Item 1. BUSINESS
General
The Registrant, Eastern Edison Company, a retail electric utility company, is a corporation organized under the laws of the Commonwealth of Massachu setts. Eastern Edison is a wholly owned subsidiary of EUA, a Massachusetts voluntary association organized and existing under a Declaration of Trust dated April 2, 1928, as amended, and is a registered holding company under the 1935 Act. EUA owns directly all of the shares of common stock of three operating retail electric utility companies: Eastern Edison, Blackstone, and Newport. Blackstone operates in northern Rhode Island, Eastern Edison operates in southeastern Massachusetts, and Newport operates in south coastal Rhode Island. These subsidiaries are collectively referred to as the Retail Subsidiaries. Eastern Edison owns all of the permanent securities of Montaup, a generation and transmission company, which supplies electricity to Eastern Edison, to Blackstone, to Newport and to two unaffiliated utilities for resale. EUA also owns directly all of the shares of common stock of EUA Cogenex, EUA Energy, EUA Ocean State and EUA Service. EUA Service provides various accounting, financial, engineering, planning, data processing and other services to all EUA System companies. EUA Cogenex is an energy service and cogeneration company. EUA Energy was organized to invest in energy-related projects. EUA Ocean State owns a 29.9% interest in OSP's two gas-fired generating units. (See Item 2.
Item 3. LEGAL PROCEEDINGS
Rate Proceedings
See descriptions of proceedings under Item 1, BUSINESS -- Rates.
Environmental Proceedings
1. Montaup and EUA Service received a Notice of Responsibility on July 27, 1987 from the DEP for suspected hazardous material at a site owned by Montaup on Hortonville Road in Swansea, Massachusetts. EUA Service has contracted for and received an environmental site assessment for the property, identifying the previous property owner as the party likely responsible for the deposit of suspected hazardous waste materials on the site. This assessment has been submitted to the DEP, identifying the previous property owner. Under MCP regulations, Montaup must take the initiative to complete investigative and remedial actions by August 1997.
2. During March-April 1990, Eastern Edison conducted a limited environmental investigation (Phase I study) of a portion of its Dupont Substation in Brockton, Massachusetts. During the investigation, Eastern Edison notified the DEP that it had encountered oils and PCBs. On May 3, 1990, the DEP notified Eastern Edison of its liability for releases of oil and/or hazardous materials at the site, and requested a copy of the Phase I study. Following its review of the Phase I study on January 23, 1991, the DEP issued a Notice of Responsibility to Eastern Edison requiring a Phase II - Comprehensive Site Investigation. On February 12, 1991, Eastern Edison notified the DEP that it will perform the Phase II study and continue to work with DEP at this site. A scope of work for the Phase II study was submitted on April 12, 1991. Eastern Edison will proceed once the DEP approves the scope of work. Under the new MCP, the DEP must classify this site before Eastern Edison can proceed with further studies. A Phase II study and a site ranking may be required by July 1995.
Eastern Edison and Montaup are unable to predict the outcome of any of the foregoing environmental matters or to estimate the potential costs which may ultimately result. It is the policy of these companies in such cases to provide notice to liability insurers and to make claims. However, at this time, no claims have been filed against any insurer and it is not possible at this time to predict whether liability, if any, will be assumed by, or can be enforced against, the insurance carrier in these matters. Under CERCLA, each responsible party can be held "jointly and severally" liable for clean-up costs. Eastern Edison and Montaup could thus be held fully liable for environmental damages for which they were only partially responsible. However, Eastern Edison and Montaup might then be entitled to recover costs from other PRPs.
As of December 31, 1993, Eastern Edison and Montaup have incurred costs of approximately $108,000 in connection with the foregoing environmental matters and estimate that additional expenditures may be incurred through 1994 up to $850,000.
As a general matter Eastern Edison and Montaup will seek to recover costs relating to environmental proceedings in their rates, although there is no assurance that they will be authorized to recover any particular cost. Montaup is currently recovering certain of the incurred costs in its rates. Estimated amounts after 1995 are not now determinable since site studies which are the basis of these estimates have not been completed. As a result of the recoverability in current rates, and the uncertainty regarding both its estimated liability, as well as potential contributions from insurance carriers and other responsible parties Eastern Edison and Montaup do not believe that the ultimate impact of the environmental costs will be material to either of them and thus, no loss accrual has been recorded.
Other_Proceedings
In December 1992, Montaup commenced a declaratory judgment action in which it sought to have the Massachusetts Superior Court determine its rights under the Power Purchase Agreement between it and Aquidneck Power Limited Partnership (Aquidneck). Montaup sought a declaration that the Power Purchase Agreement was binding on the parties according to its terms. Aquidneck asserted that Montaup had either an express or implied obligation to negotiate new terms and conditions to the Power Purchase Agreement. Specifically, the defendants sought to amend, through negotiations, certain milestone events to which they were bound in the Power Purchase Agreement as written. Aquidneck failed to meet the first milestone of January 1, 1993. Accordingly, on January 5, 1993, Montaup exercised its rights to terminate the Power Purchase Agreement effective immediately. In January 1994, a counterclaim by Aquidneck claimed certain breaches of the Power Purchase Agreement, including an alleged failure on the part of Montaup to renegotiate the terms and conditions of the Power Purchase Agreement relating to the first milestone event. Also in January 1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
Aquidneck apparently claims $11 million of damages on the theory that EUA can "avoid an approximately $11 million obligation to purchase capacity and power which it does not currently need." Aquidneck seeks treble damages claiming Montaup, EUA and EUA Service violated state laws willfully and knowingly.
Montaup, EUA and EUA Service intend to defend the counterclaim vigorously and believe that Aquidneck's claims have no basis in law.
On June 30, 1987, the MDPU commenced a proceeding for the purpose of inves tigating Eastern Edison's power planning process after rejecting a proposed Purchased Capacity Adjustment Clause. One of the purposes of this proceeding is to investigate the prudency of Eastern Edison's all requirements contract with Montaup. No procedural dates have been set nor has any other activity occurred in this docket. Eastern Edison cannot predict the outcome of this matter at this time.
On January 8, 1992, the Massachusetts Municipal Wholesale Electric Cooperative and its member municipalities, all of which are members of NEPOOL, filed a suit in Massachusetts Superior Court against the investor-owned utilities that are also members of NEPOOL. The suit alleges damages by NEPOOL's establishment of minimum size requirements for generating units designated as pool-planned generating units. The suit names as defendants members of NEPOOL, including Blackstone, Eastern Edison, Montaup and Newport (NEPOOL members of the EUA System). Discovery has not begun, pending resolution of certain procedural matters. FERC, initiated an action when the EUA subsidiaries and other participants filed and amendment to the NEPOOL Agreement with the FERC that concerns many of the issues raised in the Massachusetts litigation. The plaintiffs in the Massachusetts litigation, and one other participant have objected to the amendment, and have sought tot prevent or delay its effectiveness. The FERC has not yet determined whether or when it will hold hearings on this matter. Management cannot predict the ultimate outcome of this proceeding at this time.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART_II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of Eastern Edison's common stock is owned beneficially and of record by EUA.
The dividends paid on Eastern Edison's common stock during the past two years are as follows:
Dividends Paid Dividends Paid 1993 Per Share 1992 Per Share -------------- --------------
First Quarter $1.91 First Quarter $1.55 Second Quarter 1.93 Second Quarter 1.72 Third Quarter 1.96 Third Quarter 1.70 Fourth Quarter 2.77 Fourth Quarter 1.77
No dividends may be paid on Eastern Edison's common stock unless full dividends on Eastern Edison's outstanding Preferred Stock for all past and the current quarterly dividend periods have been paid or declared and set apart for payment, nor may any dividends be paid on Eastern Edison's common stock if Eastern Edison is in default on any sinking fund obligation provided for its Preferred Stock. See also Notes C, D and E of Notes to Consolidated Financial Statements.
Item 6.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
(1) Certain amounts in 1990 and 1989 have been reclassified to conform with current presentations.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REVIEW OF OPERATIONS
Overview
Consolidated Net Earnings for 1993 were $28.1 million as compared to $29.2 million for 1992, a decrease of $1.1 million. Retail sales increased by 2.2% as sales to residential and industrial customers grew by 3.3% and 5.8%, respectively, indicating that the region's economy may be starting to recover from its recession. The positive impacts of: (i) growth in kWh sales, (ii) a rate increase granted Eastern Edison effective in mid-January 1993, (iii) interest savings from Eastern Edison's refinancings and, (iiii) a decrease in direct controllable operation and maintenance expenses did not entirely offset the negative impact of increases in indirect operations and maintenance expenses on Consolidated Net Earnings.
Consolidated Net Earnings for 1992 were $29.2 million as compared to $23.8 million for 1991. The 1992 results were positively impacted by the following factors: (i) a rate increase granted to Montaup effective May 7, 1991; (ii) a reduction in operating expenses (discussed below); and, (iii) increased retail kWh sales in 1992 compared to 1991 levels. Retail sales increased by 0.9% as sales to industrial and commercial customers grew by 2.6% and 1.3%, respectively. In response to the continuing weak economic conditions in the Northeast, Eastern Edison and Montaup exercised cost control measures and during the year Eastern Edison received authorization to increase rates by $8.1 million effective January 1993.
Comparison of Financial Results
Operating Revenues
Operating Revenues for 1993 decreased $3.2 million as compared to 1992. Revenues attributable to the recovery of fuel expense declined $11.2 million primarily as a result of outages of company-owned units and reduced fuel costs. Also, other operating revenues, primarily of Montaup, decreased $0.9 million. Offsetting these decreases somewhat were: (i) increased base revenues aggregating approximately $5.0 million related to the Company's rate increase in January 1993; (ii) increased recoveries of purchased power expense and Conservation and Load Management (C&LM) expenses aggregating approximately $3.9 million and, (iii) increased kWh sales (see Expenses below).
Operating Revenues for 1992 increased $5.6 million as compared to 1991. The increase is due primarily to an increase of $5.7 million in purchased power expense recovery for the period along with a $2.1 million increase relating to Montaup's rate increase of May 1991 and increased kWh sales in 1992. These increases were partially offset by lower fuel recoveries of $1.6 million.
Expenses
1993 vs. 1992
The Company's most significant expense items continue to be Fuel and Purchased Power-Demand which comprised 57% of Total Operating expenses in 1993. Fuel expense decreased approximately $11.5 million or 11.9%, from 1992, due largely to a decrease in total generation resulting from outages experienced by company-owned units. Canal Unit 2, which is 50% owned by Montaup, began a scheduled outage on February 13, 1993, and returned to service on April 5, 1993 while Somerset Unit No. 6, a wholly owned unit of Montaup, was out of service for most of 1993 due to unanticipated waterwall restoration. Offsetting these impacts on fuel expense somewhat was a 3.7% decrease of Montaup's average cost of fuel for the period.
Purchased Power expense decreased $1.8 million or 1.4% as compared to 1992. The decrease was caused primarily by a $3.8 million decrease in C&LM expense recorded as purchase power. Offsetting these decreases somewhat was the increased costs of $1.6 million billed by Montaup's suppliers.
Other Operation and Maintenance expenses are comprised of two components, Direct Controllable and Indirect. Direct Controllable expenses include expense items such as salaries, fringe benefits, insurance, maintenance, etc. Indirect expenses include items over which the Company has limited short-term control and include such expense items as Montaup's joint ownership interests in generating facilities such as Seabrook Unit 1 and Millstone Unit 3, power contracts where transmission rental fees are fixed, conservation and load management expenses that are fully recovered in revenues and expenses related to new accounting standards such as FAS87 and FAS106, to name a few.
Total Other Operation and Maintenance expense increased $8.8 million or 12.2% in 1993 when compared to the same period of 1992. The increase reflects the increases in direct expenses including (i) an increase of $3.9 million in maintenance expenses of jointly owned units of Montaup; (ii) an increase of $4.1 million in C&LM expenses; (iii) an increase of $2.2 million due to expenses relating to the Company's adoption of the FASB Statement No. 106, "Accounting for Post Retirement Benefits"; and, (iv) an increase of $0.4 million related to a pension accrual. The above increases were partially offset by a reduction in direct controllable expenses resulting from by the Company's strict attention to cost control.
AFUDC represents a non-cash element of income and was only 2.4% of 1993 Consolidated Net Earnings. Total AFUDC in 1993 decreased $273,000 from 1992 due primarily to lower AFUDC rates used in 1993.
Other Income & (Deductions) - Net decreased $5.9 million or over 100% in 1993. The decrease is due primarily to the 1992 reversal of certain previously established reserves relating to matters in litigation, the favorable resolution of which was reached in 1992.
Interest Expense on long-term debt decreased by $4.9 million or 17.9% for 1993 as compared to 1992 primarily due to Eastern Edison's refinancing activity more fully described under Financial Condition and Liquidity, below.
Other Interest Expense increased $1.6 million or over 100% in 1993 as compared to 1992. The increase is primarily due to an increase in Eastern Edison's amortization of debt expense of about $0.7 million and the allocation of $0.4 million of EUA Service interest expense in 1993, previously included in operating expense.
The Preferred Dividend requirement of the the Company decreased by approximately $0.7 million or 19.6% in 1993 due to Eastern Edison's 1993 Preferred Stock financing activity. See Financial Condition and Liquidity, below for further discussion.
Inflation continues to have an impact on the operations of Eastern Edison and Montaup. At the federal level, wholesale rate-making practices permit a forward-looking test period enabling anticipation of inflationary increases. The MDPU's traditional use of historical test periods for Eastern Edison at the state level is more limiting in this respect.
1992 vs. 1991
The Company's Fuel and Purchased Power-Demand expenses comprised 60% of total operating expenses in 1992. For 1992, Fuel expense decreased $2.3 million or 2.3% as compared to 1991. The change is due primarily to the offsetting effects of an increase in kWh requirements of 4.4% and significantly greater use of less expensive gas fuel in 1992 resulting from a full year's operation of OSP Unit II. Purchased Power-Demand expense did not change significantly in 1992 vs. 1991.
Other Operation and Maintenance expense decreased $1.2 million or 1.3% in 1992 when compared to the same periods of 1991. The decrease reflects the offsetting impact of a 1992 decrease in Eastern Edison amortization expenses and increased legal expenses of Montaup. Certain previously deferred items of Eastern Edison became fully amortized in December 1991. Effective cost control measures by Eastern Edison and Montaup helped to defray the impact of inflation on the Company.
AFUDC represents a non-cash element of income and was only 3.2% of 1992 Consolidated Net Earnings. Total AFUDC in 1992 decreased $590,000 from 1991 due primarily to lower AFUDC rates used in 1992.
Other Income & (Deductions) - Net increased $4.1 million or over 100% in 1992. This increase is explained by the net reduction of $6.2 million in the level of reserves required to be established under Generally Accepted Accounting Principles relating to certain matters in litigation, the favorable resolution of which occurred in 1992. This increase was partially offset by a reduction of $2.5 million in the amount of income tax credits allocated to this account in 1991 as a result of the utilization of EUA Parent tax losses incurred in 1991.
Interest Expense on long-term debt decreased by $2.6 million or 8.8% for 1992 as compared to 1991 primarily due to the redemption of $45 million First Mortgage and Collateral Trust Bonds (FMBs) and the refinancing of the Company's 10% First Mortgage Bonds with lower cost debt. (See Financial Condition and Liquidity, below).
Other Interest Expense increased $1.7 million or over 100% in 1992 as compared to 1991. The increase is primarily due to a 1991 reversal of interest previously accrued with respect to the proposed tax disallowance of the Seabrook Unit 2 abandonment loss. (See Note J -- Commitments and Contingencies - - Other for further details.)
Rate Activity
Montaup expects to file a rate reduction application with the Federal Energy Regulatory Commission. This application will match more closely Montaup's revenues with its decreasing cost of doing business resulting from, among other things, a reduced rate base, lower capital costs and successful cost control efforts. The application will also include a request for recovery of all of Montaup's FAS106 expenses as provided in FERC's generic order of December 1992. A decision on this application is expected during second half of 1994.
Financial_Condition_and_Liquidity
Eastern Edison's and Montaup's need for permanent capital is primarily related to the construction of facilities required to meet the needs of existing and future customers. For 1993, 1992 and 1991, Eastern Edison's and Montaup's cash construction expenditures were $22.6 million, $14.7 million and $20.0 million, respectively.
Cash construction expenditures are expected to be approximately $36.0 million in 1994 and will aggregate approximately $104.3 million for the years 1995 through 1998.
In the utility industry, cash construction requirements not met with internally generated funds are obtained through short-term borrowings which are ultimately funded with permanent capital. EUA System companies including, Eastern Edison and Montaup, maintain short-term lines of credit with various banks aggregating approximately $140 million. These credit lines are available to other affiliated companies under joint credit line arrangements. At December 31, 1993, unused short-term lines of credit amounted to approximately $103 million. At December 31, 1993, neither Eastern Edison nor Montaup had any outstanding short-term debt. In 1993, internally generated funds amounted to $39.4 million or in excess of 100% of the cash construction requirements.
In addition to construction expenditures, projected requirements for maturing long-term debt securities through 1998 are: $35 million, $7 million, and $60 million in 1995, 1996, and 1998, respectively. The Company has no sinking fund requirements until the year 2003.
Financing Activity:
Preferred Equity:
Eastern Edison redeemed with available cash its 8.32% Series and 4.64% Series non-redeemable preferred stock on June 1, 1993 and December 1, 1993, respectively. In connection with these redemption, Eastern Edison incurred premiums of approximately $106,000 related to the 8.32% Series and $179,000 related to the 4.64% Series. These amounts are included in Preferred Stock Redemption Costs on the Consolidated Statement of Capitalization. Eastern Edison will seek recovery of these amounts in its next rate proceeding.
On June 1, 1993, Eastern Edison used available cash to redeem all of its 9.00% Series Preferred Stock. In connection with this redemption, a premium of approximately $850,500 was incurred and is included in Preferred Stock Redemption Costs on the Consolidated Statement of Capitalization.
On August 11, 1993, Eastern Edison issued 300,000 shares of $100 par value, 6-5/8% Preferred Stock. The proceeds were used to redeem its outstanding 9.80% Series Preferred Stock and for other corporate purposes. In connection with the 9.80% Series redemption, Eastern Edison incurred a premium of approximately $1,352,000. This premium is also included in Preferred Stock Redemption Costs on the Consolidated Statement of Capitalization. Eastern Edison will seek recovery of these premiums in its next rate proceeding.
Debt:
In May 1993, Eastern Edison issued $100 million of First Mortgage Bonds (FMBs) in the following denominations: (i) $20 million of 5-7/8% Bonds due May 1, 1998; (ii) $40 million of 6-7/8% Bonds due May 1, 2003; and (iii) $40 million of 8% Bonds due May 1, 2023. The proceeds were used to redeem FMBs of Eastern Edison of $55 million of 9-5/8%, $35 million of 10-1/8% and $10 million of 8-3/8%.
In June 1993, Eastern Edison used available cash to redeem $5 million of 8-3/8% FMBs.
In July 1993, Eastern Edison issued $40 million of 5-3/4% FMBs, proceeds of which were used to redeem its $40 million of 9-7/8% FMBs in September 1993.
Eastern Edison redeemed in mid-August 1993 its $40 million of 10-1/8% Pollution Control Revenue Bonds with the proceeds from the July issuance of $40 million of 5-7/8% Pollution Control Revenue Bonds.
In September 1993, Eastern Edison issued $8 million of 6.35% FMBs due September 1, 2003 and $7 million of 4.875% FMBs due September 1, 1996. The proceeds were used to redeem $8 million of 7-7/8% FMBs due 2002 and $7 million of 6.5% FMBs due 1997.
In October 1993, the Company used available cash to retire $5 million of 4-1/2% FMBs at maturity.
Environmental Matters
The EPA, as well as state and local authorities, have jurisdiction over releases of pollutants into the environment. They have broad authority to set rules and regulations, including the required installation of pollution control devices and remedial actions. The EPA has updated its clean air standards regulating the emissions from utility power plants into the air to take effect in 1995. Tests at Montaup's Somerset Station indicate that Unit No. 6 will be able to utilize lower sulfur coal than is already being burned to meet the 1995 air standards with only a minimal capital investment. Montaup determined that it would not be economical to repair Unit No. 5 of Somerset Station and has placed it in deactivated reserve. (see Item 2. PROPERTIES).
In April 1992, the NESCAUM, an environmental advisory group for eight Northeast states including Massachusetts and Rhode Island issued recommenda tions for oxides of nitrogen controls for existing utility boilers required to meet the ozone non-attainment requirements of the Clean Air Act. The NESCAUM recommendations are more restrictive than the Clean Air Act requirements. Massachusetts has issued new regulations to implement oxides of nitrogen reduction requirements. The DEP has amended its regulations to require that Reasonable Availably Control Technology (RACT) be implemented at all stationary sources potentially emitting 50 tons or more per year of oxides of nitrogen. Rhode Island has not yet issued regulations to implement oxides of nitrogen reduction requirements. Montaup is in the process of reviewing compliance strategies. Any compliance strategy may require the implementation of additional pollution control technology as early as 1995. Montaup would seek recovery of pollution control expenditures through rates.
Eastern Edison and Montaup are also parties to certain other environmental proceedings. Management is unable to predict the outcome of any of these environmental matters or to estimate the ultimate costs which may result. It is the policy of these companies in such cases to provide notice to liability insurers and to initiate claims. However, at this time no claims have been filed against any insurer and it is not possible at this time to predict whether liability, if any, will be assumed by, or can be enforced against, the insurance carrier in these matters. As of December 31, 1993, Eastern Edison and Montaup have incurred costs of approximately $108,000 in connection with such environmental matters. It is estimated that additional costs of up to $850,000 may be incurred through 1995. Montaup is currently recovering certain of its incurred environmental costs in rates. As a result of the recoverability in current rates of environmental costs, and the uncertainty regarding both its estimated liability, as well as potential contributions from insurance carriers, Eastern Edison and Montaup do not believe that the ultimate impact of environmental costs will be material to either of them and thus, no loss accrual has been recorded. (see Item 3. LEGAL PROCEEDINGS -- Environmental Proceedings).
A number of scientific studies in the past several years have examined the possibility of health effects from EMF that are found wherever there is electricity. While some of the studies have indicated there may be some association between exposure to EMF and health effects, many others have indicated no direct association. The research to date has not conclusively established a direct causal relationship between EMF exposure and human health. Additional studies, which are intended to provide a better understanding of the subject, are continuing.
Some states have enacted regulations to limit the strength of EMF at the edge of transmission line rights-of-way. Rhode Island has enacted a statute which authorizes and directs the Rhode Island Energy Facilities Siting Board to establish rules and/or regulations governing construction of high voltage transmission lines of 69 KV or more. Various bills are pending in the Massachusetts legislature that would require certain disclosures about the potential health effects of EMF. Management cannot predict the impact which legislation or other developments concerning EMF may have on Eastern Edison or Montaup.
Change in Accounting Standards
The Company adopted FAS106, "Accounting for Post-Retirement Benefits Other Than Pensions," as of January 1, 1993. This standard establishes accounting and reporting standards for such post-retirement benefits as health care and life insurance. FAS106 further requires the accrual of the cost of such benefits during an employee's years of service and the recognition of the actuarially determined total post-retirement benefit obligations (Transition Obligation) earned by existing employees and retirees. Previously, Eastern Edison followed the "pay-as-you-go" methodology of accounting for such costs. The Company elected to recognize the Transition Obligation over a period of 20 years as permitted by FAS106. The resultant annual expense, including amortization of the Transition Obligation and net of capitalized amounts, was approximately $4.8 million in 1993. Regulatory decisions issued in December 1992 permitted Eastern Edison to recover through rates approximately $2.1 million of this amount in 1993 and Montaup was allowed to defer FAS106 related costs through 1995 until it filed for recovery of such amounts prior to that time. Accordingly approximately $1.4 million of FAS106-related costs were deferred by Montaup in 1993. Montaup will request recovery of all of its FAS106 expenses, including amortization of deferred amounts in its March 1994 rate application. Eastern Edison has also established an irrevocable external Voluntary Employee Benefit Association (VEBA) Trust Fund as required by the aforementioned regulatory decisions. Contributions to the fund began in March 1993 and totaled approximately $2.3 million were made during 1993.
Effective January 1993, Eastern Edison adopted the Financial Accounting Standards Board (FASB) Statement No. 109, "Accounting for Income Taxes" (FAS109), which essentially supersedes its Statement No. 96 (FAS96). As a result of the adoption of FAS96 in 1990, FAS109 resulted only in the reclassification of certain assets and liabilities and did not significantly impact the Company.
In November 1992, FASB issued Statement No. 112, "Employers' Accounting for Postemployment Benefits." EUA is required to adopt this standard no later than January 1, 1994. The estimated impact of this standard on the Company is immaterial and therefore it is anticipated that no liability will be recorded.
Other
On January 25, 1994, the generating Unit No. 5 at Somerset Station was placed in deactivated reserve. The 69 MW, 42 year old unit had been out of service for 5 months because of mechanical problems. An assessment of the cost and feasibility of repairing and refurbishing the unit to meet reliability standards and Clean Air Act Amendments regulations concluded that rebuilding the unit would not be economical. Current forecasts indicate that with a combination of company owned generation, current long-term purchased power contracts, expected short-term power opportunities, and Montaup's C&LM programs, no additional capacity requirements will be needed through the year 1999.
Montaup, as a 3.27% equity participant in two companies which built and operate certain transmission interconnection facilities between the Hydro-Quebec Electric System and New England has guaranteed approximately $6.0 million of their outstanding debt. In addition, Montaup has minimum rental commitments under a non-cancellable transmission facilities support agreement for years subsequent to 1993 which total approximately $14.3 million.
Montaup is recovering through rates its share of estimated decommissioning costs for Millstone Unit 3 and Seabrook Unit 1. Montaup's share of the current estimate of total costs to decommission Millstone Unit 3 is $15.1 million in 1993 dollars, and Seabrook Unit 1 is $10.6 million in 1993 dollars. These figures are based on studies performed by the lead owners of the plants. In addition, Montaup pays into decommissioning reserves pursuant to contractual arrangements with other nuclear generating facilities in which it has an equity ownership interest or life-of-the-unit entitlement. Such expenses are currently recovered through rates.
Montaup owns a 4.01% interest in Millstone Unit 3 and a 2.9% interest in Seabrook Unit 1. Northeast Utilities, the operator of the units, indicates that Millstone Unit 3 has sufficient on-site storage facilities to accommodate high-level wastes and spent fuel for the projected life of the units. Only minimal capital expenditures are projected for the foreseeable future. Similarly, at the Seabrook Project there is on-site storage capacity which, with minimal capital expenditures, should be sufficient for twenty years or until the year 2010. No near-term capital expenditures are anticipated to accommodate an increase in storage requirements after 2010.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this report under Item 14(a)(1).
Item 9.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
(a), (b), (c), (d) and (e) The names, ages and positions of all of the directors and executive officers of Eastern Edison as of March 17, 1994 are listed below with their business experience during the past five years. The directors, Treasurer and Clerk of Eastern Edison are each elected to serve until the next annual stockholders' meeting. All other officers are elected to serve until the next meeting of directors following the annual stockholders' meeting. There is no family relationship between any of the directors or officers of Eastern Edison. Messrs. Pardus and Stevens are Trustees of EUA.
Name, Age Business Experience and_Position During_Past_5_Years
Elizabeth J. Alden, 40 President, Alden Products Company. Director since Director June 1993.
Richard M. Burns, 56 Vice President, Assistant Treasurer and Assistant Vice President (1) Clerk since April 1986; Comptroller of parent since 1976, Assistant Secretary of parent since 1978 and Assistant Treasurer of parent since April 1986; responsible primarily for the accounting affairs of Eastern Edison.
John D. Carney, 49 President and Director since January 1990; Vice Director and President from April 1986 to December 1989; President (2) responsible for the day-to-day activities of the Company.
Robert W. Giggey, 58 Chairman and CEO of Innovative Medical Inc., Director President of Deknatel, Inc., previously a Division of Pfizer Hospital Products Group, Inc. from January 1987 to October 1993; Director since January 1991.
Barbara A. Hassan, 44 Vice President since January 1990; prior to that Vice President she was both Director and Manager of Customer Service for the EUA System since January 1985; responsible for the operation and maintenance of the transmission and distribution facilities of the Company.
Arthur A. Hatch, 63 Executive Vice President and Director since Director and Executive January 1990; Executive Vice President of Vice President (3) parent since January 1990; President of Eastern Edison from June 1986 to December 1989; responsible for power supply, purchasing management, engineering and operations of the transmission and distribution facilities of the EUA System.
Clifford J. Hebert, Jr., 46 Treasurer since April 1986; Treasurer of parent Treasurer(4) since April 1986; responsible for financial and treasury activities of the EUA System.
Robert W. Lavoie, 56 Vice President since March 1987; responsible for credit, meter reading and consumer services activities of the company.
William F. O'Connor, 54 Clerk since 1974; Secretary of parent since 1971; Clerk (5) responsible primarily for the corporate affairs of Eastern Edison.
Donald G. Pardus, 53 Chairman of the Board since July 1989; Vice Chair- Director and man of the Board from January 1986 to July 1989; Chairman of the Board (6) Chairman of parent since July 1990; President of parent from December 1985 to June 1990; Chief Executive Officer of parent since April 1989; Chief Operating Officer of parent from January 1988 to April 1989; responsible for the overall management of the EUA System; Director since 1979.
Robert G. Powderly, 46 Executive Vice President since March 1992; Director and Executive President of Newport from March 1990 to April Vice President (7) 1992; prior to that time he was a Vice President of EUA Service for more than five years; responsible for the corporate communications, information systems and rate activities of the EUA System; Director since March 1992.
Donald H. Ramsbottom, 64 Executive Director, University of Massachusetts Director Dartmouth Foundation since April 1991; Vice President of The First National Bank of Boston from 1987 to January 1991; Director since January 1982.
John R. Stevens, 53 Vice Chairman of the Board since July 1989; Exec- Director and Vice utive Vice President from July 1987 to July Chairman of the Board (8) 1989; President of parent since July 1990; Chief Operating Officer of parent since January 1990; Executive Vice President of parent from June 1987 to December 1989; responsible for retail operations and new ventures of the EUA System; Director since July 1987.
_________________ (1) Comptroller, Assistant Treasurer and Assistant Secretary of EUA; Vice President, Comptroller, Assistant Treasurer, Assistant Clerk/Secretary and Director of EUA Service; Vice President, Assistant Treasurer and Assistant Secretary of Blackstone; Vice President, Assistant Treasurer, Assistant Clerk and Director of Montaup and EUA Energy; Comptroller, Assistant Treasurer and Director of EUA Cogenex; Assistant Treasurer of EUA Ocean State; Vice President and Assistant Treasurer of Newport.
(2) Vice President and Director of EUA Service and Montaup.
(3) Executive Vice President of EUA; Executive Vice President and Director of Blackstone, EUA Cogenex, EUA Energy, EUA Ocean State, EUA Service, Montaup and Newport.
(4) Treasurer of EUA, EUA Service, Blackstone, Montaup, EUA Energy, EUA Ocean State and Newport; Treasurer and Assistant Clerk/Secretary of EUA Cogenex.
(5) Secretary of EUA; Vice President, Secretary, Clerk and Director of EUA Service; Clerk and Director of EUA Cogenex, EUA Energy and Montaup; Secretary/Clerk of Blackstone, EUA Ocean State and Newport.
(6) Chairman, Trustee, and Chief Executive Officer of EUA; Chairman and Director of Blackstone, EUA Cogenex, EUA Energy, EUA Ocean State, EUA Power, EUA Service, Montaup, and Newport.
(7) Executive Vice President of EUA; Executive Vice President and Director of Blackstone, EUA Cogenex, EUA Energy, EUA Ocean State, EUA Service and Newport. (8) President, Trustee and Chief Operating Officer of EUA; Vice Chairman and Director of Blackstone, EUA Cogenex and Newport; President and Director of EUA Energy, EUA Ocean State, EUA Service and Montaup.
(f) Except as described below, there have been no events under any bankruptcy act, no criminal proceedings and no judgements or injunctions material to the evaluation of the ability and integrity of any director or executive officer during the past five years.
On February 28, 1991, EUA Power (now Great Bay Power Corporation), filed a voluntary petition with the federal Bankruptcy Court for protection under Chapter 11 of the federal Bankruptcy Code. EUA Power, a wholly owned subsidiary of EUA prior to February 5, 1993, the date it redeemed all of its equity securities held by EUA, was organized solely for the purpose of acquiring an interest in the Seabrook Project and selling in the wholesale market its share of electricity generated by the project.
Messrs. Burns, Hatch, Hebert, O'Connor, Pardus and Stevens, who have been officers or directors of EUA Power within the last two years, resigned their positions effective December 30, 1992, with the exception of Mr. Stevens who remains the sole officer and director of Great Bay Power Corporation. Mr. Stevens serves at the request, and subject to the discretion of the officially appointed committee representing the holders of outstanding EUA Power Secured Notes.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Information is set out below as to cash compensation paid by Eastern Edison during the year 1993 to each executive officer of Eastern Edison whose aggregate cash compensation for the year exceeded $100,000.
Long-Term All Compensation Other Name and Annual Compensation Restricted Compen- Principal Fiscal Incentive Stock sation Position Year Salary Bonus Other(1) Awards(2) (3)
John D. Carney 1993 $134,025 $38,867 $6,618 $ - $3,015 President 1992 126,025 24,003 3,443 60,616 2,520 1991 113,025 10,170 - - -
Barbara A. Hassan 1993 101,025 23,343 - - 2,272 Vice President 1992 91,025 11,557 - - 1,668 1991 84,025 5,040 - - -
Robert W. Lavoie 1993 100,758 21,352 - - 2,269 Vice President 1992 94,925 12,179 - - 1,898 1991 88,942 5,934 - - -
___________________ (1) Represents amounts reimbursed for the tax liability accruing as a result of the personal use of a company-owned automobile.
(2) Aggregate amount and value (including the value reflected in the table under "Restricted Stock Awards") of shares granted under EUA's Restricted Stock Plan to the officers listed above is as follows: Mr. Carney 3,725 shares, $84,286. Dividends are paid on these shares.
(3) Contributions made under the Employees' Savings Plan.
The Employees' Retirement Plan of Eastern Utilities Associates and its subsidiary companies (Plan) is a tax-qualified defined benefit plan available to employees who have completed one year of service and have attained the age of twenty-one. The officers named in the compensation table above participate in the Plan. Directors of Eastern Edison who are not also employees of the EUA System are not covered by the Plan. The benefits of participants become fully vested after five years of service. Annual lifetime benefits are determined under formulas applicable to all employees regardless of position and the amounts depend on length of credited service and salaries prior to retirement. Benefits are equal to one and six tenths percent of salaries (averaged over the four years preceding retirement) for each year of credited service up to thirty-five, reduced for each year by one and two tenths percent of the participant's estimated age sixty-five Social Security benefit, plus seventy-five hundredths percent of salaries for each year of credited service in excess of thirty-five years up to the Plan maximum of forty years.
Any contributions to provide benefits under the Plan are made by the EUA System in amounts determined by the Plan's actuaries to meet the funding stand ards established by the Employee Retirement Income Security Act of 1974. These contributions are actuarially determined and cannot appropriately be allocated to individual participants. The annual benefits shown in the table below are straight life annuity amounts, without reduction for primary Social Security benefits as described above. Federal law limits the annual benefits payable from qualified pension plans in the form of a life annuity, after reduction for Social Security benefits, to $115,641 plus adjustments for increases in the cost of living. The number of years of service credited at present under the Plan to Mr. Carney, Ms. Hassan and Mr. Lavoie is twenty-seven, thirty-two and twenty-three, respectively.
Average Annual _____________________Years_of_Service______________________ ____Salary____ ___15___ ___20___ ___25___ ___30___ ___35___ ___40___
$ 50,000 $ 12,000 $ 16,000 $ 20,000 $ 24,000 $ 28,000 $ 29,875 100,000 24,000 32,000 40,000 48,000 56,000 59,750 150,000 36,000 48,000 60,000 72,000 84,000 89,625 200,000 48,000 64,000 80,000 96,000 112,000 119,500 250,000 60,000 80,000 100,000 120,000 140,000 149,375
Mr. Carney is a participant in a non-qualified supplemental retirement plan for certain officers of the EUA System. The plan provides for the annual payment of supplemental retirement benefits equal to 25% of the officer's base salary when he retires, for a period of fifteen (15) years following the date of retirement. In addition, in the event of the death of the participant prior to retirement an amount equal to 200% of the officer's base salary at that time will be paid to his beneficiary. Eastern Edison, through its affiliate, EUA Service, maintains life insurance on the participants to fund, in whole or in part, its future liabilities under the plan, and that corporation is the owner and beneficiary of such life insurance. Any amounts not covered by insurance will be paid out of other funds available to Eastern Edison. In the event of a change in control of the Company, a trust fund will be established by the Company to ensure the performance of its payment obligations under the supplemental retirement plan.
The EUA System maintains a non-qualified, unfunded Retirement and Savings Restoration Plan (The Restoration Plan). The purpose of the Restoration Plan is to restore benefits under the qualified Plans' formulas which can not be paid from, or into, the qualified plan trusts due to federal limitations on either earnings, contributions or benefits. Payments or contributions which exceed the applicable federal limitations are made outside the qualified plans in the same manner and under the same conditions as are applicable to benefits payable from, or contributions payable to, the qualified plans. In the event of a change of control of the Association, a trust fund will be established by the Association to ensure the performance of its payment obligations under the Restoration Plan.
Severance agreements with certain officers of the EUA System provide that an officer's stipulated compensation, benefits, position, responsibilities and other conditions of employment will not be reduced during the term of the agreement, which is thirty-six months commencing upon the date on which a Change in Control, as defined in the agreements, of the Company. If within thirty-six months after a Change in Control the officer's employment is terminated for any reason other than Cause, as defined in the agreements, the Company will, subject to certain limitations to comply with provisions of the Internal Revenue Code, pay the officer within five business days a lump-sum cash amount equal to three times the present value of such officer's annualized total compensation, continue or vest certain fringe benefits and common share grants, and reimburse legal fees and expenses incurred as a result of the termination or to enforce the provisions of the severance agreement. If the officer leaves the employ of the Company following a reduction in his position, compensation, responsibilities, authority or other benefits existing prior to the Change in Control, or suffers a relocation of regular employment of more than fifty miles, such departure will be deemed to be a termination for reasons other than Cause.
Each non-management director of Eastern Edison receives, as a standard arrangement, compensation in the amount of $600 for each directors' meeting attended and additional compensation for all services as a director in the amount of $4,000 annually.
Compensation Committee Interlocks and Insider Participation:
John D. Carney, President and a Director of the Registrant, participated in deliberations concerning the compensation of executive officers other than himself.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners.
Amount (number of Name and Address of shares) and Nature of Percent of Title of Class Beneficial Owner Beneficial Ownership Class
Common Stock Eastern Utilities 2,891,357* 100% $25 par value, Associates of Eastern One Liberty Square Edison Boston, Massachusetts
_______________ *All shares, which are the only voting securities of Eastern Edison, are registered in the name of the beneficial owner.
(b) Security ownership of management as of January 7, 1994.
Amount (number of Name shares) and Nature of Percent of Title_of_Class Beneficial_Owner Beneficial_Ownership_(1) Class
Common Shares, John D. Carney 387 Less than $5 par value, 641 (3) one percent of Eastern 3,725 (4) for each Utilities Arthur A. Hatch 1,408 individual Associates 244 (2) 1,832 (3) 5,433 (4) Donald G. Pardus 977 3,631 (2) 3,648 (3) 13,607 (4) Robert G. Powderly 401 125 (2) 1,002 (3) 3,919 (4) 324 (5) John R. Stevens 1,449 1,098 (3) 9,798 (4) Directors and Executive Officers as a Group 64,618 (6)
_____________________ (1) Unless otherwise indicated, beneficial ownership is based on sole investment and voting power.
(2) Jointly owned with spouse.
(3) Shares held under the ESP as to which the individual indicated has voting power.
(4) Shares received under the Grant Plan as to which each has voting power.
(5) Held in fiduciary capacity.
(6) Represents less than four-tenths of one percent of the outstanding common shares of EUA at January 7, 1994. Included are 14,920 shares held for officers under EUA's ESP, 4,008 shares jointly owned with the officers' spouses, 39,636 shares received under EUA's Restricted Stock Plan, and 390 shares held in a fiduciary capacity. - ---------
The directors and executive officers of Eastern Edison did not own any of Eastern Edison's 6-5/8% Preferred Stock at January 7, 1994.
(c) Eastern Edison knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
The following financial statements and supplementary data are filed herewith as required by Item 8.
Consolidated Statement of Income for the three years in the period ended December 31, 1993.
Consolidated Statement of Retained Earnings for the three years in the period ended December 31, 1993.
Consolidated Statement of Cash Flows for the three years in the period ended December 31, 1993.
Consolidated Balance Sheet at December 31, 1993 and 1992.
Consolidated Statement of Capitalization at December 31, 1993 and 1992.
Notes to Consolidated Financial Statements at December 31, 1993, 1992, and 1991.
Report of Independent Accountants, dated March 4, 1994.
(a)(2) Financial Statement Schedules:
The following additional consolidated financial statement schedules are filed herewith:
1. Financial Statement Schedules:
Schedule V - Property, Plant and Equipment for the three years ended December 31, 1993.
Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the three years ended December 31, 1993.
Schedule IX - Short-Term Borrowings for the three years ended December 31, 1993.
Schedule X - Supplementary Income Statement Information for the three years ended December 31, 1993.
All other schedules have been omitted since the required information is not present or not sufficiently material to require submission of the schedule, or because the information required is included in the financial statements or the notes thereto.
(a)(3) Exhibits (*denotes filed herewith)
Articles of Incorporation and By-Laws:
3-1.08 - Form of Restated and Amended Articles of Organization (filed as Exhibit A-39 to Form U-1 File No. 70-7865 of Eastern Edison)
3-2.08 - By-Laws of Eastern Edison, as amended (Exhibit 3-2, Form 10-K for 1980, File No. 0-8480).
Instruments Defining the Rights of Shareholders, Including Indentures:
- Eastern Edison -
4-1.08 - Indenture of First Mortgage and Deed of Trust dated as of September 1, 1948 of Eastern Edison (Exhibit 4-1, Registration No. 2-77468).
4-2.08 - First Supplemental Indenture dated as of February 1, 1953 of Eastern Edison (Exhibit A, File No. 70-3015).
4-3.08 - Second Supplemental Indenture dated as of May 1, 1954 of Eastern Edison (Exhibit A-3, File No. 70-3371).
4-4.08 - Third Supplemental Indenture dated as of June 1, 1955 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70- 3371).
4-5.08 - Fourth Supplemental Indenture dated as of September 1, 1957 of Eastern Edison (Exhibit D to Certificate of Notification, File No. 70-3619).
4-6.08 - Fifth Supplemental Indenture dated as of April 1, 1959 of Eastern Edison (Exhibit D to Certificate of Notification, File No. 70- 3798).
4-7.08 - Sixth Supplemental Indenture dated as of October 1, 1963 of Eastern Edison (Exhibit F to Certificate of Notification, File No. 70-4164).
4-8.08 - Seventh Supplemental Indenture dated as of June 1, 1969 of Eastern Edison (Exhibit D to Certificate of Notification, File No. 70- 4748).
4-9.08 - Eighth Supplemental Indenture dated as of July 1, 1972 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70- 5195).
4-10.08 - Ninth Supplemental Indenture dated as of September 1, 1973 of Eastern Edison (Exhibit F to Certificate of Notification, File No. 70-5379).
4-11.08 - Tenth Supplemental Indenture dated as of October 1, 1975 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70-5719).
4-12.08 - Eleventh Supplemental Indenture dated as of January 1, 1979 of Eastern Edison (Exhibit 5-24, Registration No. 2-65785).
4-13.08 - Twelfth Supplemental Indenture dated as of October 1, 1980 of Eastern Edison (Exhibit F to Certificate of Notification, File No. 70-6463).
4-14.08 - Thirteenth Supplemental Indenture dated as of July 1, 1981 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70-6608).
4-15.08 - Fourteenth Supplemental Indenture dated as of June 1, 1982 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70-6737).
4-16.08 - Fifteenth Supplemental Indenture dated as of August 1, 1983 of Eastern Edison (Exhibit F to Certificate of Notification, File No. 70-6851).
4-17.08 - Sixteenth Supplemental Indenture dated as of September 1, 1984 of Eastern Edison (Exhibit 4-31, Form 10-K of EUA for 1984, File No. 1-5366).
4-18.08 - Seventeenth Supplemental Indenture dated as of July 1, 1986 of Eastern Edison (Exhibit F to Certificate of Notification, File No. 70-7254).
4-19.08 - Eighteenth Supplemental Indenture dated as of June 1, 1987 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70-7373).
4-20.08 - Nineteenth Supplemental Indenture dated as of November 1, 1987 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70-7373).
4-21.08 - Twentieth Supplemental Indenture dated as of May 1, 1988 of Eastern Edison (Exhibit C to Certificate of Notification, File No. 70-7373).
4-22.08 - Twenty-first Supplemental Indenture dated as of September 1, 1988 of Eastern Edison (Exhibit F to Certificate of Notification, File No. 20-7511).
4-23.08 - Twenty-second Supplemental Indenture dated as of December 1, 1990 of Eastern Edison (Exhibit 4-34, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
4-24.08 - Twenty-third Supplemental Indenture dated as of July 1, 1992 of Eastern Edison (Exhibit 4-24, Form 10-K of Eastern Edison for 1992, File No. 8480).
4-25.08 - Indenture dated as of December 1, 1990 of Eastern Edison with Citibank, N.A., as Trustee (Exhibit 4-35, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
4-26.08 - Form of Eastern Edison Medium Term Note (Exhibit 4-36, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
4-27.08 - Twenty-Fourth Supplemental Indenture dated as of May 1, 1993 (filed as Exhibit A-27 to Form U-1, File No. 70-7865 of Eastern Edison).
4-28.08 - Twenty-Fifth Supplemental Indenture dated as of July 1, 1993 (filed as Exhibit A-28 to Form U-1, File No. 70-7865 of Eastern Edison).
- Montaup -
4-1.05 - Form of 8% Debenture Bonds due 2000 of Montaup (Exhibit 4-10, Registration No. 2-41488).
4-2.05 - Form of 8-1/4% Debenture Bonds due 2003 of Montaup (Exhibit B-3, Form U5S of EUA for year 1973).
4-3.05 - Form of 14% Debenture Bonds due 2005 of Montaup (Exhibit 4-11, Registration No. 2-55990).
4-4.05 - Form of 10% Debenture Bonds due 2008 of Montaup (Exhibit 5-3, Registration No. 2-65785).
4-5.05 - Form of 16-1/2% Debenture Bonds due 2010 of Montaup (Exhibit 4-11, Form 10-K of EUA for 1980, File No. 1-5366).
4-6.05 - Form of 12-3/8% Debenture Bonds due 2013 of Montaup (Exhibit 4-13, Form 10-K of EUA for 1983, File No. 1-5366).
4-7.05 - Form of 10-1/8% Debentures due 2008 of Montaup (Exhibit 4, Form 10-Q of Eastern Edison for quarter ended September 30, 1983, File No. 0-8480).
4-8.05 - Form of 9% Debenture Bonds due 2020 of Montaup (Exhibit 4-10, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
4-9.05 - Form of 9 3/8% Debenture Bonds due 2020 of Montaup (Exhibit 4-11, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
Material Contracts:
- EUA -
10-1.03 - Employees' Retirement Plan of Eastern Utilities Associates and its Subsidiary Companies Trust Agreement as amended and restated, effective July 1, 1981 (Exhibit 10-1, Registration No. 2-80205).
10-2.03 - Employees' Retirement Plan of Eastern Utilities Associates and its Subsidiary Companies Plan as amended and restated, effective January 1, 1985 as amended as of January 1, 1985, July 1, 1987, January 1, 1989, December 30, 1990, July 1, 1991, September 2, 1991, and March 1, 1992 (Exhibit 10-2, Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-77, Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-118, Form 10-K of EUA for 1987, File No. 1-5366; Exhibit 10-95, Form 10-K of EUA for 1988, File No. 1-5366; Exhibit 10-79, Form 10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 10-120, Form 10-K of EUA for 1991, File No. 1- 5366; Exhibit 10-122, Form 10-K of EUA for 1991, File No. 1-5366; Exhibit 10-123, Form 10-K of EUA for 1991, File No. 1-5366; Exhibit 10-69, Form 10-K of EUA for 1992, File No. 1-5366).
10-3.03 - Eastern Utilities Associates Employees' Savings Plan Trust Agreement. (Filed on Exhibit 10-3 of Form 10-K of EUA for 1992, File No. 1-5366).
10-4.03 - Eastern Utilities Associates Employees' Savings Plan as amended and restated effective January 1, 1989. (Filed as Exhibit 10-4 of Form 10-K of EUA for 1992, File No. 1-5366).
10-5.03 - Form of Service Contract between EUA Service and each of the other companies (including Eastern Edison and Montaup) in the EUA System (Exhibit 13-1, Registration No. 2-55990).
10-6.03 - Form of EUA Restricted Stock Plan effective July 17, 1989 (Exhibit 10-13 of EUA Form 10-K for 1992, File No. 1-5366).
10-7.03 - Service contract and supplement among the EUA System, New England Electric System, Boston Edison Co., New England Gas & Electric Association system and Vermont Electric Power Company, Inc. for services to be provided by the New England Power Service Company (Exhibit 10-14.03, EUA 10-K for 1993, File No. 1-5366).
10-8.03 - Thirtieth Amendment to NEPOOL Agreement regarding pool planning, pool-planned facilities, pool-planned purchases and pool-planned unit provisions (Exhibit 10-15.03, EUA 10-K for 1993, File No. 1-5366).
- Eastern Edison -
*10-1.08 - Trust Indenture dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Shawmut Bank, N.A.
*10-2.08 - Loan Agreement dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Eastern Edison.
*10-3.08 - Power Purchase Agreement entered into as of September 20, 1993 by and between Meridian Middleboro Limited Partnership and Eastern Edison Company.
*10-4.08 - Inducement Letter dated July 14, 1993 from Eastern Edison to the Massachusetts Industrial Finance Agency and Goldman, Sachs & Company and Citicorp Securities Markets, Inc.
- Montaup -
10-1.05 - Montaup Contract, as amended (Exhibit 4-B, Registration No. 2-14119; Exhibit 13-A1, Registration No. 2-14718; Exhibit 4-B-2, Registration No. 2-26509; Exhibit 4-B-3, Registration No. 2-33061; Exhibits 13-3 and 13-4, Registration No. 2-48966; Exhibit B-2, Form U5S of EUA for year 1974 and Exhibit 5-40, Registration No. 2-62862).
10-2.05 - Transmission Contract (composite copy) among Yankee Atomic Electric Company's Sponsors, including Montaup, dated June 30, 1959 (Exhibit 13-6-D, Registration No. 2-15798).
10-3.05 - Power Contract (composite copy) between Connecticut Yankee Atomic Power Company and Montaup dated July 1, 1964 (Exhibit B-1, File No. 70-4245).
10-4.05 - Capital Funds Agreement (composite copy) between Connecticut Yankee Atomic Power Company and Montaup dated September 1, 1964 (Exhibit B-2, File No. 70-4245).
10-5.05 - Stockholder Agreement (composite copy) among Connecticut Yankee Atomic Power Company's Sponsors, including Montaup, dated July 1, 1964 (Exhibit B-4, File No. 70-4245).
10-6.05 - Capital Funds Agreement (composite copy) between Vermont Yankee Nuclear Power Corporation and Montaup dated as of February 1, 1968, and Amendment thereto dated as at March 12, 1968 (Exhibit B- 2, File No. 70-4611; Exhibit B-3, File No. 70-4611).
10-7.05 - Form of Power Contract between Vermont Yankee Nuclear Power Corporation and Montaup dated as of February 1, 1968, as amended June 1, 1972, April 15, 1983, April 24, 1985, June 1, 1985, May 6, 1988 (2), June 15, 1989 and December 1, 1989 (Exhibit B-4, File No. 70-4591; Exhibit 13-21, Registration No. 2-46612; Exhibit 10- 63, Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-74, Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-78, Form 10-K of EUA for 1986, File No. 1-5366; Exhibits 10-97 and 10-98, Form 10-K of EUA for 1988, File No. 1-5366; Exhibit 10-95, Form 10-K of EUA for 1989, File No. 1-5366; Exhibit 10-80, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
10-8.05 - Sponsor Agreement (composite copy) among Vermont Yankee Nuclear Power Corporation's Sponsors, including Montaup, dated as of August 1, 1968 (Exhibit 4-0, Registration No. 2-33061).
10-9.05 - Capital Funds Agreement (composite copy) between Maine Yankee and Montaup dated May 20, 1968 and as amended August 1, 1985 (Exhibit B-2, File No. 70-4658; Exhibit 10-78, Form 10-K of EUA for 1985, File No. 1-5366).
10-10.05 - Power Contract (composite copy) between Maine Yankee Atomic and Montaup dated May 20, 1968, as amended December 19, 1983 and January 1, 1984 (Exhibit B-3, File No. 70-4658; Exhibit 10-64, Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-66, Form 10-K of EUA for 1984, File No. 1-5366).
10-11.05 - Stockholder Agreement (composite copy) among Maine Yankee Sponsors, including Montaup, dated May 20, 1968 (Exhibit B-4, File 70-4658).
10-12.05 - Agreement (composite copy) among Vermont Yankee Nuclear Power Corporation's Sponsors, including Montaup, dated as of April 30, 1969 (Exhibit B-7, File No. 70-4435).
10-13.05 - Form of Agreement among Maine Yankee Atomic Power Company's Sponsors dated as of May 20, 1969 (Exhibit B-5, File No. 70-4658).
10-14.05 - Form of New England Power Pool Agreement dated as of September 1, 1971, as amended as of July 1, 1972, March 1, 1973, April 2, 1973, March 15, 1974, June 1, 1975, September 1, 1975, December 31, 1976, January 18, 1977, July 1, 1977, August 1, 1977, August 15, 1978, January 31, 1980, February 1, 1980, September 1, 1981, December 1, 1981, June 1, 1982, June 15, 1983, October 1, 1983, August 1, 1985, August 15, 1985, January 1, 1986, September 1, 1986, March 1, 1988, May 1, 1988, March 15, 1989 and October 1, 1990, (Exhibit 13-45, Registration No. 2-41488; Exhibit 13-38, Registration No. 2-46612; Exhibits 13-39 and 13-40, Registration No. 2-48966; Exhibit B-3, Form U5S of EUA for year 1974; Exhibit 13-35(a), Registration No. 2-54449; Exhibit 13-35, Registration No. 2-55990, Exhibits 5-69 and 5-70, Registration Exhibit 13-35(a), Registration No. 2-54449; Exhibit 13-35, Registration No. 2-55990, Exhibits 5-69 and 5-70, Registration No. 2-58625; Exhibit 6, Form 10-K of EUA for 1977, File No. 1-5366; Exhibit 1, Form 10-K of EUA for 1979, File No. 1-5366; Exhibit No. 10-67, Registration No. 2- 80205; Exhibit 10-65, Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-66, Form 10-K of EUA for 1983, File No. 1-5366; Exhibits 10-75, 10-76, and 10-77, Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-79, Form 10-K of EUA for 1986, File No. 1- 5366; Exhibits 10-99 and 10-100, Form 10-K of EUA for 1988, File No. 1-5366; Exhibit 10-96, Form 10-K of EUA for 1989, File No. 1- 5366; Exhibit 10-81, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
10-15.05 - Joint Ownership Agreement--NEPCO Nuclear Units dated as of January 2, 1976 as amended August 6, 1976 among New England Power Company and other utilities, including Montaup (Exhibit 13-41, Registration No. 2-55990; Exhibit 5-77, Registration No. 2-58625).
10-16.05 - Unit Participation Agreement between Maine Electric Power Company, Inc. and New Brunswick Electric Power Commission dated November 15, 1971 (Exhibit 13-43.1, Registration No. 2-44377).
10-17.05 - Assignment Agreement dated March 20, 1972 between Maine Electric Power Company, Inc. and New Brunswick Electric Power Commission (Exhibit 13-43.3, Registration No. 2-44377).
10-18.05 - Agreement dated October 13, 1972 for Joint Ownership, Construction and Operation of Pilgrim Unit No. 2 among Boston Edison Company and other utilities including Montaup, as amended July 25, 1973, September 15, 1974, December 1, 1974, February 15, 1975, April 30, 1975, June 30, 1975, November 30, 1975 and December 15, 1975 (Exhibit 13-51, Registration No. 2-46612; Exhibit 13-56, Registration No. 2-48966; Exhibit B-5, Form U5S of EUA for year 1974; Exhibit 13-52-A and 13-52-B, Registration No. 2-53819; Exhibit 13-45(a), Registration No. 2-54449; Exhibits 13-48 and 13-47(a), Registration No. 2-55990).
10-19.05 - Agreement dated as of May 1, 1973 for Joint Ownership, Construction and Operation of New Hampshire Nuclear Units among Public Service Company of New Hampshire and other utilities including Montaup, as amended as of May 24, 1974, June 21, 1974, September 25, 1974, October 25, 1974, January 31, 1975, as supplemented by Letter Agreement dated April 27, 1978 and amended as of April 18, 1979 (two amendments), April 25, 1979, June 8, 1979, October 11, 1979, December 15, 1979, June 16, 1980, December 31, 1980, June 1, 1982, April 27, 1984, June 15, 1984, March 8, 1985, March 14, 1986, May 1, 1986, September 19, 1986, November 1987, January 13, 1989 and November 1, 1990. (Exhibit 13-57, Registration No. 2-48966; Exhibit B-6, Form U5S of EUA for year 1974; Exhibit 5-130, Registration No. 2-62862; Exhibit 5-70, Registration No. 2-65785; Exhibit 2, Form 10-K of EUA for 1979, File No. 1-5366; Exhibit 5-34, Registration No. 2-69052; Exhibit 20-1, Form 10-K of EUA for 1980, File No. 1-5366; Exhibit 10-69, Registration No. 2-80205; Exhibit 2, Form 10-Q of EUA for the Quarter Ended March 31, 1984, File No. 1-5366; Exhibit 3, Form 10- Q of EUA for the Quarter Ended June 30, 1984, File No. 1-5366; Exhibit 10-70, Form 10-K of EUA for 1985, File No. 1-5366; Exhibits 10-80 and 10-81, Form 10-K of EUA for 1986, File No. 1- 5366; Exhibits 10-95 and 10-96, Form 10-K of EUA for 1987, File No. 1-5366; Exhibit 10-101, Form 10-K of EUA for 1988, File No. 1- 5366; Exhibit 10-82, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
10-20.05 - Sharing Agreement dated as of September 1, 1973 among The Connecticut Light and Power Company and other utilities, including Montaup, concerning participation in a nuclear generating unit located in Connecticut (Millstone Unit No. 3), as amended and supplemented by Amendatory Agreement dated May 11, 1984 as amended as of April 1, 1986 (Exhibit B-17, Form U5S of EUA for year 1973; Exhibit B-8, as amended as of April 11, 1986, Form U5S of EUA for year 1974; Exhibit B-30, Form U5S of EUA for year 1976; Exhibit 10-68, Form 10-K of EUA for 1984, File No. 1-5366; Exhibit 10-82, Form 10-K of EUA for 1986, File No. 1-5366).
10-21.05 - Agreement for Joint Ownership, Construction and Operation of William F. Wyman Unit No. 4 dated November 1, 1974 as amended June 30, 1975, August 16, 1976 and December 31, 1978 among Central Maine Power Company and other utilities including Montaup (Exhibit B-9, Form U5S of EUA for year 1974; Exhibit 13-58, Registration No. 2-55990; Exhibit 5-95, Registration No. 2-58625; Exhibit 5- 40, Registration No. 2-69052).
10-22.05 - Agreement for Joint Ownership dated as of October 27, 1970 between Canal Electric Company and Montaup (Exhibit 13-71, Registration No. 2-55990).
10-23.05 - Agreement for use of Common Facilities by Canal Units I and II and for Allocation of Related Costs dated as of October 27, 1970 between Canal Electric Company and Montaup (Exhibit 13-72, Registration No. 2-55990).
10-24.05 - Supplementary Power Contract dated as of April 1, 1978, by and between Connecticut Yankee Atomic Power Company and Montaup (Exhibit 10-45, Form 10-K of EUA for 1987, File No. 1-5366).
10-25.05 - Guarantee Agreement (composite copy) dated as of November 13, 1981 between The Connecticut Bank and Trust Company, as Trustee, and Montaup relating to debentures of Connecticut Yankee Atomic Power Company (Exhibit 10-61, Form 10-K of EUA for 1981, File No. 1- 5366).
10-26.05 - Guarantee Agreement dated as of November 5, 1981 between Bankers Trust Company, as Trustee of the Vernon Energy Trust, and Montaup relating to a nuclear fuel sales agreement and related transactions entered into by Vermont Yankee Nuclear Power Corporation (Exhibit 10-63, Form 10-K of EUA for 1981, File No. 1- 5366).
10-27.05 - Agreement for Seabrook Project Disbursing Agent, dated as of May 23, 1984, as amended March 8, 1985, May 20, 1985, June 18, 1985, January 1, 1986, November, 1987, August 1, 1989, and restated as of November 1, 1990, among the participants in the Seabrook nuclear generating project, including Montaup and Yankee Atomic Electric Company (Exhibit 2, Form 10-Q of EUA for the Quarter Ended June 30, 1984, File No. 1-5366; Exhibit 10-69, Form 10-K of EUA for 1985, File No. 1-5366; Exhibits 10-86, 10-87 and 10-88, Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-97, Form 10-K of EUA for 1987, File No. 1-5366; Exhibit 10-105, Form 10-K of EUA for 1989, File No. 1-5366; Exhibit 10-84, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
10-28.05 - Guarantee Agreement dated as of August 1, 1985 among The Connecticut Bank and Trust Company, Connecticut Yankee Atomic Power Company and Montaup Electric Company relating to Revolving Credit Loans of Connecticut Yankee (Exhibit 10-85, Form 10-K of EUA for 1985, File No. 1-5366).
10-29.05 - Equity Funding Agreement for New England Hydro-Transmission Corporation dated as of June 1, 1985, between New England Hydro-Transmission Corporation and several New England electric utilities, including Montaup as amended as of May 1, 1986 and September 1, 1987 (Exhibits 10-96 and 10-97, Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-116, Form 10-K of EUA for 1987, File No. 1-5366).
10-30.05 - Equity Funding Agreement for New England Hydro-Transmission Electric Company, Inc. dated as of June 1, 1985, between New England Hydro-Transmission Electric Company, Inc. and several New England electric utilities, including Montaup as amended as of May 1, 1986 and September 1, 1987 (Exhibits 10-98 and 10-99, Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-117, Form 10-K of EUA for 1987, File No. 1-5366).
10-31.05 - Unit Power Agreement for the Sale of Unit Capacity and Energy from Ocean State Power Project to Montaup Electric Company dated as of May 14, 1986 as amended as of August 27, 1986, September 27, 1987, October 21, 1988, July 21, 1989, February 1, 1990 and December 21, 1990 (Exhibits 10-101 and 10-102, Form 10-K of EUA for 1986, File No. 1-5366; Exhibits 10-106 and 10-107, Form 10-K of EUA for 1988, File No. 1-5366; Exhibit 10-106, Form 10-K of EUA for 1989, File No. 1-5366; Exhibits 10-86 and 10-87, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
10-32.05 - Power Purchase Agreement dated as of October 17, 1986, between Northeast Energy Associates and Montaup as amended as of June 28, 1989 (Exhibit 10-103, Form 10-K of EUA for 1986, File No. 1-5366; Exhibit 10-103, Form 10-K of EUA for 1989, File No. 1-5366).
10-33.05 - Unit Sales Agreement between Montaup Electric Company and Massachusetts Municipal Wholesale Electric Company for Purchase of Capacity and Energy from Canal No. 2 dated as of November 1, 1986 (Exhibit 10-105, Form 10-K of EUA for 1986, File No. 1-5366).
10-34.05 - Settlement Agreement dated as of January 13, 1989 among Montaup, EUA Power, certain past and present owners of the Seabrook Project and Yankee Atomic Electric Company (Exhibit 10-110, Form 10-K of EUA for 1988, File No. 1-5366).
10-35.05 - Unit Power Agreement for the Sale of Second Unit Capacity and Energy from Ocean State Power Project to Montaup Electric Company dated as of September 28, 1988 as amended by an amendment dated July 21, 1989, and February 7, 1990 and a Supplemental Agreement dated July 21, 1989 (Exhibit 10-104, Form 10-K of EUA for 1989, File No. 1-5366; Exhibit No. 10-88, Form 10-K of Eastern Edison for 1990, File No. 0-8480).
10-36.05 - Purchase Power Contract between Newport and Montaup dated July 23, 1963, as revised on March 23, 1983 (Exhibit 10-108, Form 10-K of EUA for 1990, File No. 1-5366).
10-37.05 - Purchase Power Contract between Newport and Montaup for Contract Demand Service effective May 1, 1983, as amended on July 1, 1983, December 28, 1983 and November 1, 1984 (Exhibit 10-89, Form 10-K of Eastern Edison for 1990, File No. 0-8480 and Exhibit 10-109, Form 10-K of EUA for 1990, File No. 1-5366).
10-38.05- Power Contract (composite copy) between Yankee Atomic and Montaup dated June 30, 1959 as Revised April 1, 1975 and as further amended October 1, 1980, April 1, 1985, May 6, 1988, June 26, 1989 and July 1, 1989 (Exhibit 13-6, Registration No. 2-72654; Exhibit 10-73, Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-96, Form 10-K of EUA for 1988, File No. 1-5366; Exhibits 10-93 and 10- 94, Form 10-K of EUA for 1989, File No. 1-5366).
*10-39.05 - Memorandum of understanding by and between Canal Electric Company and Montaup Electric Company dated September 23, 1993.
*10-40.05 - Ancillary Agreement by and between Algonquin Gas Transmission Company, Canal Electric Company and Montaup Electric Company dated October 8, 1993.
Amendments to Exhibits Previously Filed:
None.
Subsidiaries of the Registrant:
23-1.08 - Montaup Electric Company, which is organized in Massachusetts, is the only subsidiary of Eastern Edison Company and does business under its indicated corporate name.
(b) Reports on Form 8-K.
- On January 25, 1994, the Registrant filed a current report on Form 8-K with respect to Item 5. (Other Events).
- On March 23, 1994, the Registrant filed a current report on Form 8-K with respect to Item 5. (Other Events).
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.
Signature Title Date
EASTERN EDISON COMPANY
March 21, By /s/ Richard M. Burns Vice President ----------------------- (Principal Accounting Officer) Richard M. Burns
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.
/s/ Donald G. Pardus Chairman of the Board (Principal ------------------------ Executive Officer) and Director Donald G. Pardus
/s/ John R. Stevens Vice Chairman and Director ------------------------ (Principal Financial Officer) John R. Stevens
/s/ Richard M. Burns Vice President ------------------------ (Principal Accounting Officer) Richard M. Burns
/s/ John D. Carney President and Director ------------------------ John D. Carney
/s/ Arthur A. Hatch Executive Vice President and ------------------------ Director Arthur A. Hatch
March 21, 1994 /s/ Robert G. Powderly Executive Vice President and ------------------------ Director Robert G. Powderly
/s/ Robert W. Giggey Director ------------------------ Robert W. Giggey
/s/ Donald H. Ramsbottom Director ------------------------ Donald H. Ramsbottom
/s/ Elizabeth Alden Director ------------------------ Elizabeth Alden
EASTERN EDISON COMPANY AND SUBSIDIARY
Item 8 and Item 14(a)(1). Consolidated Financial Statements and Supplementary Data
Item 14(a)(2). Financial Statement Schedules
Eastern Edison Company and Subsidiary Consolidated Statement of Income Years Ended December 31, (In Thousands)
Consolidated Statement of Retained Earnings Years Ended December 31, (In Thousands)
The accompanying notes are an integral part of the financial statements.
Eastern Edison Company and Subsidiary Consolidated Statement of Cash Flows Years Ended December 31, (In Thousands)
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
Eastern Edison Company and Subsidiary Consolidated Statement of Capitalization December 31, (In Thousands)
(1) Authorized and Outstanding. The accompanying notes are an integral part of the financial statements.
EASTERN EDISON COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1993, 1992, and 1991
(A) Summary of Significant Accounting Policies:
General: The accounting policies and practices of Eastern Edison and of Montaup are subject to regulation by FERC and the MDPU with respect to their rates and accounting. Eastern Edison and Montaup conform with generally accepted accounting principles, as applied in the case of regulated public utilities, and conform with the accounting requirements and ratemaking practices of the regulatory authority having jurisdiction.
Principles_of_Consolidation: The consolidated financial statements include the accounts of Eastern Edison and its subsidiary, Montaup. All material intercompany balances and transactions have been eliminated in consolidation.
Jointly_Owned_Companies: Montaup follows the equity method of accounting for its stock ownership investments in jointly owned companies including four regional nuclear generating companies. Montaup's investments in these nuclear generating companies range from 2.25 to 4.50 percent. Montaup is entitled to the electricity produced from these facilities based on its ownership interests and is billed pursuant to contractual agreements which are approved by FERC.
One of the four nuclear generating facilities is being decommissioned, but Montaup is required to pay its share of certain continuing costs (see Note J - Commitments and Contingencies -- Nuclear Power Supply).
Montaup also has an equity investment of 3.27% in each of the two companies which own and operate interconnection facilities used to transmit hydroelectric power between the Hydro-Quebec Electric System and New England.
Transactions_with_Affiliates: Eastern Edison is a wholly owned subsidiary of EUA. In addition to its investment in Eastern Edison, EUA has interests in two other retail companies, a service corporation, and three other non-utility companies.
Transactions between Montaup and other affiliated companies include the following: sales of electricity by Montaup to Blackstone and Newport of approximately $121,447,000 in 1993, $117,714,000 in 1992 and $120,511,000 in 1991; accounting, engineering and other services rendered by EUA Service to Eastern Edison and Montaup of approximately $27,418,000, $23,196,000, and $23,206,000 in 1993, 1992 and 1991, respectively; and, operating expense from the rental of transmission facilities by Blackstone to Montaup of approximately $2,884,000 in 1993 $2,445,000 in 1992, and $2,660,000 in 1991. Montaup rental of transmission facilities to Newport for the years 1993, 1992, and 1991 amounted to $487,000, $365,000, and $263,000 respectively. Transactions with affiliated companies are subject to review by applicable regulatory commissions.
Utility_Plant_and_Depreciation: Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work, direct labor and material, allocable overhead, allowance for funds used during
(A) Summary of Significant Accounting Policies: -- (Continued)
construction and indirect charges for engineering and supervision. For financial statement purposes, depreciation is computed on the straight-line method based on estimated useful lives of the various classes of property. Provisions for depreciation, on a consolidated basis, were equivalent to a composite rate of approximately 3.2% for 1993 and 1992, and 3.1% for 1991 based on the average depreciable property balances at the beginning and end of each year.
Allowance_for_Funds_Used_During_Construction: AFUDC represents the estimated cost of borrowed and equity funds used to finance Eastern Edison's and Montaup's construction program. In accordance with regulatory accounting, AFUDC is capitalized, as a cost of utility plant, in the same manner as certain general and administrative costs. AFUDC is not an item of current cash income, but is recovered over the service life of utility plant in the form of increased revenues collected as a result of higher depreciation expense. The combined rate used in calculating AFUDC was 9.3% in 1993, 10.83% in 1992, and 11.56% in 1991.
Operating_Revenues: Revenues are based on billing rates authorized by applicable federal and state regulatory commissions. Eastern Edison follows the policy of accruing the estimated amount of unbilled base rate revenues for electricity provided at the end of the month to more closely match costs and revenues. Montaup recognizes revenues when billed. In addition, Eastern Edison and Montaup also record the difference between fuel costs incurred and fuel costs billed. Montaup also records the difference between purchased power costs incurred and billed.
Income_Taxes: The general policy of Eastern Edison and Montaup with respect to accounting for federal income taxes is to reflect in income the estimated amount of taxes currently payable, as determined from the consolidated tax return on an allocated basis, and to provide for deferred taxes on certain items subject to temporary differences to the extent permitted by the various regulatory commissions.
As permitted by the regulatory commissions, it is the policy of Eastern Edison and Montaup to defer recognition of the annual investment tax credits and to amortize these credits over the productive lives of the related assets.
Cash_and_Temporary_Cash_Investments: Eastern Edison and Montaup consider all highly liquid investments and temporary cash investments with a maturity of three months or less, when acquired, to be cash equivalents.
(B) Income Taxes:
Components of income tax expense for the years 1993, 1992 and 1991 are as follows:
________________________________________________________________ (In_Thousands)____________________1993________1992________1991__
Federal: Current $11,554 $ 8,236 $ 3,548 Deferred 2,841 6,141 3,619 Investment Tax Credit, Net _(1,016) _(1,078) ____153 _13,379 _13,299 __7,320
State: Current 2,359 2,044 725 Deferred ____207 ____731 __1,985 __2,566 __2,775 __2,710 Charged to Operations 15,945 16,074 10,030 Charged to Other Income: Current 392 171 (1,592) Deferred ____(67) __1,658 ___(195) Total $16,270 $17,903 $ 8,243 ======= ======= =======
Total income tax expense was different than the amounts computed by applying federal income tax statutory rates to book income subject to tax for the following reasons:
__________________________________________________________________________ (In_Thousands)______________________________1993________1992________1991__
Federal Income Tax Computed at Statutory Rates $16,580 $17,275 $12,169 (Decreases) Increases in Tax from: Equity Component of AFUDC (101) (142) (186) Depreciation of Equity AFUDC 851 493 67 Amortization and Utilization of ITC (1,066) (1,069) (1,071) Consolidated Tax Savings (314) (3,060) State Taxes, Net of Federal Income Tax Benefit 1,735 2,087 1,890 Cost of Removal (273) 150 (853) Other __1,142 ___(891) ___(713) Total Income Tax Expense $16,270 $17,903 $ 8,243 ======= ======= =======
(B) Income Taxes -- Continued
The provision for deferred taxes resulting from temporary differences is comprised of the following: _________________________________________________________________________ (In_Thousands)_____________________________1993________1992________1991__
Excess Tax Depreciation $ 5,704 6,851 $ 7,121 Debt Component of AFUDC (1,899) (1,899) (1,924) Abandonment Losses (622) (706) Capitalized Overheads (97) (337) (690) Effect of State and Local Taxes 196 1,020 1,985 Deferred Charges 556 (538) (751) Conservation and Load Management (315) (315) (325) Pilgrim Refund 83 112 2,180 Net Operating Loss Carry Forward 1,702 (1,469) Other -- Net (1,201) 1,309 (12) Alternative Minimum Tax 256 Pensions ___(46) ____991 _______ Total $ 2,981 $ 8,530 $ 5,409 ======= ======= =======
Eastern Edison and Montaup adopted FASB statement No. 109, "Accounting for Income Taxes" (FAS109) effective as of January 1, 1993. FAS109 superseded FASB Statement No. 96 (FAS96) which required recognition of deferred income taxes for temporary differences that are reported in different years for financial reporting and tax purposes using the liability method. Under the liability method deferred tax liabilities or assets are computed using the tax rates that will be in effect when temporary differences reverse. Generally, for regulated companies, the change in tax rates may not be immediately recognized in operating results because of rate making treatment and provisions in the Tax Reform Act of 1986. The adoption of FAS109 had no impact on the results of operations for 1993. At December 31, 1993 total deferred tax assets for which no valuation allowance was deemed necessary were $24.3 million and total deferred tax liabilities were $141.6 million.
Total deferred tax assets and liabilities are comprised as follows:
Deferred Tax Deferred Tax Assets Liabilities ($000) ($000)
Plant Related Plant Related Differences 16,721 Differences 135,707 Alternative Refinancing Minimum Tax 4,254 Costs 1,866 Litigation Provisions 811 Pensions 1,404 Pensions 421 Other 2,142 Other 2,595 Total 24,349 Total 141,572 ====== =======
As of December 31, 1993 and 1992, the Company had recorded on its Consolidated Balance Sheet a regulatory liability to ratepayers of approximately $24.7 million and $31.3 million, respectively. This amount primarily represents excess deferred income taxes resulting from the reduction in the federal income tax rate and also includes deferred taxes provided on investment tax credits. Also at December 31, 1993, and 1992 a regulatory asset of approximately $42.3 million and $46.5 million, respectively had been recorded, representing the cumulative amount of federal income taxes on temporary depreciation differences which were previously flowed through to ratepayers.
Montaup has approximately $597,000 of investment tax credit carryforwards which expire between the years 2001 and 2005. Eastern Edison and Montaup have approximately $100,000 and $4.2 million, respectively, of alternative minimum tax credits which can be utilized to reduce the EUA System's consolidated regular tax liability and have no expiration.
(C) Capital Stock:
Eastern Edison redeemed with available cash its 8.32% Series and 4.64% Series non-redeemable preferred stock on June 1, 1993 and December 1, 1993, respectively. In connection with these redemptions, Eastern Edison incurred premiums of approximately $106,000 related to the 8.32% Series and $179,000 related to 4.64% Series. These amounts are included in Preferred Stock Redemption Costs on the Consolidated Statement of Capitalization. Eastern Edison will seek recovery of these amounts in its next rate proceeding.
Under the terms and provisions of the issues of preferred stock of Eastern Edison, certain restrictions are placed upon the payment of dividends on common stock by Eastern Edison. At December 31, 1993 and 1992, the respective capitalization ratios were in excess of the minimum requirements which would make these restrictions effective.
(D) Redeemable Preferred Stock:
On June 1, 1993, Eastern Edison used available cash to redeem all of its 9.00% Series Preferred Stock. In connection with this redemption, a premium of approximately $850,500 was incurred and is included in Preferred Stock Redemption Costs on the Consolidated Statement of Equity Capital and Preferred Stock.
On August 11, 1993, Eastern Edison issued 300,000 shares of $100 par value, 6-5/8% Preferred Stock. The proceeds were used to redeem its outstanding 9.80% Series Preferred Stock and for other corporate purposes. In connection with the 9.80% Series redemption, Eastern Edison incurred a premium of approximately $1,352,000. This premium is also included in Preferred Stock Redemption Costs on the Consolidated Statement of Equity Capital and Preferred Stock. Eastern Edison will seek recovery of these premiums in its next rate proceeding.
Eastern Edison's 6-5/8% Preferred Stock issue is entitled to mandatory sinking funds sufficient to redeem 15,000 shares during each twelve-month period commencing September 1, 2003. The redemption price is $100 per share plus accrued dividends. All outstanding shares of the 6-5/8% issue will be subject to mandatory redemption on September 1, 2008 at a price of $100 per share plus accrued dividends.
(D) Redeemable Preferred Stock -- Continued
In the event of liquidation, the holders of Eastern Edison's 6-5/8% Preferred Stock are entitled to $100 per share plus accrued dividends.
(E) Retained Earnings:
Under the provisions of Eastern Edison's Indenture securing the First Mort gage and Collateral Trust Bonds, retained earnings in the amount of approximately $97,803,000 as of December 31, 1993 were unrestricted as to the payment of cash dividends on its Common Stock.
(F) Long-Term Debt:
The various mortgage bond issues of Eastern Edison are collateralized by substantially all of their utility plant. In addition, Eastern Edison's bonds are collateralized by securities of Montaup, which are wholly-owned by Eastern Edison, in the principal amount of approximately $259 million.
In May 1993, Eastern Edison issued $100 million of First Mortgage and Collateral Trust Bonds (FMBs) in the following denominations: (i) $20 million of 5-7/8% Bonds due May 1, 1998; (ii) $40 million of 6-7/8% Bonds due May 1, 2003; and (iii) $40 million of 8% Bonds due May 1, 2023. The proceeds were used to redeem Eastern Edison's $55 million of 9-5/8%, $35 million of 10-1/8% and $10 million of 8-3/8% FMBs.
In June 1993, Eastern Edison used available cash to redeem $5 million of 8-3/8% FMBs.
In July 1993, Eastern Edison issued $40 million 5-3/4% FMBs, proceeds of which were used to redeem its $40 million 9-7/8% FMBs in September 1993.
Eastern Edison redeemed in mid-August 1993 its $40 million 10-1/8% Pollution Control Revenue Bonds with the proceeds from the July issuance of $40 million 5-7/8% Pollution Control Revenue Bonds.
In September 1993, Eastern Edison issued $8 million of 6.35% FMBs due September 1, 2003 and $7 million of 4.875% FMBs due September 1, 1996. The proceeds were used to redeem $8 million of 7-7/8% FMBs due 2002 and $7 million of 6.5% FMBs due 1997.
The Company aggregate amount of current cash sinking fund requirements and maturities of long-term debt, (excluding amounts that may be satisfied by available property additions) for each of the five years following 1993 are: none in 1994, $35 million in 1995, $7 million in 1996, none in 1997 and $60 million in 1998.
(G) Lines of Credit:
EUA System companies including Eastern Edison maintain short-term lines of credit with various banks aggregating approximately $140 million. At December 31, 1993, unused short-term lines of credit were approximately $103 million. In accordance with informal agreements with the various banks, commitment fees are required to maintain certain lines of credit.
(H) Jointly Owned Facilities:
At December 31, 1993, in addition to the stock ownership interests discussed in Note A, Summary of Significant Accounting Policies - Jointly Owned Companies, Montaup had direct ownership interests in the following electric generating facilities (dollars in thousands):
Accumulated Provision For Net Construc- Utility Depreciation Utility tion Percent Plant in and Plant in Work in Owned Service Amortization Service Progress
Montaup: Canal Unit 2 50.00% $ 67,000 $40,142 $ 26,858 $ 873 Wyman Unit 4 1.96% 4,020 1,803 2,217 11 Seabrook Unit 1 2.90% 207,898 15,676 192,222 1,480 Millstone Unit 3 4.01% 183,938 33,491 150,447 486
The foregoing amounts represent Montaup's interest in each facility, including nuclear fuel where appropriate, and are included on the like-captioned lines on the Consolidated Balance Sheet. At December 31, 1993, Montaup's total net investment in nuclear fuel of the Seabrook and Millstone Units amounted to $5.7 million and $2.8 million, respectively. Montaup's shares of related operating and maintenance expenses with respect to units reflected in the table above are included in the corresponding operating expenses.
(I) Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate:
Cash and Temporary Cash Investments: The carrying amount approximates fair value because of the short-term maturity of those instruments.
Redeemable Preferred Stock and Long-Term Debt: The fair value of the Company's redeemable preferred stock and long-term debt were based on quoted market prices for such securities.
The estimated fair values of the Company's financial instruments at December 31, 1993 are as follows (dollars in thousands):
Carrying Fair Amount Value _________________________________________________________________ Cash and Temporary Cash Investments $ 697 $ 697
Redeemable Preferred Stock 30,000 30,975
Long-Term Debt 265,000 270,827
(J) Commitments and Contingencies:
Joint owners of nuclear projects are also subject to the risk that one of their number may be unable or unwilling to finance its share of the project's costs, thus jeopardizing continuation of the project. On February 28, 1991, EUA Power (now known as Great Bay Power Corporation), a 12.13% owner of the Seabrook Project in which Montaup has a 2.9% ownership interest, filed for protection under Chapter 11 of the federal Bankruptcy Code. The Great Bay Power Corporation Plan of Reorganization was confirmed by the Bankruptcy Court on March 5, 1993. On February 2, 1994, the Official Bondholders Committee of Great Bay Power Corporation announced that it accepted a plan of reorganization financing proposal from Omega Advisers, Inc. which provided for a $35 million equity investment in exchange for 60% of the equity of the reorganized Great Bay Power Corporation. Implementation of the Omega proposal will require modification of the plan of reorganization and approval from the Bankruptcy Court, the NRC, FERC and the NHPUC. Under the plan, as modified, the bondholders will receive 40% of the equity in the reorganized Great Bay Power Corporation in exchange for their bondholder claims.
Nuclear Fuel Disposal and Nuclear Plant Decommissioning Costs: The Nuclear Waste Policy Act of 1982 (NWPA) establishes that the federal government is responsible for the disposal of spent nuclear fuel and obligates the Department of Energy (DOE) to design, license, build and operate a permanent repository for high level radioactive wastes and spent nuclear fuel. NWPA specifies that DOE provide for the disposal of the waste and spent fuel starting in 1998. DOE does not expect to achieve this date. As an interim strategy, DOE is considering making available other federal government sites to temporarily accommodate those firms that have depleted their own on-site spent nuclear fuel storage capacity. The DOE anticipates that a permanent disposal site for spent fuel will be ready to accept fuel for storage or disposal on or before 2010. However, the NRC, which must license the site, has stated only that a permanent repository will become available by the year 2025. Millstone Unit 3 management has indicated it has sufficient on-site storage facilities to accommodate high level wastes and spent fuel for the projected life of the unit. Only minimal capital expenditures are projected for the foreseeable future. At Seabrook there is on-site storage capacity which, with minimal capital expenditures, should be sufficient for twenty years, or to the year 2010. No near-term capital expenditures are anticipated to accommodate an increase in storage requirements after 2010. Montaup is required to pay a fee based on its share of the generation from Millstone Unit 3 and Seabrook Unit 1. Montaup is recovering these fees through its fuel adjustment clause.
Also, Montaup is recovering through rates its share of estimated decommissioning costs for Millstone Unit 3 and Seabrook Unit 1. Montaup's share of the current estimate of total costs to decommission Millstone Unit 3 is $15.1 million in 1993 dollars, and Seabrook Unit 1 is $10.6 million in 1993 dollars. These figures are based on studies performed for the lead owners of the plants. Montaup also pays into decommissioning reserves pursuant to contractual arrangements with other nuclear generating facilities in which it has an equity ownership interest or life of the unit entitlement. Such expenses are currently recoverable through rates.
In December 1992, Montaup commenced a declaratory judgment action in which it sought to have the Massachusetts Superior Court determine its rights under
(J) Commitments and Contingencies -- Continued
the Power Purchase Agreement between it and Aquidneck Power Limited Partnership (Aquidneck). Montaup sought a declaration that the Power Purchase Agreement was binding on the parties according to its terms. Aquidneck asserted that Montaup had either an express or implied obligation to negotiate new terms and conditions to the Power Purchase Agreement. Specifically, the defendants sought to amend, through negotiations, certain milestone events to which they were bound in the Power Purchase Agreement as written. Aquidneck failed to meet the first milestone of January 1, 1993. Accordingly, on January 5, 1993, Montaup exercised its rights to terminate the Power Purchase Agreement effective immediately. In January 1994, a counterclaim by Aquidneck claimed certain breaches of the Power Purchase Agreement, including an alleged failure on the part of Montaup to renegotiate the terms and conditions of the Power Purchase Agreement relating to the first milestone event. Also in January 1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
Aquidneck apparently claims $11 million of damages on the theory that EUA can "avoid an approximately $11 million obligation to purchase capacity and power which it does not currently need." Aquidneck seeks treble damages claiming Montaup, EUA and EUA Service violated state laws willfully and knowingly.
Montaup, EUA and EUA Service intend to defend the counterclaim vigorously and believe that Aquidneck's claims have no basis in law.
Pensions: Eastern Edison and Montaup participate with the other EUA System companies in non-contributory defined benefit pension plans covering substantially all of their employees. Regulatory plan benefits are based on years of service and average compensation over the four years prior to retirement. In the case of the supplemental retirement plan for certain officers of the EUA System, benefits are based on compensation at retirement date. It is the EUA System's policy to fund the regular plan on a current basis in amounts determined to meet the funding standards established by the Employee Retirement Income Security Act of 1974.
Net pension (income) expenses for 1993, 1992 and 1991 included the following components (in thousands):
(a) Millstone Sales Tax Refund received for years 1982-1986. (b) Includes: Credit for Millstone Connecticut Sales Tax Adjustment of ($245). Credit for Seabrook Decommissioning Refund of ($586). Seabrook Pre-Operating Decommissioning Surety Premium of $119. (c) Transfer to Other Accounts.
(a) The average amount outstanding during the period was computed by dividing the summation of the daily principal balances outstanding by 365 days in 1993 and 1991, respectively and 366 in 1992.
(b) The weighted average interest rate during the period was computed by dividing the actual interest expense by the daily average short-term debt outstanding.
Schedule X Eastern Edison Company and Subsidiary Supplementary Income Statement Information (In Thousands of Dollars)
COLUMN A COLUMN B
For the Years Ended December 31,
1993 1992 1991
Charged to Costs and Expense
Taxes -- Other than Income: (a) Eastern Edison Company................. 4,398 3,715 3,529 Montaup Electric Company............... 5,438 6,235 5,161 Total.................................. 9,836 9,950 8,690 Less: Charged to Other Accounts....... 550 550 628 Charged to Operating Expenses.......... 9,286 9,400 8,062
Maintenance Expense Charged to Operations 16,254 13,364 14,706
Amounts of rents, advertising costs and research and development costs did not exceed 1% of gross revenues.
Amounts of depreciation expense were as shown in the income statement and notes thereto.
Local NOTES: (a) Payroll Property Sales and Other Tax Taxes Taxes Use Tax Expense Total For the Year Ended December 31, 1993: Eastern Edison.......... 1,231 2,722 445 4,398 Montaup................. 970 4,172 91 205 5,438 Total................... 2,201 6,894 91 650 9,836
For the Year Ended December 31, 1992: Eastern Edison.......... 1,214 2,500 1 3,715 Montaup................. 880 5,016 339 6,235 Total................... 2,094 7,516 340 9,950
For the Year Ended December 31, 1991: Eastern Edison.......... 1,218 2,308 3 3,529 Montaup................. 824 4,337 0 5,161 Total................... 2,042 6,645 3 8,690
Report of Independent Accountants
To the Directors and Shareholders of Eastern Edison Company and Subsidiary:
We have audited the consolidated financial statements and the consolidated financial statement schedules of Eastern Edison Company (a wholly-owned subsidiary of Eastern Utilities Associates) and its subsidiary, Montaup Electric Company, (collectively referred to as the "Company" hereafter) listed in item 14 (a) (1) and (2) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 1993 and 1992, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
Coopers & Lybrand
Boston, Massachusetts March 4, 1994