Item 1. Business
General
Cambridge Electric Light Company (the Company) is engaged in the production, distribution and sale of electricity at retail to approximately 44,500 customers in the city of Cambridge, Massachusetts. The service territory encompasses a seven square mile area with a population of approximately 96,000. In addition, the Company sells power for resale to the New England Power Pool (NEPOOL) and the Town of Belmont, Massachusetts (Belmont), and sells steam from its electric generating stations at wholesale to an affiliated company for distribution to customers for space heating and other purposes.
The Company, which was organized on January 28, 1886 pursuant to a special act of the legislature of the Commonwealth of Massachusetts, operates under the jurisdiction of the Massachusetts Department of Public Utilities (DPU), which regulates retail rates, accounting, issuance of securities and other matters. The Company also files its wholesale rates with the Federal Energy Regulatory Commission (FERC). The Company is a wholly-owned subsidiary of Commonwealth Energy System (System), which, together with its subsidiaries, is referred to as "the system."
By virtue of its charter, which is unlimited in time, the Company distributes electricity without direct competition in kind from any privately or municipally-owned utility. Alternate sources of energy are available to customers within the service territory, but competition from these sources to date has not been a significant factor affecting the Company (refer to the "Competition" discussion to follow in this section).
One of the Company's largest customers, the Massachusetts Institute of Technology (MIT), has completed construction of a 19 MW natural gas-fired cogeneration facility that is expected to be placed into operation in 1995. MIT anticipates that this facility will meet approximately 94% of its power, heating and cooling requirements. Sales to MIT in 1994 accounted for approximately 9.6% of the Company's total unit sales. In March 1995, the Company filed four rate schedules with the DPU that, in part, seek to recover costs incurred to serve large customers such as MIT. These rates include costs associated with providing standby, maintenance and supplemental service on an ongoing basis as well as a customer transition charge to recover other costs incurred to serve such customers should they discontinue service with the Company while remaining in Cambridge.
In March 1994, the Company was successful in negotiating a seven-year service agreement with another large customer, Harvard University, whose sales in 1994 accounted for approximately 8.5% of the Company's total unit sales.
Of the Company's 1994 retail electric unit sales, 11.7% was sold to residential customers, 75.5% to commercial customers, 6.4% to industrial customers and 6.4% to municipal and other customers.
CAMBRIDGE ELECTRIC LIGHT COMPANY
Electric Power Supply
The Company owns generating facilities with a total capacity of 131.4 MW, of which 63.8 MW is used for peaking purposes. The Company relies primarily on purchased power to meet its energy requirements.
Power purchases for the Company and Commonwealth Electric Company (Common- wealth Electric), the other wholly-owned electric distribution subsidiary of the System, are arranged whereby power is made available to the subsidiaries in accordance with their requirements including purchases from Canal Electric Company (Canal), an affiliated wholesale electric generating company located in Sandwich, Massachusetts, and a major source of purchased power for the Company. Under long-term contracts, system entitlements include one-quarter (140 MW) of the capacity and energy of Canal Unit 1 and one-half (292 MW) of the capacity and energy of Canal Unit 2. The Company's entitlements in these units are 27.9 MW and 58.2 MW, respectively.
Pursuant to a Capacity Acquisition and Disposition Agreement (CADA), Canal seeks to secure bulk electric power on a single system basis to provide cost savings for the customers of the Company and Commonwealth Electric. Canal acts on behalf of the Company and Commonwealth Electric in the procurement of additional capacity for one or both companies, or, to sell capacity and/or energy from each company's entitlements. The CADA has been accepted for filing as an amendment to Canal's FERC Rate Schedule and is in effect Seabrook 1 and Phases I and II of Hydro-Quebec. Exchange agreements are in place with these utilities whereby, in certain circumstances, it is possible to exchange capacity so that the mix of power improves the pricing for dispatch for both the seller and the purchaser. Power contracts are in place whereby Canal bills or credits the Company and Commonwealth Electric for the costs or revenues associated with these facilities. The Company and Commonwealth Electric, in turn, have billed or are billing these charges (net of revenues from sales) to their customers through rates subject to DPU approval.
The Company also has equity ownership interests (2 1/2% to 4 1/2%) in three operating nuclear units located in New England with power entitlements totaling 67.6 MW. One of the operating nuclear units, located in Wiscasset, Maine and operated by Maine Yankee Atomic Power Company, has been experiencing degradation of its steam generator tubes, principally in the form of circumferential cracking, which until early 1995 was believed to be limited to a relatively small number of tubes. During a refueling and maintenance outage that began in early February 1995, Maine Yankee, through the use of new inspection methods, detected increased degradation of the tubes well above its expectations. Maine Yankee is currently evaluating alternative courses of action to remedy this situation, most of which could result in significant capital expenditures and an extended outage period. At this time, the Company cannot predict what action will be needed to rectify the situation, the costs to be incurred or the length of the outage. The Board of Directors of Maine Yankee will be meeting in early April 1995 to consider various options. In addition, the Company has entitlements of 19.7 MW and 8.1 MW through Canal's equity ownership in Hydro-Quebec Phase II and joint-ownership in the Seabrook nuclear unit, respectively.
Additionally, on February 26, 1992, Yankee Atomic Electric Company's Board of Directors decided to permanently cease power operation at a nuclear unit
CAMBRIDGE ELECTRIC LIGHT COMPANY
located in Rowe, Massachusetts and, in time, decommission the facility. The Company has a 2% interest in this facility. For further information, refer to Note 4(d) of the Notes to Financial Statements filed under Item 8 of this report.
The Company expects to provide for future peak load plus reserve require- ments through existing system generation, including purchasing excess capacity from neighboring utilities. These and other bulk electric power purchases are necessary in order to fulfill the system's NEPOOL obligation and for Canal to acquire and deliver electric generating capacity to meet the Company's and Commonwealth Electric's requirements.
New England Power Pool
The Company, together with other electric utility companies in the New England area, is a member of NEPOOL, which was formed in 1971 to provide for the joint planning and operation of electric systems throughout New England.
NEPOOL operates a centralized dispatching facility to ensure reliability of service and to dispatch the most economically available generating units of member companies to fulfill the region's energy requirements. This concept is accomplished through the use of computers to monitor and forecast load requirements.
The Company and the System's other electric subsidiaries are also members of the Northeast Power Coordinating Council (NPCC), an advisory organization, which includes the major power systems in New England and New York plus the provinces of Ontario and New Brunswick in Canada. The NPCC establishes cri- teria and standards for reliability and serves as a vehicle for coordination in the planning and operation of these systems.
The reserve requirements used by NEPOOL participants in planning future additions are determined by NEPOOL to meet the reliability criteria recom- mended by the NPCC. The system estimates that, during the next ten years, reserve requirements so determined will be in the range of 23% to 29% of peak load.
Energy Mix
The Company's energy mix, including purchased power, was as follows:
1994 1993 1992
Oil 31% 43% 58% Nuclear 43 44 38 Natural gas 25 12 4 Hydro 1 1 - Total 100% 100% 100%
Oil-fired generation, although reduced from prior year levels, still accounts for a large percentage of the Company's total generation sources. The Company's energy mix shifted during 1993 from oil to natural gas and other types of generation due to the availability of capacity from an independent power producing facility (Altresco Pittsfield) and, to a lesser extent, an
CAMBRIDGE ELECTRIC LIGHT COMPANY
effort to reduce its reliance on oil. In addition to power purchases, the Company is actively pursuing sales of certain available capacity to utilities in and outside the New England region.
In October 1993, the system reached an agreement with Montaup Electric Company (the 50% owner of Canal Unit 2) and Algonquin Gas Transmission Company to build a natural gas pipeline that will serve the Canal Unit 2 generating station, subject to regulatory approvals. Unit 2 will be modified to burn gas in addition to oil. The project will improve air quality on Cape Cod, enable the plant to exceed the stringent 1995 air quality standards established by the Massachusetts Department of Environmental Protection and strengthen the system's bargaining position as it seeks to secure the lowest-cost fuel for its customers. Plant conversion and pipeline construction are expected to be completed in 1996.
Rates and Regulatory Matters
(a) Retail Rate Proceedings
The Company operates under the jurisdiction of the DPU, which requires historical test-year information to support changes in rates.
On May 28, 1993, the DPU issued an order increasing the Company's retail revenues by approximately $7.2 million or 6.4%. The rates, based on a June 30, 1992 test-year and effective June 1, 1993, provide an overall return of 9.95%, including an equity return of 11% and represented approximately 70% of the amount requested. The new rates reflect the costs associated with postretirement benefits other than pensions which were determined in accordance with Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," adopted by the Company as of January 1, 1993. The DPU authorized full recovery of these costs over a four-year phase-in period with carrying costs on the deferred portion. The new base rates also reflect the roll-in of costs associated with power from the Seabrook nuclear power plant which are billed to the Company by Canal. Previously these costs were recovered through the Company's Fuel Charge (FC) decimal.
(b) Wholesale Rate Proceedings
The Company requires FERC approval to increase its wholesale rates to Belmont, a "partial requirements" customer of the Company since 1986. These rates include a fuel adjustment clause that reflects changes in costs of fuels and purchased power used to supply Belmont.
During March of 1993, the Company and Belmont signed a net requirements power supply agreement, the terms and conditions of which required Belmont to pay all costs except transmission fees, which the Company and Belmont attempted to negotiate. The negotiations were not successful and the Company filed for approval of transmission rates with the FERC on June 29, 1994. The FERC accepted the rates effective January 25, 1995, subject to refund. At the same time, an investigation was opened by the FERC to determine the reasonableness of both the existing and the proposed transmission rates charged to Belmont. The Company filed its case with the FERC on October 25, 1994 and hearings are scheduled to begin during the second quarter of 1995.
CAMBRIDGE ELECTRIC LIGHT COMPANY
(c) Cost Recovery
Rate Schedule - The Company files a FC rate schedule, which provides for the current recovery, from retail customers, of fuel used in electric production, purchased power and transmission costs. This schedule requires the quarterly computation and DPU approval of a FC decimal based on forecasts of fuel, electricity purchased for resale and transmission costs and billed unit sales for each period. To the extent that collections under the rate schedule do not match actual costs for that period, an appropriate adjustment is reflected in the calculation of the decimal for the next calendar quarter.
Purchased Power - The Company has long-term contracts for the of electricity from various sources. Generally, these contracts are for fixed periods and require that the Company pay a demand charge for its capacity entitlement and an energy charge to cover the cost of fuel. The Company collects a portion of these capacity-related purchased power costs associated with certain long-term power and transmission agreements through base rates as approved by the DPU. The recovery mechanism for these costs uses a per kilowatthour factor that is calculated using historical (test-period) capacity costs and unit sales. This factor is then applied to current monthly KWH sales. When current period capacity costs and/or unit sales vary from test- period levels, the Company experiences a revenue excess or shortfall which can have a significant impact on net income. All other capacity and energy- related purchased power costs are recovered through the Company's FC. The Company and Commonwealth Electric made a filing in late 1992 with the DPU seeking an alternative method of recovery. This request was denied in a letter order issued on October 6, 1993. However, the Company and Commonwealth Electric were encouraged by the DPU's acknowledgement that the issues presented warrant further consideration. The DPU encouraged each company to continue to work with other interested parties, including the Attorney General of Massachusetts, to reach a consensus solution on the issue for future consideration. The Company and Commonwealth Electric have been involved in settlement discussions with interested parties in an effort to resolve this issue in a positive fashion and hopes to reach an agreement in the near future.
Seabrook Costs - The FERC, in a final order issued on August 4, 1992, approved full recovery of Canal's investment in the Seabrook 1 nuclear power plant. The Company and Commonwealth Electric had been billing, subject to refund, Seabrook 1 charges to their retail customers since August 1, 1990 through FC decimals approved by the DPU. As discussed in the aforementioned retail rate proceeding section, the Company is now recovering its Seabrook 1 costs in base rates.
The Company and Commonwealth Electric collect, through their respective FC, amounts being billed to them by Canal for costs associated with Seabrook 2 (over a ten-year period ending in 1997) pursuant to a Capacity Acquisition Agreement the terms of which were approved by both FERC and the DPU.
Conservation and Load Management Programs - The Company has implemented a variety of cost-effective conservation and load management (C&LM) programs for its customers which are designed to reduce future energy use. On June 30, 1993, the DPU issued an order in Phase I of a C&LM cost recovery filing made by the Company and Commonwealth Electric which allows the recovery of "lost
CAMBRIDGE ELECTRIC LIGHT COMPANY
base revenues" from electric customers. The recovery of lost base revenues is employed by the DPU to encourage effective implementation of C&LM programs.
The KWH savings that are realized as a result of the successful implementation of C&LM programs serve as the basis for determining lost base revenues. The Company recovered approximately $86,000 based on estimated KWH savings for the eighteen-month period that began January 1, 1993 beginning July 1, 1993 over a twelve-month period. On June 30, 1994, the DPU issued an order that further allows the Company to recover approximately $52,000 in additional lost base revenues for a one-year period that commenced July 1, 1994. Through December 31, 1994, the combined recovery was approximately $114,000 of which $68,000 was collected in 1994.
Potential Impact of Regulatory Restructuring - Based on the current regulatory framework, the Company accounts for the economic effects of regulation in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." Under SFAS No. 71, a utility is allowed to defer costs that would otherwise be expensed in recognition of the ability to recover them in future rates. As a result, the Company has accumulated $11.2 million of regulatory assets (approximately 8.2% of total assets) as of December 31, 1994. Management believes that the current regulatory framework provides for the continued recovery of these assets.
In the event that recovery of specific costs through rates becomes uncertain or unlikely in the future either as a result of the expanding effects of competition or specific regulatory actions, the Company could be required to move away from cost-of-service ratemaking and, therefore, SFAS No. 71 would no longer apply. Discontinuation of SFAS No. 71 could lead to the write-off of various regulatory assets, which would have an adverse impact on the Company's financial position and results of operations. At this time, management believes that it is unlikely that regulatory action would lead to the discontinuation of SFAS No. 71 in the near future.
Competition
This past year the Company continued to develop and implement strategies to deal with the increasingly competitive environment. The inherently high cost of providing energy services in the Northeast has placed the region at a competitive disadvantage as more customers begin to explore alternative supply options. Many state and federal government agencies are considering implementing programs under which utility and non-utility generators can sell electricity to customers of other utilities without regard to previously closed franchise service areas. In 1994, the DPU began an inquiry into incentive ratemaking and in February 1995 opened an investigation into electric industry restructuring.
The Company continues to be aggressive in its cost containment efforts. For example, through work force reductions and attrition the Company has reduced its work force approximately 19.7% since 1989. Also, the introduction of advanced technologies in the workplace continues to improve customer service and our competitive position in our businesses. The Company has yet to be significantly impacted by the increase in competition, and absent a major shift in regulation at the state level, believes its current strategy will have a positive impact in the near-term.
CAMBRIDGE ELECTRIC LIGHT COMPANY
Power Contract Arbitration
On May 2, 1994, the Company and Commonwealth Electric gave notice of termination of power agreements with Eastern Energy Corporation, the developer of a proposed 300 MW coal-fired plant, based on the developer's failure to meet its contractual obligations. In June 1989, the Company and Commonwealth Electric agreed to buy 27% (33 MW and 50 MW, respectively) of the power to be produced by the proposed plant, originally scheduled to begin operation in January 1992. The developer did not meet the permitting, construction or operation milestones established by the contracts, and has not yet obtained the required permits, commenced construction or sold any additional power from the proposed plant. Efforts to reshape the power agreements to provide a satisfactory arrangement were unsuccessful. In a letter dated June 30, 1994, the developer objected to the notices of termination and invoked arbitration, which is pending. A decision by the arbitrators on the legality of the Company's and Commonwealth Electric's termination is expected in 1995.
Environmental Matters
The Company is subject to laws and regulations administered by federal, state and local authorities relating to the quality of the environment. These laws and regulations affect, among other things, the siting and operation of generating facilities, and will continue to impact future operations, capital costs and construction schedules. Air emission regulations require the use of more costly lower-sulphur content fuels (0.5% maximum in the case of the Company's facilities, which are located in a populated urban area) in electric generating facilities. The amendments to the federal Clean Air Act enacted in 1990 will impose restrictions on air emissions, and have a particular impact on the cost of electric generating operations. Regulations enacted by the state of Massachusetts required a reduction in sulphur dioxide emission rates effective December 31, 1994. These regulations may also result in an increase in the cost of power purchased from others. The Company recovers its cost of fuel and purchased power through its FC or base rates.
Construction and Financing
Information concerning the Company's construction and financing programs is contained in Note 4(a) of the Notes to Financial Statements filed under Item 8 of this report.
Employees
The Company has 163 regular employees, 119 employees (73%) are represented by the Utility Workers' Union of America, A.F.L.-C.I.O. The existing collective bargaining agreement expires June 15, 1995. Employee relations have generally been satisfactory.
Item 2.
Item 2. Properties
The Company owns and operates two steam generating plants and two gas turbine units located in Cambridge with a total capability of 114.5 MW together with an integrated system of distribution lines and substations.
CAMBRIDGE ELECTRIC LIGHT COMPANY
At December 31, 1994, the Company's electric transmission and distribution system consisted of 93 pole miles of overhead lines, 681 cable miles of underground line, 217 substations and 45,004 active customer meters.
Item 3.
Item 3. Legal Proceedings
The Company is subject to legal claims and matters arising from its course of business, including its participation in a power contract arbitration as discussed in Item 1 above.
CAMBRIDGE ELECTRIC LIGHT COMPANY
PART II.
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
(a) Principal Market
Not applicable. The Company is a wholly-owned subsidiary of Commonwealth Energy System.
(b) Number of Stockholders at December 31, 1994
One
(c) Frequency and Amount of Dividends Declared in 1994 and 1993
1994 1993 Per Share Per Share Declaration Date Amount Declaration Date Amount
January 21, 1994 $ 2.59 April 26, 1993 $ .95 April 25, 1994 3.10 July 26, 1993 .90 July 18, 1994 2.00 October 18, 1993 4.50 October 24, 1994 10.00 $6.35 $17.69
Reference is made to Note 7 of the Notes to Financial Statements filed under Item 8 of this report for the restriction against the payment of cash dividends.
(d) Future dividends may vary depending on the Company's earnings and capital requirements as well as financial and other conditions existing at that time.
CAMBRIDGE ELECTRIC LIGHT COMPANY
Item 7.
Item 7. Management's Discussion and Analysis of Results of Operations
The following is a discussion of certain significant factors which have affected operating revenues, expenses and net income during the periods included in the accompanying statements of income and is presented to facilitate an understanding of the results of operations. This discussion should be read in conjunction with the Notes to Financial Statements filed under Item 8
Item 8. Financial Statements and Supplementary Data
The Company's financial statements required by this item are filed herewith on pages 17 through 36 of this report.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
CAMBRIDGE ELECTRIC LIGHT COMPANY
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cambridge Electric Light Company:
We have audited the accompanying balance sheets of CAMBRIDGE ELECTRIC LIGHT COMPANY (a Massachusetts corporation and wholly-owned subsidiary of Commonwealth Energy System) as of December 31, 1994 and 1993, and the related statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1994. These financial statements and schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and 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 a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cambridge Electric Light Company as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 5 to the financial statements, effective January 1, 1994, the Company changed its method of accounting for costs associated with postretirement benefits other than pensions.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements and schedules are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP Arthur Andersen LLP
Boston, Massachusetts February 21, 1995
CAMBRIDGE ELECTRIC LIGHT COMPANY INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PART II.
FINANCIAL STATEMENTS
Balance Sheets at December 31, 1994 and 1993
Statements of Income for the Years Ended December 31, 1994, 1993 and 1992
Statements of Retained Earnings for the Years Ended December 31, 1994, 1993 and 1992
Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
PART IV.
SCHEDULES
I Investments in, Equity in Earnings of, and Dividends Received From Related Parties for the Years Ended December 31, 1994, 1993 and 1992
II Valuation and Qualifying Accounts for the Years Ended December 31, 1994, 1993 and 1992
SCHEDULES OMITTED
All other schedules are not submitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto.
Financial statements of 50% or less owned companies accounted for by the equity method have been omitted because they do not, considered individually, constitute a significant subsidiary.
CAMBRIDGE ELECTRIC LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1994 AND 1993 ASSETS
1994 1993 (Dollars in Thousands)
PROPERTY, PLANT AND EQUIPMENT, at original cost $148 855 $145 324 Less - Accumulated depreciation 55 618 52 382 93 237 92 942 Add - Construction work in progress 3 541 1 013 96 778 93 955
INVESTMENTS Equity in nuclear electric power companies 9 164 9 059 Other 5 5 9 169 9 064
CURRENT ASSETS Cash 376 1 624 Accounts receivable - Affiliated companies 917 1 036 Customers, less reserves of $471,000 in 1994 and $491,000 in 1993 9 835 10 178 Unbilled revenues 3 088 3 835 Inventories, at average cost - Materials and supplies 577 738 Electric production fuel oil 804 575 Prepaid taxes - Property 1 702 1 600 Income - 423 Other 730 976 18 029 20 985
DEFERRED CHARGES Yankee Atomic purchased power contract 8 163 6 900 Other 5 570 3 084 13 733 9 984
$137 709 $133 988
The accompanying notes are an integral part of these financial statements.
CAMBRIDGE ELECTRIC LIGHT COMPANY BALANCE SHEETS DECEMBER 31, 1994 AND 1993 CAPITALIZATION AND LIABILITIES
1994 1993 (Dollars in Thousands) CAPITALIZATION Common Equity - Common stock, $25 par value - Authorized and outstanding - 346,600 shares in 1994 and 1993, wholly-owned by Commonwealth Energy System (Parent) $ 8 665 $ 8 665 Amounts paid in excess of par value 27 953 27 953 Retained earnings 7 166 7 056 43 784 43 674 Long-term debt, including premiums, less current sinking fund requirements and maturing debt 42 027 42 189 85 811 85 863 CURRENT LIABILITIES Interim Financing - Notes payable to banks 2 175 2 000 Advances from affiliates 550 1 305 2 725 3 305 Other Current Liabilities - Current sinking fund requirements 160 160 Accounts payable - Affiliated companies 4 212 4 972 Other 8 359 5 187 Accrued taxes - Local property and other 1 711 1 611 Income 667 97 Accrued interest 994 1 003 Other 1 878 2 776 17 981 15 806 20 706 19 111 DEFERRED CREDITS Accumulated deferred income taxes 12 639 12 189 Unamortized investment tax credits 2 035 2 130 Yankee Atomic purchased power contract 8 163 6 900 Other 8 355 7 795 31 192 29 014 COMMITMENTS AND CONTINGENCIES
$137 709 $133 988
The accompanying notes are an integral part of these financial statements.
CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 (Dollars in Thousands)
ELECTRIC OPERATING REVENUES $128 260 $126 073 $112 948
OPERATING EXPENSES Fuel used in electric production 3 020 2 376 2 589 Electricity purchased for resale 72 638 74 102 64 131 Transmission 7 206 7 719 7 922 Other operation 21 504 23 206 25 243 Maintenance 2 799 2 996 2 910 Depreciation 4 030 3 795 3 601 Taxes - Income 3 262 1 452 (691) Local property 2 968 2 683 2 298 Payroll and other 770 860 763 118 197 119 189 108 766
OPERATING INCOME 10 063 6 884 4 182
OTHER INCOME (EXPENSE),net 254 251 (50)
INCOME BEFORE INTEREST CHARGES 10 317 7 135 4 132
INTEREST CHARGES Long-term debt 3 788 3 797 3 549 Other interest charges 341 246 540 Allowance for borrowed funds used during construction (54) (9) (21) 4 075 4 034 4 068
NET INCOME $ 6 242 $ 3 101 $ 64
The accompanying notes are an integral part of these financial statements.
CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 (Dollars in Thousands)
Balance at beginning of year $ 7 056 $ 6 156 $ 6 577 Add (Deduct) Net income 6 242 3 101 64 Cash dividends on common stock (6 132) (2 201) (485) Balance at end of year $ 7 166 $ 7 056 $ 6 156
The accompanying notes are an integral part of these financial statements.
CAMBRIDGE ELECTRIC LIGHT COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992 (Dollars in Thousands)
OPERATING ACTIVITIES Net income $ 6 242 $ 3 101 $ 64 Effects of noncash items - Depreciation and amortization 4 323 3 989 3 716 Deferred income taxes 917 1 081 1 170 Investment tax credits (95) (95) (96) Earnings from corporate joint ventures (1 189) (1 069) (1 321) Dividends from corporate joint ventures 1 084 1 099 1 335 Change in working capital, exclusive of cash and interim financing - Accounts receivable and unbilled revenues 1 209 (3 013) 2 258 Prepaid (accrued) taxes 991 700 (1 906) Accounts payable and other 1 683 2 362 839 Deferred postretirement benefit and pension costs (1 019) (1 284) - All other operating items (1 967) (412) (348) Net cash provided by operating activities 12 179 6 459 5 711
INVESTING ACTIVITIES Additions to property, plant and equipment (exclusive of AFUDC) (6 499) (4 270) (3 686) Allowance for borrowed funds used during construction (54) (9) (21) Net cash used for investing activities (6 553) (4 279) (3 707)
FINANCING ACTIVITIES Sale of common stock to Parent - - 5 250 Payment of dividends (6 132) (2 201) (485) Proceeds from (payment of) short-term borrowings, net 175 500 (10 200) Proceeds from (payment of) affiliate borrowings (755) 1 305 (1 540) Long-term debt issue - - 15 000 Retirement of long-term debt through sinking funds (162) (162) (162) Long-term debt issue refunded - - (10 000) Net cash used for financing activities (6 874) (558) (2 137) Change in cash (1 248) 1 622 (133) Cash at beginning of period 1 624 2 135 Cash at end of period $ 376 $ 1 624 $ 2
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid (net of capitalized amounts) $ 3 743 $ 3 863 $ 3 481 Income taxes paid (refunded) $ 2 102 $ (44) $ 229
The accompanying notes are an integral part of these financial statements.
CAMBRIDGE ELECTRIC LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS
(1) Significant Accounting Policies
(a) General and Regulatory
Cambridge Electric Light Company (the Company) is a wholly-owned subsidiary of Commonwealth Energy System. The parent company is referred to in this report as the "System" and, together with its subsidiaries, is collectively referred to as "the system." The Company is regulated as to rates, accounting and other matters by various authorities including the Federal Energy Regulatory Commission and the Massachusetts Department of Public Utilities (DPU). The System is an exempt holding company under the provisions of the Public Utility Holding Company Act of 1935 and, in addition to its investment in the Company, has interests in other utility companies and several nonregulated companies.
The Company has established various regulatory assets in cases where the DPU has permitted or is expected to permit recovery of specific costs over time. The principal regulatory assets included in deferred charges at December 31, 1994 and 1993 were as follows:
1994 1993 (Dollars in Thousands) Yankee Atomic unrecovered plant and decommissioning costs $ 8 163 $ 6 900 Postretirement benefit costs including pensions 2 304 1 285 Other 763 874 Total regulatory assets $11 230 $ 9 059
Regulatory assets as a percent of total assets 8.2% 6.8%
The principal regulatory liabilities, reflected in deferred credits-other and relating to income taxes, were $3.7 million and $3.9 million at December 31, 1994 and 1993, respectively.
(b) Reclassifications
Certain prior year amounts are reclassified from time to time to conform with the presentation used in the current year's financial statements.
(c) Transactions with Affiliates
Transactions between the Company and other system companies include purchases and sales of electricity, including purchases of electricity through Canal Electric Company (Canal). Other Canal transactions include costs relating to the abandonment of Seabrook 2 and the recovery of a portion of Seabrook 1 pre-commercial operation costs. Transactions with other system companies include purchases of gas and sales of steam. In addition, payments for management, accounting, data processing and other services are made to an affiliate, COM/Energy Services Company. Transactions with other system companies are subject to review by the DPU.
CAMBRIDGE ELECTRIC LIGHT COMPANY
The Company's operating expenses include the following major intercompany transactions for the periods indicated:
Purchased Power Purchased Power and Transmission Period Ended Purchased Power and Transmission From Canal December 31, Canal Units Seabrook 1 As Agent (Dollars in Thousands) 1994 $11 650 $ 8 622 $ 9 780 1993 12 637 9 141 10 896 1992 13 596 9 387 9 600
The costs for the Canal and Seabrook 1 units are included in the long-term obligation table listed in Note 4(b). In addition, the Company purchased gas from an affiliate, Commonwealth Gas Company, totaling $2,158,000 in 1994, $1,485,000 in 1993 and $2,253,000 in 1992.
(d) Equity Method of Accounting
The Company uses the equity method of accounting for its investments in four nuclear electric power companies due, in part, to its ability to exercise significant influence over operating and financial policies of these entities. Under this method, it records as income the proportionate share of the net earnings of the nuclear power companies with a corresponding increase in the carrying value of the investment. The investment is reduced as cash dividends are received.
(e) Operating Revenues
Customers are billed for their use of electricity on a cycle basis throughout the month. To reflect revenues in the proper period, the estimated amount of unbilled sales revenue is recorded each month.
The Company is generally permitted to bill customers currently for fuel used in electric production, transmission and purchased power costs, conservation and load management costs and environmental costs through adjustment clauses. The Company collects capacity-related costs associated with certain long-term power arrangements through base rates. Amounts recoverable under the adjustment clauses are subject to review and adjustment by the DPU. The amount of such fuel and energy costs incurred but not yet reflected in customers' bills, which totaled $306,000 in 1994 and $1,850,000 in 1993, is recorded as unbilled revenues.
(f) Depreciation
Depreciation is provided using the straight-line method at rates intended to amortize the original cost and the estimated cost of removal less salvage of properties over their estimated economic lives. The average composite depreciation rate was 2.76% in 1994, 2.66% in 1993 and 2.59% in 1992.
(g) Maintenance
Expenditures for repairs of property and replacement and renewal of items determined to be less than units of property are charged to maintenance expense. Additions, replacements and renewals of property considered to be
CAMBRIDGE ELECTRIC LIGHT COMPANY
units of property are charged to the appropriate plant accounts. Upon retirement, accumulated depreciation is charged with the original cost of property units and the cost of removal, net of salvage.
(h) Allowance for Funds Used During Construction
Under applicable rate-making practices, the Company is permitted to include an allowance for funds used during construction (AFUDC) as an element of its depreciable property costs. This allowance is based on the amount of construction work in progress which is not included in the rate base on which the Company earns a return. An amount equal to the AFUDC capitalized in the current period is reflected in the accompanying statements of income.
While AFUDC does not provide funds currently, these amounts are recoverable in revenues over the service life of the constructed property. The amount of AFUDC recorded was at a weighted average rate of 6.5% in 1994, 3.5% in 1993 and 4.5% in 1992.
(2) Income Taxes
For financial reporting purposes, the Company provides federal and state income taxes on a separate return basis. However, for federal income tax purposes, the Company's taxable income and deductions are included in the consolidated income tax return of the System and it makes tax payments or receives refunds on the basis of its tax attributes in the tax return in accordance with applicable tax regulations.
The following is a summary of the provisions for income taxes for the years ended December 31, 1994, 1993 and 1992:
1994 1993 1992 (Dollars in Thousands) Federal: Current $1 976 $ 327 $(1 636) Deferred 805 973 1 252 Investment tax credits (95) (96) (96) 2 686 1 204 (480) State: Current 464 140 (129) Deferred 157 195 240 621 335 111 3 307 1 539 (369) Amortization of regulatory liability relating to deferred income taxes (45) (87) (322) $3 262 $1 452 $ (691)
Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS No. 109 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect in the year in which the differences are expected to reverse.
CAMBRIDGE ELECTRIC LIGHT COMPANY
Accumulated deferred income taxes consisted of the following in 1994 and 1993: 1994 1993 (Dollars in Thousands) Liabilities Property-related $15 144 $14 820 Postretirement benefits plan 604 358 All other 1 564 1 076 17 312 16 254 Assets Investment tax credit 1 313 1 375 Pension plan 732 704 Regulatory liability 1 192 1 256 All other 1 109 959 4 346 4 294 Accumulated deferred income taxes, net $12 966 $11 960
The net year-end deferred income tax liability above includes a current deferred tax liability of $327,000 in 1994 and a deferred tax asset of $229,000 in 1993, which were included in accrued income taxes and prepaid income taxes, respectively, in the accompanying balance sheets.
The total income tax provision previously set forth represents 34% in 1994, 32% in 1993 and 110% in 1992 of income before such taxes. The following table reconciles the statutory federal income tax rate to these percentages:
1994 1993 1992 (Dollars in Thousands)
Federal statutory rate 35% 35% 34%
Federal income tax expense at statutory levels $3 326 $1 594 $(213) Increase (Decrease) from statutory levels: State tax, net of federal tax benefit 404 218 86 Tax versus book depreciation 39 27 35 Amortization of excess deferred reserves (14) (87) (182) Amortization of investment tax credits (95) (96) (95) Reversal of capitalized expenses (100) (14) (14) Dividend received deduction (291) (264) (315) Other (7) 74 7 $3 262 $1 452 $(691)
Effective federal income tax rate 34% 32% 110%
As a result of the Revenue Reconciliation Act of 1993, the Company's federal income tax rate increased to 35% effective January 1, 1993.
CAMBRIDGE ELECTRIC LIGHT COMPANY
(3) Long-Term Debt and Interim Financing
(a) Long-Term Debt
Long-term debt outstanding exclusive of maturing debt issues, current sinking fund requirements and related premiums is as follows:
Original Balance-December 31, Issue 1994 1993 (Dollars in Thousands)
7-Year Notes - 9.97%, due 1996 $20 000 $20 000 $20 000 7-Year Notes - 8.04%, due 1999 10 000 10 000 10 000 15-Year Notes - 8.7%, due 2007 5 000 5 000 5 000 30-Year Notes - Series C, 6 1/4%, due 1997 6 000 4 320 4 380 Series D, 7 3/4%, due 2002 5 000 2 700 2 800 $42 020 $42 180
Under the terms of its Indenture of Trust, the Company is required to make periodic sinking fund payments for retirement of outstanding long-term debt. The payments and balances of maturing debt issues for the five years subsequent to December 31, 1994 are as follows:
Sinking Fund Maturing Year Payments Debt Issues Total (Dollars in Thousands)
1995 $160 $ - $ 160 1996 160 20 000 20 160 1997 100 4 260 4 360 1998 100 - 100 1999 100 10 000 10 100
(b) Notes Payable to Banks
The Company and other system companies maintain both committed and uncommitted lines of credit for the short-term financing of their construction programs and other corporate purposes. As of December 31, 1994, system companies had $90 million of committed lines that will expire at varying intervals in 1995. These lines are normally renewed upon expiration and require annual fees of up to .1875% of the individual line. At December 31, 1994, the uncommitted lines of credit totaled $90 million. Interest rates on the outstanding borrowings generally are at an adjusted money market rate and averaged 4.3% and 3.3% in 1994 and 1993, respectively. The Company's notes payable to banks totaled $2,175,000 and $2,000,000 at December 31, 1994 and 1993, respectively.
(c) Advances from Affiliates
Notes payable to the System totaled $410,000 at December 31, 1994. The Company had no notes payable to the System at December 31, 1993. These notes are written for a term of up to 11 months and 29 days. Interest is at the prime rate and is adjusted for changes in the rate during the term of the notes. This rate averaged 7.3% and 6% in 1994 and 1993, respectively.
CAMBRIDGE ELECTRIC LIGHT COMPANY
The Company is also a member of the COM/Energy Money Pool (the Pool), an arrangement among the subsidiaries of the System, whereby short-term cash surpluses are used to help meet the short-term borrowing needs of the utility subsidiaries. In general, lenders to the Pool receive a higher rate of return than they otherwise would on such investments, while borrowers pay a lower interest rate than those available from banks. Interest rates on the outstanding borrowings are based on the monthly average rate that the Company would otherwise have to pay to banks, less one-half the difference between that rate and the monthly average U.S. Treasury bill weekly auction rate. The borrowings are for a period of less than one year and are payable upon demand. Rates on these borrowings averaged 4.3% and 3.2% in 1994 and 1993, respectively. The Company had borrowings from the Pool totaling $140,000 and $1,305,000 at December 31, 1994 and 1993, respectively.
(d) Disclosures about Fair Value of Financial Instruments
The fair value of certain financial instruments included in the accompanying balance sheets as of December 31, 1994 and 1993 is as follows:
1994 1993 (Dollars in Thousands)
Carrying Fair Carrying Fair Value Value Value Value
Long-Term Debt $ 42 187 $ 41 966 $ 42 349 $ 45 782
The carrying amount of cash and advances from affiliates approximates the fair value because of the short maturity of these financial instruments.
The estimated fair value of long-term debt is based on quoted market prices of the same or similar issues or on the current rates offered for debt with the same remaining maturity. The fair values shown above do not purport to represent the amounts at which those obligations would be settled.
(4) Commitments and Contingencies
(a) Financing and Construction Programs
The Company is engaged in a continuous construction program presently estimated at $33.7 million for the five-year period from 1995 through 1999. Of that amount, $9.3 million is estimated for 1995. The program is subject to periodic review and revision because of factors such as changes in business conditions, rates of customer growth, effects of inflation, maintenance of reliable and safe service, equipment delivery schedules, licensing delays, availability and cost of capital and environmental factors. The Company expects to finance these expenditures on an interim basis with internally generated funds and short-term borrowings that are ultimately expected to be repaid with the proceeds from sales of long-term debt and equity securities.
CAMBRIDGE ELECTRIC LIGHT COMPANY
(b) Long-Term Power Contracts
The Company has long-term contracts for the of electricity from various sources. Generally, these contracts are for fixed periods and require that the Company pay a demand charge for the capacity entitlement and an energy charge to cover the cost of fuel. Pertinent information with respect to life- of-the-unit contracts for power from operating nuclear units in which the Company has an equity ownership is as follows:
Connecticut Maine Vermont Yankee Yankee Yankee (Dollars in Thousands)
Year of initial operation 1968 1972 1972 Equity Ownership (%) 4.50 4.00 2.50 Plant Entitlement (%) 4.50 3.59 2.25 Plant Capability (MW) 560.0 870.0 496.0 Company Entitlement (MW) 25.2 31.2 11.2 Contract Expiration Date 1998 2008 2012 1992 Actual Cost ($) 9 508 6 671 3 970 1993 Actual Cost ($) 10 016 7 050 4 076 1994 Actual Cost ($) 8 902 6 250 3 660 Decommissioning cost estimate (100%) ($) 361 994 342 706 329 586 Company's decommissioning cost ($) 16 290 12 303 7 416 Market value of assets (100%) ($) 148 474 108 678 113 300 Company's market value of assets ($) 6 681 3 902 2 549
The Company pays its share of decommissioning expense to each of the operators of the nuclear facilities as a cost of electricity purchased for resale. The Company also has long-term contracts to capacity from other generating facilities. Information relative to these contracts is as follows:
Range of Contract Expiration Entitlement 1994 1993 1992 Dates % MW Cost Cost Cost (Dollars in Thousands) Type of Unit Cogenerating 2011 17.2 27.5 $14 808 $ 4 979 $ - Oil 2002-2009 * 86.1 11 650 12 637 13 596 Nuclear 2026 0.7 8.1 8 622 9 141 9 387 Total 121.7 $35 080 $26 757 $22 983
(*) Includes contracts to power from two oil-fired units with capacity entitlements of 4.99% and 9.97%.
Costs pursuant to these contracts are included in electricity purchased for resale in the accompanying statements of income and are recoverable in revenues through either the Fuel Charge or in base rates. The estimated aggregate obligations under the life-of-the-unit contracts for capacity from the operating Yankee nuclear units and other long-term purchased power
CAMBRIDGE ELECTRIC LIGHT COMPANY
obligations, including the Canal and Seabrook 1 units, in effect for the five years subsequent to 1994 is as follows:
Long-Term Equity-Owned Purchased Nuclear Units Power Total (Dollars in Thousands)
1995 $21 740 $38 020 $59 760 1996 22 959 38 744 61 703 1997 20 609 40 027 60 636 1998 24 801 41 820 66 621 1999 24 487 42 798 67 285
In addition, the Company incurred costs for purchases from the New England Power Pool of $6,241,000, $11,039,000 and $11,215,000 in 1994, 1993 and 1992, respectively.
(c) Guarantee Agreement
In connection with its investment in Maine Yankee Atomic Power Company, the Company has guaranteed its pro rata portion of that company's nuclear fuel financing. At December 31, 1994, the Company's portion amounted to $880,000.
(d) Yankee Atomic
In February 1992, the Board of Directors of Yankee Atomic Electric Company (Yankee Atomic) agreed to permanently discontinue power operation and decom- mission the Yankee Nuclear Power Station (the Plant). The Plant provided less than 1% of the Company's capacity. At December 31, 1994, the Company's 2% investment in Yankee Atomic was approximately $519,000. Presently, purchased power costs, which include a provision for ultimate decommissioning of the unit, are billed to the Company and collected from customers. The Company's estimated decommissioning costs include its unrecovered share of all costs associated with the shutdown of the Plant, recovery of its Plant investment and the decommissioning and closing of the Plant. The most recent cost estimate to permanently shut down the Plant is approximately $408.2 million. The Company's share of this liability is $8.2 million and is currently reflected in the accompanying balance sheets as a liability and corresponding regulatory asset. The market value of the Company's share of assets in the Plant's decommissioning fund at December 31, 1994 is approximately $2.2 million.
(e) Price-Anderson Act
Under the Price-Anderson Act (the Act), owners of nuclear power plants have the benefit of approximately $9 billion of public liability coverage, which would compensate the public for valid bodily injury and property loss on a no-fault basis in the event of an accident at a commercial nuclear power plant. Under the provisions of the Act, each nuclear reactor with an operating license can be assessed up to $79.2 million per nuclear incident with a maximum assessment of $10 million per incident within one calendar year. Nuclear plant owners have initiated insurance programs designed to help
CAMBRIDGE ELECTRIC LIGHT COMPANY
cover liability claims relating to property damage, decontamination, replace- ment power and business interruption costs for participating utilities arising from a nuclear incident.
The Company has an equity ownership interest in four nuclear generating facilities. The operators of these units maintain nuclear insurance coverage (on behalf of the owners of the facilities) with Nuclear Electric Insurance Limited (NEIL II and NEIL III) and the combined American Nuclear Insurers/Mu- tual Atomic Energy Liability Underwriters (ANI). NEIL II provides $1.4 billion of property, boiler, machinery and decontamination insurance coverage, including $250 million of accidental premature decommissioning losses both in excess of the $500 million required by the Act. NEIL III provides $850 million of additional insurance coverage. All companies insured with NEIL are subject to retroactive assessments if losses exceed the accumulated funds available. ANI provides $500 million of "all risk" property damage, boiler, machinery and decontamination insurance. An additional $200 million of primary financial protection coverage is provided for off-site bodily injury or property damage caused by a nuclear incident. ANI also provides secondary financial protection liability insurance, which currently provides $8.7 billion of retrospective insurance premium benefits in accordance with the provisions of the Act. Additional coverage provided by ANI includes tort liability protection arising out of radiation injury claims by nuclear workers, and injury or property damage caused by the transportation or shipment of nuclear materials or waste.
Based on its various ownership interests in the four nuclear generating facilities, the Company's retrospective premium could be as high as $1.3 million annually or a cumulative total of $10.3 million, exclusive of the effect of inflation indexing (at five-year intervals) and a 5% surcharge ($4 million) in the event that total public liability claims from a nuclear incident exceed the funds available to pay such claims.
(f) Environmental Matters
The Company is subject to laws and regulations administered by federal, state and local authorities relating to the quality of the environment. These laws and regulations affect, among other things, the siting and operation of electric generating and transmission facilities and can require the instal- lation of expensive air and water pollution control equipment. These regulations have had an impact on the Company's operations in the past and will continue to have an impact on future operations, capital costs and construction schedules of major facilities.
(5) Employee Benefit Plans
(a) Pension
The Company has a noncontributory pension plan covering substantially all regular employees who have attained the age of 21 and have completed one year of service. Pension benefits are based on an employee's years of service and compensation. The Company makes monthly contributions to the plan consistent with the funding requirements of the Employee Retirement Income Security Act of 1974.
CAMBRIDGE ELECTRIC LIGHT COMPANY
Components of pension expense and related economic assumptions to develop pension expense were as follows:
1994 1993 1992 (Dollars in Thousands)
Service cost $ 560 $ 459 $ 471 Interest cost 1 732 1 646 1 544 Return on plan assets - (gain)/loss 392 (3 175) (2 156) Net amortization and deferral (1 901) 1 781 849 Total pension expense 783 711 708 Transfers from affiliated companies, net 404 400 448 Less: Amounts capitalized and deferred 386 232 111 Net pension expense $ 801 $ 879 $ 1 045
Discount rate 7.25% 8.50% 8.50% Assumed rate of return 8.50 8.50 8.50 Rate of increase in future compensation 4.50 5.50 5.50
Pension expense reflects the use of the projected unit credit method, which is also the actuarial cost method used in determining future funding of the plan. The Company, in accordance with current rate-making, is deferring the difference between pension contribution, which is allowed currently in base rates and pension expense, recognized pursuant to Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions." The funded status of the Company's pension plan (using a measurement date of December 31) is as follows:
1994 1993 (Dollars in Thousands) Accumulated benefit obligation: Vested $(16 519) $(17 172) Nonvested (1 871) (2 267) $(18 390) $(19 439)
Projected benefit obligation $(22 343) $(23 109) Plan assets at fair market value 21 931 23 236 Projected benefit obligation (greater) less than plan assets (412) 127 Unamortized transition obligation 962 1 099 Unrecognized prior service cost 1 314 1 091 Unrecognized gain (3 418) (3 600) Accrued pension cost $ (1 554) $ (1 283)
The following actuarial assumptions were used in determining the plan's year-end funded status: 1994 1993
Discount rate 8.50% 7.25% Rate of increase in future compensation 5.00 4.50
Plan assets consist primarily of fixed-income and equity securities. Fluctuations in the fair market value of plan assets will affect pension expense in future years.
CAMBRIDGE ELECTRIC LIGHT COMPANY
(b) Other Postretirement Benefits
Through December 31, 1992, the Company provided postretirement health care and life insurance benefits to eligible retired employees. Employees became eligible for these benefits if their age plus years of service at retirement equaled 75 or more, provided, however, that such service was performed for a subsidiary of the System. As of January 1, 1993, the Company eliminated postretirement health care benefits for those nonbargaining employees who were less than 40 years of age or had less than 12 years of service at that date. Under certain circumstances, eligible employees are now required to make contributions for postretirement benefits.
Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106). This new standard requires the accrual of the expected cost of such benefits during the employees' years of service and the recognition of an actuarially determined postretirement benefit obligation earned by existing retirees. The assumptions and calculations involved in determining the accrual and the accumulated postretirement benefit obligation (APBO) closely parallel pension accounting requirements. The cumulative effect of implementation of SFAS No. 106 as of January 1, 1993 was approximately $10 million, which is being amortized over 20 years. Prior to 1993, the cost of postretirement benefits was recognized as the benefits were paid. The cost of retiree medical care and life insurance benefits totaled $428,000 in 1992.
In 1993, the Company began making contributions to various voluntary employee beneficiary association (VEBA) trusts that were established pursuant to section 501(c)9 of the Internal Revenue Code (the Code). The Company also made contributions to a sub-account of its pension plan pursuant to section 401(h) of the Code to satisfy a portion of its postretirement benefit obligation. The Company contributed approximately $1.4 million and $1.1 million to these trusts during 1994 and 1993, respectively.
The net periodic postretirement benefit cost for the years ended December 31, 1994 and 1993 included the following components and related assumptions:
1994 1993 (Dollars in Thousands)
Service cost $ 198 $ 201 Interest cost 784 839 Return on plan assets (14) (74) Amortization of transition obligation over 20 years 497 498 Net amortization and deferral (94) (7) Total postretirement benefit cost 1 371 1 457 Transfers from affiliated companies, net 603 586 Less: Amounts capitalized and deferred 863 1 268 Net postretirement benefit cost $1 111 $ 775
Discount rate 7.25% 8.50% Assumed rate of return 8.50 8.50 Rate of increase in future compensation 4.50 4.50
CAMBRIDGE ELECTRIC LIGHT COMPANY
The funded status of the Company's postretirement benefit plan using a measurement date of December 31, 1994 and 1993 is as follows:
1994 1993 (Dollars in Thousands) Accumulated postretirement benefit obligation: Retirees $ (5 990) $ (5 837) Fully eligible active plan participants (1 358) (1 406) Other active plan participants (3 147) (3 116) (10 495) (10 359) Plan assets at fair market value 1 681 980 Accumulated postretirement benefit obligation greater than plan assets (8 814) (9 379) Unamortized transition obligation 8 956 9 453 Unrecognized gain (142) (74) $ - $ -
The following actuarial assumptions were used in determining the plan's year-end funded status:
1994 1993
Discount rate 8.50% 7.25% Rate of increase in future compensation 5.00 4.50
In determining its estimated APBO and the funded status of the plan for 1994 and 1993, the Company assumed health care trend rates as follows:
1994 1993
Medicare Part B premiums 12.3% 14.9% Medical care 8.5 9.0 Dental care 5.0 5.0
The above rates, with the exception of the dental rate, which remains constant, decrease to five percent in the year 2007 and remain at that level thereafter. A one percent change in the medical trend rate would have a $145,000 impact on the Company's annual expense (interest component - $46,000; service cost - $99,000) and would change the accumulated benefit obligation by approximately $1.3 million.
Plan assets consist primarily of fixed-income and equity securities. Fluctuations in the fair market value of plan assets will affect postretirement benefit expense in future years.
The DPU's policy on postretirement benefits is to allow in rates the maximum tax deductible contributions made to trusts that have been established specifically to pay postretirement benefits. Effective with its June 1, 1993 rate order from the DPU, the Company was allowed to recover its SFAS No. 106 expense in base rates over a four-year phase-in period with carrying costs on the deferred balance. At December 31, 1994 and 1993, this deferral amounted to approximately $1.8 million and $1.1 million, respectively.
CAMBRIDGE ELECTRIC LIGHT COMPANY
(c) Savings Plan
The Company has an Employees Savings Plan that provides for Company contributions equal to contributions by eligible employees of up to four percent of each employee's compensation rate. Effective January 1, 1993, the rate was increased to five percent for those employees no longer eligible for postretirement health benefits. The Company's contribution was $325,000 in 1994, $321,000 in 1993 and $327,000 in 1992.
(6) Lease Obligations
The Company leases equipment and office space under arrangements that are classified as operating leases. These agreements are for terms of one year or longer. Leases currently in effect contain no provisions that prohibits the Company from entering into future lease agreements or obligations.
Future minimum lease payments, by period and in the aggregate, of noncancelable operating leases consisted of the following at December 31, 1994: Operating Leases (In Thousands)
1995 $1 441 1996 1 146 1997 812 1998 783 1999 783 Beyond 1999 2 350 Total future minimum lease payments $7 315
Total rent expense for all operating leases, except those with terms of a month or less, amounted to $1,484,000 in 1994, $1,577,000 in 1993 and $1,688,000 in 1992. There were no contingent rentals and no sublease rentals for the years 1994, 1993 and 1992.
(7) Dividend Restriction
At December 31, 1994, approximately $5,562,000 of retained earnings was restricted against the payment of cash dividends by terms of the Indenture of Trust securing long-term debt. As of the same date, retained earnings also included approximately $4,167,000 representing the Company's equity in undistributed earnings of the nuclear companies.
CAMBRIDGE ELECTRIC LIGHT COMPANY
PART V.
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Index to Financial Statements
Financial statements and notes thereto of the Company together with the Report of Independent Public Accountants, are filed under Item 8 of this report and listed on the Index to Financial Statements and Schedules (page 18).
(a) 2. Index to Financial Statement Schedules
Filed herewith at page(s) indicated -
Schedule I - Investments in, Equity in Earnings of, and Dividends Received From Related Parties - Years Ended December 31, 1994, 1993 and 1992 (pages 46-48).
Schedule II - Valuation and Qualifying Accounts - Years Ended December 31, 1994, 1993 and 1992 (page 49).
(a) 3. Exhibits: Notes to Exhibits -
a. Unless otherwise designated, the exhibits listed below are incorporated by reference to the appropriate exhibit numbers and the Securities and Exchange Commission file numbers indicated in parentheses.
b. The following is a glossary of Commonwealth Energy System and subsidiary companies' acronyms that are used throughout the following Exhibit Index:
CES.....................Commonwealth Energy System CE......................Commonwealth Electric Company CEL.....................Cambridge Electric Light Company CEC.....................Canal Electric Company CG......................Commonwealth Gas Company NBGEL...................New Bedford Gas and Edison Light Company
CAMBRIDGE ELECTRIC LIGHT COMPANY
Exhibit Index
Exhibit 3. Articles of incorporation and by-laws.
3.1 Articles of incorporation of CEL (Exhibit 1 to the CEL Form 10-K for 1990, File No.2-7909).
3.2 By-laws of CEL, as amended (Exhibit 2 to the CEL Form 10-K for 1990, File No.2-7909).
Exhibit 4. Instruments defining the rights of security holders; including indentures.
Indenture of Trust or Supplemental Indenture of Trust.
4.1.1 Original Indenture on Form S-1 (April 1949) (Exhibit 7(a), File No. 2-7909). 4.1.2 Third Supplemental on Form 10-K (1984) (Exhibit 1, File No. 2- 7909). 4.1.3 Fourth Supplemental on Form 10-K (1984) (Exhibit 2, File No. 2- 7909). 4.1.4 Sixth Supplemental on Form 10-Q (June 1989) (Exhibit 1, File No. 2-7909). 4.1.5 Seventh Supplemental on Form 10-Q (June 1992) (Exhibit 1, File No. 2-7909).
Exhibit 10. Material Contracts.
10.1 Power Contracts.
10.1.1 Power Contract between CEC and CEL dated December 1, 1965 (Exhibit 13(a)(1) to the CEC Form S-1, File No. 2-30057).
10.1.2 Contract between CEC and NBGEL and CEL, affiliated companies, for the sale for specified amounts of electricity from CEC Unit 2 dated January 12, 1976 (Exhibit 7 to the CES Form 10-K for 1985, File No. 1-7316).
10.1.3 Power Contract, as amended to February 28, 1990, superseding the Power Contract dated September 1, 1986 and amendment dated June 1, 1988, between CEC (seller) and CE and CEL (purchasers) for seller's entire share of the Net Unit Capability of Seabrook 1 and related energy produced and other provisions (Exhibit 1 to the CEC Form 10- Q (March 1990), File No. 2-30057).
10.1.4 Termination Supplement between CEC, CE and CEL RE: Seabrook Unit 2 dated December 8, 1986 (Exhibit 3 to the CEC Form 10-K for 1986, File No. 2-30057).
10.1.5 Agreement for Joint-Ownership, Construction and Operation of the New Hampshire Nuclear Units (Seabrook) between CE, Public Service Company of New Hampshire (PSNH) and others dated May 1, 1973 and filed by CE as Exhibit 13(N) on Form S-1 dated October 1973, File No. 2-49013, and as amended below:
CAMBRIDGE ELECTRIC LIGHT COMPANY
10.1.5.1 First through Fifth Amendments to 10.1.5 dated May 24, 1974, June 21, 1974, September 25, 1975, October 25, 1974 and January 31, 1975, respectively (Exhibit 13(m) to CE's Form S-1, (November 7, 1975), File No. 2-54995).
10.1.5.2 Sixth through Eleventh Amendments to 10.1.5 dated April 18, 1979, April 18, 1979, April 25, 1979, June 8, 1979, October 11, 1979 and December 15, 1979, respectively (Refiled as Exhibit 1 to the CEC Form 10-K for 1989, File No. 2-30057).
10.1.5.3 Twelfth through Fourteenth Amendments to 10.1.5 dated May 16, 1980, December 31, 1980 and June 1, 1982, respectively (Refiled as Exhibits 1, 2 and 3 to the CE 1992 Form 10-K), File No. 2-7749).
10.1.5.4 Fifteenth and Sixteenth Amendment to 10.1.5 dated April 27, 1984 and June 15, 1984, respectively (Exhibit 1 to the CEC Form 10-Q (June 1984), File No. 2-30057).
10.1.5.5 Seventeenth Amendment to 10.1.5 dated March 8, 1985 (Exhibit 1 to the CEC Form 10-Q (March 1985), File No. 2-30057).
10.1.5.6 Eighteenth Amendment to 10.1.5 dated March 14, 1986 (Exhibit 1 to the CEC Form 10-Q (March 1986), File No. 2-30057).
10.1.5.7 Nineteenth Amendment to 10.1.5 dated May 1, 1986 (Exhibit 1 to the CEC Form 10-Q (June 1986), File No. 2-30057).
10.1.5.8 Twentieth Amendment to 10.1.5 dated September 19, 1986 (Exhibit 1 to the CEC Form 10-K for 1986, File No. 2-30057).
10.1.5.9 Twenty-First Amendment to 10.1.5 dated November 12, 1987 (Exhibit 1 to the CEC Form 10-K for 1989, File No. 2-30057).
10.1.5.10 Twenty-Second Amendment and Settlement Agreement to 10.1.5 both dated January 13, 1989, (Exhibit 4 to the CEC Form 10-K for 1988, File No. 2-30057).
10.1.6 Resolutions proposed by Merrill Lynch Capital Markets and adopted by the Joint-Owners of the Seabrook Nuclear Project regarding Project financing, dated May 14, 1984 (Exhibit 1 to the CEC Form 10-Q (March 1984), File No. 2-30057).
10.1.7 Interim Agreement to Preserve and Protect the Assets of and Investment in Seabrook by and between CEC, PSNH and other participants, dated April 27, 1984 (Exhibit 2 to the CEC Form 10-Q (June 1984), File No. 2-30057).
10.1.8 Agreement for Seabrook Project Disbursing Agent by and among CEC, PSNH and other participants establishing Yankee Atomic Electric Company as the disbursing agent under the Joint-Ownership Agreement, dated May 23, 1984, (Exhibit 4 to the CEC Form 10-Q (June 1984), File No. 2-30057).
CAMBRIDGE ELECTRIC LIGHT COMPANY
10.1.8.1 First Amendment dated March 8, 1985 to 10.1.8 (Exhibit 2 to the CEC Form 10-Q (March 1985), File No. 2-30057).
10.1.8.2 Second through Fifth Amendments dated May 20, 1985, June 18, 1985, January 2, 1986 and November 12, 1987, respectively, to 10.1.8 (Exhibit 4 to the CEC Form 10-K for 1987, File No. 2-30057).
10.1.9 Capacity Acquisition Agreement between CEC, CEL and CE dated September 25, 1980 (Exhibit 1 to the 1991 CEC Form 10-K, File No. 2-30057).
10.1.9.1 Supplement to 10.1.9 consisting of three Capacity Acquisition Commitments each dated May 7, 1987, concerning Phases I and II of the Hydro-Quebec Project and electricity acquired from Connecticut Light and Power Company (Exhibit 1 to the CEC Form 10-Q (September 1987), File No. 2-30057).
10.1.9.2 Supplements to 10.1.9 consisting of two Capacity Acquisition Commitments each dated October 31, 1988, concerning electricity acquired from Western Massachusetts Electric Company and/or Connecticut Light and Power Company for periods ranging from November 1, 1988 to October 31, 1994 (Exhibit 2 to the CEC Form 10- Q (September 1989), File No. 2-30057).
10.1.9.3 Amendment to 10.1.9 as amended and restated June 1, 1993, henceforth referred to as the Capacity Acquisition and Disposition Agreement, whereby CEC, as agent, in addition to acquiring power may also sell bulk electric power which the Company and/or CE owns or otherwise has the right to sell (Exhibit 1 to CE's Form 10-Q (September 1993), File No. 2-30057).
10.1.10 Power Contract between Yankee Atomic Electric Company and CEL, dated June 30, 1959, as amended April 1, 1975 (Exhibit 1 to the CEL Form 10-K, File No. 2-7909).
10.1.10.1 Second, Third and Fourth Amendments to 10.1.10 as amended October 1, 1980, April 1, 1985 and May 6, 1988, respectively (Exhibit 2 to the CEL Form 10-Q (June 1988), File No. 2-7909).
10.1.10.2 Fifth and Sixth Amendments to 10.1.10 as amended June 26, 1989 and July 1, 1989, respectively (Exhibit 1 to the CEL Form 10-Q (September 1989), File No. 2-7909).
10.1.11 Power Contract between Connecticut Yankee Atomic Power Company and CEL dated July 1, 1964 (Exhibit 13-K1 to the CES Form S-1, (April 1967) File No. 2-25597).
10.1.11.1 Additional Power Contract to 10.1.11 providing for extension on the contract term dated April 30, 1984 (Exhibit 5 to the CEL Form 10-Q (June 1984), File No. 2-7909).
CAMBRIDGE ELECTRIC LIGHT COMPANY
10.1.11.2 Second Supplementary Power Contract to 10.1.11 providing for decommissioning financing dated April 30, 1984 (Exhibit 6 to the CEL Form 10-Q (June 1984), File No. 2-7909).
10.1.12 Power Contract between CEL and Vermont Yankee Nuclear Power Corporation dated February 1, 1968 (Exhibit 3 to the CEL 1984 Form 10-K, File No. 2-7909).
10.1.12.1 First Amendment (Section 7) and Second Amendment (decommissioning financing) to 10.1.12 as amended June 1, 1972 and April 15, 1983, respectively (Exhibits 1 and 2, respectively, to the CEL Form 10-Q (June 1984), File No. 2-7909).
10.1.12.2 Third and Fourth Amendments to 10.1.12 as amended April 1, 1985 and June 1, 1985, respectively (Exhibit 1 and 2 to the CEL Form 10-Q (June 1986) File No. 2-7909).
10.1.12.3 Fifth and Sixth Amendments to 10.1.12 both as amended May 6, 1988 (Exhibit 1 to the CEL Form 10-Q (June 1988), File No. 2-7909).
10.1.12.4 Seventh Amendment to 10.1.12 as amended June 15, 1989 (Exhibit 2 to the CEL Form 10-Q (September 1989), File No. 2-7909).
10.1.12.5 Additional Power Contract between CEL and Vermont Yankee Nuclear Power Corporation providing for decommissioning financing and contract extension dated February 1, 1984 (Refiled as Exhibit 1 to the 1993 CEL Form 10-K, File No. 2-7909).
10.1.13 Power Contract between Maine Yankee Atomic Power Company and CEL dated May 20, 1968 (Exhibit 5 to the CES Form S-7, File No. 2- 38372).
10.1.13.1 First Amendment (decommissioning financing) and Second Amendment (supplementary payments) to 10.1.13 as amended March 1, 1984 and January 1, 1984, respectively (Exhibits 3 and 4 to the CEL Form 10- Q (June 1984), File No. 2-7909).
10.1.13.2 Third Amendment to 10.1.13 as amended October 1, 1984 (Exhibit 1 to the CEL Form 10-Q (September 1984), File No. 2-7909).
10.1.14 Participation Agreement between Maine Electric Power Company and CEL and/or NBGEL for the construction of a 345 KV transmission line between Wiscasset, Maine and Mactaquac, New Brunswick, Canada and for the purchase of base and peaking capacity from the New Brunswick Electric Power Commission, dated June 20, 1969 (Exhibit 13 to the CES Form 10-K for 1984, File No. 1-7316).
10.1.14.1 Supplement Amending 10.1.14, as amended June 24, 1970 (Exhibit 8 to the CES Form S-7, Amendment No. 1, File No. 2-38372).
10.1.15 Service Agreement for Non-Firm Transmission Service between Boston Edison Company and CEL dated July 5, 1984 (Exhibit 4 to the CEL 1984 Form 10-K, File No. 2-7909).
CAMBRIDGE ELECTRIC LIGHT COMPANY
10.1.16 Power Exchange Agreement by and between Boston Edison Company and CEL dated December 1, 1984 (Exhibit 5 to the CEL 1984 Form 10-K, File No. 2-7909).
10.1.17 Agreement, dated September 1, 1985, With Respect To Amendment of Agreement With Respect To Use Of Quebec Interconnection, dated December 1, 1981, among certain New England Power Pool (NEPOOL) utilities to include Phase II facilities in the definition of "Project" (Exhibit 1 to the CEC Form 10-Q (September 1985), File No. 2-30057).
10.1.17.1 Amendatory Agreement No. 3 to 10.1.17, as amended June 1, 1990 (Exhibit 1 to the CEC Form 10-Q (September 1990), File No. 2- 30057).
10.1.18 Preliminary Quebec Interconnection Support Agreement - Phase II among certain NEPOOL utilities, dated June 1,1984 (Exhibit 6 to the CE Form 10-Q (June 1984), File No. 2-7749).
10.1.18.1 First, Second and Third Amendments to 10.1.18 as amended March 1, 1985, January 1, 1986 and March 1, 1987, respectively (Exhibit 1 to the CEC Form 10-Q (March 1987), File No. 2-30057).
10.1.18.2 Fourth and Eighth Amendments to 10.1.18 as amended July 1, 1987 and August 1, 1988, respectively (Exhibit 3 to the CEC Form 10-Q (September 1988), File No. 2-30057).
10.1.18.3 Fifth, Sixth and Seventh Amendments to 10.1.18 as amended October 15, 1987, December 15, 1987 and March 1, 1988, respectively (Exhibit 1 to the CEC Form 10-Q (June 1988), File No. 2-30057).
10.1.18.4 Ninth and Tenth Amendments to 10.1.18 as amended November 1, 1988 and January 15, 1989, respectively (Exhibit 2 to the CEC Form 10-K for 1988, File No. 2-30057).
10.1.18.5 Eleventh Amendment to 10.1.18 as amended November 1, 1989 (Exhibit 4 to the CEC Form 10-K for 1989, File No. 2-30057).
10.1.18.6 Twelfth Amendment to 10.1.18 as amended April 1, 1990 (Exhibit 1 to the CEC Form 10-Q (June 1990), File No. 2-30057).
10.1.19 Agreement to Preliminary Quebec Interconnection Support Agreement - Phase II among PSNH, New England Power Company, Boston Edison Company and CEC whereby PSNH assigns a portion of its interests under the original Agreement to the other three parties, dated October 1, 1987 (Exhibit 2 to the CEC 1987 Form 10-K, File No. 2- 30057).
10.1.20 Phase II Equity Funding Agreement for New England Hydro- Transmission Electric Company, Inc. (New England Hydro (Massachusetts) between New England Hydro and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 2 to the CEC Form 10-Q (September 1985), File No. 2-30057).
CAMBRIDGE ELECTRIC LIGHT COMPANY
10.1.21 Phase II Equity Funding Agreement for New England Hydro- Transmission Corporation (New Hampshire Hydro) between New Hampshire Hydro and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 3 to the CEC Form 10-Q (September 1985), File No. 2- 30057).
10.1.21.1 Amendment No. 1 to 10.1.21 as amended May 1, 1986 (Exhibit 6 to the CEC Form 10-Q (March 1987), File No. 2-30057).
10.1.21.2 Amendment No. 2 to 10.1.21 as amended September 1, 1987 (Exhibit 3 to the CEC Form 10-Q (September 1987), File No. 2-30057).
10.1.22 Phase II Massachusetts Transmission Facilities Support Agreement dated June 1, 1985, refiled as a single agreement incorporating Amendments 1 through 7 dated May 1, 1986 through January 1, 1989, respectively, between New England Hydro-Transmission Electric Company, Inc. (New England Hydro) and certain NEPOOL utilities (Exhibit 2 the CEC Form 10-Q (September 1990), File No. 2-30057).
10.1.23 Phase II New Hampshire Transmission Facilities Support Agreement dated June 1, 1985, refiled as a single agreement incorporating Amendments 1 through 8 dated May 1, 1986 through January 1, 1990, respectively, between New England Hydro-Transmission Corporation (New Hampshire Hydro) and certain NEPOOL utilities (Exhibit 3 to the CEC Form 10-Q (September 1990), File No. 2-30057).
10.1.24 Phase II New England Power AC Facilities Support Agreement between New England Power and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 6 to the CEC Form 10-Q (September 1985), File No. 2- 30057).
10.1.24.1 Amendments Nos. 1 and 2 to 10.1.24 as amended May 1, 1986 and February 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (March 1987), File No. 2-30057).
10.1.24.2 Amendments Nos. 3 and 4 to 10.1.24 as amended June 1, 1987 and September 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q (September 1987), File No. 2-30057).
10.1.25 Phase II Boston Edison AC Facilities Support Agreement between Boston Edison Company and certain NEPOOL utilities, dated June 1, 1985 (Exhibit 7 to the CEC Form 10-Q (September 1985), File No. 2- 30057).
10.1.25.1 Amendments Nos. 1 and 2 to 10.1.25 as amended May 1, 1986 and February 1, 1987, respectively (Exhibit 2 to the CEC Form 10-Q (March 1987), File No. 2-30057).
10.1.25.2 Amendments Nos. 3 and 4 to 10.1.25 as amended June 1, 1987 and September 1, 1987, respectively (Exhibit 4 to the CEC Form 10-Q (September 1987), File No. 2-30057).
CAMBRIDGE ELECTRIC LIGHT COMPANY
10.1.26 Agreement Authorizing Execution of Phase II Firm Energy Contract among certain NEPOOL utilities in regard to participation in the purchase of power from Hydro Quebec, dated September 1, 1985 (Exhibit 8 to the CEC Form 10-Q (September 1985), File No. 2- 30057).
10.1.27 System Power Sales Agreement by and between Connecticut Light and Power (CL&P), Western Massachusetts Electric Company (Northeast Utilities companies), as sellers, and CEL, as buyer, of power in excess of firm power customer requirements from the electric systems of the Northeast Utilities companies, dated June 1, 1984, as effective October 25, 1985 (Exhibit 1 to the CEL 1985 Form 10-K, File No. 2-7909).
10.1.28 Power Sale Agreement by and between Altresco Pittsfield, L. P. and the Company for entitlement to the electric capacity and related energy to be produced by a cogeneration facility located in Pittsfield, Massachusetts, dated February 20, 1992 (Exhibit 1 to the CEL Form 10-Q (September 1993), File No. 2-7909).
10.1.28.1 System Exchange Agreement by and among Altresco Pittsfield, L.P., the Company, CE and New England Power Company, dated July 2, 1993 (Exhibit 3 to the CE Form 10-Q (September 1993), File No. 2-7749).
10.2 Other Agreements.
10.2.1 Pension Plan for Employees of Commonwealth Energy System and Subsidiary Companies as amended and restated January 1, 1993 (Exhibit 1 to the CES Form 10-Q (September 1993), File No. 1-7316).
10.2.2 Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies as amended and restated January 1, 1993 (Exhibit 2 to the CES Form 10-Q (September 1993), File No. 1-7316).
10.2.2.1 First Amendment to the Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies, as amended and restated as of January 1, 1993, effective October 1, 1994. (Exhibit 1 to the CES Form S-8 (January 1995), File No. 1-7316).
10.2.3 NEPOOL Agreement dated September 1, 1971 as amended through August 1, 1977 between NEGEA Service Corporation, as agent for CEL, CEC, NBGEL and various other electric utilities operating in New England, together with amendments dated August 15, 1978, January 31, 1979 and February 1, 1980 (Exhibit 5(c)13 to the CES Form S-16 (April 1980), File No. 2-64731).
CAMBRIDGE ELECTRIC LIGHT COMPANY
10.2.3.1 Thirteenth Amendment to 10.2.3 dated September 1, 1981 (Exhibit 3 to the CES 1991 Form 10-K, File No. 1-7316).
10.2.3.2 Fourteenth through Twentieth Amendments to 10.2.3 as amended December 1, 1981, June 1, 1982, June 15, 1983, October 1, 1983, August 1, 1985, August 15, 1985 and September 1, 1985, respectively (Exhibit 4 to the CES Form 10-Q (September 1985), File No. 1-7316).
10.2.3.3 Twenty-first Amendment to 10.2.3 as amended to January 1, 1986 (Exhibit 1 to the CES Form 10-Q (March 1986), File No. 1-7316).
10.2.3.4 Twenty-second Amendment to 10.2.3 as amended to January 1, 1986 (Exhibit 1 to the CES Form 10-Q (September 1986), File No. 1-7316).
10.2.3.5 Twenty-third Amendment to 10.2.3 as amended April 30, 1987 (Exhibit 1 to the CES Form 10-Q (June 1987), File No. 1-7316).
10.2.3.6 Twenty-fourth Amendment to 10.2.3 as amended March 1, 1988 (Exhibit 1 to the CES 1987 Form 10-K, File No. 1-7316).
10.2.3.7 Twenty-fifth Amendment to 10.2.3 as amended May 1, 1988 (Exhibit 1 to the CES Form 10-Q (March 1988), File No. 1-7316).
10.2.3.8 Twenty-sixth Amendment to 10.2.3 as amended March 15, 1989 (Exhibit 1 to the CES Form 10-Q (March 1989), File No. 1-7316).
10.2.3.9 Twenty-seventh Amendment to 10.2.3 as amended October 1, 1990 (Exhibit 3 to the CES 1990 Form 10-K, File No. 1-7316).
10.2.3.10 Twenty-Eighth Amendment to 10.2.3 as amended September 15, 1992 (Exhibit 1 to the CES Form 10-Q (September 1994), File No. 1-7316).
10.2.3.11 Twenty-Ninth Amendment to 10.2.3 as amended May 1, 1993 (Exhibit 2 to the CES Form 10-Q (September 1994), File No. 1-7316).
10.2.4 Guarantee Agreement by CEL (as guarantor) and MYA Fuel Company (as initial lender) covering the unconditional guarantee of a portion of the payment obligations of Maine Yankee Atomic Power Company under a loan agreement and note initially between Maine Yankee and MYA Fuel Company (Exhibit 3 to the CEL 1985 Form 10-K, File No. 2- 7909).
Exhibit 27. Financial Data Schedule
Filed herewith as Exhibit 1 is the Financial Data Schedule for the twelve months ended December 31, 1994.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended December 31, 1994.
SCHEDULE I
CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1994 (Dollars in Thousands)
Balance Balance December 31, Equity December 31, Name of Issuer and 1993 in Dividends 1994 Description of Investment Shares Amount Earnings Received Amount
Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 490 $ 743 $ 650 $4 583 Maine Yankee Atomic Power Company 20 000 2 776 245 277 2 744 Vermont Yankee Nuclear Power Corporation 10 001 1 317 158 157 1 318 Yankee Atomic Electric Company 3 068 476 43 - 519 Total $9 059 $1 189 $1 084 $9 164
Other Investments Massachusetts Business Development Corporation 500 $ 5 $ 5 Total $ 5 $ 5
Under terms of the capital funds agreements and power contracts, no stock may be sold or transferred except to another stockholder; however, no market exists for these securities.
See Note 4(d) of the Notes to Financial Statements included in Item 8 of this report for a discussion of the permanent closing of the nuclear plant owned by Yankee Atomic Electric Company. /TABLE
SCHEDULE I
CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1993 (Dollars in Thousands)
Balance Balance December 31, Equity December 31, Name of Issuer and 1992 in Dividends 1993 Description of Investment Shares Amount Earnings Received Amount
Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 518 $ 563 $ 591 $4 490 Maine Yankee Atomic Power Company 20 000 2 759 328 311 2 776 Vermont Yankee Nuclear Power Corporation 9 801 1 336 178 197 1 317 Yankee Atomic Electric Company 3 068 476 - - 476 Total $9 089 $1 069 $1 099 $9 059
Other Investments Massachusetts Business Development Corporation 500 $ 5 $ 5 Total $ 5 $ 5
Under terms of the capital funds agreements and power contracts, no stock may be sold or transferred except to another stockholder; however, no market exists for these securities.
See Note 4(d) of the Notes to Financial Statements included in Item 8 of this report for a discussion of the permanent closing of the nuclear plant owned by Yankee Atomic Electric Company. /TABLE
SCHEDULE I
CAMBRIDGE ELECTRIC LIGHT COMPANY INVESTMENTS IN, EQUITY IN EARNINGS OF, AND DIVIDENDS RECEIVED FROM RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1992 (Dollars in Thousands)
Balance Balance December 31, Equity December 31, Name of Issuer and 1991 in Dividends 1992 Description of Investment Shares Amount Earnings Received Amount
Common Stock Connecticut Yankee Atomic Power Company 15 750 $4 600 $ 721 $ 803 $4 518 Maine Yankee Atomic Power Company 20 000 2 758 336 335 2 759 Vermont Yankee Nuclear Power Corporation 9 801 1 325 208 197 1 336 Yankee Atomic Electric Company 3 068 420 56 - 476 Total $9 103 $1 321 $1 335 $9 089
Other Investments Massachusetts Business Development Corporation 500 $ 5 $ 5 Total $ 5 $ 5
Under terms of the capital funds agreements and power contracts, no stock may be sold or transferred except to another stockholder; however, no market exists for these securities.
See Note 4(d) of the Notes to Financial Statements included in Item 8 of this report for a discussion of the permanent closing of the nuclear plant owned by Yankee Atomic Electric Company. /TABLE
SCHEDULE II
CAMBRIDGE ELECTRIC LIGHT COMPANY VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (Dollars in Thousands)
Additions Balance at Provision Deductions Balance Beginning Charged to Accounts at End Description of Year Operations Recoveries Written Off of Year
Year Ended December 31, 1994
Allowance for Doubtful Accounts $491 $561 $ 92 $673 $471
Year Ended December 31, 1993
Allowance for Doubtful Accounts $453 $257 $280 $499 $491
Year Ended December 31, 1992
Allowance for Doubtful Accounts $309 $801 $ 1 $658 $453
CAMBRIDGE ELECTRIC LIGHT COMPANY FORM 10-K DECEMBER 31, 1994
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.
CAMBRIDGE ELECTRIC LIGHT COMPANY (Registrant)
By: WILLIAM G. POIST William G. Poist, Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Principal Executive Officers:
WILLIAM G. POIST March 29, 1995 William G. Poist, Chairman of the Board and Chief Executive Officer
R. D. WRIGHT March 29, 1995 Russell D. Wright, President and Chief Operating Officer
Principal Financial Officer:
JAMES D. RAPPOLI March 29, 1995 James D. Rappoli, Financial Vice President and Treasurer
Principal Accounting Officer:
JOHN A. WHALEN March 29, 1995 John A. Whalen, Comptroller
A majority of the Board of Directors:
WILLIAM G. POIST March 29, 1995 William G. Poist, Director
R. D. WRIGHT March 29, 1995 Russell D. Wright, Director
JAMES D. RAPPOLI March 29, 1995 James D. Rappoli, Director