percent.
As a result of CL&P's February 5, 1999 rate case decision, CL&P was
required to obtain waivers of or amendments to certain of their common
equity and interest coverage tests. WMECO sought a change to the common
equity test as well. In March 1999, both companies' common equity ratio
tests were reduced to 28 percent for the remaining term of the Revolving
Credit Agreement, and CL&P's interest coverage test for the period beginning
April 1, 1999 was reduced to 1.75 to 1.
Under the NU Credit Agreement, NU was required to maintain a common
equity ratio of at least 32 percent. In addition, NU was required to
maintain a quarterly interest coverage ratio of 2.50 to 1 for the quarter
ending December 31, 1998. NU met these requirements in 1998. In March 1999,
the NU Credit Agreement was amended to reduce the common equity ratio test
to 31 percent for the remaining term of the agreement and to impose a 2.0 to
1 interest coverage ratio test for the first quarter of 1999 and a 1.75 to 1
test for the second quarter.
NU's guarantee of Select Energy's payment obligations under its letter
of credit presently requires it to maintain an interest coverage ratio of
2.0 to 1 and a common equity ratio of 31 percent.
In addition to the Select guarantees, NU has provided credit assurance,
including guarantees of letters of credit, performance guarantees and other
assurances for the financial and performance obligations of certain of its
unregulated subsidiaries. NU currently is limited by the SEC to an aggregate
of $75 million of such credit assurance arrangements. NU expects to
increase this limitation in the future.
PSNH and NAEC are parties to a variety of financing agreements which
provide that the credit thereunder can be terminated or accelerated if each
does not maintain specified minimum ratios of common equity to capitalization
(as defined in each agreement). For PSNH, the minimum common equity ratio
required in certain letters of credit and reimbursement agreements and its
$75 million revolving credit agreement is not less than 32.5 percent. At
December 31, 1998, PSNH's common equity ratio was 53.41 percent. For NAEC,
the minimum common equity ratio required under its term loan agreement is
25 percent; at December 31, 1998, NAEC's common equity ratio was 30.06 percent.
In addition, PSNH's revolving credit agreement and letters of credit
and reimbursement agreements require that for PSNH to obtain and maintain
borrowings thereunder, it must demonstrate that its ratio of operating
income to interest expense will be at least 2.35 to 1 at the end of each
fiscal quarter for the remaining term of the agreements. The NAEC term
loan agreement requires a ratio of adjusted net income to interest expense
of 1.50 to 1 at the end of each fiscal quarter for the remaining term of
the agreement. For the 12-month period ended December 31, 1998 the
corresponding ratios for PSNH and NAEC were 4.07 to 1 and 2.02 to 1,
respectively.
In addition, PSNH and NAEC are parties to a variety of financing
agreements providing in effect that the credit thereunder can be terminated
or accelerated if there are actions taken, either by PSNH or NAEC or by the
State of New Hampshire, that deprive PSNH and/or NAEC of the benefits of the
Rate Agreement and/or the Seabrook Power Contracts.
The amounts of short-term borrowings that may be incurred by NU, CL&P,
PSNH, WMECO, HWP and NAEC are also subject to periodic approval by the SEC
under the 1935 Act. The following table shows the amount of short-term
borrowings authorized by the SEC for each company as of January 1, 1999 and
the net amounts of outstanding short-term debt and cash investments of those
companies at the end of 1998 and as of March 1, 1999:
Short-Term Debt
Maximum Authorized Outstanding
Short-Term Debt and (Cash Investments)*
12/31/98 3/1/99
(Millions)
NU.................. $200 $(34.4) $ (27.9)
CL&P ............... 375 3.4 138.5
PSNH**.............. 125 (58.7) (110.7)
WMECO............... 150 50.9 102.1
HWP................. 5 (10.1) (11.4)
NAEC................ 60 (30.3) (64.1)
OTHER............... N/A (3.0) (9.3)
Total $(82.2) $ 17.2
* These columns include borrowings of or cash investments by various System
companies from NU and other System companies. Total System short-term
indebtedness to unaffiliated lenders was $30 million at December 31, 1998
and $225 million at March 1, 1999.
** The NHPUC has approved short term borrowings by PSNH under the $75
million secured revolving credit agreement that will expire in April 1999.
When the revolving credit agreement expires, PSNH's maximum authorized short
term debt pursuant to New Hampshire law will be approximately $66 million.
The supplemental indentures under which NU issued $175 million in
principal amount of 8.58 percent amortizing notes in December 1991 and $75
million in principal amount of 8.38 percent amortizing notes in March 1992
contain restrictions on dispositions of certain System companies' stock,
limitations of liens on NU assets and restrictions on distributions on and
acquisitions of NU stock. Under these provisions, NU, CL&P, PSNH and WMECO
may not dispose of voting stock of CL&P, PSNH or WMECO other than to NU or
another System company, except that CL&P may sell voting stock for cash to
third persons if so ordered by a regulatory agency so long as the amount
sold is not more than 19 percent of CL&P's voting stock after the sale.
The restrictions also generally prohibit NU from pledging voting stock of
CL&P, PSNH or WMECO or granting liens on its other assets in amounts greater
than five percent of the total common equity of NU. The Revolving Credit
Agreement, the NU Credit Agreement and NU's guarantee of Select Energy's
obligations under its letter of credit have similar restrictions. As of
December 31, 1998, no NU debt was secured by liens on NU assets. Finally,
NU may not declare or make distributions on its capital stock, acquire its
capital stock (or rights thereto), or permit a System company to do the
same, at times when there is an event of default under the supplemental
indentures under which the amortizing notes were issued.
The charters of CL&P and WMECO contain preferred stock provisions
restricting the amount of unsecured debt those companies may incur. As
of December 31, 1998, CL&P's and WMECO's charters permit CL&P and WMECO
to incur an additional $466 million and $96 million, respectively, of
unsecured debt.
The indentures securing the outstanding first mortgage bonds of CL&P,
PSNH, WMECO and NAEC provide that additional bonds may not be issued,
except for certain refunding purposes, unless earnings (as defined in
each indenture and before income taxes, and, in the case of PSNH, without
deducting the amortization of PSNH's regulatory asset), are at least twice
the pro forma annual interest charges on outstanding bonds and certain prior
lien obligations and the bonds to be issued. CL&P and WMECO's 1998 earnings
do not permit them to meet those earnings coverage tests, but as of December
31, 1998, CL&P and WMECO would be able to issue up to $91.6 million and $6.4
million of additional first mortgage bonds, respectively, on the basis of
previously issued but refunded bonds, without having to meet the earnings
coverage test.
The preferred stock provisions of CL&P's and WMECO's charters also
prohibit the issuance of additional preferred stock (except for refinancing
purposes) unless income before interest charges (as defined and after income
taxes and depreciation) is at least 1.5 times the pro forma annual interest
charges on indebtedness and the annual dividend requirements on preferred
stock that will be outstanding after the additional stock is issued. CL&P
and WMECO are currently unable to issue additional preferred stock under
these provisions.
SEC rules under the 1935 Act require that dividends on NU's shares be
based on the amount of dividends received from subsidiaries, not on the
undistributed retained earnings of subsidiaries. NU suspended the payment
of dividends beginning with the quarter ended June 30, 1997.
The supplemental indentures under which CL&P's and WMECO's first
mortgage bonds have been issued limit the amount of cash dividends and
other distributions these subsidiaries can make to NU out of their retained
earnings. As of December 31, 1998, WMECO had $46.0 million of unrestricted
retained earnings. As of the same date, CL&P had an accumulated deficit of
approximately $330.0 million that must be made up before it is able to pay
dividends to NU. The indenture under which NAEC's Series A Bonds have been
issued also limits the amount of cash dividends or distributions NAEC can
make to NU to retained earnings plus $10 million. At December 31, 1998,
approximately $53.2 million was available to be paid under this provision.
PSNH's revolving credit agreement and letters of credit and
reimbursement agreements prohibit it from declaring or paying any cash
dividends or distributions on any of its capital stock, except for dividends
on the preferred stock, unless minimum interest coverage and common equity
ratio tests discussed above are satisfied. These agreements also require
creditor approval to pay more than $25 million in dividends to NU. PSNH's
preferred stock provisions also limit the amount of cash dividends and other
distributions PSNH can make to NU if, after taking the dividend or other
distribution into account, PSNH's common stock equity is less than 25 percent
of total capitalization. At December 31, 1998, approximately $293.2 million
was available to be paid under these provisions. If NAEC could not meet the
common equity covenant referred to above, it would also be unable to pay
common dividends. At December 31, 1998, $45.1 million was available to be
paid by NAEC under this provision.
On March 20, 1998, in connection with the approval of PSNH's revolving
credit agreement, the NHPUC issued an order requiring PSNH to obtain NHPUC
approval before paying any dividends on its common stock and before investing
any PSNH funds in the NU System Money Pool during the expected 364-day term
of the facilities.
Certain System financing agreements also have covenants or trigger events
tied to credit ratings of certain System companies.
The downgrade by Moody's of WMECO's first mortgage bonds to Ba2 in
December 1997 brought those ratings to a level at which the sponsor of WMECO's
$40 million accounts receivable program can take various actions, in its
discretion, which would have the practical effect of limiting WMECO's ability
to utilize the facility. The WMECO accounts receivable program could be
terminated if WMECO's first mortgage bond credit ratings experience one more
level of downgrade. CL&P's $200 million accounts receivable program could be
terminated if its senior secured debt is downgraded two more steps from its
current ratings.
CL&P is party to an operating lease with General Electric Capital
Corporation related to the use of four turbine generators having an
installed cost of approximately $70 million and a stipulated loss value of
$59 million. CL&P must meet certain financial covenants that are similar to
the Revolving Credit Agreement. As a result of CL&P's February 5, 1999 rate
decision, CL&P was required to obtain a waiver of these covenants for the
fourth quarter of 1998 and is in the process of renegotiating the
requirements.
For information regarding the effect of downgrades on certain fossil-
fuel hedging agreements of CL&P, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."
CONSTRUCTION PROGRAM
The System's construction program expenditures, including allowance for
funds used during construction (AFUDC), in the period 1999 through 2003 are
estimated to be as follows:
1999 2000 2001 2002 2003
(Millions of Dollars)
PRODUCTION
CL&P................. $38.8 $ 67.4 $39.5 $26.8 $31.6
PSNH................. 20.0 4.9 6.6 2.4 7.7
WMECO................ 8.7 18.6 11.8 8.9 7.7
NAEC................. 8.2 8.4 4.5 4.3 1.9
Other................ 0.8 3.2 4.3 2.0 0.4
----- ----- ----- ----- -----
System Total....... $76.6 $102.5 $66.7 $44.4 $49.3
SUBSTATIONS AND TRANSMISSION LINES
CL&P................. $ 8.0 $ 3.3 $ 7.0 $ 8.2 $33.1
PSNH................. 5.8 2.1 2.1 2.2 2.3
WMECO................ 6.0 3.0 0.3 0.1 0.1
NAEC................. - - - - -
Other................ 0.1 - - - -
----- ----- ----- ----- -----
System Total....... $19.9 $ 8.4 $ 9.4 $10.5 $35.5
DISTRIBUTION OPERATIONS
CL&P................. $171.4 $236.5 $261.2 $255.0 $248.6
PSNH................. 32.4 57.5 55.7 57.7 58.9
WMECO................ 16.9 20.3 21.1 20.6 19.3
NAEC................. - - - - -
Other................ 0.3 0.2 0.1 0.2 0.1
------ ------ ------ ------ ------
System Total....... $221.0 $314.5 $338.1 $333.5 $326.9
GENERAL
CL&P................. $ 12.7 $ 4.4 $ 43.3 $ 2.8 $ 3.4
PSNH................. 9.7 0.8 0.9 0.9 0.9
WMECO................ 2.0 1.0 0.5 0.5 0.5
NAEC................. - - - - -
Other................ 21.9 20.3 21.0 - -
------ ------ ------ ------ ------
System Total....... $ 46.3 $ 26.5 $ 25.7 $ 30.1 $ 25.4
TOTAL CONSTRUCTION
CL&P................. $230.9 $311.6 $311.0 $292.8 $316.7
PSNH................. 67.9 65.3 65.3 63.2 69.8
WMECO................ 33.6 42.9 33.7 30.1 27.6
NAEC................. 8.2 8.4 4.5 4.3 1.9
Other................ 23.1 23.7 25.4 28.1 21.1
------ ------ ------ ------ ------
System Total....... $363.7 $451.9 $439.9 $418.5 $437.1
The construction program data shown above includes all anticipated
capital costs necessary for committed projects and for those reasonably
expected to become committed, regardless of whether the need for the
project arises from environmental compliance, nuclear safety, reliability
requirements or other causes. The construction program's main focus is
maintaining and upgrading the existing transmission and distribution
system and nuclear and fossil-generating facilities. The increase in
construction expenditures after 1999 is primarily related to projected
capital improvements for the distribution system. System companies'
construction needs, however, may change substantially in light of their
commitment to sell their non-nuclear generating units in connection with
restructuring in Massachusetts and Connecticut. It is possible that the
System companies will no longer construct any new generating facilities,
but instead contract with third parties for capacity in a competitive
generation market.
ELECTRIC OPERATIONS
DISTRIBUTION AND SALES
The System companies traditionally have owned and operated a fully
integrated electric utility business. Restructuring legislation in New
Hampshire, Massachusetts and Connecticut, however, requires PSNH, WMECO
and CL&P, respectively, to separate the distribution, transmission and
generation functions of their business.
The System companies furnish retail franchise service in 149, 198 and 59
cities and towns in Connecticut, New Hampshire and Massachusetts, respectively.
In December 1998, CL&P furnished retail franchise service to approximately 1.11
million customers in Connecticut, PSNH provided retail service to approximately
422,000 customers in New Hampshire and WMECO served approximately 196,000
retail franchise customers in Massachusetts. HWP serves 32 retail customers
in Holyoke, Massachusetts.
The following table shows the sources of 1998 electric revenues based
on categories of customers:
CL&P PSNH** WMECO NAEC Total System
Residential........ 41% 32% 39% - 41%
Commercial......... 37 27 35 - 34
Industrial......... 13 17 20 - 15
Wholesale*......... 7 23 5 100% 9
Other.............. 2 1 1 - 1
Total.............. 100% 100% 100% 100% 100%
* Includes capacity sales and sales from PSNH to CL&P and WMECO.
** Excludes sales related to the retail pilot program in New Hampshire.
NAEC's 1998 electric revenues were derived entirely from sales to PSNH
under the Seabrook power contracts. See "Rates--New Hampshire Retail Rates--
Seabrook Power Contracts" for a discussion of the contracts.
The actual changes in retail kWh sales for the last two years and the
forecasted sales growth estimates for the ten-year period 1998 through 2008,
in each case exclusive of wholesale sales, non-franchised retail sales and
sales related to the retail pilot program in New Hampshire, for the System,
CL&P, PSNH and WMECO are set forth below:
1998 over 1997 over Forecast 1998-2008
1997 1996 Compound Rate of Growth
System......... 1.9% (.3)% 1.3%
CL&P........... 2.2% 0 % 1.1%
PSNH........... 2.3% (.1)% 1.9%
WMECO.......... 1.3% (1.0)% 0.8%
Consolidated NU retail sales rose by 1.9 percent in 1998 compared with
1997 primarily due to the continuing strengthening of the regional economy.
This growth occurred despite the negative impact of weather constraining
sales by an estimated 1.0 percent. Residential electric sales were up
.5 percent. Commercial sales were up by 3.2 percent for the year and
industrial sales increased by 2.2 percent. Retail sales for all of the
System companies increased in 1998 with CL&P, WMECO and PSNH sales up 2.2
percent, 2.3 percent and 1.3 percent, respectively.
REGIONAL AND SYSTEM COORDINATION
The System companies and most other New England utilities are parties
to an agreement (NEPOOL Agreement), which provides for coordinated planning
and operation of the region's generation and transmission facilities. The
NEPOOL Agreement was restated and revised as of March 1997 to provide for
a pool-wide open access transmission tariff and for the creation of an
Independent System Operator (ISO). Under these new arrangements: (i) the
ISO, a non-profit corporation whose board of directors and staff is not
controlled by or affiliated with market participants, ensures the reliability
of the NEPOOL transmission system, administers the NEPOOL tariff and oversees
the efficient and competitive functioning of the regional power market; (ii)
the NEPOOL tariff provides for non-discriminatory open access to the regional
transmission network at one rate regardless of transmitting distance for all
transactions; and (iii) a broader governance structure for NEPOOL and a more
open, competitive market structure are established.
Pursuant to the NEPOOL Agreement, if a participant is unable to meet
its capacity responsibility obligations, the participant is required
to purchase capacity through the ISO at a market clearing price as set
forth in the NEPOOL Agreement. The System has been meeting its capacity
responsibility while the Millstone units were shut down through purchased-
power contracts with other utilities. The cost of these arrangements
for 1998 was approximately $27 million. Assuming Millstone 2 returns to
service in April 1999, the further costs related to the System's capacity
responsibility obligations are estimated to be approximately $6 million.
There are two agreements that determine the manner in which costs
and savings are allocated among the System companies. Under an agreement
(NUG&T) among CL&P, WMECO and HWP (Initial System Companies), these
companies pool their electric production costs and the costs of their
principal transmission facilities. Pursuant to the merger agreement between
NU and PSNH, the Initial System Companies and PSNH entered into a ten-year
sharing agreement (Sharing Agreement), expiring in June 2002, that provides,
among other things, for the allocation of the capability responsibility
savings and energy expense savings resulting from a single-system dispatch
through NEPOOL. It is expected that these agreements will be terminated
and/or modified in connection with restructuring.
TRANSMISSION ACCESS AND FERC REGULATORY CHANGES
In April 1996, FERC issued its final open access rule (Order 888) to
promote competition in the electric industry. Order 888 requires, among
other things, all public utilities that own, control or operate facilities
used for transmitting electric energy in interstate commerce to file an
open-access, nondiscriminatory transmission tariff and to take transmission
service for their own new wholesale sales and purchases under the open
access tariffs. Order 888 also supports full recovery of legitimate, prudent
and verifiable wholesale stranded costs, but indicates that FERC will not
interfere with state determinations of retail stranded costs.
On May 2, 1997, the System companies, along with other parties, filed
with the U.S. Court of Appeals an appeal of Order 888, challenging FERC's
abdication of its responsibility to ensure uniform recovery of full stranded
costs at the wholesale and retail level, including FERC's refusal to endorse
stranded costs payments (e.g., exit fees) for customers physically bypassing
their former supplier, as well as FERC's imposition of an ordinary negligence
standard of liability on transmission providers. This matter is still pending.
In a companion order to Order 888 (Order 889), FERC also required
electric utilities to develop and maintain a same-time information system
that will give existing and potential transmission users the same access
to transmission information that the electric utility enjoys, and required
electric utilities to separate transmission from generation marketing
functions pursuant to standards of conduct. The System companies are
complying with the requirements of Order 889.
In 1998, the System companies collected approximately $34 million in
incremental transmission revenues from other electric utility generators.
For information regarding certain disputes between PSNH and NHEC,
which have been the subject of various FERC proceedings, see "Item 3.
Legal Proceedings."
NUCLEAR GENERATION
GENERAL
Certain System companies have ownership interests in four nuclear
units, Millstone 1, 2 and 3 and Seabrook 1, and equity interests in four
regional nuclear companies (the Yankee Companies) that separately own CY,
MY, Vermont Yankee (VY) and Yankee Rowe. System companies operate the three
Millstone units and Seabrook 1. Yankee Rowe, CY, MY and Millstone 1 have
been permanently removed from service. For information regarding the
decommissioning of these units, see " Electric Operations -- Nuclear
Plant Performance and Regulatory Oversight - Decommissioning," below.
CL&P and WMECO own 100 percent of Millstone 1 and 2 as tenants in
common. Their respective ownership interests in each unit are 81 percent
and 19 percent.
CL&P, PSNH and WMECO have agreements with other New England utilities
covering their joint ownership as tenants in common of Millstone 3. CL&P's,
PSNH's and WMECO's ownership interests in the unit are 52.93, 2.85 and 12.24
percent, respectively. NAEC and CL&P have 35.98 percent and 4.06 percent
ownership interests, respectively, in Seabrook.
In 1996, one of the joint owners of Millstone 3, Vermont Electric
Generation and Transmission Cooperative, Inc. (VEG&T), filed for bankruptcy.
The subsequent liquidation resulted in the offering of VEG&T's .035 percent
share of Millstone 3 for sale to the joint owners of Millstone 3. None
of the non-NU joint owners accepted the offer. CL&P expects to make the
necessary regulatory filings to acquire ownership of the VEG&T share in
1999.
The Millstone 3 and Seabrook joint ownership agreements provide for
pro-rata sharing by the owners of each unit of the construction and
operating costs, the electrical output and the associated transmission
costs. CL&P and WMECO, through NNECO as agent, operate Millstone 3 at cost,
and without profit, under a sharing agreement that obligates them to utilize
good utility operating practice and requires the joint owners to share the
risk of employee negligence and other risks pro rata in accordance with
their ownership shares. The sharing agreement provides that CL&P and WMECO
would only be liable for damages to the non-NU owners for a deliberate
breach of the agreement pursuant to authorized corporate action.
For information regarding lawsuits filed against NU by the non-NU
owners of Millstone 3 regarding the sharing agreement and certain
arbitration proceedings related to the ongoing Millstone outages, see
"Item 3 - Legal Proceedings."
CL&P, PSNH, WMECO and other New England electric utilities are the
stockholders of the Yankee companies. Each Yankee company owns a single
nuclear generating unit. The stockholder-sponsors of each Yankee company
are responsible for proportional shares of the operating and decommissioning
costs of the respective Yankee company and are entitled to proportional
shares of the electrical output in the case of Vermont Yankee (VY), which
is the only operating unit of the four Yankee companies set forth below.
The relative rights and obligations with respect to the Yankee companies
are approximately proportional to the stockholders' percentage stock holdings,
but vary slightly to reflect arrangements under which nonstockholder electric
utilities have contractual rights to some of the output of particular units.
The Yankee companies and CL&P's, PSNH's and WMECO's stock ownership percentages
in the Yankee companies are set forth below:
CL&P PSNH WMECO System
Connecticut Yankee Atomic
Power Company (CYAPC) ...... 34.5% 5.0% 9.5% 49.0%
Maine Yankee Atomic Power
Company (MYAPC) ............ 12.0% 5.0% 3.0% 20.0%
Vermont Yankee Nuclear
Power Corporation (VYNPC)... 9.5% 4.0% 2.5% 16.0%
Yankee Atomic Electric
Company (YAEC) ............ 24.5% 7.0% 7.0% 38.5%
CL&P, PSNH and WMECO are obligated to provide their percentages of any
additional equity capital necessary for VY, but do not expect to need to
contribute additional equity capital in the future. CL&P, PSNH and WMECO
believe that VY could require additional external financing in the next
several years to finance construction expenditures, nuclear fuel and for
other purposes. Although the way in which VYNPC would attempt to finance
these expenditures, if they are needed, has not been determined, CL&P, PSNH
and WMECO could be asked to provide further direct or indirect financial
support. CYAPC, YAEC and MYAPC could also request their sponsors to provide
future financial support necessary in connection with the decommissioning of
their respective units, the level of which support cannot be estimated at
this time, but could be material.
The operators of Millstone 2 and 3, VY and Seabrook 1 hold full term
operating licenses from the NRC and are subject to the jurisdiction of
the NRC. The NRC has broad jurisdiction over the design, construction
and operation of nuclear generating stations, including matters of public
health and safety, financial qualifications, antitrust considerations and
environmental impact. The NRC issues 40-year initial operating licenses
to nuclear units and NRC regulations permit renewal of licenses for an
additional 20-year period. The NRC also has jurisdiction over the
decommissioning activities at Yankee Rowe, CY, MY, and Millstone 1.
The NRC also regularly conducts generic reviews of technical and other
issues, a number of which may affect the nuclear plants in which System
companies have interests. The cost of complying with any new requirements
that may result from these reviews cannot be estimated at this time, but
such costs could be substantial. For more information regarding recent
actions taken by the NRC with respect to the System's nuclear units, see
"Nuclear Plant Performance and Regulatory Oversight" below.
NUCLEAR PLANT PERFORMANCE AND REGULATORY OVERSIGHT
MILLSTONE 2 AND 3
Millstone 2 and 3 are located in Waterford, Connecticut, and have
license expirations of July 31, 2015 and November 25, 2025, respectively.
Millstone Station has been the subject of intense regulatory scrutiny over
the last several years. Millstone 3, the largest plant, was returned to
service in July 1998, after having been shutdown since March 30, 1996. The
unit operated at a capacity factor of 70.5 percent from the time it returned
from its extended outage in July 1998 through December 31, 1998. The unit
was shutdown from December 11, 1998 to December 31, 1998 to modify certain
valves that had failed during routine surveillance testing. The unit is
scheduled to begin a refueling outage on May 1, 1999. Millstone 3 remains
on the NRC's watch list as a Category 2 facility, which indicates that the
NRC intends to continue to closely monitor the facility.
Millstone 2 has been out of service since February 21, 1996. This unit
is presently on the NRC's watch list as a Category 3 plant. Plants in this
category are required to receive formal NRC commissioners' approval to resume
operations. Key steps before restart include final verification that the unit
is in conformance with its design and licensing basis; that management processes
support safe and conservative operations; and that the employees are effective
at identifying and correcting deficiencies at the unit. Management currently
hopes to restart Millstone 2 in the spring of 1999.
In addition to the various technical and design basis issues at Millstone,
the NRC continues to focus on the System's response to employee concerns at
the units. In October 1996, the NRC issued an order that requires NNECO to
develop and implement a comprehensive plan for handling safety concerns raised
by Millstone employees and for assuring an environment free from retaliation
and discrimination. The NRC also ordered NNECO to contract for an independent
third party to oversee the implementation of the comprehensive plan. At an
NRC Commissioners' briefing on January 19, 1999, the NRC Staff recommended
that the third party oversight contractor was no longer necessary.
For information regarding criminal investigations by the NRC's Office
of Investigations (OI) and the Office of the U. S. Attorney for the District
of Connecticut related to various matters at Millstone and CY, a citizens'
petition related to nuclear operations and potential joint owner litigation
related to the extended outages, see "Item 3. Legal Proceedings."
SEABROOK
Seabrook, a 1148-MW pressurized-water reactor, has a license expiration
date of October 17, 2026. The Seabrook operating license expires 40 years
from the date of issuance of authorization to load fuel, which was about
three and one-half years before Seabrook's full-power operating license was
issued. The System will determine at the appropriate time whether to seek
recapture of some or all of this period from the NRC and thus add up to
an additional three and one-half years to the operating term for Seabrook.
Seabrook had no planned refueling and maintenance outage in 1998. In
1998, Seabrook operated at a capacity factor of 82.7 percent. Seabrook
experienced two unplanned outages in 1998 (December 5, 1997 - January 17,
1998 and June 11, 1998 - July 11, 1998). During the course of repairing a
leak during the first outage, problems occurred in the control building air
conditioning system. Modifications were made to the air conditioning system
at that time, but required additional modifications and the replacement of
two refrigeration compressors. The unit is scheduled to begin a 45-day
refueling outage on March 26, 1999.
VERMONT YANKEE
VY, a 514-MW boiling water reactor, has a license expiration date of
March 21, 2012. In 1998, VY operated at a capacity factor of 75.2 percent.
VY had a planned refueling outage from March 20, 1998 to June 3, 1998.
NUCLEAR INSURANCE
For information regarding nuclear insurance, see "Commitments and
Contingencies--Nuclear Insurance Contingencies" in the notes to NU's, CL&P's,
PSNH's, WMECO's and NAEC's financial statements.
NUCLEAR FUEL
GENERAL
The supply of nuclear fuel for the System's existing units requires the
procurement of uranium concentrates, followed by the conversion, enrichment
and fabrication of the uranium into fuel assemblies suitable for use in the
System's units. Fuel may also be purchased at a point after any of the
above processes are completed. The System expects that uranium concentrates
and related services for the units operated by the System and for the other
units in which the System companies are participating that are not covered
by existing contracts, will be available for the foreseeable future on
reasonable terms and prices.
As a result of the Energy Policy Act, the United States commercial
nuclear power industry is required to pay the United States Department
of Energy (DOE), through a special assessment, for the costs of the
decontamination and decommissioning of uranium enrichment plants owned
by the United States government, no more than $150 million per annum for
15 years beginning in 1993. Each domestic nuclear utility's payment is
based on its pro rata share of all enrichment services received by the
United States commercial nuclear power industry from the United States
government through October 1992. Each year, the DOE adjusts the annual
assessment using the Consumer Price Index. The Energy Policy Act provides
that the assessments are to be treated as reasonable and necessary current
costs of fuel, which costs shall be fully recoverable in rates in all
jurisdictions. The System's remaining share to be recovered, assuming no
escalation, is approximately $60 million as of December 31, 1998. Management
believes that the DOE assessments against CL&P, WMECO, PSNH and NAEC will
be recoverable in future rates. Accordingly, each of these companies has
recognized these costs as a regulatory asset, with a corresponding obligation
on its balance sheet.
On October 22, 1998, an action was initiated by the owners of the
Millstone units in the U.S. Court of Federal Claims against the DOE regarding
the special annual assessment that DOE imposes on purchasers of enriched
uranium to meet the future costs of decontaminating and decommissioning
government owned uranium enrichment facilities. Similar actions for Seabrook
and Connecticut Yankee were filed on October 23, 1998. The lawsuits challenge
the imposition of the D&D assessment on federal constitutional grounds, and
are similar to actions filed by a number of other utilities against DOE. As
of December 31, 1998, the System companies had paid approximately $28 million
into the fund.
Nuclear fuel costs associated with nuclear plant operations include
amounts for disposal of spent nuclear fuel. The System companies include in
their nuclear fuel expense spent fuel disposal costs accepted by the DPUC,
NHPUC and DTE in rate case or fuel adjustment decisions. Spent fuel
disposal costs also are reflected in FERC-approved wholesale charges.
HIGH-LEVEL RADIOACTIVE WASTE
The Nuclear Waste Policy Act of 1982 (NWPA) provides that the federal
government is responsible for the permanent disposal of spent nuclear reactor
fuel (SNF) and high-level waste. As required by the NWPA, electric utilities
generating SNF and high-level waste are obligated to pay fees into a fund
which would be used to cover the cost of siting, constructing, developing and
operating a permanent disposal facility for this waste. The System companies
have been paying for such services for fuel burned on or after April 7, 1983
on a quarterly basis since July 1983. The DPUC, NHPUC and DTE permit the fee
to be recovered through rates. For nuclear fuel used to generate electricity
prior to April 7, 1983 (prior-period fuel), payment must be made prior to the
first delivery of spent fuel to the DOE. The DOE's current estimate for an
available site is 2010. For more information regarding payments related to
the prior-period fuel, see "Spent Nuclear Fuel Disposal Costs" in the notes
to NU's, CL&P's, PSNH's, WMECO's and NAEC's financial statements.
In return for payment of the fees prescribed by the NWPA, the federal
government is to take title to and dispose of the utilities' high-level
wastes and SNF. There has been numerous litigation involving the DOE's
statutory and contractual obligation to accept high-level waste and SNF.
While the courts have declined to order DOE to begin accepting spent fuel
for disposal on January 31, 1998, the courts left open the utilities'
ability to bring damage claims against the DOE.
On February 18, 1998, YAEC filed a complaint against DOE in the United
States Court of Federal Claims seeking damages in excess of $70 million
resulting from DOE's failure to accept spent nuclear fuel for disposal.
CYAPC and MYAPC filed similar complaints on March 4, 1998 and June 2, 1998
seeking damages of over $90 million and $128 million, respectively. On
October 29, 1998, the court found liability on the part of DOE to YAEC for
breach of the Standard Contract, based upon DOE's failure to begin disposal
of SNF. In separate orders dated October 30, 1998 and November 3, 1998,
respectively, the court extended its rulings in the YAEC case to the damage
claim cases filed by CYAPC and MYAPC. DOE is expected to appeal the claims
court decision.
Until the federal government begins accepting nuclear waste for disposal,
nuclear generating plants will need to retain high-level waste and spent fuel
onsite or make some other provisions for their storage. With the addition of
new storage racks, storage facilities for Millstone 3 are expected to be
adequate for the projected life of the unit. With the implementation of
currently planned modifications, the storage facilities for Millstone 2
are expected to be adequate (maintaining the capacity to accommodate a
full-core discharge from the reactor) until 2005. Fuel consolidation,
which has been licensed for Millstone 2, could provide adequate storage
capability for its projected life. Seabrook is expected to have spent fuel
storage capacity until at least 2010.
The available capacity of the VY spent fuel pool is expected to be able
to accommodate full-core removal until 2001. Full core discharge ability
through the year 2008 could be achieved with the installation of additional
storage racks in the spent fuel pool, subject to approval of a pending NRC
license amendment. VYNPC is also investigating other options for additional
storage capacity beyond the year 2001.
Adequate storage capacity exists to accommodate all of the SNF at
Millstone 1, CY, MY and Yankee Rowe until that fuel is removed by the DOE.
LOW-LEVEL RADIOACTIVE WASTE
The System currently has contracts to dispose its low-level radioactive
waste (LLRW) at two privately operated facilities in Clive, Utah, and in
Barnwell, South Carolina. The current political situation in South Carolina
makes it difficult to predict whether the Barnwell facility will remain
open. Because access to LLRW disposal may be lost at any time, the System
has plans that will allow for onsite storage of LLRW for at least five
years.
DECOMMISSIONING
Based upon the System's most recent comprehensive site-specific updates
of the decommissioning costs for each of the three Millstone units and for
Seabrook, the recommended decommissioning method continues to be immediate
and complete dismantlement of those units at their retirement. The table
below sets forth the estimated Millstone and Seabrook decommissioning costs
for the System companies. The estimates are based on the latest site
studies, stated in December 31, 1998 dollars.
CL&P PSNH WMECO NAEC System
(Millions)
Millstone 1....... $ 560.5 $ - $131.5 $ - $ 692.0
Millstone 2....... 322.0 - 75.5 - 397.5
Millstone 3....... 296.2 15.9 68.5 - 380.6
Seabrook.......... 19.9 - - 175.9 195.8
Total........... $1,198.6 $15.9 $275.5 $175.9 $1,665.9
As of December 31, 1998, the System recorded balances (at market) in
its external decommissioning trust funds are as follows:
CL&P PSNH WMECO NAEC System
(Millions)
Millstone 1....... $210.5 $ - $ 58.7 $ - $269.2
Millstone 2....... 142.1 - 40.9 - 183.0
Millstone 3....... 96.3 5.6 26.0 - 127.9
Seabrook.......... 3.8 - - 35.2 39.0
Total........... $452.7 $5.6 $125.6 $35.2 $619.1
In 1986, the DPUC approved the establishment of separate external
trusts for the currently tax-deductible portions of decommissioning expense
accruals for Millstone 1 and 2 and for all expense accruals for Millstone 3.
WMECO has established independent trusts to hold all decommissioning
expense collections from customers. The DTE has authorized WMECO to collect
its current decommissioning estimate for the three Millstone units.
New Hampshire enacted a law in 1981 requiring the creation of a state-
managed fund to finance decommissioning of any units in that state. NAEC's
costs for decommissioning are billed by it to PSNH and recovered by PSNH
under the Rate Agreement. Under the Rate Agreement, PSNH is entitled to a
base rate increase to recover increased decommissioning costs. In its recent
restructuring orders, the NHPUC determined that PSNH would be allowed to
recover decommissioning costs through stranded cost charges. See "Rates--
New Hampshire Retail Rates" for further information on the Rate Agreement
and restructuring.
The decommissioning cost estimates for the System nuclear units
are reviewed and updated regularly to reflect inflation and changes in
decommissioning requirements and technology. Changes in requirements or
technology, or adoption of a decommissioning method other than immediate
dismantlement, could change these estimates. CL&P, PSNH and WMECO attempt
to recover sufficient amounts through their allowed rates to cover their
expected decommissioning costs. Only the portion of currently estimated
total decommissioning costs that has been accepted by regulatory agencies is
reflected in rates of the System companies. Based on present estimates, and
assuming its nuclear units operate to the end of their respective license
periods, the System expects that the decommissioning trust funds will be
substantially funded when those expenditures have to be made.
Based on a continued unit operation study filed with the DPUC in 1998,
CL&P and WMECO decided to shutdown Millstone 1 and instead prepare for final
decommissioning. The total estimated decommissioning costs, which have been
updated to reflect the early shutdown of the unit, are approximately $692.0
million as of December 31, 1998 ($560.5 million for CL&P and $131.5 million
for WMECO). CL&P and WMECO use external trusts to fund the estimated
decommissioning costs of Millstone 1. At December 31, 1998, the fair market
value of the balance in the trusts was approximately $269.2 million ($210.5
million for CL&P and $58.7 million for WMECO). In addition, CL&P had
previously established a decommissioning reserve on its books which
represents amounts which have been collected by CL&P, but not funded to
the external decommissioning trust, and will also be used to fund the
total estimated decommissioning obligation of Millstone 1. At December 31,
1998, the balance of this account was approximately $21.9 million.
In the February 5, 1999 rate decision, the DPUC allowed for the
recovery of CL&P's decommissioning and closure obligations for Millstone 1.
A proceeding to determine the decommissioning amounts to be recovered for
Millstone 1 will be commenced in 1999. CL&P expects to seek recovery of
decommissioning related costs for its interests in other nuclear units in
restructuring proceedings to be commenced in 1999.
WMECO is seeking recovery of decommissioning related costs as part of
their restructuring regulatory proceedings. Based upon the restructuring law
in Massachusetts, management believes it is probable that WMECO will be
allowed to recover from customers the estimated remaining costs associated
with Millstone 1 which have been recorded on their balance sheets as a
deferred asset, including decommissioning, unrecovered plant and related
assets, and other expenditures. WMECO has recorded a liability on its
balance sheets for its share of the total estimated obligation to
decommission the plant.
CYAPC, YAEC, VYNPC and MYAPC are all collecting revenues for
decommissioning from their power purchasers. The table below sets forth
the System companies' estimated share of decommissioning costs (and closure
costs where applicable) of the Yankee units. The estimates are based on the
latest site studies. For information on the equity ownership of the System
companies in each of the Yankee units, see "Electric Operations--Nuclear
Generation--General."
CL&P PSNH WMECO System
(Millions)
VY................ $ 54.4 $21.2 $13.3 $ 84.8
Yankee Rowe*...... 20.0 5.7 5.7 31.5
CY*............... 172.0 24.9 47.4 244.3
MY*............... 85.8 35.8 21.5 143.0
Total........... $ 328.2 $87.6 $87.8 $503.6
* As discussed more fully below, the costs shown include all of the
expected future billings associated with the funding of decommissioning,
recovery of remaining assets and other closure costs associated with the
early retirement of Yankee Rowe, CY and MY as of December 31, 1998 which
have been recorded as an obligation on the books of the System companies.
As of December 31, 1998 the System's share of the external decommissioning
trust fund balances (at market), which have been recorded on the books of the
Yankee Companies, is as follows:
CL&P PSNH WMECO System
(Millions)
VY................ $ 21.7 $ 9.1 $ 5.7 $ 36.5
Yankee Rowe....... 36.4 10.4 10.4 57.2
CY................ 89.9 13.0 24.8 127.7
MY................ 25.5 10.6 6.4 42.5
Total........... $173.5 $43.2 $47.2 $264.0
CYAPC accrues decommissioning costs on the basis of immediate
dismantlement at retirement. In late December 1996, CYAPC made a filing
with FERC to amend the wholesale power contracts between the owners of the
facility and revise decommissioning cost estimates and other cost estimates
for the facility. The amendments clarify the owners' entitlement to full
recovery of sunk costs and the ongoing costs of maintaining the plant in
accordance with NRC rules until decommissioning begins and ensures that
decommissioning will continue to be funded through June 2007, the full
license term, despite the unit's earlier shutdown.
On August 31, 1998, the FERC Administrative Law Judge (ALJ) released an
initial decision regarding the December 1996 filing. The decision contained
provisions which would allow for the recovery, through rates, of the balance
of the NU System companies' net unamortized investment in CY, which was
approximately $51.7 million as of December 31, 1998. The decision also
called for the disallowance of the recovery of a portion of the return on
the CY investment. The ALJ's decision also stated that decommissioning
collections should continue to be based on the previously approved estimate
of $309.1 million (in 1992 dollars), with an inflation adjustment of 3.8
percent per year, until a new, more reliable estimate has been prepared
and tested.
During October 1998, both CYAPC and the NU Owners filed briefs on
exceptions to the ALJ decision. If the initial ALJ decision is upheld, CYAPC
could be required to write off a portion of the regulatory asset associated
with the plant closing.
If upheld, CYAPC's management has estimated the effect of the ALJ
decision on CYAPC's earnings to be approximately $37.5 million, of which
the NU Owners' share would be approximately $18.4 million. NU management
cannot predict the outcome of the hearing at this time, however, NU will
continue to support CYAPC's efforts to contest this initial decision.
MYAPC also accrues decommissioning costs on the basis of immediate
dismantlement at retirement. On January 14, 1998, MYAPC made a filing with
FERC to amend its power contracts with the owners/purchasers and revise its
decommissioning and other charges. FERC accepted the proposed application
for filing, and made the amendments and the proposed charges under the
contracts effective on January 15, 1998 subject to refund after hearings.
On January 18, 1999, MYAPC filed an offer of settlement which, if accepted
by the FERC, will resolve all the issues in the FERC decommissioning rate
case proceeding. The settlement provides, among other things, the following:
(1) MYAPC will collect $33.6 million annually to pay for decommissioning and
spent fuel; (2) its return on equity will be set at 6.5 percent; (3) MYAPC
is permitted full recovery of all unamortized investment in MY, including
fuel, and (4) an incentive budget for decommissioning is set at $436.3
million. For information regarding a dispute between the sponsors of MY and
a number of municipalities and cooperatives which had purchase agreements
with MYAPC, see "Item 3. Legal Proceedings."
Effective January 1996, YAEC began billing its sponsors, including
CL&P, WMECO and PSNH, amounts based on a revised estimate approved by FERC
that assumes decommissioning by the year 2000.
For more information regarding nuclear decommissioning, see "Nuclear
Decommissioning and Plant Closure Costs" in the notes to NU's, CL&P's,
PSNH's, WMECO's and NAEC's financial statements.
OTHER REGULATORY AND ENVIRONMENTAL MATTERS
ENVIRONMENTAL REGULATION
GENERAL
The System and its subsidiaries are subject to federal, state and local
regulations with respect to water quality, air quality, toxic substances,
hazardous waste and other environmental matters. Additionally, the System's
major generation and transmission facilities may not be constructed or
significantly modified without a review by the applicable state agency of
the environmental impact of the proposed construction or modification.
Compliance with environmental laws and regulations, particularly air and
water pollution control requirements, may limit operations or require
substantial investments in new equipment at existing facilities.
SURFACE WATER QUALITY REQUIREMENTS
The federal Clean Water Act (CWA) requires every "point source" discharger
of pollutants into navigable waters to obtain a National Pollutant Discharge
Elimination System (NPDES) permit from the United States Environmental
Protection Agency (EPA) or state environmental agency specifying the allowable
quantity and characteristics of its effluent. System facilities have all
required NPDES permits in effect, but several of these permits are currently
in the renewal process. Compliance with NPDES and state water discharge permits
has necessitated substantial expenditures, which are difficult to estimate,
and may require further expenditures because of additional requirements that
could be imposed in the future. For information regarding a lawsuit related to
alleged violations of certain facilities' NPDES permits, see "Item 3. Legal
Proceedings."
The Federal Oil Pollution Act of 1990 (OPA 90) sets out the requirements
for facility response plans and periodic inspections of spill response equipment
at facilities that can cause substantial harm to the environment by discharging
oil or hazardous substances into the navigable waters of the United States and
onto adjoining shorelines. The System companies are currently in compliance
with the requirements of OPA 90. OPA 90 includes limits on the liability that
may be imposed on persons deemed responsible for release of oil. The limits
do not apply to oil spills caused by negligence or violation of laws or
regulations. OPA 90 also does not preempt state laws regarding liability for
oil spills. In general, the laws of the states in which the System owns
facilities and through which the System transports oil could be interpreted
to impose strict liability for the cost of remediating releases of oil and
for damages caused by releases. The System currently carries general liability
insurance in the total amount of $100 million annual coverage for oil spills.
AIR QUALITY REQUIREMENTS
The Clean Air Act Amendments of 1990 (CAAA) impose stringent requirements
on emissions of sulfur dioxide (SO2) and nitrogen oxide (NOX) for the purpose
of controlling acid rain and ground level ozone. In addition, the CAAA address
the control of toxic air pollutants. Installation of continuous emissions
monitors and expanded permitting provisions also are included. Compliance
with CAAA requirements has cost the System approximately $48 million as of
December 31, 1998: $11 million for CL&P, $33 million for PSNH, $1 million
for WMECO and $3 million for HWP. Compliance costs for additional federal
and state NOX control requirements to be effective in 1999 are currently
estimated to be approximately $10 million for both CL&P and PSNH. In addition,
PSNH expects to spend approximately $2 million a year for SO2 allowances.
Existing and future federal and state air quality regulations,
including Connecticut and Massachusetts restructuring legislation, which
requires development of generator performance standards, and recently
proposed regulations seeking to impose new source standards on existing
units, could hinder or possibly preclude the construction of new, or the
modification of existing, fossil units in the System's service area and
could raise the capital and operating cost of existing units. The ultimate
cost impact of these requirements on the System cannot be estimated because
of uncertainties about how EPA and the states will implement various
requirements of the CAAA.
Section 126 of the Clean Air Act provides for parties to request that
the EPA take action against emissions sources whose emissions may be
atmospherically transported and contribute to nonattainment of the National
Ambient Air Quality Standards in other states. In accordance with this, a
group of northeastern states filed a petition with EPA in 1997 asking them
to take action against a broadly defined group of emissions sources in
several midwestern states which are believed to be contributing to the
nonattainment of the ozone standard in the Northeast. EPA has deferred
specific action on the Section 126 petitions until its call for state
implementation plans in the affected states is complete, probably about
2003. A final decision by the EPA could have a significant effect on NOX
reduction requirements imposed on System companies after 1999.
HAZARDOUS WASTE REGULATIONS
As many other industrial companies have done in the past, System
companies disposed of residues from operations by depositing or burying such
materials on-site or disposing of them at off-site landfills or facilities.
Typical materials disposed of include coal gasification waste, fuel oils,
gasoline and other hazardous materials that might contain polychlorinated
biphenyls (PCBs). It has since been determined that deposited or buried
wastes, under certain circumstances, could cause groundwater contamination
or create other environmental risks. The System has recorded a liability
for what it believes is, based upon currently available information, its
estimated environmental remediation costs for waste disposal sites for
which the System companies expect to bear legal liability, and continues
to evaluate the environmental impact of its former disposal practices.
Under federal and state law, government agencies and private parties can
attempt to impose liability on System companies for such past disposal.
At December 31, 1998, the liability recorded by the System for its estimated
environmental remediation costs for known sites needing remediation including
those sites described below, exclusive of recoveries from insurance or from
third parties, was approximately $21.5 million, within the range of $21.5
million to $36.4 million. These costs could be significantly higher if
alternative remedies become necessary.
Under the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, commonly known as Superfund, EPA has
the authority to clean up or order clean up of hazardous waste sites and to
impose the clean up costs on parties deemed responsible for the hazardous
waste activities on the sites. Responsible parties include the current
owner of a site, past owners of a site at the time of waste disposal, waste
transporters and waste generators. The System currently is involved in one
Superfund site in New Jersey, one in New Hampshire and one in Kentucky,
which could have a material impact on the System. The System has committed
in the aggregate approximately $1.3 million to its share of the clean up of
these sites.
As discussed below, in addition to the remediation efforts for the
above-mentioned Superfund sites, the System has been named as a potentially
responsible party (PRP) and is monitoring developments in connection with
several state environmental actions. The level of study of each site and the
information about the waste contributed to the site by the System and other
parties differs from site to site. Where reliable information is available
that permits the System to make a reasonable estimate of the expected total
costs of remedial action and/or the System's likely share of remediation
costs for a particular site, those cost estimates are provided below. All
cost estimates were made in accordance with generally accepted accounting
principles where remediation costs were probable and reasonably estimable.
In 1987, the Connecticut Department of Environmental Protection (CDEP)
published a list of 567 hazardous waste disposal sites in Connecticut.
The System owns two sites, in Stamford and Rockville, which are on this
list. Both sites were formerly used by CL&P predecessor companies for the
manufacture of coal gas (also known as town gas sites) from the late 1800s
to the 1950s. Site investigations have been completed at these sites and
discussions with state regulators are in progress to address the need for
and extent of remediation necessary to protect public health and the
environment. The total reserve established for these two sites is $6.5
million.
CL&P owns two sections of an abandoned railroad bed in Portland and
Ridgefield, Connecticut. Past studies of portions of the railroad bed have
indicated elevated levels of arsenic in the upper two to three feet of soil
at both locations. A portion of the Portland site was cleaned up in 1997,
but the System reserved approximately $1.8 million for future remediation
efforts.
PSNH contacted New Hampshire Department of Environmental Services
(NHDES) in December 1993 concerning possible coal tar contamination in
Laconia, New Hampshire, in Lake Opechee and the Winnipesaukee River near
an area where PSNH and a second PRP formerly owned and operated a coal
gasification plant from the late 1800's to the 1950's. A comprehensive site
investigation was completed in December 1996. This study has shown that
byproducts from the operation of the former manufactured gas plant are
present in groundwater, subsurface soil and in the sediments of the adjacent
Winnipesaukee River. A remediation action plan is currently under review
by the NHDES. A reserve of $3.8 million has been established for this site.
PSNH has also recently received requests from NHDES to conduct site
investigations at three additional former manufactured gas plant sites.
These sites are located in Keene, Nashua, and Dover, New Hampshire.
Studies are now being planned to understand site conditions and any
environmental impacts. PSNH is also involved in other site studies to
assess contamination, but PSNH's liability at these sites is not expected
to be material.
Environmental contaminants have been identified at the former
Manchester Steam generating station in Manchester, New Hampshire. The NHDES
has requested additional studies to occur at the site in 1999. A reserve of
$4.1 million has been established for abatement and remediation at the site.
In Massachusetts, System companies have been designated by the
Massachusetts Department of Environmental Protection (MDEP) as a PRP for
twelve sites under MDEP's hazardous waste and spill remediation program. At
two sites, the System may incur remediation costs that may be material to
HWP depending on the remediation requirements. At one site, HWP has been
identified by MDEP as one of three PRPs in a coal tar site in Holyoke,
Massachusetts. HWP owned and operated the Holyoke Gas Works from 1859 to
1902. The site is located on the east side of Holyoke, adjacent to the
Connecticut River and immediately downstream of HWP's Hadley Falls Station.
MDEP has designated both the land and river deposit areas as priority waste
disposal sites. The PRPs have been notified of the need to remove tar
deposits from the river. To date, HWP has spent approximately $1 million
for river studies and construction costs related to the site. The total
estimated costs for removal of tar patches in the river range from $2
million to $3 million. HWP has agreed to complete the removal of tar
patches following negotiations of a consent decree with various state
and federal regulatory agencies.
The second site is a former manufactured gas plant facility in
Easthampton, Massachusetts. WMECO predecessor companies owned and operated
the Easthampton Gas Works from 1864 to 1924. Previous investigations have
identified coal tar deposits on the land portion of the site. An analysis
of the human, health and ecological risks at the site and a remedial action
plan will be submitted to the MDEP in 1999. WMECO has reserved approximately
$1.3 million for remediation costs for the site.
In the past, the System has received other claims from government
agencies and third parties for the cost of remediating sites not currently
owned by the System but affected by past System disposal activities and may
receive more such claims in the future. The System expects that the costs
of resolving claims for remediating sites about which it has been notified
will not be material, but cannot estimate the costs with respect to sites
about which it has not been notified.
ELECTRIC AND MAGNETIC FIELDS
Published reports have discussed the possibility of adverse health
effects from electric and magnetic fields (EMF) associated with electric
transmission and distribution facilities and appliances and wiring in
buildings and homes. Most researchers, as well as numerous scientific
review panels considering all significant EMF epidemiological and laboratory
studies to date, agree that current information remains inconclusive,
inconsistent and insufficient for characterizing EMF as a health risk.
Based on this information, management does not believe that a causal
relationship between EMF exposure and adverse health effects has been
established or that significant capital expenditures are appropriate to
minimize unsubstantiated risks. The System companies have closely monitored
research and government policy developments for many years and will continue
to do so.
If further investigation were to demonstrate that the present
electricity delivery system is contributing to increased risk of cancer
or other health problems, the industry could be faced with the difficult
problem of delivering reliable electric service in a cost-effective manner
while managing EMF exposures. To date, no courts have concluded that
individuals have been harmed by EMF from electric utility facilities, but
if utilities were to be found liable for damages, the potential monetary
exposure for all utilities, including the System companies, could be
enormous. Without definitive scientific evidence of a causal relationship
between EMF and health effects, and without reliable information about the
kinds of changes in utilities' transmission and distribution systems that
might be needed to address the problem, if one is found, no estimates of
the cost impacts of remedial actions and liability awards are available.
See "Item 3. Legal Proceedings" for information about lawsuits brought
against NU by plaintiffs regarding EMF exposure.
FERC HYDRO PROJECT LICENSING
Federal Power Act licenses may be issued for hydroelectric projects for
terms of 30 to 50 years as determined by FERC. Upon the expiration of a
license, any hydroelectric project so licensed is subject to reissuance by
FERC to the existing licensee or to others upon payment to the licensee of
the lesser of fair value or the net investment in the project plus severance
damages less certain amounts earned by the licensee in excess of a
reasonable rate of return.
The System companies currently hold FERC licenses for 19 hydroelectric
projects aggregating approximately 1,375 MW of capacity, located in
Connecticut, Massachusetts and New Hampshire. CL&P, WMECO and PSNH have
proposed to auction their hydroelectric projects in the future.
The license for HWP's Holyoke Project expires in late 1999. On
September 3, 1997, HWP filed its application for a new license for the
Holyoke Project. On August 29, 1997, a competing application for the
project was submitted by the Ashburnham Municipal Light Plant and the
Massachusetts Municipal Wholesale Electric Company. The competing
application proposes to add an additional 15 MW of generating capacity
at the site, as well as additional changes, modifications and improvements
to the facility. The competing license application was amended to add the
City of Holyoke Gas and Electric Department as an additional applicant.
Absent significant differences in the competing license applications
the Federal Power Act gives a preference to an existing licensee for the new
license. If the license is awarded to a competing applicant, HWP is entitled
to compensation equal to the lesser of book value or fair market value and
severance damages pursuant to the Federal Power Act. Completion of all licensing
activities and issuance of a new license is expected by September 1, 1999.
CL&P's FERC licenses for operation of the Falls Village and Housatonic
Hydro Projects expire in 2001. A draft license application, which proposes
to combine both projects under one license is scheduled to be completed in
the first quarter of 1999. A final license application is expected to be
submitted to FERC in the third quarter of 1999.
FERC has issued a notice indicating that it has authority to order
project licensees to decommission projects that are no longer economic to
operate. The potential costs of decommissioning a project, however, could
be substantial. FERC has recently ordered its first project decommissioning
under this authority. It is likely that this FERC decision will be
appealed.
EMPLOYEES
As of December 31, 1998, the System companies had 9,077 full and part-
time employees on their payrolls, of which 2,379 were employed by CL&P,
1,265 by PSNH, 533 by WMECO, 77 by HWP, 1,624 by NNECO, 2,355 by NUSCO and
844 by NAESCO. NU, NAEC, Mode 1, NUEI, NGC, NGS, and Select Energy have no
employees.
Approximately 2,300 employees of CL&P, PSNH, WMECO, NAESCO and HWP are
covered by ten union agreements, which expire between May 31, 1999 and
October 1, 2001.
YEAR 2000
For information regarding the System's efforts to address this issue,
see "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ITEM 2. Properties
The physical properties of the NU System are owned or leased by
subsidiaries of NU. CL&P's principal plants and other properties are
located either on land which is owned in fee or on land, as to which CL&P
owns perpetual occupancy rights adequate to exclude all parties except
possibly state and federal governments, which has been reclaimed and filled
pursuant to permits issued by the United States Army Corps of Engineers.
The principal properties of PSNH are held by it in fee. In addition, PSNH
leases space in an office building under a 30-year lease expiring in 2002.
WMECO's principal plants and a major portion of its other properties are
owned in fee, although one hydroelectric plant is leased. NAEC owns a
35.98 percent interest in Seabrook 1 and approximately 560 acres of
exclusion area land located around the unit. In addition, CL&P, PSNH, and
WMECO have certain substation equipment, data processing equipment, nuclear
fuel, gas turbines, nuclear control room simulators, vehicles, and office
space that are leased. With few exceptions, the NU System companies' lines
are located on or under streets or highways, or on properties either owned
or leased, or in which the company has appropriate rights, easements, or
permits from the owners.
CL&P's properties and PSNH's properties are subject to the lien of
each company's respective first mortgage indenture. WMECO's properties are
subject to the lien of its first mortgage indenture. NAEC's First Mortgage
Bonds are secured by a lien on the Seabrook 1 interest described above, and
all rights of NAEC under the Seabrook Power Contracts. In addition, CL&P's
and WMECO's interests in Millstone 1 are subject to second liens for the
benefit of lenders under agreements related to pollution control revenue
bonds. Various of these properties are also subject to minor encumbrances
which do not substantially impair the usefulness of the properties to the
owning company.
The NU System companies' properties are well maintained and are in
good operating condition.
Transmission and Distribution System
At December 31, 1998, the NU System companies owned 103 transmission
and 400 distribution substations that had an aggregate transformer capacity
of 25,186,669 kilovoltamperes (kVa) and 9,153,470 kVa, respectively; 3,074
circuit miles of overhead transmission lines ranging from 69 kilovolt (kV)
to 345 kV, and 192 cable miles of underground transmission lines ranging
from 69 kV to 138 kV; 32,952 pole miles of overhead and 2,060 conduit bank
miles of underground distribution lines; and 409,210 line transformers in
service with an aggregate capacity of 17,399,000 kVa.
Electric Generating Plants
As of December 31, 1998, the electric generating plants of the NU
System companies and the NU System companies' entitlement in the generating
plant of the Vermont Yankee regional generating company were as follows (See
"Item 1. Business - Electric Operations, Nuclear Generation" for information
on ownership and operating results for the year.):
Claimed
Year Capability*
Owner Plant Name (Location) Type Installed (kilowatts)
CL&P Millstone (Waterford, CT)
Unit 2** Nuclear 1975 708,345
Unit 3 Nuclear 1986 603,436
Seabrook (Seabrook, NH) Nuclear 1990 47,175
VT Yankee (Vernon, VT) Nuclear 1972 45,189
Total Nuclear-Steam Plants ( 4 units) 1,404,145
Total Fossil-Steam Plants (10 units) 1954-73 1,883,000
Total Hydro-Conventional (25 units) 1903-55 98,970
Total Hydro-Pumped Storage ( 7 units) 1928-73 937,100
Total Internal Combustion (20 units) 1966-96 567,540
Total CL&P Generating Plant (66 units) 4,890,755
PSNH Millstone (Waterford, CT)
Unit 3 Nuclear 1986 32,461
VT Yankee (Vernon, VT) Nuclear 1972 18,999
Total Nuclear-Steam Plants ( 2 units) 51,460
Total Fossil-Steam Plants ( 7 units) 1952-78 1,056,918
Total Hydro-Conventional (20 units) 1917-83 67,930
Total Internal Combustion ( 5 units) 1968-70 101,850
Total PSNH Generating Plant (34 units) 1,278,158
WMECO Millstone (Waterford, CT)
Unit 2** Nuclear 1975 166,155
Unit 3 Nuclear 1986 139,519
VT Yankee (Vernon, VT) Nuclear 1972 11,904
Total Nuclear-Steam Plants ( 3 units) 317,578
Total Fossil-Steam Plants ( 3 units) 1949-57 209,460
Total Hydro-Conventional (27 units) 1904-34 110,910***
Total Hydro-Pumped Storage ( 4 units) 1972-73 212,800
Total Internal Combustion ( 3 units) 1968-69 63,500
Total WMECO Generating Plant (40 units) 914,248
Claimed
Year Capability*
Owner Plant Name (Location) Type Installed (kilowatts)
NAEC Seabrook (Seabrook, NH) Nuclear 1990 418,111
HWP Mt. Tom (Holyoke, MA) Fossil-Steam 1960 147,000
Total Hydro-Conventional (15 units) 1905-1983 43,560
Total HWP Generating Plant (16 units) 190,560
NU System Millstone (Waterford, CT)
Unit 2** Nuclear 1975 874,500
Unit 3 Nuclear 1986 775,416
Seabrook (Seabrook, NH) Nuclear 1990 465,286
VT Yankee (Vernon, VT) Nuclear 1972 76,092
Total Nuclear-Steam Plants ( 4 units) 2,191,294
Total Fossil-Steam Plants (21 units) 1952-78 3,296,378
Total Hydro-Conventional (87 units) 1903-83 321,370
Total Hydro-Pumped Storage ( 7 units) 1928-73 1,149,900
Total Internal Combustion (28 units) 1966-96 732,890
Total NU System Generating Plant
Including Vermont Yankee (147 units) 7,691,832
Excluding Vermont Yankee (146 units) 7,615,740
*Claimed capability represents winter ratings as of December 31, 1998.
**The number shown represents claimed capability at December 31, 1996.
Millstone 2 has been out of service since February 21, 1996. The
company has restructured its nuclear organization and is currently
implementing comprehensive plans to restart the unit. The actual date
of the return to service for the unit is dependent, in part, upon the
completion of independent inspections and reviews by the NRC and a vote
by the NRC Commissioners. Millstone 2 is expected to be ready to
restart in the spring of 1999.
***Total Hydro-Conventional capability includes the Cobble Mtn. plant's
33,960 kW which is leased from the City of Springfield, MA.
Franchises
NU's operating subsidiaries hold numerous franchises in the territories
served by them. For more information regarding recent judicial, regulatory
and legislative decisions and initiatives that may affect the terms under
which the System companies provide electric service in their franchised
territories, see Item 1. "Business - Electric Industry Restructuring" and
"Item 3. Legal Proceedings."
CL&P. Subject to the power of alteration, amendment or repeal by the
General Assembly of Connecticut and subject to certain approvals, permits
and consents of public authority and others prescribed by statute, CL&P has,
subject to certain exceptions not deemed material, valid franchises free
from burdensome restrictions to provide electric transmission and distribution
services, and, until January 2000, to sell electricity, in the respective areas
in which it is now supplying such service.
In addition to the right to provide electric transmission and
distribution services as set forth above, the franchises of CL&P include,
among others, limited rights and powers, as set forth in Public Act 98-28,
to manufacture, generate, purchase and sell electricity at retail, including
to provide standard offer, backup and default service, to sell electricity
at wholesale to other utility companies and municipalities and to erect and
maintain certain facilities on public highways and grounds, all subject to
such consents and approvals of public authority and others as may be
required by law. The franchises of CL&P include the power of eminent
domain. For a more detailed discussion of Public Act 98-28, see "Item 1.
Business - Electric Industry Restructuring."
PSNH. Subject to the power of alteration, amendment or repeal by the
General Court (legislature) of the State of New Hampshire and subject to
certain approvals, permits and consents of public authority and others
prescribed by statute, PSNH has, subject to certain exceptions not deemed
material, valid franchises free from burdensome restrictions to sell
electricity in the respective areas in which it is now supplying such
service.
In addition to the right to sell electricity as set forth above, the
franchises of PSNH include, among others, rights and powers to manufacture,
generate, purchase, transmit and distribute electricity, to sell electricity
at wholesale to other utility companies and municipalities and to erect and
maintain certain facilities on certain public highways and grounds, all
subject to such consents and approvals of public authority and others as
may be required by law. The franchises of PSNH include the power of eminent
domain.
NNECO. Subject to the power of alteration, amendment or repeal by the
General Assembly of Connecticut and subject to certain approvals, permits
and consents of public authority and others prescribed by statute, NNECO has
a valid franchise free from burdensome restrictions to sell electricity to
utility companies doing an electric business in Connecticut and other
states.
In addition to the right to sell electricity as set forth above, the
franchise of NNECO includes, among others, rights and powers to manufacture,
generate and transmit electricity, and to erect and maintain facilities
on certain public highways and grounds, all subject to such consents and
approvals of public authority and others as may be required by law.
WMECO. WMECO is authorized by its charter to conduct its electric
business in the territories served by it, and has locations in the public
highways for transmission and distribution lines. Such locations are
granted pursuant to the laws of Massachusetts by the Department of Public
Works of Massachusetts or local municipal authorities and are of unlimited
duration, but the rights thereby granted are not vested. Such locations are
for specific lines only, and, for extensions of lines in public highways,
further similar locations must be obtained from the Department of Public
Works of Massachusetts or the local municipal authorities. In addition,
WMECO has been granted easements for its lines in the Massachusetts Turnpike
by the Massachusetts Turnpike Authority.
Pursuant to the Massachusetts restructuring legislation, the DTE is
required to define service territories for each distribution company,
including WMECO, based on the service territories actually served on
July 1, 1997, and following to the extent possible municipal boundaries.
After established by the DTE, until terminated by effect of law or otherwise,
the distribution company shall have the exclusive obligation to provide
distribution service to all retail customers within its service territory,
and no other person shall provide distribution service within such service
territory without the written consent of such distribution company.
HWP and Holyoke Power and Electric Company (HP&E). HWP, and its wholly
owned subsidiary HP&E, are authorized by their charters to conduct their
businesses in the territories served by them. HWP's electric business is
subject to the restriction that sales be made by written contract in amounts
of not less than 100 horsepower, except for municipal customers in the
counties of Hampden or Hampshire, Massachusetts and except for customers
who occupy property in which HWP has a financial interest, by ownership or
purchase money mortgage. HWP also has certain dam and canal and related
rights, all subject to such consents and approvals of public authorities
and others as may be required by law. The two companies have locations in
the public highways for their transmission and distribution lines. Such
locations are granted pursuant to the laws of Massachusetts by the Department
of Public Works of Massachusetts or local municipal authorities and are of
unlimited duration, but the rights thereby granted are not vested. Such
locations are for specific lines only and, for extensions of lines in public
highways, further similar locations must be obtained from the Department of
Public Works of Massachusetts or the local municipal authorities. The two
companies have no other utility franchises.
NAEC. NAEC is authorized by the NHPUC to own and operate its interest
in Seabrook 1.
ITEM 3 - LEGAL PROCEEDINGS
1. Litigation Relating to Electric and Magnetic Fields
On October 14, 1998, the plaintiffs withdrew the remaining lawsuit
pending in Connecticut Superior Court alleging physical and emotional
damages from exposure to EMF in which NU and CL&P were defendants, thus
ending all material litigation against NU and CL&P relating to EMF.
2. Connecticut DPUC - CL&P's Petition for Declaratory Ruling Regarding
Proposed Retail Sales of Electricity by Texas-Ohio Power, Inc. (TOP).
In February 1998 the Connecticut Supreme Court ruled that TOP was a
foreign electric company and therefore was prohibited from making retail
sales of electricity in Connecticut. The Court also ruled that the DPUC was
correct in finding that because TOP did not use public streets it was not an
electric light company prohibited by Connecticut corporate law from making
retail electric sales. The Court made it clear that it would have ruled
differently on this issue if TOP were using public streets.
On September 3, 1998, the bankruptcy court for the Southern District
of Texas - Houston Division granted a Joint Motion to Dismiss filed by the
parties to a related lawsuit. CL&P had been sued in the fall of 1997 by
Triple C Power, Inc., the successor of the bankrupt TOP. The lawsuit stemmed
from CL&P's petition for declaratory rulings from the DPUC.
3. Connecticut Attorney General - Civil Environmental Lawsuit
On October 5, 1998, the Connecticut Superior Court, after hearing
arguments, approved a settlement which resolved a civil lawsuit by the
Connecticut Department of Environmental Protection (CDEP) against NNECO
and NUSCO for violations of the Millstone Station water permit and
Connecticut water discharge regulations. The settlement required NNECO
to pay a $700,000 civil penalty and expend $500,000 to fund three supplemental
environmental projects. NNECO is also required to perform and have third-
party review of two environmental audits of its water compliance program and
to inform the CDEP of major changes to its environmental management system.
An intervening party has appealed the approval of the settlement to
Connecticut Appellate Court.
4. Connecticut Municipal Electric Energy Cooperative (CMEEC) Dispute
In mid-April 1998, the FERC issued an order accepting CL&P's filing
of a settlement with the Connecticut Municipal Electric Energy Cooperative
(CMEEC) over issues arising under the Millstone Units 1 and 2 life of unit
contract. The filing had requested a March 3, 1998 termination date for
the Millstone Units 1 and 2 contract, and a date of October 31, 1998 for
the termination of several CL&P fossil/hydro contracts with CMEEC. In
accordance with the settlement, CL&P received a lump sum payment of $24
million from CMEEC, which had been held in escrow pending FERC approval of
the settlement and the completion of certain additional steps related to
the court and arbitration proceedings.
5. FERC - Transmission Charges Disputes
On May 18, 1998, the FERC issued an order requiring certain NU system
companies, primarily CL&P and WMECO, to refund disputed transmission charges
to MMWEC, United Illuminating and other customers whose transmission rates
are subject to this order. Refunds amounting to approximately $10 million
have been paid to customers and a refund compliance report has been submitted
to the FERC, which report is pending final approval.
6. Shareholder Securities Class Actions
Consolidated Federal Court Actions: Pursuant to a court order dated
October 1, 1997, the six class actions separately filed against NU in
1996 were consolidated for pre-trial and trial purposes. The actions
are based on various Federal securities law and common law theories alleging
misrepresentations and omissions in public disclosures related to the System's
nuclear situation. These complaints represent classes of plaintiffs who
purchased or otherwise acquired NU common stock during periods ranging from
March 1994 to April 1996. This matter is currently in mediation.
State Court Actions: NU has been served with two separately filed
class actions based on various state securities law and common law theories
alleging misrepresentations and omissions in public disclosures related to
the System's nuclear situation. These complaints represent classes of
plaintiffs who purchased or otherwise acquired NU common stock during
periods ranging from December 1993 to April 1996. Plaintiffs' counsel in
both state actions agreed to stay the actions pending the outcome of the
consolidated federal court actions described above.
NU believes that all of these class actions are without merit and
intends to vigorously defend in all such actions.
7. Millstone 3 - Joint Owner Litigation
CL&P and WMECO, through NNECO as agent, operate Millstone 3, at cost
and without profit, under a Sharing Agreement. On August 7, 1997, the non-NU
owners of Millstone 3 filed demands for arbitration with CL&P and WMECO as
well as three lawsuits in Massachusetts Superior Court against NU and its
current and many of its former trustees. The non-NU owners raise a number
of contract, tort and statutory claims, arising out of the operation of
Millstone 3. The demands 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. The NU companies believe
there is no legal basis for the claims and intend to defend against them
vigorously. An arbitrator to hear the claims against CL&P and WMECO has
been appointed and hearings are scheduled to commence in the fall of 1999.
The defendants, including NU, in the three lawsuits requested consolidation
of those actions, which request was granted. Additionally, NU filed motions
for summary judgment in December 1998, which motions are still pending.
8. Maine Yankee - Secondary Purchasers Dispute
A number of municipalities and cooperatives (Secondary Purchasers)
notified the sponsors of MY, including CL&P, WMECO and PSNH, that they
consider their purchase and payment obligations under their purchase
agreements to have been terminated as a result of the August 6, 1997
decision by the MYAPC Board of Directors (MY Board) to retire MY.
Accordingly, these Secondary Purchasers informed the sponsors that they
would be making no further payments under the contracts for the period
following the MY Board's decision. Through such contracts, the sponsors
agreed to deliver a portion of the capacity and electrical output from MY
until the year 2003 in exchange for payment by the Secondary Purchasers of
a pro rata share of the plant's costs and expenses.
Following a series of regulatory and legal proceedings related to
this matter at the FERC and in Maine state courts, on February 5, 1999,
the parties filed a settlement with the FERC in this matter. A separate
settlement related to the MY decommissioning rate case was filed with
the FERC on January 18, 1999. Upon an order from the FERC accepting the
settlements, the Secondary Purchasers will make a total settlement payment
of $16.5 million in full satisfaction of their obligations with respect
to all past and future MY-related operations and decommissioning costs.
9. Southeastern Connecticut Regional Resources Recovery Authority (SCRRRA)
Contract Disputes
On March 31, 1998, the Connecticut Supreme Court issued a decision in
connection with one of three disputes involving CL&P and SCRRRA. In its
decision, the Court ruled that CL&P was obligated to pay the contract rate
specified in their electricity purchase agreement for the entire net electric
output of SCRRRA's trash-to-energy plant in Preston rather than for the lower
output level specified in the agreement. As a result of this decision, CL&P
agreed to a payment schedule which obligated it to pay SCRRRA approximately
$3.8 million plus accrued interest of approximately $700,000. Most of the
amount paid will be recovered through CL&P's energy adjustment clause.
On November 25, 1998, the DPUC approved a settlement and an associated
amendment, providing for alternative rates, to the SCRRRA contract. This
resolved the second SCRRRA dispute, which related to Connecticut's so-called
"municipal rate law." The amendment lowered the rate CL&P pays to SCRRRA for
electricity. As a result of this contract amendment and settlement, CL&P
withdrew the litigation it had initiated in the remaining dispute involving
SCRRRA.
10. Connecticut DPUC - Energy Adjustment Clause (EAC)
CL&P has appealed to Connecticut Superior Court a DPUC order that,
pending a final ruling in CY's decommissioning proceeding currently
before the FERC, CL&P exclude from its EAC rate the replacement power
costs resulting from the retirement of CY. The appeal has been briefed
and argued and a decision is pending. Pursuant to the February 5, 1999
CL&P rate decision, DPUC permitted CL&P to collect CY replacement power
costs on a current basis effective September 28, 1998. The deferred amount
prior to September 28, 1998 was approximately $75 million.
11. Amended Partial Requirements Agreement (APRA)
On May 29, 1998, FERC issued an order rejecting PSNH's complaint
against the New Hampshire Electric Cooperative, Inc. (NHEC) concerning
NHEC's solicitation of bids from qualifying facilities (QFs) to supplant
wholesale purchase obligations it has with PSNH under the APRA. FERC ruled
that NHEC's purchase obligations under the APRA expressly allow it to
purchase QF power and that the price for such purchases may be determined
by negotiation between NHEC and the individual QF. Additionally, the
decision ordered PSNH to refund to NHEC any overcollections with interest.
On October 6, 1998, FERC issued a final decision rejecting PSNH's request
for clarification and rehearing of the May 1998 order. Refunds were made
in the amount of approximately $98,000. The financial impact of this decision
in the future will vary depending upon the level of purchases from the QFs
made by NHEC.
On February 24, 1999, FERC issued a decision in a separate proceeding
concerning a dispute between PSNH and NHEC over the requirements of the APRA
after the initiation of competition within NHEC's service territory. The
FERC held that the APRA requires NHEC to pay PSNH for all capacity metered
at the delivery points, but that NHEC is not required to pay PSNH for energy
purchased by its members from competitive sources. The financial impact
of this decision in the future will depend upon the implementation of
restructuring in NHEC's service area.
On March 23, 1998, NHEC requested that FERC initiate another proceeding
relating to the APRA's wholesale Fuel and Purchased Power Adjustment Clause
(FPPAC). NHEC's complaint is based on actions taken by the NHPUC concerning
PSNH's retail FPPAC charge. On November 30, 1998, FERC issued an order
rejecting most of NHEC's arguments. With respect to issues concerning the
prudence of post-retirement expenditures for MY and CY, FERC deferred any
ruling pending its decisions in hearings related to those plants. FERC
determined a hearing is necessary to determine the prudence of pre-
retirement costs related to MY and CY. In December 1998, a tentative
settlement was reached with NHEC on the remaining issues which were set
for hearing before the FERC. Under the settlement, PSNH will provide NHEC
with a credit toward current or future obligations. The amount of the credit
is not expected to be material.
In 1998, PSNH had sales to NHEC, under the APRA, of approximately $60.7
million. During 1998, NHEC paid PSNH an average of 10.8 cents per kWh for
these sales.
12. NRC Office of Investigations and U.S. Attorney Investigations and
Related Matters
The NRC's Office of Investigations (OI) has been examining various
matters at Millstone and CY, including but not limited to procedural and
technical compliance matters and employee concerns. One of these matters
was referred, and others may be referred, to the Office of the U.S. Attorney
for the District of Connecticut (U.S. Attorney) for possible criminal
prosecution. The referred matter concerned full core off-load procedures
and related matters at Millstone. On October 2, 1998, the Company was
informed that the U.S. Attorney had declined prosecution of this matter.
Also, in July 1998, the Company was informed that the U.S. Attorney's Office
had declined prosecution of issues arising from the 1996 nuclear workforce
reduction. The U.S. Attorney is also reviewing possible criminal violations
arising out of certain other activities at Millstone and CY, including its
licensed operator training programs. NU has been informed by the government
that it is a target of the investigation, but that no one in senior
management is either a target or a subject of their investigations.
The U.S. Attorney, together with the U.S. EPA, is also investigating
possible criminal violations of federal environmental laws at certain NU
facilities, including Millstone and Devon. NU has been informed by the
government that it is a target of the investigation, but that no one in
senior management is either a target or a subject of their investigations.
Management does not believe that any System company or officer has
engaged in conduct that would warrant a federal criminal prosecution. NU
intends to continue to fully cooperate with the OI and the U.S. Attorney in
their ongoing investigations.
13. NRC - Spent Fuel Pool Off-Load Practices 2.206 Petition
In August 1995, a petition was filed with the NRC under Section 2.206
of the NRC's regulations by the organization We the People and a NUSCO
employee. The petitioners maintained that NU's historic practice of off-
loading the full reactor core at Millstone 1 resulted in spent fuel pool
heat loads in excess of the pool's NRC-approved cooling capability, and
asserted that the practice was a knowing and willful violation of NRC
requirements. The petitioners also filed a supplemental petition concerning
refueling practices at Millstone 2 and 3 and Seabrook Station.
On December 26, 1996, the Acting Director of the Office of Nuclear
Reactor Regulation issued a partial decision granting, in part, the
petition. The decision concluded that the design of the spent fuel pool
and related system at Millstone 1 was adequate, and that the full core
offload practices at that unit, Millstone 3 and Seabrook were safe. The
petitioners' assertions regarding Millstone 2 were not substantiated. On
October 15, 1998, NNECO waived the five year statute of limitations with
respect to the NRC's ability to initiate a civil penalty action for a
reporting issue related to the Millstone 1 full-core offload issue. The
NRC is presently reviewing the matter and is expected to take action on
this issue in the near future.
14. Other Legal Proceedings
The following sections of Item 1. "Business" discuss additional
legal proceedings: See "Electric Industry Restructuring" and "Rates"
for information about CL&P's rate and energy adjustment clause proceedings,
various state restructuring proceedings and civil lawsuits related thereto
and NHPUC proceedings involving PSNH's franchise rights; "Electric Operations--
Transmission Access and FERC Regulatory Changes" for information about
proceedings relating to power and transmission issues; "Electric Operations--
Nuclear Generation" and "Electric Operations--Nuclear Plant Performance and
Regulatory Oversight" for information related to nuclear plant performance,
nuclear fuel enrichment pricing, high-level and low-level radioactive waste
disposal, decommissioning matters and NRC regulation; "Other Regulatory and
Environmental Matters" for information about proceedings involving surface
water and air quality, toxic substances and hazardous waste, electric and
magnetic fields, licensing of hydroelectric projects, and other matters.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No Event that would be described in response to this item occurred
with respect to NU, CL&P, PSNH, WMECO or NAEC.
PART II
Item 5. Market for the Registrants' Common Equity and Related
Shareholder Matters
NU. The common shares of NU are listed on the New York Stock Exchange.
The ticket symbol is "NU," although it is frequently presented as "Noeast
Util" and/or "NE Util" in various financial publications. The high and low
sales prices for the past two years, by quarters, are shown below.
Year Quarter High Low
1998 First $14 5/16 $11 11/16
Second 17 13 5/8
Third 17 1/16 14 3/8
Fourth 17 1/4 15 7/16
1997 First $14 1/4 $ 7 5/8
Second 9 7/8 7 3/4
Third 10 9/16 9
Fourth 13 15/16 9 1/2
As of January 29, 1999, there were 89,130 common shareholders of record
of NU. As of the same date, there were a total of 137,031,264 common shares
issued, including 6,029,984 million unallocated ESOP shares held in the ESOP
trust.
No dividends were declared on NU common shares during 1998. NU
declared and paid a quarterly dividend of $0.25 per share during the first
quarter of 1997. On March 25, 1997, the NU Board of Trustees adopted a
resolution suspending the quarterly dividends on NU's common shares,
indefinitely. The declaration of future dividends may vary depending on
capital requirements and income, as well as financial and other conditions
existing at the time.
Information with respect to dividend restrictions for NU and its
subsidiaries is contained in Item 1. Business under the caption "Financing
Program - Financing Limitations" and in Note (b) to the "Consolidated
Statements of Shareholders' Equity" on page 25 of NU's 1998 Annual Report
to Shareholders, which information is incorporated herein by reference.
CL&P, PSNH, WMECO, and NAEC. The information required by this item is
not applicable because the common stock of CL&P, PSNH, WMECO, and NAEC is
held solely by NU.
Item 6. Selected Financial Data
NU. Reference is made to information under the heading "Selected
Consolidated Financial Data" contained on page 48 of NU's 1998 Annual Report
to Shareholders, which information is incorporated herein by reference.
CL&P. Reference is made to information under the heading "Selected
Financial Data" contained on page 53 of CL&P's 1998 Annual Report, which
information is incorporated herein by reference.
PSNH. Reference is made to information under the heading "Selected
Financial Data" contained on pages 50 and 51 of PSNH's 1998 Annual Report,
which information is incorporated herein by reference.
WMECO. Reference is made to information under the heading "Selected
Financial Data" contained on page 45 of WMECO's 1998 Annual Report, which
information is incorporated herein by reference.
NAEC. Reference is made to information under the heading "Selected
Financial Data" contained on page 30 of NAEC's 1998 Annual Report, which
information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations; and
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
NU. Reference is made to information under the heading "Management's
Discussion and Analysis" contained on pages 12 through 19 in NU's 1998
Annual Report to Shareholders, which information is incorporated herein by
reference.
CL&P. Reference is made to information under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained on pages 41 through 52 in CL&P's 1998 Annual Report, which
information is incorporated herein by reference.
PSNH. Reference is made to information under the heading
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained on pages 41 through 49 in PSNH's 1998
Annual Report, which information is incorporated herein by reference.
WMECO. Reference is made to information under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained on pages 37 through 44 in WMECO's 1998 Annual Report,
which information is incorporated herein by reference.
NAEC. Reference is made to information under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained on pages 24 through 29 in NAEC's 1998 Annual Report, which
information is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
NU. Reference is made to information under the headings "Company
Report," "Report of Independent Public Accountants," "Consolidated
Statements of Income," "Consolidated Statements of Comprehensive Income,"
"Consolidated Statements of Cash Flows," "Consolidated Statements of
Income Taxes," "Consolidated Balance Sheets," "Consolidated Statements of
Capitalization," "Consolidated Statements of Shareholders' Equity," "Notes
to Consolidated Financial Statements," and "Consolidated Statements of
Quarterly Financial Data" contained on pages 20 through 47 in NU's 1998
Annual Report to Shareholders, which information is incorporated herein by
reference.
CL&P. Reference is made to information under the headings
"Consolidated Balance Sheets," "Consolidated Statements of Income,"
"Consolidated Statements of Comprehensive Income," "Consolidated Statements
of Cash Flows," "Consolidated Statements of Common Stockholder's Equity,"
"Notes to Consolidated Financial Statements," "Report of Independent Public
Accountants," and "Statements of Quarterly Financial Data" contained on
pages 2 through 40 and page 53 in CL&P's 1998 Annual Report, which
information is incorporated herein by reference.
PSNH. Reference is made to information under the headings "Balance
Sheets," "Statements of Income," "Statements of Comprehensive Income,"
"Statements of Cash Flows," "Statements of Common Equity," "Notes to
Financial Statements," "Report of Independent Public Accountants," and
"Statements of Quarterly Financial Data" contained on pages 2 through 40 and
page 52 in PSNH's 1998 Annual Report, which information is incorporated
herein by reference.
WMECO. Reference is made to information under the headings
"Consolidated Balance Sheets," "Consolidated Statements of Income,"
"Consoldidated Statements of Comprehensive Income," "Consolidated Statements
of Cash Flows," "Consolidated Statements of Common Stockholder's Equity,"
"Notes to Consolidated Financial Statements," "Report of Independent Public
Accountants," and "Statements of Quarterly Financial Data" contained on
pages 2 through 36 and page 45 in WMECO's 1998 Annual Report, which
information is incorporated herein by reference.
NAEC. Reference is made to information under the headings "Balance
Sheets," "Statements of Income," "Statements of Cash Flows," "Statements of
Common Stockholder's Equity," "Notes to Financial Statements," "Report of
Independent Public Accountants," and "Statements of Quarterly Financial
Data" contained on pages 2 through 23 and page 30 in NAEC's 1998 Annual
Report which information is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
No event that would be described in response to this item has occurred
with respect to NU, CL&P, PSNH, WMECO, or NAEC.
PART III
Item 10. Directors and Executive Officers of the Registrants
NU.
In addition to the information provided below concerning the executive
officers of NU, incorporated herein by reference is the information contained
in the sections "Proxy Statement", "Committee Composition and Responsibility",
"Common Stock Ownership of Certain Beneficial Owners", "Common Stock Ownership
of Management", "Compensation of Trustees", "Executive Compensation", "Pension
Benefits", and "Report on Executive Compensation" of the definitive proxy
statement for solicitation of proxies by NU's Board of Trustees, dated March 31,
1999, which will be filed with the Commission pursuant to Rule 14a-6 under the
Securities Exchange Act of 1934 (the Act).
First First
Positions Elected Elected
Name Held an Officer a Trustee
John H. Forsgren EVP, CFO 02/01/96 n/a
William T. Frain, Jr. OTH 02/01/94 n/a
Cheryl W. Grise' SVP, SEC, GC 06/01/91 n/a
Bruce D. Kenyon P 09/03/96 n/a
Hugh C. MacKenzie P 07/01/88 n/a
Michael G. Morris CHB, P, CEO, T 08/19/97 08/19/97
Gary D. Simon OTH 04/15/98 n/a
Lisa J. Thibdaue OTH 01/01/98 n/a
CL&P.
First First
Positions Elected Elected
Name Held an Officer a Director
John H. Forsgren EVP, CFO, D 02/01/96 06/10/96
Cheryl W. Grise' SVP, SEC, GC 06/01/91 n/a
Bruce D. Kenyon P, D 09/03/96 09/03/96
Hugh C. MacKenzie P, D 07/01/88 06/06/90
Michael G. Morris CH, D 08/19/97 08/19/97
Lisa J. Thibdaue VP 01/01/98 n/a
PSNH.
First First
Positions Elected Elected
Name Held an Officer a Director
John C. Collins D n/a 10/19/92
John H. Forsgren EVP, CFO, D 02/01/96 08/05/96
William T. Frain, Jr. P, COO, D 03/18/71 02/01/94
Cheryl W. Grise' SVP, SEC, GC 07/31/98 n/a
Bruce D. Kenyon P, D 09/03/96 11/24/97
Gerald Letendre D n/a 10/19/92
Hugh C. MacKenzie D n/a 02/01/94
Michael G. Morris CH, CEO, D 08/19/97 08/19/97
Jane E. Newman D n/a 10/19/92
Lisa J. Thibdaue VP 01/01/98 n/a
WMECO.
First First
Positions Elected Elected
Name Held an Officer a Director
John H. Forsgren EVP, CFO, D 02/01/96 06/10/96
Cheryl W. Grise' SVP, SEC, AC, GC 06/01/91 n/a
Bruce D. Kenyon P, D 09/03/96 09/03/96
Hugh C. MacKenzie P, D 07/01/88 06/06/90
Michael G. Morris CH, D 08/19/97 08/19/97
Lisa J. Thibdaue VP 01/01/98 n/a
NAEC.
First First
Positions Elected Elected
Name Held an Officer a Director
Ted C. Feigenbaum EVP, CNO 10/21/91 n/a
John H. Forsgren EVP, CFO, D 02/01/96 11/01/97
Cheryl W. Grise' SVP, SEC, GC 10/21/91 n/a
Bruce D. Kenyon P, CEO, D 09/03/96 09/03/96
Michael G. Morris CH, D 08/19/97 08/19/97
Key:
AC - Assistant Clerk EVP - Executive Vice President
CAO - Chief Administrative Officer GC - General Counsel
CEO - Chief Executive Officer OTH - Executive Officer of NU system
CFO - Chief Financial Officer P - President
CH - Chairman SEC - Secretary
CHB - Chairman of the Board SVP - Senior Vice President
COO - Chief Operating Officer T - Trustee
D - Director VP - Vice President
Name Age Business Experience During Past 5 Years
John C. Collins (1) 53 Chief Executive Officer, The Hitchcock
Clinic, Dartmouth - Hitchcock Medical
Center since 1977.
Ted C. Feigenbaum (2) 48 Executive Vice President and Chief Nuclear
Officer of NAEC since February, 1996;
previously Senior Vice President of NAEC
since 1991; Senior Vice President and Chief
Nuclear Officer of PSNH June, 1992 to August,
1992; President and Chief Executive Officer -
New Hampshire Yankee Division of PSNH
October, 1990 to June, 1992 and Chief Nuclear
Production Officer of PSNH January, 1990 to
June, 1992.
John H. Forsgren (3) 52 Executive Vice President and Chief
Financial Officer of NU, CL&P, PSNH, WMECO
and NAEC since February, 1996; previously
Managing Director of Chase Manhattan Bank
from 1995 to 1996 and Senior Vice President
of The Walt Disney Company from 1990 to 1994.
William T. Frain, Jr.(4) 57 President and Chief Operating Officer of PSNH
since February, 1994; previously Senior Vice
President of PSNH from 1992 to 1994.
Cheryl W. Grise' 46 Senior Vice President, Secretary and
General Counsel of NU, CL&P, PSNH and NAEC and
Senior Vice President, Secretary, Assistant
Clerk and General Counsel of WMECO since July,
1998; previously Senior Vice President and
Chief Administrative Officer of CL&P, PSNH
and NAEC, and Senior Vice President of WMECO
from December, 1995 to July 1998; previously
Senior Vice President-Human Resources and
Administrative Services of CL&P, WMECO and
NAEC from 1994 to 1995 and Vice President-
Human Resources of CL&P, WMECO and NAEC from
1992 to 1994.
Bruce D. Kenyon (5) 56 President and Chief Executive Officer of NAEC
since September, 1996 and President-Generation
Group of NU, CL&P, PSNH and WMECO since March,
1999; previously President-Nuclear Group of NU,
CL&P, PSNH and WMECO from September, 1996 to
March, 1999; previously President and Chief
Operating Officer of South Carolina Electric
and Gas Company from 1990 to 1996.
Gerald Letendre 57 President, Diamond Casting & Machine Co., Inc.
since 1972.
Hugh C. MacKenzie (6) 56 President-Retail Business Group of NU since
February, 1996 and President of CL&P and WMECO
since January, 1994; previously Senior Vice
President-Customer Service Operations of CL&P
and WMECO from 1990 to 1994.
Michael G. Morris (7) 52 Chairman of the Board, President and Chief
Executive Officer of NU, Chairman and Chief
Executive Officer of PSNH, and Chairman of
CL&P, NAEC and WMECO since August, 1997;
previously President and Chief Executive
Officer of Consumers Power Company from 1994
to 1997 and Executive Vice President and Chief
Operating Officer of Consumers Power Company
from 1992 to 1994.
Jane E. Newman (8) 53 Managing Director, The Commerce Group since
January 10, 1999; formerly Dean, Whittemore
School of Business and Economics of the
University of New Hampshire from January, 1998
to January 5, 1999; previously Executive Vice
President and Director, Exeter Trust Company
from 1995 to 1997 and President, Coastal
Broadcasting Corporation from 1992 to 1995.
Gary D. Simon (9) 50 Senior Vice President-Strategy and Development
of Northeast Utilities Service Company since
April, 1998.
Lisa J. Thibdaue 45 Vice President-Rates, Regulatory Affairs and
Compliance of CL&P, PSNH and WMECO since
January, 1998; previously Executive Director,
Rates and Regulatory Affairs, Consumers Power
Company from 1996 to 1998 and Director of
Regulatory Affairs, Consumers Power Company
from 1991 to 1996.
(1) Director of Blue Cross and Blue Shield of Vermont, Fleet Bank - New
Hampshire, Hamden Assurance Company Limited and the Business and
Industry Association of New Hampshire.
(2) Director of Connecticut Yankee Atomic Power Company, Maine Yankee
Atomic Power Company, Vermont Yankee Nuclear Power Corporation, and
Yankee Atomic Electric Company.
(3) Director of Connecticut Yankee Atomic Power Company and NorthEast Optic
Network, Inc.
(4) Director of the Business and Industry Association of New Hampshire and
the Greater Manchester Chamber of Commerce; Trustee of Saint Anselm
College.
(5) Trustee of Columbia College and Director of Connecticut Yankee Atomic
Power Company.
(6) Director of Connecticut Yankee Atomic Power Company.
(7) Director of Connecticut Yankee Atomic Power Company.
(8) Director of Exeter Trust Company, Perini Corporation and Consumers
Water Company.
(9) Director of NorthEast Optic Network, Inc.
There are no family relationships between any director or executive
officer and any other director or executive officer of NU, CL&P, PSNH, WMECO
or NAEC.
Item 11. Executive Compensation
NU.
Incorporated herein by reference is the information contained in the
sections "Executive Compensation", "Summary Compensation Table", "Option/SAR
Grants in Last Fiscal Year", "Fiscal Year-End Option/SAR Values", "Pension
Benefits", and "Report on Executive Compensation" of the definitive proxy
statement for solicitation of proxies by NU, dated March 31, 1999, which
will be filed with the Commission pursuant to Rule 14a-6 under the Act.
CL&P, PSNH, WMECO and NAEC SUMMARY COMPENSATION TABLE
The following tables present the cash and non-cash compensation received by the Chief Executive Officer and the next
four highest paid executive officers of CL&P, PSNH, WMECO and NAEC, in accordance with rules of the Securities and
Exchange Commission (SEC):
Annual Compensation Long Term Compensation
Awards Payouts
Securities Long
Other Restrict- Underlying Term All
Annual ed Stock Options/ Incentive Other
Compensa- Award(s) Stock Program Compen-
Name and Salary tion($) ($) Appreciation Payouts sation($)
Principal Position Year ($) Bonus($) (Note 1) (Note 2) Rights (#) ($) (Note 3)
Michael G. Morris 1998 757,692 891,000 134,376 255,261 64,574 - 4,800
Chairman of the
Board, President 1997 258,333 1,350,000 - - 500,000 - -
and Chief Executive
Officer 1996 - - - - - - -
Bruce D. Kenyon 1998 500,000 300,000 - - 21,236 - 4,800
President -
Nuclear Group 1997 500,000 300,000 - 306,522 139,745 - -
1996 144,231 400,000 - 499,762 - - -
John H. Forsgren 1998 373,077 - - - 73,183 - 104,800
Executive Vice
President and 1997 350,000 - - 378,787 184,382 - 50,000
Chief Financial
Officer 1996 305,577 - 62,390 80,380 - - -
Hugh C. MacKenzie 1998 270,000 - - - 15,496 37,652 7,500
President - Retail
Business Group 1997 270,000 - - 189,778 142,549 26,998 4,800
1996 264,904 - - - - 19,834 7,500
Cheryl W. Grise' 1998 209,231 - - - 12,916 20,720 6,123
Senior Vice
President, 1997 200,000 - - 119,109 89,468 15,188 4,800
Secretary and
General Counsel 1996 200,000 - - - - 10,937 6,000
(in CL&P, PSNH and
WMECO tables only)
Ted C. Feigenbaum 1998 260,000 48,750 - 40,961 10,044 20,723 7,800
Executive Vice
President and 1997 260,000 30,119 - - - 21,498 4,800
Chief Nuclear Officer
of NAEC 1996 248,858 - - - - 14,770 7,222
(in NAEC table only)
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Grant Date Value
Number of
Securities % of Total
Underlying Options/SARs Grant Date
Options/SARs Granted to Exercise or Present
Granted (#) Employees Base Price Expiration Value ($)
Name (Note 4) in Fiscal Year ($/sh) Date (Note 4)
Michael G. Morris 64,574 8.18% 16.3125 5/12/2008 255,417
Bruce D. Kenyon 21,236 2.69% 16.3125 5/12/2008 84,098
John H. Forsgren 73,183 9.28% 16.3125 5/12/2008 289,599
Hugh C. MacKenzie 15,496 1.96% 16.3125 5/12/2008 61,367
Cheryl W. Grise' 12,916 1.64% 16.3125 5/12/2008 51,150
Ted C. Feigenbaum 10,044 1.28% 16.3125 5/12/2008 39,776
FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARS Options/SARs
at Fiscal Year-End (#) at Fiscal Year-End ($)
Exercisable Unexercisable Exercisable Unexercisable
Michael G. Morris 21,524 543,050 0 3,187,500
Bruce D. Kenyon 7,079 150,919 0 442,445
John H. Forsgren 24,394 229,234 0 583,766
Hugh C. MacKenzie 5,166 149,836 0 451,323
Cheryl W. Grise' 4,306 96,167 0 283,260
Ted C. Feigenbaum 3,348 6,696 0 0
Notes to Summary Compensation and Option/SAR Grants Tables:
1. Other annual compensation for Mr. Morris consists of 1998 relocation
expense reimbursements, and for Mr. Forsgren consists of 1996 tax
payments on a restricted stock award.
2. The aggregate restricted stock holdings by the five individuals named
in the table were, at December 31, 1998, 137,719 shares with a value of
$2,203,504 (CL&P, PSNH and WMECO) and 130,699 shares with a value of
$2,091,184 (NAEC). Awards shown for 1997 (except for additional awards
made for Messrs. Kenyon and Forsgren - see below) were restricted stock
unit grants under the Stock Price Recovery Incentive Program made on
January 1, 1997 and vested on January 4, 1999. Mr. Kenyon also
received 12,200 Restricted Stock Units on July 8, 1997, with a value
at date of grant of $120,475, which will vest, as will the restricted
shares granted to him in 1996, when Millstone Station is removed from
the Nuclear Regulatory Commission's "watch list," provided that this
occurs within three years of Mr. Kenyon's commencement of employment
(September 3, 1996) and the Systematic Assessment of Licensee
Performance and Institute of Nuclear Power Operations ratings of
Seabrook Station have not materially changed from their 1996 levels,
or, if earlier, when he is transferred to a new position at the Company
or an affiliate, as defined. Mr. Forsgren also received 13,500
Restricted Stock Units on July 8, 1997, with a value at grant of
$133,313, which vested, as did the restricted stock granted to him
in 1996, on January 1, 1999. Any dividends paid on restricted stock
and units are reinvested into additional restricted stock and units,
respectively, subject to the same vesting schedule.
3. "All Other Compensation" consists of employer matching contributions
under the Northeast Utilities Service Company 401k Plan, generally
available to all eligible employees, special matching contributions
under the Northeast Utilities Deferred Compensation Plan for Executives
(Mr. Morris: $17,931, Mr. Kenyon: $10,000, Mr. MacKenzie: $2,700, Mrs.
Grise': $1,323, Mr. Feigenbaum: $3,000), and in the case of Mr.
Forsgren, retention payments ($100,000 in 1998, $50,000 in 1997).
4. These options were granted on May 12, 1998 under the Incentive Plan
(except for Mr. Morris's options, and 45,919 of Mr. Forsgren's options,
which were granted May 19, 1998). All options granted vest one-third on
grant date, one-third on May 12, 1999 and one-third on May 12, 2000.
Valued using the Black-Scholes option pricing model, with the following
assumptions: Volatility: 34.97 percent (36 months of monthly data);
Risk-free rate: 5.88 percent; Dividend yield: 5.54 percent (36 months
of monthly data); Exercise date: May 12, 2008.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Overview and Strategy
The Compensation Committee of the Board of Trustees (the Committee) is the
administrator of executive compensation for the executives of the Northeast
Utilities system (the Company) with authority to establish and interpret the
terms of the Company's executive salary and incentive programs. The goal of
the Committee's executive compensation program for 1998 was to provide a
competitive compensation package to enable the Company to attract and retain
key executives both during this critical turnaround period for the Company
and with an eye towards the future in a more competitive environment. The
Committee further sought to align executive interests with those of Northeast
Utilities' shareholders and with Company performance by increased use of share-
based incentives.
To help achieve these goals, the Committee drew upon information from a
variety of sources, including compensation consultants, utility and general
industry surveys, and other publicly available information, including proxy
statements. In 1998, the Company's comparison groups for purposes of executive
compensation consisted of a consultant's database of roughly 700 companies from
a broad variety of industries, a consultant's database of over 90 electric and
combination electric and gas utilities, and a smaller group of ten electric
utilities whose operating characteristics were substantially similar to those
of the Company in terms of generation mix and customer size. Nine of the ten
companies are included in the Standard & Poor's (S&P) Electric Companies Index,
which is the index used in the share performance chart shown in the NU Proxy
Statement.
Base Salary
The Committee sets base salary ranges for all executive officers and sets
the annual base salary for each executive officer except for the Chief Executive
Officer (CEO), whose base salary is set by the Board of Trustees following a
recommendation by the Committee. In 1998, the Committee reviewed the base
salary levels of the Company's entire officer group against those of the 90
utility market comparison group with a goal of targeting aggregate officer base
salary to the median. The Committee periodically adjusts officers' base
salaries to reflect considerations such as changes in responsibility, market
sensitivity, individual performance and internal equity. The CEO's base salary
was increased by 3.33 percent in 1998 based on the market review and the
Committee's judgment as to his past and expected future performance.
Stock Price Recovery Incentive Program
During 1996, the Committee established a special Stock Price Recovery
Incentive Program for eight senior officers, including the four executive
officers listed in the Summary Compensation Table other than the CEO, in lieu
of other executive incentive programs for 1996-1998. The purpose of the program
was to focus these senior officers on achieving fundamental business goals
relative to the challenges of nuclear operations and industry restructuring,
with a net effect of advancing shareholder interests through share price
recovery. Awards under the program vested on January 1, 1999, in the form
of common shares and stock appreciation rights.
Annual Incentive Awards
The Committee established an Annual Incentive Bonus Program during 1998 for
officers not participating in the Stock Price Recovery Incentive Program. The
bonus payout target was 80 percent of base salary for the CEO, and varied from
20 to 25 percent of base salary for those officers that did not participate in
the Stock Price Recovery Incentive Program. The Annual Incentive Bonus Program
was designed to calculate actual aggregate payouts based on the Company's
performance against an earnings per share goal. Individual awards were made
from this bonus pool in cash in February, 1999 and for participants other
than the CEO were based upon individual performance as measured against
pre-established individual goals. The CEO received a cash award under this
program at his target level. Based on Company performance during 1998, the
Board also approved an award of common shares for the CEO having a value equal
to 35 percent of his base salary.
Long-Term Incentive Grants
Long-term incentive grants were made in May 1998 to each executive officer
and other officers and key employees of the Company. The Committee targeted
these awards such that the total of base pay, target annual incentive awards,
and long-term incentive awards for the officer group would be at the 75th
percentile of the 90 utility market comparison group. Except for participants
in the Stock Price Recovery Incentive Program, one-half of the grants'
intended value was made in restricted stock and one-half was made in stock
options. Grants under this program to participants in the Stock Price Recovery
Incentive Program were reduced to reflect their participation in that program
and were made entirely in stock options. The CEO's grant was targeted at 60
percent of base salary, as required by his employment agreement.
Long Term Incentive Payouts
During 1998, the Committee made awards under the 1995-1997 long-term
incentive program. Awards, in common shares, were based on the Company's
relative ranking against a group of electric utilities with respect to
shareholder return and cost of service. Achievement of goals was less than
target and resulted in awards that were 49.5 percent of target.
Internal Revenue Service Limitation on Deductibility of Executive
Compensation
The Committee believes that its compensation program will adequately
respond to issues raised by the deductibility cap placed on executive salaries
by Section 162(m) of the Internal Revenue Code because of the use of stock
options and qualified performance-based compensation in Company incentive
programs.
Dated: February 23, 1999
Respectfully submitted,
Robert E. Patricelli, Chairman
William J. Pape II, Vice Chairman
Cotton Mather Cleveland
E. Gail de Planque
Elizabeth T. Kennan
John F. Swope
PENSION BENEFITS
The following table shows the estimated annual retirement
benefits payable to an executive officer of Northeast Utilities upon
retirement, assuming that retirement occurs at age 65 and that the
officer is at that time not only eligible for a pension benefit under
the Northeast Utilities Service Company Retirement Plan (the
Retirement Plan) but also eligible for the make-whole benefit and the
target benefit under the Supplemental Executive Retirement Plan for
Officers of Northeast Utilities System Companies (the Supplemental
Plan). The Supplemental Plan is a non-qualified pension plan
providing supplemental retirement income to system officers. The
make-whole benefit under the Supplemental Plan, available to all
officers, makes up for benefits lost through application of certain
tax code limitations on the benefits that may be provided under the
Retirement Plan, and includes as "compensation" awards under the
executive incentive plans and deferred compensation (as earned). The
target benefit further supplements these benefits and is available to
officers at the Senior Vice President level and higher who are
selected by the Board of Trustees to participate in the target
benefit and who remain in the employ of Northeast Utilities companies
until at least age 60 (unless the Board of Trustees sets an earlier
age).
The benefits presented below are based on a straight life
annuity beginning at age 65 and do not take into account any
reduction for joint and survivorship annuity payments. Final average
compensation for purposes of calculating the target benefit is the
highest average annual compensation of the participant during any 36
consecutive months compensation was earned. Compensation taken into
account under the target benefit described above includes salary,
bonus, restricted stock awards, and long-term incentive payouts shown
in the Summary Compensation Table, but does not include employer
matching contributions under the 401k Plan. In the event that an
officer's employment terminates because of disability, the retirement
benefits shown above would be offset by the amount of any disability
benefits payable to the recipient that are attributable to
contributions made by Northeast Utilities and its subsidiaries under
long term disability plans and policies.
ANNUAL BENEFIT
Final Average Years of Credited Service
Compensation
15 20 25 30 35
$200,000 $72,000 $96,000 $120,000 $120,000 $120,000
250,000 90,000 120,000 150,000 150,000 150,000
300,000 108,000 144,000 180,000 180,000 180,000
350,000 126,000 168,000 210,000 210,000 210,000
400,000 144,000 192,000 240,000 240,000 240,000
450,000 162,000 216,000 270,000 270,000 270,000
500,000 180,000 240,000 300,000 300,000 300,000
600,000 216,000 288,000 360,000 360,000 360,000
700,000 252,000 336,000 420,000 420,000 420,000
800,000 288,000 384,000 480,000 480,000 480,000
900,000 324,000 432,000 540,000 540,000 540,000
1,000,000 360,000 480,000 600,000 600,000 600,000
1,100,000 396,000 528,000 660,000 660,000 660,000
1,200,000 432,000 576,000 720,000 720,000 720,000
Each of the executive officers of Northeast Utilities named in
the Summary Compensation Table is currently eligible for a target
benefit, except Messrs. Morris and Kenyon, whose Employment
Agreements provide specially calculated retirement benefits, based on
their previous arrangements with CMS Energy/Consumers Energy Company
(CMS) and South Carolina Electric and Gas, respectively. Mr.
Morris's agreement provides that upon retirement after reaching the
fifth anniversary of his employment date with the Company (or upon
disability or termination without cause or following a change in
control, as defined, of the Company) he will be entitled to receive a
special retirement benefit calculated by applying the benefit formula
of the CMS Supplemental Executive Retirement Plan to all compensation
earned from the Company and to all service rendered to the Company
and CMS. If Mr. Kenyon retires with at least three years but less
than five years of service with the Company, he will be deemed to
have five years of service for purpose of his special retirement
benefit, and if he retires with at least three years of service with
the Company, he will receive a lump sum payment of $500,000.
As of December 31, 1998, the five current executive officers
named in the Summary Compensation Table had the following years of
credited service for purposes of calculating target benefits under
the Supplemental Plan (or in the case of Messrs. Morris and Kenyon,
for purposes of calculating the special retirement benefits under
their respective Employment Agreements): Mr. Morris - 10, Mr. Kenyon
- - 2, Mr. Forsgren - 2, Mr. MacKenzie - 33, and for CL&P, WMECO and
PSNH, Mrs. Grise' - 18, and for NAEC, Mr. Feigenbaum - 12. Assuming
that retirement were to occur at age 65 for these officers,
retirement would occur with 23, 11, 15, 41, 37, and 29 years of
credited service, respectively.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Northeast Utilities Service Company (NUSCO) has entered into
employment agreements (the Officer Agreements) with each of the named
executive officers. The Officer Agreements are also binding on
Northeast Utilities and on each majority-owned subsidiary of
Northeast Utilities.
Each Officer Agreement obligates the officer to perform such
duties as may be directed by the NUSCO Board of Directors or the
Northeast Utilities Board of Trustees, protect the Company's
confidential information, and refrain, while employed by the Company
and for a period of time thereafter, from competing with the Company
in a specified geographic area. Each Officer Agreement provides that
the officer's base salary will not be reduced below certain levels
without the consent of the officer, and that the officer will
participate in specified benefits under the Supplemental Executive
Retirement Plan or other supplemental retirement programs (see
Pension Benefits, above) and/or in certain executive incentive
programs at specified incentive opportunity levels.
Each Officer Agreement provides for a specified employment term
and for automatic one-year extensions of the employment term unless
at least six months' notice of non-renewal is given by either party.
The employment term may also be ended by the Company for "cause", as
defined, at any time (in which case no supplemental retirement
benefit, if any, shall be due), or by the officer on thirty days'
prior written notice for any reason. Absent "cause", the Company may
remove the officer from his or her position on sixty days' prior
written notice, but in the event the officer is so removed and signs
a release of all claims against the Company, the officer will receive
one or two years' base salary and annual incentive payments,
specified employee welfare and pension benefits, and vesting of stock
appreciation rights, options and restricted stock.
Under the terms of an Officer Agreement, upon any termination of
employment following a change of control, as defined, between (a) the
earlier of the date shareholders approve a change of control
transaction or a change of control transaction occurs and (b) the
earlier of the date, if any, on which the Board of Trustees abandons
the transaction or the date two years following the change of
control, if the officer signs a release of all claims against the
Company the officer will be entitled to certain payments including a
multiple (not to exceed four) of annual base salary, annual incentive
payments, specified employee welfare and pension benefits, and
vesting of stock appreciation rights, options and restricted stock.
Certain of the change in control provisions may be modified by the
Board of Trustees prior to a change in control, on at least two
years' notice to the affected officer(s).
Besides the terms described above, the Officer Agreements of
Messrs. Morris, Kenyon, Forsgren and Feigenbaum provide for a
specified salary, cash, restricted stock and/or stock options upon
employment, special incentive programs and/or special retirement
benefits. See Summary Compensation Table and Pension Benefits,
above, for further description of these provisions. Mr. Kenyon's
Officer Agreement also provides for a special short term incentive
compensation program in lieu of a portion of the Stock Price Recovery
Incentive Program. Under this special program Mr. Kenyon is eligible
to receive a payment up to 100 percent of base salary depending on
his fulfillment of certain incentive goals for each of the years
ending August 31, 1997 and August 31, 1998, and for the 16 month
period ending December 31, 1999.
The descriptions of the various agreements set forth above are
for purpose of disclosure in accordance with the proxy and other
disclosure rules of the SEC and shall not be controlling on any
party; the actual terms of the agreements themselves determine the
rights and obligations of the parties.
Item 12. Security Ownership of Certain Beneficial Owners and Management
NU.
Incorporated herein by reference is the information contained in
the sections "Common Stock Ownership of Certain Beneficial Owners",
"Common Stock Ownership of Management", "Compensation of Trustees",
"Executive Compensation", "Pension Benefits", and "Report on
Executive Compensation" of the definitive proxy statement for
solicitation of proxies by NU, dated March 31, 1999 which will be
filed with the Commission pursuant to Rule 14a-6 under the Act.
CL&P, PSNH, WMECO and NAEC.
NU owns 100% of the outstanding common stock of registrants
CL&P, PSNH, WMECO and NAEC. As of February 25, 1999, the Directors
and Executive Officers of CL&P, PSNH, WMECO and NAEC beneficially
owned the number of shares of each class of equity securities of NU
listed below. No equity securities of CL&P, PSNH, WMECO or NAEC are
owned by the Directors and Executive Officers of CL&P, PSNH, WMECO
and NAEC. Unless otherwise noted, each Director and Executive
Officer of CL&P, PSNH, WMECO and NAEC has sole voting and investment
power with respect to the listed shares.
CL&P, PSNH, WMECO, and NAEC DIRECTORS AND EXECUTIVE OFFICERS
Title of Amount and Nature of Percent of
Class Name Beneficial Ownership Class (1)
NU Common John C. Collins 0
NU Common Ted C. Feigenbaum 12,273 (2)
NU Common John H. Forsgren 43,995 (3)
NU Common William T. Frain, Jr. 11,503 (4)
NU Common Cheryl W. Grise' 22,008 (5)
NU Common Bruce D. Kenyon 60,133 (6)
NU Common Gerald Letendre 0
NU Common Hugh C. MacKenzie 23,782 (7)
NU Common Michael G. Morris 72,566 (8)
NU Common Jane E. Newman 0
Amount beneficially owned by Directors and Executive Officers as a group:
Amount and Nature of
Company Number of Persons Beneficial Ownership
CL&P 6 248,904 (9)
PSNH 10 260,407 (10)
WMECO 6 248,904 (9)
NAEC 7 261,177 (11)
(1) As of February 25, 1999 there were 137,120,486 common shares of
NU outstanding. The percentage of such shares beneficially
owned by any Director or Executive Officer, and by all
Directors and Executive Officers of CL&P, PSNH, WMECO and NAEC
as a group, does not exceed one percent.
(2) These shares include 3,348 shares that could be acquired by Mr.
Feigenbaum pursuant to currently exercisable options. These
shares also include 3,596 restricted shares as to which Mr.
Feigenbaum has voting but no investment power.
(3) These shares include 24,394 shares that could be acquired by
Mr. Forsgren pursuant to currently exercisable options. These
shares also include 8,213 restricted shares as to which Mr.
Forsgren has voting but no investment power.
(4) These shares include 2,395 shares that could be acquired by Mr.
Frain pursuant to currently exercisable options. These shares
also include 3,524 restricted shares as to which Mr. Frain has
voting but no investment power.
(5) Mrs. Grise' shares voting and investment power with respect to
259 of these shares, which are held by her husband as custodian
for their minor children. These shares also include 4,306
shares that could be acquired by Mrs. Grise' pursuant to
currently exercisable options. These shares also include 4,928
restricted shares as to which Mrs. Grise' has voting but no
investment power.
(6) These shares also include 7,079 shares that could be acquired
by Mr. Kenyon pursuant to currently exercisable options. These
shares also include 39,544 restricted shares as to which Mr.
Kenyon has voting but no investment power.
(7) These shares also include 5,166 shares that could be acquired
by Mr. MacKenzie pursuant to currently exercisable options.
These shares also include 4,928 restricted shares as to which
Mr. MacKenzie has voting but no investment power.
(8) Mr. Morris shares voting and investment power with respect to
1,333 of these shares with his wife. These shares also include
21,524 shares that could be acquired by Mr. Morris pursuant to
currently exercisable options. These shares also include
34,100 restricted shares as to which Mr. Morris has voting but
no investment power.
(9) Included in the group total are 2,511 shares that could be
acquired by executive officers other than the named executive
officers pursuant to currently exercisable options. The group
total also includes 3,308 restricted shares as to which
executive officers other than the named executive officers have
voting but no investment power.
(10) Included in the group total are 4,906 shares that could be
acquired by executive officers other than the named executive
officers pursuant to currently exercisable options. The group
total also includes 6,832 restricted shares as to which
executive officers other than the named executive officers have
voting but no investment power.
(11) Included in the group total are 5,859 shares that could be
acquired by executive officers other than the named executive
officers pursuant to currently exercisable options. The group
total also includes 6,898 restricted shares as to which
executive officers other than the named executive officers have
voting but no investment power.
Item 13. Certain Relationships and Related Transactions
NU.
Incorporated herein by reference is the information contained in
the section "Certain Relationships and Related Transactions" of the
definitive proxy statement for solicitation of proxies by NU's Board
of Trustees, dated March 31, 1999, which will be filed with the
Commission pursuant to Rule 14a-6 under the Act.
CL&P, PSNH, WMECO and NAEC.
No relationships or transactions that would be described in
response to this item exist now or existed during 1998 with respect
to CL&P, PSNH, WMECO and NAEC.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
The Report of Independent Public Accountants and financial
statements of NU, CL&P, PSNH, WMECO and NAEC are hereby
incorporated by reference and made a part of this report
(see "Item 8. Financial Statements and Supplementary Data").
Report of Independent Public Accountants
on Schedules S-1
Consent of Independent Public Accountants S-3
2. Schedules:
Financial Statement Schedules for NU (Parent),
NU and Subsidiaries, CL&P and Subsidiaries,
PSNH and WMECO and Subsidiary are listed in
the Index to Financial Statements Schedules S-4
3. Exhibits Index E-1
(b) Reports on Form 8-K:
NU and CL&P filed 8-Ks dated January 28, 1999 with
the SEC on January 29, 1999. This 8-K filing
disclosed the details and the impacts of the DPUC
January 19, 1999 draft rate decision.
NORTHEAST UTILITIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NORTHEAST UTILITIES
(Registrant)
Date: March 9, 1999 By /s/ Michael G. Morris
Michael G. Morris
Chairman of the Board,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date Title Signature
March 9, 1999 Chairman of the Board, /s/ Michael G. Morris
President and Michael G. Morris
Chief Executive Officer
and a Trustee
March 9, 1999 Executive Vice /s/ John H. Forsgren
President and Chief John H. Forsgren
Financial Officer
March 9, 1999 Vice President and /s/ John J. Roman
Controller John J. Roman
March 9, 1999 Trustee /s/ Cotton M. Cleveland
Cotton M. Cleveland
Trustee
William F. Conway
March 9, 1999 Trustee /s/ E. Gail de Planque
E. Gail de Planque
March 9, 1999 Trustee /s/ Elizabeth T. Kennan
Elizabeth T. Kennan
March 9, 1999 Trustee /s/ William J. Pape II
William J. Pape II
March 9, 1999 Trustee /s/ Robert E. Patricelli
Robert E. Patricelli
March 9, 1999 Trustee /s/ John F. Swope
John F. Swope
March 9, 1999 Trustee /s/ John F. Turner
John F. Turner
THE CONNECTICUT LIGHT AND POWER COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE CONNECTICUT LIGHT AND POWER COMPANY
(Registrant)
Date: March 9, 1999 By /s/ Michael G. Morris
Michael G. Morris
Chairman
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date Title Signature
March 9, 1999 Chairman and /s/ Michael G. Morris
a Director Michael G. Morris
March 9, 1999 President and /s/ Hugh C. MacKenzie
a Director Hugh C. MacKenzie
March 9, 1999 Executive Vice /s/ John H. Forsgren
President and John H. Forsgren
Chief Financial
Officer and a
Director
March 9, 1999 Vice President /s/ John J. Roman
and Controller John J. Roman
March 9, 1999 Director /s/ Bruce D. Kenyon
Bruce D. Kenyon
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
(Registrant)
Date: March 9, 1999 By /s/ Michael G. Morris
Michael G. Morris
Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date Title Signature
March 9, 1999 Chairman and Chief /s/ Michael G. Morris
Executive Officer Michael G. Morris
and a Director
March 9, 1999 President and /s/ William T. Frain, Jr.
Chief Operating William T. Frain, Jr.
Officer and
a Director
March 9, 1999 Executive Vice /s/ John H. Forsgren
President and John H. Forsgren
Chief Financial
Officer and a
Director
March 9, 1999 Vice President /s/ John J. Roman
and Controller John J. Roman
March 9, 1999 Director /s/ John C. Collins
John C. Collins
March 9, 1999 Director /s/ Bruce D. Kenyon
Bruce D. Kenyon
March 9, 1999 Director /s/ Gerald Letendre
Gerald Letendre
March 9, 1999 Director /s/ Hugh C. MacKenzie
Hugh C. MacKenzie
March 9, 1999 Director /s/ Jane E. Newman
Jane E. Newman
WESTERN MASSACHUSETTS ELECTRIC COMPANY
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
(Registrant)
Date: March 9, 1999 By /s/ Michael G. Morris
Michael G. Morris
Chairman
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date Title Signature
March 9, 1999 Chairman and /s/ Michael G. Morris
a Director Michael G. Morris
March 9, 1999 President and /s/ Hugh C. MacKenzie
a Director Hugh C. MacKenzie
March 9, 1999 Executive Vice /s/ John H. Forsgren
President and John H. Forsgren
Chief Financial
Officer and a
Director
March 9, 1999 Vice President /s/ John J. Roman
and Controller John J. Roman
March 9, 1999 Director /s/ Bruce D. Kenyon
Bruce D. Kenyon
NORTH ATLANTIC ENERGY CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NORTH ATLANTIC ENERGY CORPORATION
(Registrant)
Date: March 9, 1999 By /s/ Michael G. Morris
Michael G. Morris
Chairman
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date Title Signature
March 9, 1999 Chairman and /s/ Michael G. Morris
a Director Michael G. Morris
March 9, 1999 President and /s/ Bruce D. Kenyon
Chief Executive Bruce D. Kenyon
Officer and
a Director
March 9, 1999 Executive Vice /s/ John H. Forsgren
President and John H. Forsgren
Chief Financial
Officer and a
Director
March 9, 1999 Vice President /s/ John J. Roman
and Controller John J. Roman
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
We have audited in accordance with generally accepted auditing
standards, the financial statements included in Northeast Utilities'
annual report to shareholders and The Connecticut Light and Power
Company's and Western Massachusetts Electric Company's annual reports,
incorporated by reference in this Form 10-K, and have issued our
reports thereon dated February 23, 1999. Our audit was made for the
purpose of forming an opinion on the basic financial statements taken
as a whole. The schedules listed in the accompanying Index to
Financial Statements Schedules are the responsibility of the
companies' management and are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not a required
part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Hartford, Connecticut
February 23, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
We have audited in accordance with generally accepted auditing
standards, the financial statements included in North Atlantic Energy
Corporation's and Public Service Company of New Hampshire's annual
reports, incorporated by reference in this Form 10-K and have issued
our reports thereon dated February 23, 1999. Our reports included an
explanatory paragraph regarding the existence of conditions which
raise substantial doubt about the companies' abilities to continue as
going concerns. Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The
schedules listed in the accompanying Index to Financial Statements
Schedules are the responsibility of the companies' management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic financial
statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Hartford, Connecticut
February 23, 1999
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included (or incorporated by reference)
in this Form 10-K, into the Company's previously filed Registration
Statements No. 33-55279 of The Connecticut Light and Power Company,
No. 33-56537 of CL&P Capital, LP and No. 33-34622, No. 33-44814, No.
33-63023, No. 33-40156, No. 333-52413, and No. 338-52415 of Northeast
Utilities.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Hartford, Connecticut
March 16, 199
INDEX TO FINANCIAL STATMENTS SCHEDULES
Schedule
I. Financial Information of Registrant:
Northeast Utilities (Parent) Balance
Sheets 1998 and 1997 S-5
Northeast Utilities (Parent) Statements
of Income 1998, 1997, and 1996 S-6
Northeast Utilities (Parent) Statements
of Cash Flows 1998, 1997, and 1996 S-7
II. Valuation and Qualifying Accounts and Reserves
1998, 1997, and 1996:
Northeast Utilities and Subsidiaries S-8 - S-10
The Connecticut Light and Power Company
and Subsidiaries S-11 - S-13
Public Service Company of New Hampshire S-14 - S-16
Western Massachusetts Electric Company
and Subsidiary S-17 - S-19
All other schedules of the companies' for which provision is made
in the applicable regulations of the Securities and Exchange
Commission are not required under the related instructions or are not
applicable, and therefore have been omitted.
SCHEDULE I
NORTHEAST UTILITIES (PARENT)
FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
AT DECEMBER 31, 1998 AND 1997
(Thousands of Dollars)
1998 1997
---------- ----------
ASSETS
- ------
Other Property and Investments:
Investments in subsidiary companies, at
equity................................................... $2,161,901 $2,314,746
Investments in transmission companies, at equity.......... 17,692 19,635
Other, at cost............................................ 67 402
----------- -----------
2,179,660 2,334,783
----------- -----------
Current Assets:
Cash...................................................... - 10
Notes receivable from affiliated companies................ 34,400 34,200
Notes and accounts receivable............................ 723 711
Receivables from affiliated companies..................... 1,033 961
Taxes receivable...................................... 7,969 -
Prepayments............................................... 96 265
----------- -----------
44,221 36,147
----------- -----------
Deferred Charges:
Accumulated deferred income taxes......................... 5,236 5,692
Unamortized debt expense.................................. 101 232
Other..................................................... 256 47
----------- -----------
5,593 5,971
----------- -----------
Total Assets......................................... $2,229,474 $2,376,901
=========== ===========
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common Shareholders' Equity:
Common shares, $5 par value--Authorized
225,000,000 shares; 137,031,264 shares issued and
130,954,740 shares outstanding in 1998 and
136,842,170 shares issued and
130,182,736 outstanding in 1997......................... $ 685,156 $ 684,211
Capital surplus, paid in.................................. 940,661 932,494
Deferred contribution plan--employee stock ownership plan. (140,619) (154,141)
Retained earnings......................................... 560,769 707,522
Accumulated other comprehensive income.................... 1,405 (1)
----------- -----------
Total common shareholders' equity....................... 2,047,372 2,170,085
Long-term debt............................................ 158,000 177,000
----------- -----------
Total capitalization.................................... 2,205,372 2,347,085
----------- -----------
Current Liabilities:
Long-term debt--current portion........................... 19,000 17,000
Accounts payable.......................................... 1,882 1,857
Accounts payable to affiliated companies.................. 714 216
Accrued taxes............................................. 15 7,860
Accrued interest.......................................... 2,097 2,343
Dividend reinvestment plan................................ - 90
----------- -----------
23,708 29,366
----------- -----------
Other Deferred Credits...................................... 394 450
----------- -----------
Total Capitalization and Liabilities $2,229,474 $2,376,901
=========== ===========
SCHEDULE I
NORTHEAST UTILITIES (PARENT)
FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(Thousands of Dollars Except Share Information)
1998 1997 1996
------------- ------------- -------------
Operating Revenues............... $ - $ - $ -
------------- ------------- -------------
Operating Expenses:
Other.......................... 7,674 8,657 8,920
Federal income taxes........... 1,569 (10,697) (10,390)
------------- ------------- -------------
Total operating expenses...... 9,243 (2,040) (1,470)
------------- ------------- -------------
Operating (Loss)/Income.......... (9,243) 2,040 1,470
------------- ------------- -------------
Other Income/(Loss):
Equity in earnings of
subsidiaries.................. (145,874) (118,195) 55,370
Equity in earnings of
transmission companies........ 2,903 2,968 3,306
Other, net..................... 21,995 2,184 368
------------- ------------- -------------
Other (loss)/income, net..... (120,976) (113,043) 59,044
------------- ------------- -------------
(Loss)/income before interest
charges..................... (130,219) (111,003) 60,514
------------- ------------- -------------
Interest Charges................. 16,534 18,959 21,585
------------- ------------- -------------
(Loss)/Earnings for Common Shares $ (146,753) $ (129,962) $ 38,929
============= ============= =============
(Loss)/Earnings Per Common Share
Basic and Diluted.............. $ (1.12) $ (1.01) $ 0.30
============= ============= =============
Common Shares Outstanding
(average)....................... 130,549,760 129,567,708 127,960,382
============= ============= =============
SCHEDULE I
NORTHEAST UTILITIES (PARENT)
FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, 1996
(Thousands of Dollars)
1998 1997 1996
------------ -------------- --------------
Operating Activities:
Net (loss)/income...................................... $ (146,753) $ (135,708) $ 1,831
Adjustments to reconcile to net cash
from operating activities:
Equity in earnings of subsidiary companies........... 145,874 123,941 (18,272)
Cash dividends received from subsidiary companies.... 47,000 132,994 247,101
Deferred income taxes................................ 777 1,558 3,868
Other sources of cash................................ 21,512 11,738 17,961
Other uses of cash................................... (586) (2,101) (3,065)
Changes in working capital:
Receivables........................................ (84) 6,247 (7,312)
Accounts payable................................... 523 (14,031) (3,183)
Other working capital (excludes cash).............. (15,981) 5,490 (13,724)
------------ -------------- --------------
Net cash flows from operating activities................. 52,282 130,128 225,205
------------ -------------- --------------
Financing Activities:
Issuance of common shares.............................. 2,659 6,502 10,622
Net decrease in short-term debt........................ - (38,750) (18,750)
Reacquisitions and retirements of long-term debt....... (17,000) (16,000) (14,000)
Cash dividends on common shares........................ - (32,134) (176,276)
------------ -------------- --------------
Net cash flows used for financing activities............. (14,341) (80,382) (198,404)
------------ -------------- --------------
Investment Activities:
NU System Money Pool................................... (200) (28,725) 4,200
Investment in subsidiaries............................. (40,029) (22,583) (33,217)
Other investment activities, net....................... 2,278 1,562 2,208
------------ -------------- --------------
Net cash flows used for investments...................... (37,951) (49,746) (26,809)
------------ -------------- --------------
Net decrease in cash for the period...................... (10) - (8)
Cash - beginning of period............................... 10 10 18
------------ -------------- --------------
Cash - end of period..................................... $ - $ 10 $ 10
============ ============== ==============
Supplemental Cash Flow Information
Cash paid/(refunded) during the year for:
Interest, net of amounts capitalized................... $ 18,960 $ 18,960 $ 21,770
============ ============== ==============
Income taxes........................................... $ (16,000) $ (16,000) $ (7,700)
============ ============== ==============
NORTHEAST UTILITIES AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1998
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 2,052 $ 3,042 $ - $ 2,677 (a)$ 2,417
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 34,437 $ 12,427 $ - $ 6,426 (b)$ 40,438
========= ========= ========= ========= =========
</TABLE)
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, and expenses in connection therewith.
NORTHEAST UTILITIES AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1997
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- ------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 17,062 $ 14,854 $ - $ 29,864 (a) $ 2,052
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 36,260 $ 9,542 $ - $ 11,365 (b) $ 34,437
========= ========= ========= ========= =========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
NORTHEAST UTILITIES AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1996
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance atCharged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 14,379 $ 21,761 $ - $ 19,078 (a) $ 17,062
========= ========= ========= ========== ==========
Asset valuation reserves $ 10,266 $ $ - $ 10,266 $ -
========= ========= ========= ========== ==========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 38,409 $ 8,397 $ - $ 10,546 (b) $ 36,260
========= ========= ========= ========== ==========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1998
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 300 $ 183 $ - $ 183 (a)$ 300
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 14,962 $ 5,612 $ - $ 3,918 (b)$ 16,656
========= ========= ========= ========= =========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, and expenses in connection therewith.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1997
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- ------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 13,241 $ 10,509 $ - $ 23,450 (a) $ 300
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 18,879 $ 4,458 $ - $ 8,375 (b) $ 14,962
========= ========= ========= ========= =========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1996
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance atCharged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 10,567 $ 15,704 $ - $ 13,030 (a) $ 13,241
========= ========= ========= ========== ==========
Asset valuation reserves $ 10,266 $ - $ - $ 10,266 $ -
========= ========= ========= ========== ==========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 19,874 $ 5,709 $ - $ 6,704 (b) $ 18,879
========= ========= ========= ========== ==========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1998
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 1,702 $ 2,726 $ - $ 2,387 (a)$ 2,041
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 7,788 $ 4,136 $ - $ 2,018 (b)$ 9,906
========= ========= ========= ========= =========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, and expenses in connection therewith.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1997
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- ------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 1,700 $ 3,259 $ - $ 3,257 (a) $ 1,702
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 7,265 $ 1,647 $ - $ 1,124 (b) $ 7,788
========= ========= ========= ========= =========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1996
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance atCharged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 1,582 $ 2,906 $ - $ 2,788 (a) $ 1,700
========= ========= ========= ========== ==========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 8,142 1,040 $ - $ 1,917 (b) $ 7,265
========= ========= ========= ========== ==========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1998
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 50 $ 106 $ - $ 106 (a)$ 50
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 5,503 $ 816 $ - $ 359 (b)$ 5,960
========= ========= ========= ========= =========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, and expenses in connection therewith.
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1997
(Thousands of Dollars)
- ------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance at Charged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- ------------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 2,121 $ 1,086 $ - $ 3,157 (a) $ 50
========= ========= ========= ========= =========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 5,575 $ 1,093 $ - $ 1,165 (b) $ 5,503
========= ========= ========= ========= =========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
WESTERN MASSACHUSETTS ELECTRIC COMPANY SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED DECEMBER 31, 1996
(Thousands of Dollars)
- -------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
--------------------
(1) (2)
Charged to
Balance atCharged to other Balance
beginning costs and accounts- Deductions- at end
Description of period expenses describe describe of period
- -------------------------------------------------------------------------------------------------
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
Reserves for uncollectible accounts $ 2,230 $ 3,097 $ - $ 3,206 (a) $ 2,121
========= ========= ========= ========== ==========
RESERVES NOT APPLIED AGAINST ASSETS:
Operating reserves $ 5,144 $ 1,222 $ - $ 791 (b) $ 5,575
========= ========= ========= ========== ==========
(a) Amounts written off, net of recoveries.
(b) Principally payments for environmental remediation, various injuries and
damages, employee medical expenses, and expenses in connection therewith.
EXHIBIT INDEX
Each document described below is incorporated by reference to the files
of the Securities and Exchange Commission, unless the reference to the
document is marked as follows:
* - Filed with the 1998 Annual Report on Form 10-K for NU and herein
incorporated by reference from the 1998 NU Form 10-K, File No. 1-5324
into the 1998 Annual Reports on Form 10-K for CL&P, PSNH, WMECO and
NAEC.
# - Filed with the 1998 Annual Report on Form 10-K for NU and herein
incorporated by reference from the 1998 NU Form 10-K, File No. 1-5324
into the 1998 Annual Report on Form 10-K for CL&P.
@ - Filed with the 1998 Annual Report on Form 10-K for NU and herein
incorporated by reference from the 1998 NU Form 10-K, File No. 1-5324
into the 1998 Annual Report on Form 10-K for PSNH.
** - Filed with the 1998 Annual Report on Form 10-K for NU and herein
incorporated by reference from the 1998 NU Form 10-K, File No. 1-5324
into the 1998 Annual Report on Form 10-K for WMECO.
## - Filed with the 1998 Annual Report on Form 10-K for NU and herein
incorporated by reference from the 1998 Form 10-K, File No. 1-5324 into
the 1998 Annual Report on Form 10-K for NAEC.
Exhibit
Number Description
3 Articles of Incorporation and By-Laws
3.1 Northeast Utilities
3.1.1 Declaration of Trust of NU, as amended through May 24,
1988. (Exhibit 3.1.1, 1988 NU Form 10-K, File No. 1-5324)
3.2 The Connecticut Light and Power Company
3.2.1 Certificate of Incorporation of CL&P, restated to March
22, 1994. (Exhibit 3.2.1, 1993 NU Form 10-K, File No. 1-
5324)
3.2.2 Certificate of Amendment to Certificate of Incorporation
of CL&P, dated December 26, 1996. (Exhibit 3.2.2, 1996 NU
Form 10-K, File No. 1-5324)
# 3.2.3 Certificate of Amendment to Certificate of Incorporation
of CL&P, dated April 27, 1998.
3.2.4 By-laws of CL&P, as amended to January 1, 1997. (Exhibit
3.2.3, 1996 NU Form 10-K, File No. 1-5324)
3.3 Public Service Company of New Hampshire
3.3.1 Articles of Incorporation, as amended to May 16, 1991.
(Exhibit 3.3.1, 1993 NU Form 10-K, File No. 1-5324)
3.3.2 By-laws of PSNH, as amended to November 1, 1993.
(Exhibit 3.3.2, 1993 NU Form 10-K, File No. 1-5324)
3.4 Western Massachusetts Electric Company
3.4.1 Articles of Organization of WMECO, restated to February
23, 1995. (Exhibit 3.4.1, 1994 NU Form 10-K, File No. 1-
5324)
3.4.2 By-laws of WMECO, as amended to February 11, 1998.
(Exhibit 3.4.2, 1997 NU Form 10-K, File No. 1-5324)
3.5 North Atlantic Energy Corporation
3.5.1 Articles of Incorporation of NAEC dated September 20,
1991. (Exhibit 3.5.1, 1993 NU Form 10-K, File No. 1-5324)
3.5.2 Articles of Amendment dated October 16, 1991 and June 2,
1992 to Articles of Incorporation of NAEC. (Exhibit
3.5.2, 1993 NU Form 10-K, File No. 1-5324)
3.5.3 By-laws of NAEC, as amended to November 8, 1993.
(Exhibit 3.5.3, 1993 NU Form 10-K, File No. 1-5324)
4 Instruments defining the rights of security holders, including
indentures
4.1 Northeast Utilities
4.1.1 Indenture dated as of December 1, 1991 between Northeast
Utilities and IBJ Schroder Bank & Trust Company, with
respect to the issuance of Debt Securities. (Exhibit
4.1.1, 1991 NU Form 10-K, File No. 1-5324)
4.1.2 First Supplemental Indenture dated as of December 1, 1991
between Northeast Utilities and IBJ Schroder Bank & Trust
Company, with respect to the issuance of Series A Notes.
(Exhibit 4.1.2, 1991 NU Form 10-K, File No. 1-5324)
4.1.3 Second Supplemental Indenture dated as of March 1, 1992
between Northeast Utilities and IBJ Schroder Bank & Trust
Company with respect to the issuance of 8.38% Amortizing
Notes. (Exhibit 4.1.3, 1992 NU Form 10-K, File No. 1-
5324)
4.1.4 Credit Agreement among NU, CL&P and WMECO and several
commercial banks, dated as of November 21, 1996.
(Exhibit No. B.1, File No. 70-8875)
4.1.5 First Amendment and Waiver dated as of May 30, 1997 to
Credit Agreement dated as of November 21, 1996 among NU,
CL&P, WMECO, and the Co-Agents and Banks named therein.
(Exhibit B.4(a) (Execution Copy), File No. 70-8875)
4.1.6 Second Amendment and Waiver dated as of September 11,
1998 to Credit Agreement dated as of November 21, 1996
among NU, CL&P, WMECO, and the Co-Agents and Banks named
therein. (Exhibit B.10 (Execution Copy), File No. 70-
8875)
4.1.7 Third Amendment and Waiver dated as of March 3, 1999 to
Credit Agreement dated as of November 21, 1996 among NU,
CL&P, WMECO, and the Co-Agents and Banks named therein.
(Exhibit B.11 (Execution Copy), File No. 70-8875)
4.1.8 Credit Agreement dated as of February 10, 1998 among NU,
the Lenders named therein, and Toronto Dominion (Texas),
Inc., as Administrative Agent, TD Securities (USA) Inc.,
as Arranger. (Exhibit B.9 (Execution Copy), File No. 70-
8875)
4.1.9 First Amendment dated as of February 8, 1999 to Credit
Agreement dated as of February 10, 1998 among NU, the
Lenders named therein, and Toronto Dominion (Texas),
Inc., as Administrative Agent, TD Securities (USA) Inc.,
as Arranger. (Exhibit A (Execution Copy), File No. 70-
8875)
4.1.10 Second Amendment dated as of March 9, 1999 to Credit
Agreement dated as of February 10, 1998 among NU, the
Lenders named therein, and Toronto Dominion (Texas),
Inc., as Administrative Agent, TD Securities (USA) Inc.,
as Arranger. (Exhibit B.12 (Execution Copy), File No.70-
8875)
4.2 The Connecticut Light and Power Company
4.2.1 Indenture of Mortgage and Deed of Trust between CL&P and
Bankers Trust Company, Trustee, dated as of May 1, 1921.
(Composite including all twenty-four amendments to May 1,
1967.) (Exhibit 4.1.1, 1989 NU Form 10-K, File No. 1-
5324)
Supplemental Indentures to the Composite May 1, 1921
Indenture of Mortgage and Deed of Trust between CL&P and
Bankers Trust Company, dated as of:
# 4.2.2 December 1, 1969. (Exhibit 4.20, File No. 2-60806)
4.2.3 June 30, 1982. (Exhibit 4.33, File No. 2-79235)
4.2.4 December 1, 1989. (Exhibit 4.1.26, 1989 NU Form 10-K,
File No. 1-5324)
4.2.5 July 1, 1992. (Exhibit 4.31, File No. 33-59430)
4.2.6 July 1, 1993. (Exhibit A.10(b), File No. 70-8249)
4.2.7 July 1, 1993. (Exhibit A.10(b), File No. 70-8249)
4.2.8 December 1, 1993. (Exhibit 4.2.14, 1993 NU Form 10-K,
File No. 1-5324)
4.2.9 February 1, 1994. (Exhibit 4.2.16, 1993 NU Form 10-K,
File No. 1-5324)
4.2.10 June 1, 1994. (Exhibit 4.2.15, 1994 NU Form 10-K, File
No. 1-5324)
4.2.11 October 1, 1994. (Exhibit 4.2.16, 1994 NU Form 10-K, File
No. 1-5324)
4.2.12 June 1, 1996. (Exhibit 4.2.16, 1996 NU Form 10-K, File
No. 1-5324)
4.2.13 January 1, 1997. (Exhibit 4.2.17, 1996 NU Form 10-K, File
No. 1-5324)
4.2.14 May 1, 1997. (Exhibit 4.19, File No. 333-30911)
4.2.15 June 1, 1997. (Exhibit 4.20, File No. 333-30911)
4.2.16 June 1, 1997. (Exhibit 4.2.17, 1997 NU Form 10-K, File
No. 1-5324)
# 4.2.17 May 1, 1998.
# 4.2.18 May 1, 1998.
4.2.19 Financing Agreement between Industrial Development
Authority of the State of New Hampshire and CL&P
(Pollution Control Bonds, 1986 Series) dated as of
December 1, 1986. (Exhibit C.1.47, 1986 NU Form U5S,
File No. 30-246)
4.2.20 Financing Agreement between Industrial Development
Authority of the State of New Hampshire and CL&P
(Pollution Control Bonds, 1988 Series) dated as of
October 1, 1988. (Exhibit C.1.55, 1988 NU Form U5S, File
No. 30-246)
4.2.21 Financing Agreement between Industrial Development
Authority of the State of New Hampshire and CL&P
(Pollution Control Bonds) dated as of December 1, 1989.
(Exhibit C.1.39, 1989 NU Form U5S, File No. 30-246)
4.2.22 Loan and Trust Agreement among Business Finance Authority
of the State of New Hampshire, CL&P and the Trustee
(Pollution Control Bonds, 1992 Series A) dated as of
December 1, 1992.(Exhibit C.2.33, 1992 NU Form U5S, File
No. 30-246)
4.2.23 Loan Agreement between Connecticut Development Authority
and CL&P (Pollution Control Bonds - Series A, Tax Exempt
Refunding) dated as of September 1, 1993. (Exhibit
4.2.21, 1993 NU Form 10-K, File No. 1-5324)
4.2.24 Loan Agreement between Connecticut Development Authority
and CL&P (Pollution Control Bonds - Series B, Tax Exempt
Refunding) dated as of September 1, 1993. (Exhibit
4.2.22, 1993 NU Form 10-K, File No. 1-5324)
4.2.25 Amended and Restated Loan Agreement between Connecticut
Development Authority and CL&P (Pollution Control Revenue
Bond - 1996A Series) dated as of May 1, 1996 and Amended
and Restated as of January 1, 1997. (Exhibit 4.2.24,
1996 NU Form 10-K, File No. 1-5324)
4.2.25.1 Amended and Restated Indenture of Trust between
Connecticut Development Authority and the
Trustee (CL&P Pollution Control Revenue Bond-
1996A Series), dated as of May 1, 1996 and
Amended and Restated as of January 1, 1997.
(Exhibit 4.2.24.1, 1996 NU Form 10-K, File No.
1-5324)
4.2.25.2 Standby Bond Purchase Agreement among CL&P,
Societe Generale, New York Branch and the
Trustee, dated January 23, 1997. (Exhibit
4.2.24.2, 1996 NU Form 10-K, File No. 1-5324)
4.2.25.3 Amendment No. 1, dated January 21, 1998, to the
Standby Bond Purchase Agreement, dated January
23, 1997. (Exhibit 4.2.24.3, 1997 NU Form 10-
K, File No. 1-5324)
# 4.2.25.4 Amendment No. 2, dated December 9, 1998, to the
Standby Bond Purchase Agreement, dated January
23, 1997.
4.2.25.5 AMBAC Municipal Bond Insurance Policy issued by
the Connecticut Development Authority (CL&P
Pollution Control Revenue Bond-1996A Series),
effective January 23, 1997. (Exhibit 4.2.24.3,
1996 NU Form 10-K, File No. 1-5324)
4.2.26 Amended and Restated Limited Partnership Agreement (CL&P
Capital, L.P.) among CL&P, NUSCO, and the persons who
became limited partners of CL&P Capital, L.P. in
accordance with the provisions thereof dated as of
January 23, 1995 (MIPS). (Exhibit A.1 (Execution Copy),
File No. 70-8451)
4.2.27 Indenture between CL&P and Bankers Trust Company, Trustee
(Series A Subordinated Debentures), dated as of
January 1, 1995 (MIPS). (Exhibit B.1 (Execution Copy),
File No. 70-8451)
4.2.28 Payment and Guaranty Agreement of CL&P dated as of
January 23, 1995 (MIPS). (Exhibit B.3 (Execution Copy),
File No. 70-8451)
4.3 Public Service Company of New Hampshire
4.3.1 First Mortgage Indenture dated as of August 15, 1978
between PSNH and First Fidelity Bank, National
Association, New Jersey, Trustee, (Composite including
all amendments to May 16, 1991). (Exhibit 4.4.1, 1992 NU
Form 10-K, File No. 1-5324)
4.3.1.1 Tenth Supplemental Indenture dated as of May 1,
1991 between PSNH and First Fidelity Bank,
National Association. (Exhibit 4.1, PSNH
Current Report on Form 8-K dated February 10,
1992, File No. 1-6392)
@ 4.3.2 Revolving Credit Agreement, dated as of April 23, 1998
(includes an Assignment and Security Agreement related to
Accounts Receivable).
4.3.3 Series A (Tax Exempt New Issue) PCRB Loan and Trust
Agreement dated as of May 1, 1991. (Exhibit 4.2, PSNH
Current Report on Form 8-K dated February 10, 1992, File
No. 1-6392)
4.3.4 Series B (Tax Exempt Refunding) PCRB Loan and Trust
Agreement dated as of May 1, 1991. (Exhibit 4.3, PSNH
Current Report on Form 8-K dated February 10, 1992, File
No. 1-6392)
4.3.5 Series C (Tax Exempt Refunding) PCRB Loan and Trust
Agreement dated as of May 1, 1991. (Exhibit 4.4, PSNH
Current Report on Form 8-K dated February 10, 1992, File
No. 1-6392)
4.3.6 Series D (Taxable New Issue) PCRB Loan and Trust
Agreement dated as of May 1, 1991. (Exhibit 4.5, PSNH
Current Report on Form 8-K dated February 10, 1992, File
No. 1-6392)
4.3.6.1 First Supplement to Series D (Tax Exempt
Refunding Issue) PCRB Loan and Trust Agreement
dated as of December 1, 1992. (Exhibit
4.4.5.1, 1992 NU Form 10-K, File No. 1-5324)
@ 4.3.6.2 Second Supplement to Series D PCRB Loan and
Trust Agreement dated as of May 1, 1995.
@ 4.3.6.3 Amended and Restated Second Series D (May 1,
1991 Taxable New Issue) PCRB Letter of Credit
and Reimbursement Agreement dated as of
April 23, 1998.
4.3.7 Series E (Taxable New Issue) PCRB Loan and Trust
Agreement dated as of May 1, 1991. (Exhibit 4.6, PSNH
Current Report on Form 8-K dated February 10, 1992, File
No. 1-6392)
4.3.7.1 First Supplement to Series E (Tax Exempt
Refunding Issue) PCRB Loan and Trust Agreement
dated as of December 1, 1993. (Exhibit 4.3.8.1,
1993 NU Form 10-K, File No. 1-5324)
@ 4.3.7.2 Second Supplement to Series E PCRB Loan and
Trust Agreement dated as of May 1, 1995.
@ 4.3.7.3 Amended and Restated Second Series E (May 1,
1991 Taxable New Issue) PCRB Letter of Credit
and Reimbursement Agreement dated as of
April 23, 1998.
4.4 Western Massachusetts Electric Company
4.4.1 First Mortgage Indenture and Deed of Trust between WMECO
and Old Colony Trust Company, Trustee, dated as of
August 1, 1954. (Exhibit 4.4.1, 1993 NU Form 10-K, File
No. 1-5324)
Supplemental Indentures thereto dated as of:
** 4.4.2 October 1, 1954.
4.4.3 March 1, 1967. (Exhibit 4.4.3, 1997 NU Form 10-K, File
No. 1-5324)
4.4.4 July 1, 1973. (Exhibit 2.10, File No. 2-68808)
4.4.5 December 1, 1992. (Exhibit 4.15, File No. 33-55772)
4.4.6 January 1, 1993. (Exhibit 4.5.13, 1992 NU Form 10-K, File
No. 1-5324)
4.4.7 March 1, 1994. (Exhibit 4.4.12, 1993 NU Form 10-K, File
No. 1-5324)
4.4.8 May 1, 1997. (Exhibit 4.11, File No. 33-51185)
4.4.9 July 1, 1997. (Exhibit 4.4.10, 1997 NU Form 10-K, File
No. 1-5324)
** 4.4.10 May 1, 1998.
** 4.4.11 May 1, 1998.
4.4.12 Loan Agreement between Connecticut Development Authority
and WMECO, (Pollution Control Bonds - Series A, Tax
Exempt Refunding) dated as of September 1, 1993.
(Exhibit 4.4.13, 1993 NU Form 10-K, File No. 1-5324)
4.5 North Atlantic Energy Corporation
4.5.1 First Mortgage Indenture and Deed of Trust between NAEC and
United States Trust Company of New York, Trustee, dated as
of June 1, 1992. (Exhibit 4.6.1, 1992 NU Form 10-K, File
No. 1-5324)
4.5.2 Term Credit Agreement dated as of November 9, 1995. (Exhibit
4.5.2, 1995 NU Form 10-K, File No. 1-5324)
10 Material Contracts
10.1 Stockholder Agreement dated as of July 1, 1964 among the
stockholders of Connecticut Yankee Atomic Power Company (CYAPC).
(Exhibit 10.1, 1994 NU Form 10-K, File No. 1-5324)
10.2 Form of Power Contract dated as of July 1, 1964 between CYAPC and
each of CL&P, HELCO, PSNH and WMECO. (Exhibit 10.2, 1994 NU Form
10-K, File No. 1-5324)
10.2.1 Form of Additional Power Contract dated as of April 30,
1984, between CYAPC and each of CL&P, PSNH and WMECO.
(Exhibit 10.2.1, 1994 NU Form 10-K, File No. 1-5324)
10.2.2 Form of 1987 Supplementary Power Contract dated as of
April 1, 1987, between CYAPC and each of CL&P, PSNH and
WMECO. (Exhibit 10.2.6, 1987 NU Form 10-K, File No. 1-
5324)
10.3 Capital Funds Agreement dated as of September 1, 1964 between CYAPC
and CL&P, HELCO, PSNH and WMECO. (Exhibit 10.3, 1994 NU Form 10-K,
File No. 1-5324)
10.4 Stockholder Agreement dated December 10, 1958 between Yankee Atomic
Electric Company (YAEC) and CL&P, HELCO, PSNH and WMECO. (Exhibit
10.4, 1993 NU Form 10-K, File No. 1-5324)
10.5 Form of Amendment No. 3, dated as of April 1, 1985, to Power
Contract between YAEC and each of CL&P, PSNH and WMECO, including
a composite restatement of original Power Contract dated June 30,
1959 and Amendment No. 1 dated April 1, 1975 and Amendment No. 2
dated October 1, 1980. (Exhibit 10.5, 1988 NU Form 10-K, File No.
1-5324.)
10.5.1 Form of Amendment No. 4 to Power Contract, dated May 6,1988,
between YAEC and each of CL&P, PSNH and WMECO. (Exhibit
10.5.1, 1989 NU Form 10-K, File No. 1-5324)
10.5.2 Form of Amendment No. 5 to Power Contract, dated June 26,
1989, between YAEC and each of CL&P, PSNH and WMECO.
(Exhibit 10.5.2, 1989 NU Form 10-K, File No. 1-5324)
10.5.3 Form of Amendment No. 6 to Power Contract, dated July 1,1989,
between YAEC and each of CL&P, PSNH and WMECO. (Exhibit
10.5.3, 1989 NU Form 10-K, File No. 1-5324)
10.5.4 Form of Amendment No. 7 to Power Contract, dated
February 1, 1992, between YAEC and each of CL&P, PSNH and
WMECO. (Exhibit 10.5.4, 1993 NU Form 10-K, File No. 1-
5324)
10.6 Stockholder Agreement dated as of May 20, 1968 among stockholders
of MYAPC. (Exhibit 10.6, 1997 NU Form 10-K, File No. 1-5324)
10.7 Form of Power Contract dated as of May 20, 1968 between MYAPC and
each of CL&P, HELCO, PSNH and WMECO. (Exhibit 10.7, 1997 Form 10-K,
File No. 1-5324)
10.7.1 Form of Amendment No. 1 to Power Contract dated as of March 1,
1983 between MYAPC and each of CL&P, PSNH and WMECO. (Exhibit
10.7.1, 1993 NU Form 10-K, File No. 1-5324)
10.7.2 Form of Amendment No. 2 to Power Contract dated as of
January 1, 1984 between MYAPC and each of CL&P, PSNH and
WMECO. (Exhibit 10.7.2, 1993 NU Form 10-K, File No. 1-5324)
10.7.3 Form of Amendment No. 3 to Power Contract dated as of
October 1, 1984 between MYAPC and each of CL&P, PSNH and
WMECO. (Exhibit No. 10.7.3, 1994 NU Form 10-K, File No.
1-5324)
10.7.4 Form of Additional Power Contract dated as of February 1,
1984 between MYAPC and each of CL&P, PSNH and WMECO.
(Exhibit 10.7.4, 1993 NU Form 10-K, File No. 1-5324)
10.8 Capital Funds Agreement dated as of May 20, 1968 between MYAPC and
CL&P, PSNH, HELCO and WMECO. (Exhibit 10.8, 1997 NU Form 10-K, File
No. 1-5324)
10.8.1 Amendment No. 1 to Capital Funds Agreement, dated as of
August 1, 1985, between MYAPC, CL&P, PSNH and WMECO.
(Exhibit No. 10.8.1, 1994 NU Form 10-K, File No. 1-5324)
10.9 Sponsor Agreement dated as of August 1, 1968 among the sponsors of
Vermont Yankee Nuclear Power Corporation (VYNPC). (Exhibit 10.9,
1997 NU Form 10-K, File No. 1-5324)
10.10 Form of Power Contract dated as of February 1, 1968 between VYNPC
and each of CL&P, HELCO, PSNH and WMECO. (Exhibit 10.10, 1997 NU
Form 10-K, File No. 1-5324)
10.10.1 Form of Amendment to Power Contract dated as of June 1,
1972 between VYNPC and each of CL&P, HELCO, PSNH and WMECO.
(Exhibit 5.22, File No. 2-47038)
10.10.2 Form of Second Amendment to Power Contract dated as of
April 15, 1983 between VYNPC and each of CL&P, PSNH and WMECO.
(Exhibit 10.10.2, 1993 NU Form 10-K, File No. 1-5324)
10.10.3 Form of Third Amendment to Power Contract dated as of
April 24, 1985 between VYNPC and each of CL&P, PSNH and
WMECO. (Exhibit No. 10.10.3, 1994 NU Form 10-K, File No.
1-5324)
10.10.4 Form of Fourth Amendment to Power Contract dated as of
June 1, 1985 between VYNPC and each of CL&P, PSNH and WMECO.
(Exhibit No. 10.10.4, 1996 NU Form 10-K, File No. 1-5324)
10.10.5 Form of Fifth Amendment to Power Contract dated as of May 6,
1988 between VYNPC and each of CL&P, PSNH and WMECO.
(Exhibit 10.10.5, 1990 NU Form 10-K, File No. 1-5324)
10.10.6 Form of Sixth Amendment to Power Contract dated as of May 6,
1988 between VYNPC and each of CL&P, PSNH and WMECO.
(Exhibit 10.10.6, 1990 NU Form 10-K, File No. 1-5324)
10.10.7 Form of Seventh Amendment to Power Contract dated as of
June 15, 1989 between VYNPC and each of CL&P, PSNH and
WMECO. (Exhibit 10.10.7, 1990 NU Form 10-K, File No. 1-5324)
10.10.8 Form of Eighth Amendment to Power Contract dated as of
December 1, 1989 between VYNPC and each of CL&P, PSNH and
WMECO. (Exhibit 10.10.8, 1990 NU Form 10-K, File No. 1-5324)
10.10.9 Form of Additional Power Contract dated as of February 1,
1984 between VYNPC and each of CL&P, PSNH and WMECO. (Exhibit
10.10.9, 1993 NU Form 10-K, File No. 1-5324)
10.11 Capital Funds Agreement dated as of February 1, 1968 between VYNPC
and CL&P, HELCO, PSNH and WMECO. (Exhibit 10.11, 1997 NU Form 10-K,
File No. 1-5324)
10.11.1 Form of First Amendment to Capital Funds Agreement dated
as of March 12, 1968 between VYNPC and CL&P, HELCO, PSNH and
WMECO. (Exhibit 10.11.1, 1997 NU Form 10-K, File No. 1-5324)
10.11.2 Form of Second Amendment to Capital Funds Agreement dated as
of September 1, 1993 between VYNPC and CL&P, HELCO, PSNH and
WMECO. (Exhibit 10.11.2, 1993 NU Form 10-K, File No. 1-5324)
10.12 Amended and Restated Millstone Plant Agreement dated as of December 1,
1984 by and among CL&P, WMECO and Northeast Nuclear Energy Company
(NNECO). (Exhibit 10.12, 1994 NU Form 10-K, File No. 1-5324)
10.13 Sharing Agreement dated as of September 1, 1973 with respect to 1979
Connecticut nuclear generating unit (Millstone 3). (Exhibit 6.43,
File No. 2-50142)
10.13.1 Amendment dated August 1, 1974 to Sharing Agreement - 1979
Connecticut Nuclear Unit. (Exhibit 5.45, File No. 2-52392)
10.13.2 Amendment dated December 15, 1975 to Sharing Agreement -
1979 Connecticut Nuclear Unit. (Exhibit 7.47, File No.
2-60806)
10.13.3 Amendment dated April 1, 1986 to Sharing Agreement - 1979
Connecticut Nuclear Unit. (Exhibit 10.17.3, 1990 NU Form
10-K, File No. 1-5324)
10.14 Agreement dated July 19, 1990, among NAESCO and Seabrook Joint owners
with respect to operation of Seabrook. (Exhibit 10.53, 1990 NU Form
10-K, File No. 1-5324)
10.15 Sharing Agreement between CL&P, WMECO, HP&E, HWP and PSNH dated as of
June 1, 1992. (Exhibit 10.17, 1992 NU Form 10-K, File No. 1-5324)
10.16 Rate Agreement by and between NUSCO, on behalf of NU, and the
Governor of the State of New Hampshire and the New Hampshire
Attorney General dated as of November 22, 1989. (Exhibit 10.44,1989
NU Form 10-K, File No. 1-5324)
10.16.1 First Amendment to Rate Agreement dated as of December 5,
1989. (Exhibit 10.16.1, 1995 NU Form 10-K, File No. 1-5324)
10.16.2 Second Amendment to Rate Agreement dated as of December 12,
1989. (Exhibit 10.16.2, 1995 NU Form 10-K, File No. 1-5324)
10.16.3 Third Amendment to Rate Agreement dated as of December 3,
1993. (Exhibit 10.16.3, 1995 NU Form 10-K, File No. 1-5324)
10.16.4 Fourth Amendment to Rate Agreement dated as of September 21,
1994. (Exhibit 10.16.4, 1995 NU Form 10-K, File No. 1-5324)
10.16.5 Fifth Amendment to Rate Agreement dated as of September 9,
1994. (Exhibit 10.16.5, 1995 NU Form 10-K, File No. 1-5324)
10.17 Form of Seabrook Power Contract between PSNH and NAEC, as amended
and restated. (Exhibit 10.45, 1992 NU Form 10-K, File No. 1-5324)
10.18 Agreement (composite) for joint ownership, construction and
operation of New Hampshire nuclear unit, as amended through the
November 1, 1990 twenty-third amendment. (Exhibit No. 10.17, 1994
NU Form 10-K, File No. 1-5324)
10.18.1 Memorandum of Understanding dated November 7, 1988 between
PSNH and Massachusetts Municipal Wholesale Electric Company
(Exhibit 10.17, PSNH 1989 Form 10-K, File No. 1-6392)
10.18.2 Agreement of Settlement among Joint Owners dated as of
January 13, 1989. (Exhibit 10.13.21, 1988 NU Form 10-K,
File No. 1-5324)
10.18.2.1 Supplement to Settlement Agreement, dated as of
February 7, 1989, between PSNH and Central
Maine Power Company. (Exhibit 10.18.1, PSNH
1989 Form 10-K, File No. 1-6392)
10.19 Amended and Restated Agreement for Seabrook Project Disbursing Agent
dated as of November 1, 1990. (Exhibit 10.4.7, File No. 33-35312)
10.19.1 Form of First Amendment to Exhibit 10.19. (Exhibit 10.4.8,
File No. 33-35312)
10.19.2 Form (Composite) of Second Amendment to Exhibit 10.19.
(Exhibit 10.18.2, 1993 NU Form 10-K, File No. 1-5324)
10.20 Agreement dated November 1, 1974 for Joint Ownership, Construction
and Operation of William F. Wyman Unit No. 4 among PSNH, Central
Maine Power Company and other utilities. (Exhibit 5.16 , File No.
2-52900)
10.20.1 Amendment to Exhibit 10.20 dated June 30, 1975. (Exhibit
5.48, File No. 2-55458)
10.20.2 Amendment to Exhibit 10.20 dated as of August 16, 1976.
(Exhibit 5.19, File No. 2-58251)
10.20.3 Amendment to Exhibit 10.20 dated as of December 31, 1978.
(Exhibit 5.10.3, File No. 2-64294)
10.21 Form of Service Contract dated as of July 1, 1966 between each of
NU, CL&P and WMECO and the Service Company. (Exhibit 10.20, 1993
NU Form 10-K, File No. 1-5324)
10.21.1 Service Contract dated as of June 5, 1992 between PSNH and
the Service Company. (Exhibit 10.12.4, 1992 NU Form 10-K,
File No. 1-5324)
10.21.2 Service Contract dated as of June 5, 1992 between NAEC and
the Service Company. (Exhibit 10.12.5, 1992 NU Form 10-K,
File No. 1-5324)
10.21.3 Form of Service Agreement dated as of June 29, 1992 between
PSNH and North Atlantic Energy Service Corporation, and the
First Amendment thereto. (Exhibits B.7 and B.7.1, File No.
70-7787)
10.21.4 Form of Annual Renewal of Service Contract. (Exhibit 10.20.3,
1993 NU Form 10-K, File No. 1-5324)
10.22 Memorandum of Understanding between CL&P, HELCO, HP&E, HWP and
WMECO dated as of June 1, 1970 with respect to pooling of
generation and transmission. (Exhibit 13.32, File No. 2-38177)
10.22.1 Amendment to Memorandum of Understanding between CL&P, HELCO,
HP&E, HWP and WMECO dated as of February 2, 1982 with respect
to pooling of generation and transmission. (Exhibit 10.21.1,
1993 NU Form 10-K, File No. 1-5324)
10.22.2 Amendment to Memorandum of Understanding between CL&P, HELCO,
HP&E, HWP and WMECO dated as of January 1, 1984 with respect
to pooling of generation and transmission. (Exhibit 10.21.2,
1994 NU Form 10-K, File No. 1-5324)
10.23 New England Power Pool (NEPOOL) Agreement effective as of
November 1, 1971, as amended to December 1, 1996. (Exhibit 10.15,
1988 NU Form 10-K, File No. 1-5324.)
10.23.1 Form of Interim Independent System Operator (ISO) Agreement
(Attachment to Thirty-Third Amendment to Exhibit 10.23 dated
as of December 31, 1996). (Exhibit 10.23.6, 1996 NU Form
10-K, File No. 1-5324)
* 10.23.2 Restated NEPOOL Power Pool Agreement (restated by the
Thirty-Sixth Agreement dated as of July 20, 1998 and includes
the Restated NEPOOL Open Access Transmission Tariff).
* 10.23.3 Thirty-Seventh Agreement dated as of August 15, 1998 amending
Exhibit 10.23.2.
* 10.23.4 Thirty-Eighth Agreement dated as of October 30, 1998 amending
Exhibit 10.23.2.
* 10.23.5 Thirty-Ninth Agreement dated as of November 13, 1998 amending
Exhibit 10.23.2.
* 10.23.6 Fortieth Agreement dated as of December 15, 1998 amending
Exhibit 10.23.2.
* 10.23.7 ISO New England Inc., FERC Tariff for Transmission Dispatch
and Power Administration Services.
10.24 Agreements among New England Utilities with respect to the Hydro-
Quebec interconnection projects. (See Exhibits 10(u) and 10(v);
10(w), 10(x), and 10(y), 1990 and 1988, respectively, Form 10-K of
New England Electric System, File No. 1-3446.)
10.25 Trust Agreement dated February 11, 1992, between State Street Bank
and Trust Company of Connecticut, as Trustor, and Bankers Trust
Company, as Trustee, and CL&P and WMECO, with respect to NBFT.
(Exhibit 10.23, 1991 NU Form 10-K, File No. 1-5324)
10.25.1 Nuclear Fuel Lease Agreement dated as of February 11, 1992,
between Bankers Trust Company, Trustee, as Lessor, and CL&P
and WMECO, as Lessees. (Exhibit 10.23.1, 1991 NU Form 10-K,
File No. 1-5324)
10.26 Simulator Financing Lease Agreement, dated as of February 1, 1985,
by and between ComPlan and NNECO. (Exhibit 10.25, 1994 NU Form
10-K, File No. 1-5324)
10.27 Simulator Financing Lease Agreement, dated as of May 2, 1985, by and
between The Prudential Insurance Company of America and NNECO.
(Exhibit No. 10.26, 1994 NU Form 10-K, File No. 1-5324)
10.28 Lease dated as of April 14, 1992 between The Rocky River Realty
Company (RRR) and Northeast Utilities Service Company (NUSCO) with
respect to the Berlin, Connecticut headquarters (office lease).
(Exhibit 10.29, 1992 NU Form 10-K, File No. 1-5324)
10.28.1 Lease dated as of April 14, 1992 between RRR and NUSCO with
respect to the Berlin, Connecticut headquarters (project
lease). (Exhibit 10.29.1, 1992 NU Form 10-K, File No. 1-5324)
10.29 Millstone Technical Building Note Agreement dated as of December 21,
1993 by and between The Prudential Insurance Company of America and
NNECO. (Exhibit 10.28, 1993 NU Form 10-K, File No. 1-5324)
10.30 Lease and Agreement, dated as of December 15, 1988, by and between
WMECO and Bank of New England, N.A., with BNE Realty Leasing
Corporation of North Carolina. (Exhibit 10.63, 1988 NU Form 10-K,
File No. 1-5324.)
10.31 Note Agreement dated April 14, 1992, by and between The Rocky River
Realty Company (RRR) and Purchasers named therein (Connecticut
General Life Insurance Company, Life Insurance Company of North
America, INA Life Insurance Company of New York, Life Insurance
Company of Georgia), with respect to RRR's sale of $15 million of
guaranteed senior secured notes due 2007 and $28 million of
guaranteed senior secured notes due 2017. (Exhibit 10.52, 1992 NU
Form 10-K, File No. 1-5324)
10.31.1 Amendment to Note Agreement, dated September 26, 1997.
(Exhibit 10.31.1, 1997 NU Form 10-K, File No. 1-5324)
10.31.2 Note Guaranty dated April 14, 1992 by Northeast Utilities
pursuant to Note Agreement dated April 14, 1992 between
RRR and Note Purchasers, for the benefit of The
Connecticut National Bank as Trustee, the Purchasers and
the owners of the notes. (Exhibit 10.52.1, 1992 NU Form
10-K, File No. 1-5324)
10.31.2.1 Extension of Note Guaranty, dated September 26,
1997. (Exhibit 10.31.2.1, 1997 NU Form 10-K,
File No. 1-5324)
10.31.3 Assignment of Leases, Rents and Profits, Security Agreement
and Negative Pledge, dated as of April 14, 1992 among RRR,
NUSCO and The Connecticut National Bank as Trustee, securing
notes sold by RRR pursuant to April 14, 1992 Note Agreement.
(Exhibit 10.52.2, 1997 NU Form 10-K, File No. 1-5324)
10.31.3.1 Modification of and Confirmation of Assignment
of Leases, Rents and Profits, Security Agreement
and Negative Pledge, dated as of September 26,
1997. (Exhibit 10.31.3.1, 1997 NU Form 10-K, File
No. 1-5324)
10.31.4 Purchase and Sale Agreement, dated July 28, 1997 by and
between RRR and the Sellers and Purchasers named therein.
(Exhibit 10.31.4, 1997 NU Form 10-K, File No. 1-5324)
10.31.5 Purchase and Sale Agreement, dated September 26, 1997 by
and between RRR and the Purchaser named therein. (Exhibit
10.31.5, 1992 NU Form 10-K, File No. 1-5324)
10.32 Master Trust Agreement dated as of September 2, 1986 between CL&P
and WMECO and Colonial Bank as Trustee, with respect to reserve
funds for Millstone 1 decommissioning costs. (Exhibit No. 10.32,
1996 NU Form 10-K, File No. 1-5324)
10.32.1 Notice of Appointment of Mellon Bank, N.A. as Successor
Trustee, dated November 20, 1990, and Acceptance of
Appointment. (Exhibit 10.41.1, 1992 NU Form 10-K, File
No. 1-5324)
10.33 Master Trust Agreement dated as of September 2, 1986 between CL&P
and WMECO and Colonial Bank as Trustee, with respect to reserve
funds for Millstone 2 decommissioning costs. (Exhibit No. 10.33,
1996 NU Form 10-K, File No. 1-5324)
10.33.1 Notice of Appointment of Mellon Bank, N.A. as Successor
Trustee, dated November 20, 1990, and Acceptance of
Appointment. (Exhibit 10.42.1, 1992 NU Form 10-K, File
No. 1-5324)
10.34 Master Trust Agreement dated as of April 23, 1986 between CL&P and
WMECO and Colonial Bank as Trustee, with respect to reserve funds
for Millstone 3 decommissioning costs. (Exhibit No. 10.34, 1996 NU
Form 10-K, File No. 1-5324)
10.34.1 Notice of Appointment of Mellon Bank, N.A. as Successor
Trustee, dated November 20, 1990, and Acceptance of
Appointment. (Exhibit 10.43.1, 1992 NU Form 10-K, File
No. 1-5324)
10.35 NU Executive Incentive Plan, effective as of January 1, 1991.
Exhibit 10.44, NU 1991 Form 10-K, File No. 1-5324)
* 10.35.1 NU Incentive Plan, effective as of January 1, 1998.
* 10.35.1.1 Amendment to Exhibit 10.35.1, effective as of
February 23, 1999.
10.36 Supplemental Executive Retirement Plan for Officers of NU System
Companies, Amended and Restated effective as of January 1, 1992.
(Exhibit 10.45.1, NU Form 10-Q for the Quarter Ended June 30, 1992,
File No. 1-5324)
10.36.1 Amendment 1 to Exhibit 10.36, effective as of August 1, 1993.
(Exhibit 10.35.1, 1993 NU Form 10-K, File No. 1-5324)
10.36.2 Amendment 2 to Exhibit 10.36, effective as of January 1,
1994. (Exhibit 10.35.2, 1993 NU Form 10-K, File No. 1-5324)
10.36.3 Amendment 3 to Exhibit 10.36, effective as of January 1, 1996.
(Exhibit 10.36.3, 1995 NU Form 10-K, File No. 1-5324)
* 10.37 Special Severance Program for Officers of NU System Companies, as
adopted on July 15, 1998.
* 10.37.1 Amendment to Exhibit 10.37, effective as of February 23, 1999.
10.38 Loan Agreement dated as of December 2, 1991, by and between NU and
Mellon Bank, N.A., as Trustee, with respect to NU's loan of $175
million to an ESOP Trust. (Exhibit 10.46, 1991 NU Form 10-K, File
No. 1-5324)
10.38.1 First Amendment to Exhibit 10.38 dated February 7, 1992.
(Exhibit 10.36.1, 1993 NU Form 10-K, File No. 1-5324)
10.38.2 Loan Agreement dated as of March 19, 1992 by and between
NU and Mellon Bank, N.A., as Trustee, with respect to
NU's loan of $75 million to the ESOP Trust. (Exhibit
10.49.1, 1992 NU Form 10-K, File No. 1-5324)
10.38.3 Second Amendment to Exhibit 10.38 dated April 9, 1992.
(Exhibit 10.36.3, 1993 NU Form 10-K, File No. 1-5324)
10.39 Employment Agreement with Michael G. Morris. (Exhibit 10.39, 1997
NU Form 10-K, File No. 1-5324)
* 10.39.1 Amendment to Exhibit 10.39, dated as of February 23,
1999.
10.40 Transition and Retirement Agreement with Bernard M. Fox. (Exhibit
10.39, 1996 NU Form 10-K, File No. 1-5324)
10.41 Employment Agreement with Bruce M. Kenyon. (Exhibit 10.40, 1996 NU
Form 10-K, File No. 1-5324)
* 10.41.1 Amendment to Exhibit 10.41, dated as of January 13, 1998.
* 10.41.2 Amendment to Exhibit 10.41, dated as of February 23, 1999.
10.42 Employment Agreement with John H. Forsgren. (Exhibit 10.41, 1996
NU Form 10-K, File No. 1-5324)
* 10.42.1 Amendment to Exhibit 10.42, dated as of January 13, 1998.
* 10.42.2 Amendment to Exhibit 10.42, dated as of February 23, 1999.
10.43 Employment Agreement with Hugh C. MacKenzie. (Exhibit 10.42, 1996
NU Form 10-K, File No. 1-5324)
* 10.43.1 Amendment to Exhibit 10.43, dated as of January 13, 1998.
* 10.43.2 Amendment to Exhibit 10.43, dated as of February 23, 1999.
* 10.44 Employment Agreement with Cheryl W. Grise'.
* 10.44.1 Amendment to Exhibit 10.44, dated as of January 13, 1998.
* 10.44.2 Amendment to Exhibit 10.44, dated as of February 23, 1999.
10.45 Northeast Utilities Deferred Compensation Plan for Trustees,
Amended and Restated December 13, 1994. (Exhibit 10.39, 1995 NU
Form 10-K, File No. 1-5324)
10.46 Deferred Compensation Plan for Officers of Northeast Utilities
System Companies adopted September 23, 1986. (Exhibit 10.40, 1995
NU Form 10-K, File No. 1-5324)
10.47 Northeast Utilities Deferred Compensation Plan for Executives,
adopted January 13, 1998. (Exhibit A.5, File No. 70-09185)
10.48 Reciprocal Support Agreement Among NNECO, NAESCO, CYAPC, YAEC and
NUSCO dated January 1, 1996. (Exhibit 10.41, 1995 NU Form 10K,
File No. 1-5324)
10.49 Receivables Purchase and Sale Agreement (CL&P and CL&P Receivables
Corporation), dated as of September 30, 1997. (Exhibit 10.49, 1997
NU Form 10-K, File No. 1-5324)
# 10.49.1 Amendment to Exhibit 10.49 dated September 29, 1998.
10.49.2 Purchase and Contribution Agreement (CL&P and CL&P
Receivables Corporation), dated as of September 30, 1997.
(Exhibit 10.49.1, 1997 NU Form 10-K, File No. 1-5324)
10.50 Receivables Purchase Agreement (WMECO and WMECO Receivables
Corporation), dated as of May 22, 1997. (Exhibit 10.50, 1997 NU
Form 10-K, File No. 1-5324)
10.50.1 Purchase and Sale Agreement (WMECO and WMECO Receivables
Corporation), dated as of May 22, 1997. (Exhibit 10.50.1,
1997 NU Form 10-K, File No. 1-5324)
10.51 Master Lease Agreement between General Electric Capital Corporation
and CL&P, dated as of June 21, 1996. (Exhibit 10.50, 1996 NU Form
10-K, File No. 1-5324)
10.51.1 Amendment No. 1 to Master Lease Agreement, dated as of
August 29, 1997. (Exhibit 10.51.1, 1997 NU Form 10-K,
File No. 1-5324)
10.52 NU Guaranty, dated as of November 30, 1998, made by NU, in favor of
the Participating Banks, the Issuing Banks and the Administrative
Agent, all named in a $50,000,000 Letter of Credit and
Reimbursement Agreement, dated as of November 30, 1998, among
Select Energy, Inc., the Participating Banks, the Administrative
Agent, the Issuing Bank and Documentation Agent, and the
Syndication Agent named therein. (Exhibit B.1 (Execution Copy),
File No. 70-9343)
10.52.1 Amendment No. 1 dated as of November 30, 1998 to Exhibit
10.52. (Exhibit B.3 (Execution Copy), File No. 70-9343)
13 Annual Report to Security Holders (Each of the Annual Reports is filed
only with the Form 10-K of that respective registrant.)
* 13.1 Portions of the Annual Report to Shareholders of NU (pages 12-49)
that have been incorporated by reference into this Form 10-K.
13.2 Annual Report of CL&P.
13.3 Annual Report of WMECO.
13.4 Annual Report of PSNH.
13.5 Annual Report of NAEC.
*21 Subsidiaries of the Registrant.
27 Financial Data Schedules (Each Financial Data Schedule is filed only
with the Form 10-K of that respective registrant.)
27.1 Financial Data Schedule of NU.
27.2 Financial Data Schedule of CL&P.
27.3 Financial Data Schedule of WMECO.
27.4 Financial Data Schedule of PSNH.
27.5 Financial Data Schedule of NAEC.