EXHIBIT 99(e)
(6) POSTEMPLOYMENT BENEFITS FOR THE COMPANY AND HL&P
The Company and HL&P adopted Statement of Financial Accounting
Standards (SFAS) No. 112, "Employer's Accounting for
Postemployment Benefits", effective January 1, 1994. SFAS No.
112 requires the recognition of a liability for benefits, not
previously accounted for on the accrual basis, provided to
former or inactive employees, their beneficiaries and covered
dependents, after employment but before retirement. In the
Company's and HL&P's case, this liability is principally health
care and life insurance benefits for participants in the
long-term disability plan. As required by SFAS No. 112, the
Company and HL&P expensed the transition obligation (liability
from prior years) upon adoption, and recorded a one-time,
after-tax charge to income of $8.2 million in the first quarter
of 1994. Ongoing 1994 charges to income are expected to be
immaterial.
(7) ENVIRONMENTAL AND CABLE REGULATIONS
(b) IMPACT OF THE CABLE TELEVISION CONSUMER PROTECTION AND
COMPETITION ACT OF 1992 ON KBLCOM INCORPORATED (KBLCOM). In
March 1994, the Federal Communications Commission (FCC) issued
its revised benchmark rules (Rate Rule II) as well as its
interim cost-of-service rule (Interim COS Rule). Each of these
rules became effective on May 15, 1994. Rate Rule II revises the
"benchmark formulas" established by the FCC in May 1993. Under
Rate Rule II (which will be applied prospectively), cable
operators must reduce their existing rates to the higher of (i)
the rates calculated using the revised benchmark formulas
(Revised Benchmarks) or (ii) a level 17% below such cable
operators' rates as of September 30, 1992, adjusted for
inflation. Cable operators which cannot or do not wish to comply
with the Revised Benchmarks may choose to justify their existing
rates under the Interim COS Rule. The Interim COS Rule
establishes a cost-of-service rate system similar to that used
in the telephone industry. KBLCOM expects that it will incur
increased administrative burdens under these new rules, and that
the Revised Benchmarks will impose some additional reductions in
KBLCOM's rates for regulated services. The extent of the
anticipated decline in revenues cannot be determined at this
time, but will have an adverse impact on KBLCOM's financial
position and results of operations.
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(8) JOINTLY-OWNED NUCLEAR PLANT
(d) NUCLEAR INSURANCE. HL&P and the other owners of the South Texas
Project maintain nuclear property and nuclear liability
insurance coverages as required by law and periodically review
available limits and coverage for additional protection. The
owners of the South Texas Project currently maintain $500
million in primary property damage insurance from American
Nuclear Insurers (ANI). Additionally, the owners of the South
Texas Project maintain the maximum amounts of excess property
insurance available through the insurance industry, $2.25
billion. This excess property insurance coverage consists
of $850 million of excess insurance from ANI and $1.4 billion of
excess property insurance coverage through participation in the
Nuclear Electric Insurance Limited (NEIL) II program. Under NEIL
II, HL&P and the other owners of the South Texas Project are
subject to a maximum assessment, in the aggregate, of
approximately $15.9 million in any one policy year. The
application of the proceeds of such property insurance is
subject to the priorities established by the United States
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Nuclear Regulatory Commission (NRC) regulations relating to the
safety of licensed reactors and decontamination operations.
Pursuant to the Price Anderson Act, the maximum liability to the
public for owners of nuclear power plants, such as the South
Texas Project, was decreased from $9.3 billion to $9.2 billion
effective June 3, 1994. Owners are required under the Act to
insure their liability for nuclear incidents and protective
evacuations by maintaining the maximum amount of financial
protection available from private sources and by maintaining
secondary financial protection through an industry retrospective
rating plan. The assessment of deferred premiums provided by the
plan is $75.5 million per reactor subject to indexing for
inflation, a possible 5% surcharge (but no more than $10 million
per reactor per incident in any one year) and a 3% state premium
tax. HL&P and the other owners of the South Texas Project
currently maintain the required nuclear liability insurance and
participate in the industry retrospective rating plan.
There can be no assurance that all potential losses or
liabilities will be insurable, or that the amount of insurance
will be sufficient to cover them. Any substantial losses not
covered by insurance could have a material adverse effect on
HL&P's and the Company's financial condition.
(e) NUCLEAR DECOMMISSIONING. HL&P and the other co-owners of the South
Texas Project are required by the NRC to meet minimum
decommissioning funding requirements to pay the costs of
decommissioning the South Texas Project. Pursuant to the terms
of the order of the Public Utility Commission of Texas (Utility
Commission) in Docket No. 9850, HL&P is currently funding
decommissioning costs with an independent trustee at an annual
amount of $6 million. This funding level was estimated to
provide approximately $146 million in 1989 dollars at the time
of scheduled decommissioning. In May 1994, an outside consultant
estimated HL&P's portion of decommissioning costs to be
approximately $318 million in 1994 dollars with a corresponding
funding level of $16 million per year. The consultant's calculation
of decommissioning costs for financial planning purposes used
the DECON methodology (prompt removal/dismantling), one of three
alternatives acceptable to the NRC, and assumed deactivation of
Unit No. 1 and Unit No. 2 upon expiration of their 40 year
operating licenses. HL&P is currently in a rate proceeding, see
Note 9(e) of the Notes to the Company's Consolidated and HL&P's
Financial Statements in this Report. Until the issuance of an
order in the pending rate proceeding, the exact funding level in
excess of the minimum NRC requirements cannot be determined.
While the current funding levels exceed minimum NRC
requirements, no assurance can be given that (i) the amount held
in the trust will be adequate to cover the actual
decommissioning costs of the South Texas Project or (ii) the
assumptions used in estimating decommissioning costs will
ultimately prove to be correct.
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(g) LOW-LEVEL RADIOACTIVE WASTE. In response to the federal Low-Level
Radioactive Waste Policy Act of 1980 which assigns
responsibility for low-level waste disposal to the states, Texas
has created the Texas Low-Level Radioactive Waste Disposal
Authority (Waste Disposal Authority) to build and operate a
low-level waste disposal facility. HL&P's portion of the State
of Texas assessment for the development work on this facility
was approximately $0.7 million in 1994 and will be approximately
$1.3 million for 1995. Nuclear facilities in Texas formerly had
access to the low-level waste disposal facility at Barnwell,
South Carolina which was closed in June 1994 to generators
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of radioactive waste located in states which are not members
of the Southeast compact.
HL&P has constructed a temporary low-level radioactive waste
storage facility at the South Texas Project which will be
utilized for interim storage of low-level radioactive waste
prior to the opening of the Texas Low-Level Radioactive Waste
Site. The Waste Disposal Authority currently estimates that the
Texas site could begin receiving waste in mid-1997.
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