EXHIBIT 99(b)
ITEM 3. LEGAL PROCEEDINGS.
For a description of certain legal and regulatory proceedings
affecting the Company and its subsidiaries, see Notes 9 through 12 to the
Company's Consolidated and HL&P's Financial Statements in Item 8 of this
Report, which notes are incorporated herein by reference.
In August 1993, HL&P entered into a Consent Agreement with the EPA
that resolved three Administrative Orders issued by the EPA in 1991 and 1992
regarding alleged violations of certain provisions of the Clean Water Act at
Limestone during the period 1989 through 1992. Pursuant to the Consent
Agreement, HL&P, while neither admitting nor denying the allegations contained
in the complaint, agreed to pay the EPA $87,500. On August 29, 1991, the EPA
issued an Administrative Order related to alleged noncompliance at W. A.
Parish. HL&P has taken action to address the issues cited by the EPA and
believes them to be substantially resolved at this time.
From time to time, HL&P sells equipment and material it no longer
requires for its business. In the past, some purchasers may have improperly
handled the material, principally through improper disposal of oils containing
PCBs used in older transformers. Claims have been asserted against HL&P for
clean-up of environmental contamination as well as for personal injury and
property damages resulting from the purchasers' alleged improper activities.
Although HL&P has disputed its responsibility for the actions of such
purchasers, HL&P has, in some cases, participated in or contributed to the
remediation of those sites. Such undertakings in the past have not required
material expenditures by HL&P. In 1990, HL&P, together with other companies,
participated in the clean-up of one such site. Three suits have been brought
against HL&P and a number of other parties for personal injury and property
damages in connection with that site and its cleanup. In two of the cases,
Dumes, et al. vs. Houston Lighting & Power Company, et al., pending in the
United States District Court for the Southern District of Texas, Corpus Christi
Division, and Trevino, et al. vs. Houston Lighting & Power Company, et al.,
pending before the 117th District Court of Nueces County, Texas, landowners
near the site are seeking damages primarily for lead contamination to their
property. A third lawsuit, Holland vs. Central Power and Light Company, et
al., involving an allegation of exposure to PCBs disposed of at the site, was
dismissed pursuant to a settlement agreement entered into by the parties in
July 1993. The terms of the settlement were not material. In all these
cases, HL&P has disputed its responsibility for the actions of the disposal
site operator and whether injuries or damages occurred. In addition, Gulf
States has filed suit in the United States District Court for the Southern
District of Texas, Houston Division, against HL&P and two other utilities
concerning another site in Houston, Texas, which allegedly has been
contaminated by PCBs and which Gulf States has undertaken to remediate pursuant
to an EPA order. Gulf States seeks contribution from HL&P and the other
utilities for Gulf States' remediation costs. HL&P does not currently believe
that it has any responsibility for that site, and HL&P has not been determined
by the EPA to be a responsible party for that site. Discovery is underway in
all these pending cases and, although their ultimate outcomes cannot be
predicted at this time, HL&P and the Company believe, based on information
currently available, that none of these cases will result in a material adverse
effect on the Company's or HL&P's financial condition or results of operations.
For information with respect to the EPA's identification of HL&P as a
"potentially responsible party" for remediation of a CERCLA site
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adjacent to one of HL&P's transmission lines in Harris County, see "Liquidity
and Capital Resources - HL&P - Environmental Expenditures" in Item 7 of this
Report, which information is incorporated herein by reference.
HL&P and the other owners of the South Texas Project have filed suit
against Westinghouse in the District Court for Matagorda County, Texas (Cause
No. 90-S-0684-C), alleging breach of warranty and misrepresentation in
connection with the steam generators supplied by Westinghouse for the South
Texas Project. In recent years, other utilities have encountered stress
corrosion cracking in steam generator tubes in Westinghouse units similar to
those supplied for the South Texas Project. Failure of such tubes can result
in a reduction of plant efficiency, and, in some cases, utilities have replaced
their steam generators. During an inspection concluded in the fall of 1993,
evidence was found of stress corrosion cracking consistent with that
encountered with Westinghouse steam generators at other facilities, and a small
number of tubes were found to require plugging. To date, stress corrosion
cracking has not had a significant impact on operation of either unit; however,
the owners of the South Texas Project have approved remedial operating plans
and have undertaken expenditures to minimize and delay further corrosion. The
litigation, which is in discovery, seeks appropriate damages and other relief
from Westinghouse and is currently scheduled for trial in the fall of 1994. No
prediction can be made as to the ultimate outcome of that litigation.
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