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 2. PROPERTIES
Power_Supply
Montaup supplies the EUA System with nearly 100% of its electric requirements. Newport became an all-requirements customer of Montaup on May 21, 1994, the implementation date of Montaup's wholesale rate reduction. At the same time, Montaup assumed all of Newport's power contracts and began leasing all of Newport's generation and a portion of Newport's transmission facilities. In 1994 the EUA System's wholly owned generating units referred to in the following table below consisted of Montaup's jet-fueled peaking units (Somerset Jet 1 and Jet 2) and Somerset Unit 6 which was converted from oil to coal burning in 1983, Blackstone's Pawtucket Hydro, which was repowered in 1985 and Newport's diesel peaking units (Jepson in Jamestown and Eldred in Portsmouth) which supply the EUA System with 8 MW and 8.25 MW, respectively. With the exception of Somerset's Jet 1 and Jet 2, Montaup has not significantly increased its wholly owned generating units since 1959. The EUA System has found it more economically beneficial to join with other utilities in the joint ownership of large generating units and in long-term purchase contracts, and to supplement these sources with short-term purchases as required. EUA believes that spreading the EUA System's sources of electricity among a number of plants should improve the reliability of its power supply and limit the financial exposure relating to construction and potentially prolonged outages of a generating unit.
In January 1994 Montaup determined that it would not be economically feasible to bring its 42-year old, coal-fired, Somerset Station Unit 5 generating unit into compliance with the Clean Air Act Amendments of 1990 (Clean Air Act). The unit was placed in cold storage and its net investment, $5.4 million, was transferred to electric plant held for future use pending final determination by Montaup of its usefulness. Under terms of the settlement agreement entered into by Montaup and the intervenors in Montaup's 1994 rate decrease application and filed with FERC, Montaup continues to earn a return on the net investment of the unit. Current forecasts indicate that a combination of company owned generation, current long-term purchased power contracts, expected short-term power opportunities, and Montaup's C&LM programs should meet EUA System requirements through the year 1999.
In 1994, Montaup recovered through rates approximately $14.2 million for its C&LM programs. C&LM is designed to (i) decrease existing energy demand and (ii) offset future load growth through conservation incentives, thereby minimizing future need for large capital investment in generating facilities.
The all time peak EUA System demand was approximately 921 MW experienced on July 21, 1994.
Montaup's participation in generating units of which it is not the sole owner takes various forms including stock (equity) ownership, joint ownership and purchase contracts. In most cases (other than short-term purchased power contracts) the purchaser is required to pay its share (i.e., the same percentage as the percentage of its entitlement to the output) of all of the costs of the generating unit (whether or not the unit is operating) including fixed costs, operating costs, costs of additional construction or modification, costs associated with condemnation, shutdown, retirement, or decommissioning of the unit, and certain transmission charges. Under its contracts with Maine Yankee, Connecticut Yankee Atomic Power Company, Vermont Yankee Nuclear Power Corporation and Yankee Atomic and, under its agreements relating to Phase II of the interconnection with Hydro-Quebec, Montaup may be called upon to provide additional capital and/or other types of direct or indirect financial support. (See Item 1. Business -- Yankee Atomic.)
Other_Property
Eastern Edison and Montaup own approximately 3,100 miles of transmission and distribution lines and approximately 52 substations located in the cities and towns served.
In addition to the above, Eastern Edison and Montaup also own several buildings which house distribution, maintenance or general office personnel.
See Note F of Notes to Consolidated Financial Statements regarding encum brances.
Item 3.
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. 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 the work. The DEP has classified this site under the new MCP. Eastern Edison is proceeding with 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, 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, 1994, Eastern Edison and Montaup have incurred costs of approximately $125,000 in connection with the foregoing environmental matters and estimate that additional expenditures may be incurred through 1996 up to $800,000.
As a general matter Eastern Edison and Montaup will seek to recover costs relating to environmental proceedings in their rates. Montaup is currently recovering certain of the incurred costs in its rates. Estimated amounts after 1996 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 their financial position and thus, no loss provision is required at this time.
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.
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. Also in January 1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
The Court has scheduled a hearing in April 1995 on Montaup's motion for default judgement based on Aquidneck's failure to meet its discovery obligations. In addition, Montaup intends to file a motion for summary judgment.
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). The FERC initiated an action when the EUA subsidiaries and other participants filed an 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 to prevent or delay its effectiveness. Extended settlement discussions have resulted in a settlement signed by substantially all of the parties and intervenors in both actions. The settlement, if fully implemented, will result in (i) a withdrawal of the amendment to the NEPOOL Agreement, (ii) a termination of the FERC proceeding, and (iii) after the FERC action is terminated and no longer subject to appeal, the withdrawal by the settling plaintiffs of their Superior Court complaint. The necessary papers were filed to withdraw the NEPOOL amendment and terminate the FERC proceeding. That withdrawal and termination was contested by three intervenors in the FERC proceeding. On February 10, 1995, FERC issued an order accepting a notice of cancellation of the NEPOOL amendment, effective September 12, 1994. If the settlement agreement is fully implemented, the Superior Court action will be required to be dismissed as to all but one non-settling plaintiff. 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:
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
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 $118,800 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-eight, thirty-three and twenty-four, respectively.
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 officers other than himself.
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 6, 1995.
Amount (number of Name shares) and Nature of Percent of Title_of_Class Beneficial_Owner Beneficial_Ownership_(1) Class
Common Shares, John D. Carney 1,137 Less than $5 par value, 837 (3) one percent of Eastern 2,975 (4) for each Utilities Arthur A. Hatch 1,237 individual Associates 261 (2) 2,139 (3) 4,083 (4) Donald G. Pardus 1,515 7,671 (2) 4,065 (3) 10,307 (4) Robert G. Powderly 664 142 (2) 1,241 (3) 3,919 (4) John R. Stevens 3,938 (2) 1,336 (3) 8,098 (4) Directors and Executive Officers as a Group 67,551 (5)
_____________________ (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 held under the Grant Plan as to which each has voting power.
(5) Represents less than four-tenths of one percent of the outstanding common shares of EUA at January 6, 1995. Included are 17,413 shares held for officers under EUA's ESP, 12,021 shares jointly owned with the officers' spouses, and 32,536 shares held under EUA's Restricted Stock Plan. ________________
The directors and executive officers of Eastern Edison did not own any of Eastern Edison's 6-5/8% Preferred Stock at January 6, 1995.
(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. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
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 Statements of Income for the three years in the period ended December 31, 1994.
Consolidated Statements of Retained Earnings for the three years in the period ended December 31, 1994.
Consolidated Statements of Cash Flows for the three years in the period ended December 31, 1994.
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Capitalization at December 31, 1994 and 1993.
Notes to Consolidated Financial Statements at December 31, 1994, 1993, and 1992.
Report of Independent Accountants, dated March 2, 1995.
(a)(2) Financial Statement Schedules
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 - Restated and Amended Articles of Organization of Eastern Edison (filed as Exhibit B-1 to Form U5S of EUA for 1993).
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 C-33 to Form U5S of EUA for 1993).
4-28.08 - Twenty-Fifth Supplemental Indenture dated as of July 1, 1993 (filed as Exhibit C-34 to Form U5S of EUA for 1993).
4-29.08 - Twenty-Sixth Supplemental Indenture dated as of September 1, 1993 (filed as Exhibit C-35 to Form U5S of EUA for 1993).
- 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, March 1, 1992 and July 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 10-121, 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 10-70, Form 10-K of EUA for 1992, File No. 1- 5366).
10-3.03 - Eastern Utilities Associates Employees' Savings Plan Trust Agreement. (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. (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).
- Eastern Edison -
10-1.08 - Trust Indenture dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Shawmut Bank, N.A. (Exhibit 10- 1.08, Eastern Edison Form 10-K for 1993, File No. 0-8480)
10-2.08 - Loan Agreement dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Eastern Edison (Exhibit 10-2.08, Eastern Edison Form 10-K for 1993, File No. 0-8480).
10-3.08 - Power Purchase Agreement entered into as of September 20, 1993 by and between Meridian Middleboro Limited Partnership and Eastern Edison Company (Exhibit 10-3.08, Eastern Edison Form 10-K for 1993, File No. 0-8480).
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 (Exhibit 10-4.08, Eastern Edison Form 10-K for 1993, File No. 0-8480).
- 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 - Power Contract (composite copy) between Yankee Atomic Electric Company and Montaup dated June 30, 1959 as Revised April 1, 1975, as further amended October 1, 1980, April 1, 1985, May 6, 1988, June 26, 1989 and July 1, 1989 (Exhibit 10-6, Registration No. 2-72655; Exhibit 10-73, Form 10-K of EUA for 1985, File No. 1-5366; Exhibits 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).
10-3.05 - 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 - Contract for sale of power to Montaup by Canal Electric Company dated December 1, 1965 (Exhibit 2D, File No. 0-688).
10-7.05 - 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).
10-8.05 - 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).
10-9.05 - 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).
10-10.05 - 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).
10-11.05 - 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).
10-12.05 - Stockholder Agreement (composite copy) among Maine Yankee Sponsors, including Montaup, dated May 20, 1968 (Exhibit B-4, File 70-4658).
10-13.05 - 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).
10-14.05 - Form of Agreement among Maine Yankee Atomic Power Company's Sponsors dated as of May 20, 1969 (Exhibit B-5, File No. 70- 4658).
10-15.05 - 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 3-35(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).
10-16.05 - 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 between Montaup and Boston Edison Company dated August 1, 1972 and as amended January 1, 1985 for purchase of power from Pilgrim No. 1 nuclear unit at Plymouth, Massachusetts (Exhibit 13-41, Registration No. 2-46612; Exhibit 10-67, Form 10-K of EUA for 1984, File No. 1-5366).
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 March 1, 1978, and Agreement amending said contract dated August 22, 1980 by and between Connecticut Yankee Atomic Power Company and Montaup, as amended October 15, 1982 (Exhibit 20, Form 10-K of EUA for 1977, File No. 1-5366; Exhibit 10-52, Form 10-K for EUA for 1981, File No. 1-5366; Exhibit 10-67, Form 10-K for EUA for 1983, File No. 1-5366).
10-25.05 - Eastern Utilities Associates Employees' Share Ownership Plan Trust Agreement (Exhibit 5, Form 10-K of EUA for 1977, File No. 1-5366).
10-26.05 - 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).
10-27.05 - 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).
10-28.05 - 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).
10-29.05 - 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).
10-30.05 - 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).
10-31.05 - 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).
10-32.05 - 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, 1988, October 21, 1988, July 21, 1989, February 7, 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).
10-33.05 - 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).
10-34.05 - 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).
10-35.05 - 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).
10-36.05 - 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).
10-37.05 - 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).
10-38.05 - 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).
10-39.05 - Power Contract (composite copy) between Yankee Atomic Electric Company and Montaup dated June 30, 1959 as revised April 1, 1975, as further amended October 1, 1980, April 1, 1985, May 6, 1988, June 26, 1989, July 1, 1989 and February 1, 1992 (Exhibit 10-6, Registration No. 2-72655; 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; Exhibit 10-46 Form 10-K of Eastern Edison for 1992, File No. 0-8480).
10-40.05 - Memorandum of understanding by and between Canal Electric Company and Montaup Electric Company dated September 23, 1993 (Exhibit 10-39.05, Eastern Edison 10-K for 1993, File No. 0-8480).
10-41.05 - Ancillary Agreement by and between Algonquin Gas Transmission Company, Canal Electric Company and Montaup Electric Company dated October 8, 1993. (Exhibit 10-40.05 of Eastern Edison 10-K for 1993, File No. 0-8480).
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.
None 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 20, 1995 By /s/ Richard M. Burns___ Vice President Richard M. Burns (Principal Accounting 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.
/s/ Donald G. Pardus____ Chairman of the Board (Principal Donald G. Pardus Executive Officer) and Director
/s/ John R. Stevens_____ Vice Chairman and Director John R. Stevens (Principal Financial Officer)
/s/ Richard M. Burns____ Vice President Richard M. Burns (Principal Accounting Officer)
/s/ John D. Carney______ President and Director John D. Carney
/s/ Arthur D. Hatch_____ Executive Vice President and Arthur A. Hatch Director
March 20, 1995 /s/ Robert G. Powderly__ Executive Vice President and Robert G. Powderly Director
/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
The accompanying notes are an integral part of the financial statements.
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 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994, 1993, and 1992
(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.
Reclassifications: Certain prior period amounts on the financial statements have been reclassified to conform with current presentation.
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, and has received FERC authorization to recover, its proportionate share of any unrecovered costs and costs incurred after the plant's retirement. Montaup's share of all unrecovered assets and the total estimated costs to decommission the unit aggregated approximately $18.4 million at December 31, 1994 and is included with Other Liabilities on the Consolidated Balance Sheet. Also due to recoverability, a regulatory asset has been recorded for the same amount and is included with Other Assets.
Montaup also has a stock ownership investment of 3.27% in each of the two companies which own and operate certain 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 aggregating approximately $126,237,000 in 1994, $121,447,000 in 1993, and $117,714,000 in 1992; accounting, engineering and other services rendered by EUA Service to Eastern Edison and Montaup of approximately $27,365,000,
$27,418,000 and $23,196,000 in 1994, 1993 and 1992 respectively; and, operating expense from the rental of transmission and generation facilities by Blackstone and Newport to Montaup aggregating approximately $2,665,000 in 1994, $2,884,000 in 1993 and $2,445,000 in 1992. Montaup rental of transmission facilities to Newport for the years 1994, 1993, and 1992 amounted to $149,000, $487,000 and $365,000, 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 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% in 1994, 1993 and 1992 based on the average depreciable property balances at the beginning and end of each year.
Electric Plant Held for Future Use: In January 1994 Montaup determined that it would not be economically feasible to bring its 42-year old, coal-fired Somerset Station Unit 5 generating unit into compliance with Clean Air Act Amendments of 1990 (Clean Air Act). The unit was placed in cold storage and its net investment, $5.4 million, was transferred to electric plant held for future use pending final determination by Montaup of its usefulness. Under terms of the settlement agreement filed with FERC, entered into by Montaup and the intervenors in Montaup's 1994 rate decrease application and filed with FERC, Montaup continues to earn a return on the net investment of the unit.
Other Assets: The components of Other Assets at December 31, 1994 and 1993 are detailed as follows:
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 9.56%, in 1994, 9.3% in 1993 and 10.83% in 1992.
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 EUA 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 1994, 1993, and 1992 are as follows:
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:
Eastern Edison and Montaup adopted FASB statement No. 109, "Accounting for Income Taxes" (FAS109) 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. At December 31, 1994 and 1993 no valuation allowance was deemed necessary for total deferred tax assets. The total deferred tax assets and liabilities at December 31, 1994 and 1993 are comprised as follows:
As of December 31, 1994 and 1993, the Company had recorded on its Consolidated Balance Sheet a regulatory liability to ratepayers of approximately $25.2 million and $24.7 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, 1994, and 1993 a regulatory asset of approximately $39.5 million and $42.3 million, respectively has been recorded, representing the cumulative amount of federal income taxes on temporary depreciation differences which were previously flowed through to ratepayers.
Eastern Edison and Montaup have approximately $100,000 and $4.4 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:
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, 1994 and 1993, the respective capitalization ratios were in excess of the minimum requirements which would make these restrictions effective.
(D) Redeemable Preferred Stock
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.
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 $100,458,000 as of December 31, 1994 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 $264 million.
The Company's 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 1994 are: $35 million in 1995, $7 million in 1996, none in 1997, $60 million in 1998 and none in 1999.
(G) Lines of Credit:
EUA System companies including Eastern Edison maintain short-term lines of credit with various banks aggregating approximately $150 million. At December 31, 1994, unused short-term lines of credit were approximately $118 million. These credit lines are available to other EUA System companies under joint credit line arrangements. In accordance with informal agreements with the various banks, commitment fees are required to maintain certain lines of credit. During 1994 the weighted average interest rate for short-term borrowings by the Company was 3.7%.
(H) Jointly Owned Facilities:
At December 31, 1994, 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):
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, 1994, Montaup's total net investment in nuclear fuel of the Seabrook and Millstone Units amounted to $4.0 million and $1.9 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, 1994 are as follows (dollars in thousands):
(J) Commitments and Contingencies:
Joint owners of nuclear projects are 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. It conducted its business as a Debtor-in-Possession until November 23, 1994, at which time its Plan of Reorganization became effective and Great Bay Power emerged from Chapter 11.
The owners (or lead participants) of the nuclear units in which Montaup has an interest have made, or expect to make, various arrangements for the acquisition of uranium concentrate, the conversion, enrichment, fabrication and utilization of nuclear fuel and the disposition of that fuel after use. The owners (or lead participants) of United States nuclear units have entered into contracts with the DOE for disposal of spent nuclear fuel in accordance with the NWPA. The NWPA requires (subject to various contingencies) that the federal government design, license, construct and operate a permanent repository for high level radioactive wastes and spent nuclear fuel and establish prescribed fees for the disposal of such wastes and fuel. The NWPA specifies that the DOE provide for the disposal of such waste and spent nuclear fuel starting in 1998. Objections on environmental and other grounds have been asserted against proposals for storage as well as disposal of spent nuclear fuel. The DOE anticipates that a permanent disposal site for spent fuel will be ready to accept fuel for storage or disposal by the year 2010. 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 its spent fuel for the projected life of the unit. Expenditures for additional rack storage facilities are projected to be made by 1999. At the Seabrook Project, there is on-site storage capacity which, with rack additions, should be sufficient to at least the year 2010.
The Energy Policy Act requires that a fund be created for the decommissioning and decontamination of the DOE uranium enrichment facilities. The fund will be financed in part by special assessments on nuclear power plants in which Montaup has an interest. These assessments are calculated based on the utilities' prior use of the government facilities and have been levied by the DOE since starting in September 1993 and will continue over 15 years. This cost is passed on to the joint owners or power buyers as an additional fuel charge on a monthly basis and is currently being recovered by Montaup through rates.
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 $18.0 million in 1994 dollars, and Seabrook Unit 1 is $11.5 million in 1994 dollars. These figures are based on studies performed for the lead owner of the units. 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.
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. Regular 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 expense (income) for 1994, 1993 and 1992 included the following components:
Assumptions used to determine pension cost:
The discount rate used to determine pension costs changed effective January 1, 1995 to 8.25%. The funded status of the plan cannot be presented separately for Eastern Edison and Montaup as they participate in the plan with other subsidiaries of EUA.
All benefits provided under the supplemental plan are unfunded and any payments to plan participants are made by Eastern Edison or Montaup. For the three years ended December 31, 1994, 1993 and 1992 expenses related to the supplemental plan were $266,000, $1.3 million and $169,000, respectively.
Post-Retirement Benefits: Retired employees are entitled to participate in health care and life insurance benefit plans. Health care benefits are subject to deductibles and other limitations. Health care and life insurance benefits are partially funded by EUA System companies for all qualified employees.
Eastern Edison and Montaup 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. The Company elected to recognize the Transition Obligation over a twenty year period as permitted by FAS106. The resultant annual expense, including amortization of the Transition Obligation and net of capitalized amounts, amounted to approximately $4.5 million in 1994 and $4.8 million in 1993. As a result of regulatory decisions issued in December 1992, Eastern Edison and Montaup established regulatory assets of approximately $1.4 million and $1.4 million in 1994 and 1993, respectively. Montaup was allowed to defer FAS106-related costs through 1995 or until it filed for recovery of such amounts prior to that time. Montaup has requested and received authority to recover all of its FAS106 expenses including a five-year amortization of deferred amounts in its 1994 rate decrease application. The total cost of Post-Retirement Benefits other than Pensions for 1994 and 1993 includes the following components (in thousands):
The discount rate used to determine post-retirement benefit costs was changed effective January 1, 1995, to 8.25% and was used to calculate the funded status of Post-Retirement Benefits at December 31, 1994.
Increasing the assumed health care cost trend rate by 1% each year would increase the total post-retirement benefit cost for 1994 by $481,000 and increase the total accumulated post-retirement benefit obligation by $4.1 million.
Eastern Edison and Montaup have also established an irrevocable external Voluntary Employee Benefit Association (VEBA) Trust Fund as required by the aforementioned regulatory decisions. Contributions to the VEBA fund commenced in March 1993 and contributions totaling approximately $2.9 million and $2.3 million were made during 1994 and 1993, respectively.
Prior to 1993, Eastern Edison and Montaup followed the "pay-as-you-go" methodology for accounting for post-retirement benefits other than pensions. The costs of the benefit, which amounted to approximately $1.5 million in 1992 were charged to expense.
Post-Employment Benefits: In November 1992, FASB issued Statement No. 112, "Employers' Accounting for Postemployment Benefits" for fiscal years beginning after December 15, 1993. The estimated impact of this standard is immaterial to Eastern Edison's results of operations and therefore no liability was recorded.
Long-Term Purchased Power Contracts: Eastern Edison is committed under long-term purchased power contracts, expiring on various dates through September 2021, to pay demand charges whether or not energy is received. Under terms in effect at December 31, 1994, the aggregate annual minimum commitments for such contracts are approximately $129 million in 1995 and 1996 and $128 million in 1997, $132 million 1998, $133 million in 1999 and will aggregate $1.6 billion for the ensuing years. In addition, the EUA System is required to pay additional amounts depending on the actual amount of energy received under such contracts. The demand costs associated with these contracts are reflected as Purchased Power-Demand on the Consolidated Statement of Income. Such costs are recoverable through rates.
Environmental Matters: The Comprehensive Environmental Response, Compensation Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and certain similar state statutes authorize various governmental authorities to seek court orders compelling responsible parties to take cleanup action at disposal sites which have been determined by such governmental authorities to present an imminent and substantial danger to the public and to the environment because of an actual or threatened release of hazardous substances. Because of the nature of the Eastern Edison business, various by-products and substances are produced or handled which are classified as hazardous under the rules and regulations promulgated by the EPA as well as state and local authorities. The Company generally provides for the disposal of such substances through licensed contractors, but these statutory provisions generally impose potential joint and several responsibility on the generators of the wastes for cleanup costs. Eastern Edison and Montaup have been notified with respect to a number of sites where they may be responsible for such costs, including sites where they may have joint and several liability with other responsible parties. It is the policy of Eastern Edison and Montaup to notify liability insurers and to initiate claims. However, 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, 1994, Eastern Edison and Montaup have incurred costs of approximately $125,000 in connection with the foregoing environmental matters and estimate that additional expenditures may be incurred through 1996 up to $800,000.
As a general matter Eastern Edison and Montaup will seek to recover costs relating to environmental proceedings in their rates. Montaup is currently recovering certain of the incurred costs in its rates. Estimated amounts after 1996 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 their financial position and thus, no loss provision is required at this time.
The Clean Air Act Amendments of 1990 (Clean Air Act) created new regulatory programs and generally updated and strengthened air pollution control laws. These amendments will expand the regulatory role of the United States Environmental Protection Agency (EPA) regarding emissions from electric generating facilities and a host of other sources. Montaup generating facilities will most probably be first affected in 1995, when EPA regulations will take effect. Tests at Montaup's coal-fired Somerset Unit No. 6 indicated it would be able to utilize lower sulfur coal than had been 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 the Somerset Station and therefore has placed it in deactivated reserve. Eastern Edison does not anticipate the impact from the Amendments to be material to its financial position.
In April 1992, NESCAUM, an environmental advisory group for eight Northeast states including Massachusetts and Rhode Island issued recommendations for oxides of nitrogen controls for existing utility boilers required to meet the ozone non-attainment requirements of the Clean Air Act Amendments. The NESCAUM recommendations are more restrictive than EPA's requirements. The DEP has amended its regulations to require that Reasonably Available Control Technology (RACT) be implemented at all stationary sources potentially emitting 50 tons per year or more of oxides of nitrogen. Rhode Island has also issued similar regulations requiring that RACT be implemented at all stationary sources potentially emitting 50 tons or more per year of nitrogen oxide. Montaup has initiated compliance through, among other things, selective, noncatalytic reduction processes.
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 some association between exposure to EMF and health effects, many of the 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 EMF, 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 Facility Siting Board to establish rules and/or regulations governing construction of high voltage transmission lines of 69 KV or more. There is a bill pending in the Massachusetts legislature that would authorize the MDPU to examine the potential health effects of EMF. Management cannot predict the impact, if any, which legislation or other developments concerning EMF may have on Eastern Edison or Montaup.
Guarantee of Financial Obligations: Montaup is a 3.27% equity participant in two companies which own and operate transmission facilities interconnecting New England and the Hydro Quebec system in Canada. Montaup has guaranteed approximately $5.6 million of the outstanding debt of these two companies. In addition, Montaup has a minimum rental commitment which totals approximately $14.2 million under a noncancellable transmission facilities support agreement for years subsequent to 1994.
Other
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). The FERC initiated an action when the EUA subsidiaries and other participants filed an 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 to prevent or delay its effectiveness. Extended settlement discussions have resulted in a settlement signed by substantially all of the parties and intervenors in both actions. The settlement, if fully implemented, will result in (i) a withdrawal of the amendment to the NEPOOL Agreement, (ii) a termination of the FERC proceeding, and (iii) after the FERC action is terminated and no longer subject to appeal, the withdrawal by the settling plaintiffs of their Superior Court complaint. The necessary papers were filed to withdraw the NEPOOL amendment and terminate the FERC proceeding. That withdrawal and termination was contested by three intervenors in the FERC proceeding. On February 10, 1995, FERC issued an order accepting a notice of cancellation of the NEPOOL amendment, effective September 12, 1994. If the settlement agreement is fully implemented, the Superior Court action will be required to be dismissed as to all but one non-settling plaintiff. Management cannot predict the ultimate outcome of this proceeding at this time.
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.
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. Also in January 1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
The Court has scheduled a hearing in April 1995 on Montaup's motion for default judgement based on Aquidneck's failure to meet its discovery obligations. In addition, Montaup intends to file a motion for summary judgment.
Montaup, EUA and EUA Service intend to defend the counterclaim vigorously and believe that Aquidneck's claims have no basis in law.
Report of Independent Accountants
To the Directors and Shareholder of Eastern Edison Company and Subsidiary:
We have audited the consolidated financial statements 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) of this Form 10-K. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 the 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.
Coopers & Lybrand L.L.P.
Boston, Massachusetts March 2, 1995
Item 8 and Item 14(a)(1). Consolidated Financial Statements and Supplementary Data
Item 14(a)(2). Financial Statement Schedules
The accompanying notes are an integral part of the financial statements.
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 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994, 1993, and 1992
(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.
Reclassifications: Certain prior period amounts on the financial statements have been reclassified to conform with current presentation.
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, and has received FERC authorization to recover, its proportionate share of any unrecovered costs and costs incurred after the plant's retirement. Montaup's share of all unrecovered assets and the total estimated costs to decommission the unit aggregated approximately $18.4 million at December 31, 1994 and is included with Other Liabilities on the Consolidated Balance Sheet. Also due to recoverability, a regulatory asset has been recorded for the same amount and is included with Other Assets.
Montaup also has a stock ownership investment of 3.27% in each of the two companies which own and operate certain 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 aggregating approximately $126,237,000 in 1994, $121,447,000 in 1993, and $117,714,000 in 1992; accounting, engineering and other services rendered by EUA Service to Eastern Edison and Montaup of approximately $27,365,000,
$27,418,000 and $23,196,000 in 1994, 1993 and 1992 respectively; and, operating expense from the rental of transmission and generation facilities by Blackstone and Newport to Montaup aggregating approximately $2,665,000 in 1994, $2,884,000 in 1993 and $2,445,000 in 1992. Montaup rental of transmission facilities to Newport for the years 1994, 1993, and 1992 amounted to $149,000, $487,000 and $365,000, 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 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% in 1994, 1993 and 1992 based on the average depreciable property balances at the beginning and end of each year.
Electric Plant Held for Future Use: In January 1994 Montaup determined that it would not be economically feasible to bring its 42-year old, coal-fired Somerset Station Unit 5 generating unit into compliance with Clean Air Act Amendments of 1990 (Clean Air Act). The unit was placed in cold storage and its net investment, $5.4 million, was transferred to electric plant held for future use pending final determination by Montaup of its usefulness. Under terms of the settlement agreement filed with FERC, entered into by Montaup and the intervenors in Montaup's 1994 rate decrease application and filed with FERC, Montaup continues to earn a return on the net investment of the unit.
Other Assets: The components of Other Assets at December 31, 1994 and 1993 are detailed as follows:
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 9.56%, in 1994, 9.3% in 1993 and 10.83% in 1992.
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 EUA 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 1994, 1993, and 1992 are as follows:
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:
Eastern Edison and Montaup adopted FASB statement No. 109, "Accounting for Income Taxes" (FAS109) 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. At December 31, 1994 and 1993 no valuation allowance was deemed necessary for total deferred tax assets. The total deferred tax assets and liabilities at December 31, 1994 and 1993 are comprised as follows:
As of December 31, 1994 and 1993, the Company had recorded on its Consolidated Balance Sheet a regulatory liability to ratepayers of approximately $25.2 million and $24.7 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, 1994, and 1993 a regulatory asset of approximately $39.5 million and $42.3 million, respectively has been recorded, representing the cumulative amount of federal income taxes on temporary depreciation differences which were previously flowed through to ratepayers.
Eastern Edison and Montaup have approximately $100,000 and $4.4 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:
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, 1994 and 1993, the respective capitalization ratios were in excess of the minimum requirements which would make these restrictions effective.
(D) Redeemable Preferred Stock
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.
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 $100,458,000 as of December 31, 1994 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 $264 million.
The Company's 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 1994 are: $35 million in 1995, $7 million in 1996, none in 1997, $60 million in 1998 and none in 1999.
(G) Lines of Credit:
EUA System companies including Eastern Edison maintain short-term lines of credit with various banks aggregating approximately $150 million. At December 31, 1994, unused short-term lines of credit were approximately $118 million. These credit lines are available to other EUA System companies under joint credit line arrangements. In accordance with informal agreements with the various banks, commitment fees are required to maintain certain lines of credit. During 1994 the weighted average interest rate for short-term borrowings by the Company was 3.7%.
(H) Jointly Owned Facilities:
At December 31, 1994, 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):
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, 1994, Montaup's total net investment in nuclear fuel of the Seabrook and Millstone Units amounted to $4.0 million and $1.9 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, 1994 are as follows (dollars in thousands):
(J) Commitments and Contingencies:
Joint owners of nuclear projects are 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. It conducted its business as a Debtor-in-Possession until November 23, 1994, at which time its Plan of Reorganization became effective and Great Bay Power emerged from Chapter 11.
The owners (or lead participants) of the nuclear units in which Montaup has an interest have made, or expect to make, various arrangements for the acquisition of uranium concentrate, the conversion, enrichment, fabrication and utilization of nuclear fuel and the disposition of that fuel after use. The owners (or lead participants) of United States nuclear units have entered into contracts with the DOE for disposal of spent nuclear fuel in accordance with the NWPA. The NWPA requires (subject to various contingencies) that the federal government design, license, construct and operate a permanent repository for high level radioactive wastes and spent nuclear fuel and establish prescribed fees for the disposal of such wastes and fuel. The NWPA specifies that the DOE provide for the disposal of such waste and spent nuclear fuel starting in 1998. Objections on environmental and other grounds have been asserted against proposals for storage as well as disposal of spent nuclear fuel. The DOE anticipates that a permanent disposal site for spent fuel will be ready to accept fuel for storage or disposal by the year 2010. 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 its spent fuel for the projected life of the unit. Expenditures for additional rack storage facilities are projected to be made by 1999. At the Seabrook Project, there is on-site storage capacity which, with rack additions, should be sufficient to at least the year 2010.
The Energy Policy Act requires that a fund be created for the decommissioning and decontamination of the DOE uranium enrichment facilities. The fund will be financed in part by special assessments on nuclear power plants in which Montaup has an interest. These assessments are calculated based on the utilities' prior use of the government facilities and have been levied by the DOE since starting in September 1993 and will continue over 15 years. This cost is passed on to the joint owners or power buyers as an additional fuel charge on a monthly basis and is currently being recovered by Montaup through rates.
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 $18.0 million in 1994 dollars, and Seabrook Unit 1 is $11.5 million in 1994 dollars. These figures are based on studies performed for the lead owner of the units. 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.
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. Regular 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 expense (income) for 1994, 1993 and 1992 included the following components:
Assumptions used to determine pension cost:
The discount rate used to determine pension costs changed effective January 1, 1995 to 8.25%. The funded status of the plan cannot be presented separately for Eastern Edison and Montaup as they participate in the plan with other subsidiaries of EUA.
All benefits provided under the supplemental plan are unfunded and any payments to plan participants are made by Eastern Edison or Montaup. For the three years ended December 31, 1994, 1993 and 1992 expenses related to the supplemental plan were $266,000, $1.3 million and $169,000, respectively.
Post-Retirement Benefits: Retired employees are entitled to participate in health care and life insurance benefit plans. Health care benefits are subject to deductibles and other limitations. Health care and life insurance benefits are partially funded by EUA System companies for all qualified employees.
Eastern Edison and Montaup 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. The Company elected to recognize the Transition Obligation over a twenty year period as permitted by FAS106. The resultant annual expense, including amortization of the Transition Obligation and net of capitalized amounts, amounted to approximately $4.5 million in 1994 and $4.8 million in 1993. As a result of regulatory decisions issued in December 1992, Eastern Edison and Montaup established regulatory assets of approximately $1.4 million and $1.4 million in 1994 and 1993, respectively. Montaup was allowed to defer FAS106-related costs through 1995 or until it filed for recovery of such amounts prior to that time. Montaup has requested and received authority to recover all of its FAS106 expenses including a five-year amortization of deferred amounts in its 1994 rate decrease application. The total cost of Post-Retirement Benefits other than Pensions for 1994 and 1993 includes the following components (in thousands):
The discount rate used to determine post-retirement benefit costs was changed effective January 1, 1995, to 8.25% and was used to calculate the funded status of Post-Retirement Benefits at December 31, 1994.
Increasing the assumed health care cost trend rate by 1% each year would increase the total post-retirement benefit cost for 1994 by $481,000 and increase the total accumulated post-retirement benefit obligation by $4.1 million.
Eastern Edison and Montaup have also established an irrevocable external Voluntary Employee Benefit Association (VEBA) Trust Fund as required by the aforementioned regulatory decisions. Contributions to the VEBA fund commenced in March 1993 and contributions totaling approximately $2.9 million and $2.3 million were made during 1994 and 1993, respectively.
Prior to 1993, Eastern Edison and Montaup followed the "pay-as-you-go" methodology for accounting for post-retirement benefits other than pensions. The costs of the benefit, which amounted to approximately $1.5 million in 1992 were charged to expense.
Post-Employment Benefits: In November 1992, FASB issued Statement No. 112, "Employers' Accounting for Postemployment Benefits" for fiscal years beginning after December 15, 1993. The estimated impact of this standard is immaterial to Eastern Edison's results of operations and therefore no liability was recorded.
Long-Term Purchased Power Contracts: Eastern Edison is committed under long-term purchased power contracts, expiring on various dates through September 2021, to pay demand charges whether or not energy is received. Under terms in effect at December 31, 1994, the aggregate annual minimum commitments for such contracts are approximately $129 million in 1995 and 1996 and $128 million in 1997, $132 million 1998, $133 million in 1999 and will aggregate $1.6 billion for the ensuing years. In addition, the EUA System is required to pay additional amounts depending on the actual amount of energy received under such contracts. The demand costs associated with these contracts are reflected as Purchased Power-Demand on the Consolidated Statement of Income. Such costs are recoverable through rates.
Environmental Matters: The Comprehensive Environmental Response, Compensation Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and certain similar state statutes authorize various governmental authorities to seek court orders compelling responsible parties to take cleanup action at disposal sites which have been determined by such governmental authorities to present an imminent and substantial danger to the public and to the environment because of an actual or threatened release of hazardous substances. Because of the nature of the Eastern Edison business, various by-products and substances are produced or handled which are classified as hazardous under the rules and regulations promulgated by the EPA as well as state and local authorities. The Company generally provides for the disposal of such substances through licensed contractors, but these statutory provisions generally impose potential joint and several responsibility on the generators of the wastes for cleanup costs. Eastern Edison and Montaup have been notified with respect to a number of sites where they may be responsible for such costs, including sites where they may have joint and several liability with other responsible parties. It is the policy of Eastern Edison and Montaup to notify liability insurers and to initiate claims. However, 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, 1994, Eastern Edison and Montaup have incurred costs of approximately $125,000 in connection with the foregoing environmental matters and estimate that additional expenditures may be incurred through 1996 up to $800,000.
As a general matter Eastern Edison and Montaup will seek to recover costs relating to environmental proceedings in their rates. Montaup is currently recovering certain of the incurred costs in its rates. Estimated amounts after 1996 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 their financial position and thus, no loss provision is required at this time.
The Clean Air Act Amendments of 1990 (Clean Air Act) created new regulatory programs and generally updated and strengthened air pollution control laws. These amendments will expand the regulatory role of the United States Environmental Protection Agency (EPA) regarding emissions from electric generating facilities and a host of other sources. Montaup generating facilities will most probably be first affected in 1995, when EPA regulations will take effect. Tests at Montaup's coal-fired Somerset Unit No. 6 indicated it would be able to utilize lower sulfur coal than had been 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 the Somerset Station and therefore has placed it in deactivated reserve. Eastern Edison does not anticipate the impact from the Amendments to be material to its financial position.
In April 1992, NESCAUM, an environmental advisory group for eight Northeast states including Massachusetts and Rhode Island issued recommendations for oxides of nitrogen controls for existing utility boilers required to meet the ozone non-attainment requirements of the Clean Air Act Amendments. The NESCAUM recommendations are more restrictive than EPA's requirements. The DEP has amended its regulations to require that Reasonably Available Control Technology (RACT) be implemented at all stationary sources potentially emitting 50 tons per year or more of oxides of nitrogen. Rhode Island has also issued similar regulations requiring that RACT be implemented at all stationary sources potentially emitting 50 tons or more per year of nitrogen oxide. Montaup has initiated compliance through, among other things, selective, noncatalytic reduction processes.
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 some association between exposure to EMF and health effects, many of the 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 EMF, 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 Facility Siting Board to establish rules and/or regulations governing construction of high voltage transmission lines of 69 KV or more. There is a bill pending in the Massachusetts legislature that would authorize the MDPU to examine the potential health effects of EMF. Management cannot predict the impact, if any, which legislation or other developments concerning EMF may have on Eastern Edison or Montaup.
Guarantee of Financial Obligations: Montaup is a 3.27% equity participant in two companies which own and operate transmission facilities interconnecting New England and the Hydro Quebec system in Canada. Montaup has guaranteed approximately $5.6 million of the outstanding debt of these two companies. In addition, Montaup has a minimum rental commitment which totals approximately $14.2 million under a noncancellable transmission facilities support agreement for years subsequent to 1994.
Other
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). The FERC initiated an action when the EUA subsidiaries and other participants filed an 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 to prevent or delay its effectiveness. Extended settlement discussions have resulted in a settlement signed by substantially all of the parties and intervenors in both actions. The settlement, if fully implemented, will result in (i) a withdrawal of the amendment to the NEPOOL Agreement, (ii) a termination of the FERC proceeding, and (iii) after the FERC action is terminated and no longer subject to appeal, the withdrawal by the settling plaintiffs of their Superior Court complaint. The necessary papers were filed to withdraw the NEPOOL amendment and terminate the FERC proceeding. That withdrawal and termination was contested by three intervenors in the FERC proceeding. On February 10, 1995, FERC issued an order accepting a notice of cancellation of the NEPOOL amendment, effective September 12, 1994. If the settlement agreement is fully implemented, the Superior Court action will be required to be dismissed as to all but one non-settling plaintiff. Management cannot predict the ultimate outcome of this proceeding at this time.
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.
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. Also in January 1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
The Court has scheduled a hearing in April 1995 on Montaup's motion for default judgement based on Aquidneck's failure to meet its discovery obligations. In addition, Montaup intends to file a motion for summary judgment.
Montaup, EUA and EUA Service intend to defend the counterclaim vigorously and believe that Aquidneck's claims have no basis in law.
Report of Independent Accountants
To the Directors and Shareholder of Eastern Edison Company and Subsidiary:
We have audited the consolidated financial statements 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) of this Form 10-K. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 the 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.
Coopers & Lybrand L.L.P.
Boston, Massachusetts March 2, 1995
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 6, 1995.
Amount (number of Name shares) and Nature of Percent of Title_of_Class Beneficial_Owner Beneficial_Ownership_(1) Class
Common Shares, John D. Carney 1,137 Less than $5 par value, 837 (3) one percent of Eastern 2,975 (4) for each Utilities Arthur A. Hatch 1,237 individual Associates 261 (2) 2,139 (3) 4,083 (4) Donald G. Pardus 1,515 7,671 (2) 4,065 (3) 10,307 (4) Robert G. Powderly 664 142 (2) 1,241 (3) 3,919 (4) John R. Stevens 3,938 (2) 1,336 (3) 8,098 (4) Directors and Executive Officers as a Group 67,551 (5)
_____________________ (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 held under the Grant Plan as to which each has voting power.
(5) Represents less than four-tenths of one percent of the outstanding common shares of EUA at January 6, 1995. Included are 17,413 shares held for officers under EUA's ESP, 12,021 shares jointly owned with the officers' spouses, and 32,536 shares held under EUA's Restricted Stock Plan. ________________
The directors and executive officers of Eastern Edison did not own any of Eastern Edison's 6-5/8% Preferred Stock at January 6, 1995.
(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 Statements of Income for the three years in the period ended December 31, 1994.
Consolidated Statements of Retained Earnings for the three years in the period ended December 31, 1994.
Consolidated Statements of Cash Flows for the three years in the period ended December 31, 1994.
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Capitalization at December 31, 1994 and 1993.
Notes to Consolidated Financial Statements at December 31, 1994, 1993, and 1992.
Report of Independent Accountants, dated March 2, 1995.
(a)(2) Financial Statement Schedules
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 - Restated and Amended Articles of Organization of Eastern Edison (filed as Exhibit B-1 to Form U5S of EUA for 1993).
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 C-33 to Form U5S of EUA for 1993).
4-28.08 - Twenty-Fifth Supplemental Indenture dated as of July 1, 1993 (filed as Exhibit C-34 to Form U5S of EUA for 1993).
4-29.08 - Twenty-Sixth Supplemental Indenture dated as of September 1, 1993 (filed as Exhibit C-35 to Form U5S of EUA for 1993).
- 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, March 1, 1992 and July 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 10-121, 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 10-70, Form 10-K of EUA for 1992, File No. 1- 5366).
10-3.03 - Eastern Utilities Associates Employees' Savings Plan Trust Agreement. (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. (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).
- Eastern Edison -
10-1.08 - Trust Indenture dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Shawmut Bank, N.A. (Exhibit 10- 1.08, Eastern Edison Form 10-K for 1993, File No. 0-8480)
10-2.08 - Loan Agreement dated as of July 1, 1993 between Massachusetts Industrial Finance Agency and Eastern Edison (Exhibit 10-2.08, Eastern Edison Form 10-K for 1993, File No. 0-8480).
10-3.08 - Power Purchase Agreement entered into as of September 20, 1993 by and between Meridian Middleboro Limited Partnership and Eastern Edison Company (Exhibit 10-3.08, Eastern Edison Form 10-K for 1993, File No. 0-8480).
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 (Exhibit 10-4.08, Eastern Edison Form 10-K for 1993, File No. 0-8480).
- 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 - Power Contract (composite copy) between Yankee Atomic Electric Company and Montaup dated June 30, 1959 as Revised April 1, 1975, as further amended October 1, 1980, April 1, 1985, May 6, 1988, June 26, 1989 and July 1, 1989 (Exhibit 10-6, Registration No. 2-72655; Exhibit 10-73, Form 10-K of EUA for 1985, File No. 1-5366; Exhibits 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).
10-3.05 - 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 - Contract for sale of power to Montaup by Canal Electric Company dated December 1, 1965 (Exhibit 2D, File No. 0-688).
10-7.05 - 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).
10-8.05 - 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).
10-9.05 - 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).
10-10.05 - 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).
10-11.05 - 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).
10-12.05 - Stockholder Agreement (composite copy) among Maine Yankee Sponsors, including Montaup, dated May 20, 1968 (Exhibit B-4, File 70-4658).
10-13.05 - 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).
10-14.05 - Form of Agreement among Maine Yankee Atomic Power Company's Sponsors dated as of May 20, 1969 (Exhibit B-5, File No. 70- 4658).
10-15.05 - 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 3-35(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).
10-16.05 - 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 between Montaup and Boston Edison Company dated August 1, 1972 and as amended January 1, 1985 for purchase of power from Pilgrim No. 1 nuclear unit at Plymouth, Massachusetts (Exhibit 13-41, Registration No. 2-46612; Exhibit 10-67, Form 10-K of EUA for 1984, File No. 1-5366).
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 March 1, 1978, and Agreement amending said contract dated August 22, 1980 by and between Connecticut Yankee Atomic Power Company and Montaup, as amended October 15, 1982 (Exhibit 20, Form 10-K of EUA for 1977, File No. 1-5366; Exhibit 10-52, Form 10-K for EUA for 1981, File No. 1-5366; Exhibit 10-67, Form 10-K for EUA for 1983, File No. 1-5366).
10-25.05 - Eastern Utilities Associates Employees' Share Ownership Plan Trust Agreement (Exhibit 5, Form 10-K of EUA for 1977, File No. 1-5366).
10-26.05 - 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).
10-27.05 - 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).
10-28.05 - 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).
10-29.05 - 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).
10-30.05 - 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).
10-31.05 - 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).
10-32.05 - 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, 1988, October 21, 1988, July 21, 1989, February 7, 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).
10-33.05 - 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).
10-34.05 - 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).
10-35.05 - 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).
10-36.05 - 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).
10-37.05 - 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).
10-38.05 - 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).
10-39.05 - Power Contract (composite copy) between Yankee Atomic Electric Company and Montaup dated June 30, 1959 as revised April 1, 1975, as further amended October 1, 1980, April 1, 1985, May 6, 1988, June 26, 1989, July 1, 1989 and February 1, 1992 (Exhibit 10-6, Registration No. 2-72655; 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; Exhibit 10-46 Form 10-K of Eastern Edison for 1992, File No. 0-8480).
10-40.05 - Memorandum of understanding by and between Canal Electric Company and Montaup Electric Company dated September 23, 1993 (Exhibit 10-39.05, Eastern Edison 10-K for 1993, File No. 0-8480).
10-41.05 - Ancillary Agreement by and between Algonquin Gas Transmission Company, Canal Electric Company and Montaup Electric Company dated October 8, 1993. (Exhibit 10-40.05 of Eastern Edison 10-K for 1993, File No. 0-8480).
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.
None 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 20, 1995 By /s/ Richard M. Burns___ Vice President Richard M. Burns (Principal Accounting 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.
/s/ Donald G. Pardus____ Chairman of the Board (Principal Donald G. Pardus Executive Officer) and Director
/s/ John R. Stevens_____ Vice Chairman and Director John R. Stevens (Principal Financial Officer)
/s/ Richard M. Burns____ Vice President Richard M. Burns (Principal Accounting Officer)
/s/ John D. Carney______ President and Director John D. Carney
/s/ Arthur D. Hatch_____ Executive Vice President and Arthur A. Hatch Director
March 20, 1995 /s/ Robert G. Powderly__ Executive Vice President and Robert G. Powderly Director
/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
The accompanying notes are an integral part of the financial statements.
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 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994, 1993, and 1992
(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.
Reclassifications: Certain prior period amounts on the financial statements have been reclassified to conform with current presentation.
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, and has received FERC authorization to recover, its proportionate share of any unrecovered costs and costs incurred after the plant's retirement. Montaup's share of all unrecovered assets and the total estimated costs to decommission the unit aggregated approximately $18.4 million at December 31, 1994 and is included with Other Liabilities on the Consolidated Balance Sheet. Also due to recoverability, a regulatory asset has been recorded for the same amount and is included with Other Assets.
Montaup also has a stock ownership investment of 3.27% in each of the two companies which own and operate certain 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 aggregating approximately $126,237,000 in 1994, $121,447,000 in 1993, and $117,714,000 in 1992; accounting, engineering and other services rendered by EUA Service to Eastern Edison and Montaup of approximately $27,365,000,
$27,418,000 and $23,196,000 in 1994, 1993 and 1992 respectively; and, operating expense from the rental of transmission and generation facilities by Blackstone and Newport to Montaup aggregating approximately $2,665,000 in 1994, $2,884,000 in 1993 and $2,445,000 in 1992. Montaup rental of transmission facilities to Newport for the years 1994, 1993, and 1992 amounted to $149,000, $487,000 and $365,000, 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 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% in 1994, 1993 and 1992 based on the average depreciable property balances at the beginning and end of each year.
Electric Plant Held for Future Use: In January 1994 Montaup determined that it would not be economically feasible to bring its 42-year old, coal-fired Somerset Station Unit 5 generating unit into compliance with Clean Air Act Amendments of 1990 (Clean Air Act). The unit was placed in cold storage and its net investment, $5.4 million, was transferred to electric plant held for future use pending final determination by Montaup of its usefulness. Under terms of the settlement agreement filed with FERC, entered into by Montaup and the intervenors in Montaup's 1994 rate decrease application and filed with FERC, Montaup continues to earn a return on the net investment of the unit.
Other Assets: The components of Other Assets at December 31, 1994 and 1993 are detailed as follows:
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 9.56%, in 1994, 9.3% in 1993 and 10.83% in 1992.
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 EUA 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 1994, 1993, and 1992 are as follows:
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:
Eastern Edison and Montaup adopted FASB statement No. 109, "Accounting for Income Taxes" (FAS109) 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. At December 31, 1994 and 1993 no valuation allowance was deemed necessary for total deferred tax assets. The total deferred tax assets and liabilities at December 31, 1994 and 1993 are comprised as follows:
As of December 31, 1994 and 1993, the Company had recorded on its Consolidated Balance Sheet a regulatory liability to ratepayers of approximately $25.2 million and $24.7 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, 1994, and 1993 a regulatory asset of approximately $39.5 million and $42.3 million, respectively has been recorded, representing the cumulative amount of federal income taxes on temporary depreciation differences which were previously flowed through to ratepayers.
Eastern Edison and Montaup have approximately $100,000 and $4.4 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:
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, 1994 and 1993, the respective capitalization ratios were in excess of the minimum requirements which would make these restrictions effective.
(D) Redeemable Preferred Stock
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.
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 $100,458,000 as of December 31, 1994 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 $264 million.
The Company's 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 1994 are: $35 million in 1995, $7 million in 1996, none in 1997, $60 million in 1998 and none in 1999.
(G) Lines of Credit:
EUA System companies including Eastern Edison maintain short-term lines of credit with various banks aggregating approximately $150 million. At December 31, 1994, unused short-term lines of credit were approximately $118 million. These credit lines are available to other EUA System companies under joint credit line arrangements. In accordance with informal agreements with the various banks, commitment fees are required to maintain certain lines of credit. During 1994 the weighted average interest rate for short-term borrowings by the Company was 3.7%.
(H) Jointly Owned Facilities:
At December 31, 1994, 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):
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, 1994, Montaup's total net investment in nuclear fuel of the Seabrook and Millstone Units amounted to $4.0 million and $1.9 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, 1994 are as follows (dollars in thousands):
(J) Commitments and Contingencies:
Joint owners of nuclear projects are 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. It conducted its business as a Debtor-in-Possession until November 23, 1994, at which time its Plan of Reorganization became effective and Great Bay Power emerged from Chapter 11.
The owners (or lead participants) of the nuclear units in which Montaup has an interest have made, or expect to make, various arrangements for the acquisition of uranium concentrate, the conversion, enrichment, fabrication and utilization of nuclear fuel and the disposition of that fuel after use. The owners (or lead participants) of United States nuclear units have entered into contracts with the DOE for disposal of spent nuclear fuel in accordance with the NWPA. The NWPA requires (subject to various contingencies) that the federal government design, license, construct and operate a permanent repository for high level radioactive wastes and spent nuclear fuel and establish prescribed fees for the disposal of such wastes and fuel. The NWPA specifies that the DOE provide for the disposal of such waste and spent nuclear fuel starting in 1998. Objections on environmental and other grounds have been asserted against proposals for storage as well as disposal of spent nuclear fuel. The DOE anticipates that a permanent disposal site for spent fuel will be ready to accept fuel for storage or disposal by the year 2010. 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 its spent fuel for the projected life of the unit. Expenditures for additional rack storage facilities are projected to be made by 1999. At the Seabrook Project, there is on-site storage capacity which, with rack additions, should be sufficient to at least the year 2010.
The Energy Policy Act requires that a fund be created for the decommissioning and decontamination of the DOE uranium enrichment facilities. The fund will be financed in part by special assessments on nuclear power plants in which Montaup has an interest. These assessments are calculated based on the utilities' prior use of the government facilities and have been levied by the DOE since starting in September 1993 and will continue over 15 years. This cost is passed on to the joint owners or power buyers as an additional fuel charge on a monthly basis and is currently being recovered by Montaup through rates.
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 $18.0 million in 1994 dollars, and Seabrook Unit 1 is $11.5 million in 1994 dollars. These figures are based on studies performed for the lead owner of the units. 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.
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. Regular 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 expense (income) for 1994, 1993 and 1992 included the following components:
Assumptions used to determine pension cost:
The discount rate used to determine pension costs changed effective January 1, 1995 to 8.25%. The funded status of the plan cannot be presented separately for Eastern Edison and Montaup as they participate in the plan with other subsidiaries of EUA.
All benefits provided under the supplemental plan are unfunded and any payments to plan participants are made by Eastern Edison or Montaup. For the three years ended December 31, 1994, 1993 and 1992 expenses related to the supplemental plan were $266,000, $1.3 million and $169,000, respectively.
Post-Retirement Benefits: Retired employees are entitled to participate in health care and life insurance benefit plans. Health care benefits are subject to deductibles and other limitations. Health care and life insurance benefits are partially funded by EUA System companies for all qualified employees.
Eastern Edison and Montaup 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. The Company elected to recognize the Transition Obligation over a twenty year period as permitted by FAS106. The resultant annual expense, including amortization of the Transition Obligation and net of capitalized amounts, amounted to approximately $4.5 million in 1994 and $4.8 million in 1993. As a result of regulatory decisions issued in December 1992, Eastern Edison and Montaup established regulatory assets of approximately $1.4 million and $1.4 million in 1994 and 1993, respectively. Montaup was allowed to defer FAS106-related costs through 1995 or until it filed for recovery of such amounts prior to that time. Montaup has requested and received authority to recover all of its FAS106 expenses including a five-year amortization of deferred amounts in its 1994 rate decrease application. The total cost of Post-Retirement Benefits other than Pensions for 1994 and 1993 includes the following components (in thousands):
The discount rate used to determine post-retirement benefit costs was changed effective January 1, 1995, to 8.25% and was used to calculate the funded status of Post-Retirement Benefits at December 31, 1994.
Increasing the assumed health care cost trend rate by 1% each year would increase the total post-retirement benefit cost for 1994 by $481,000 and increase the total accumulated post-retirement benefit obligation by $4.1 million.
Eastern Edison and Montaup have also established an irrevocable external Voluntary Employee Benefit Association (VEBA) Trust Fund as required by the aforementioned regulatory decisions. Contributions to the VEBA fund commenced in March 1993 and contributions totaling approximately $2.9 million and $2.3 million were made during 1994 and 1993, respectively.
Prior to 1993, Eastern Edison and Montaup followed the "pay-as-you-go" methodology for accounting for post-retirement benefits other than pensions. The costs of the benefit, which amounted to approximately $1.5 million in 1992 were charged to expense.
Post-Employment Benefits: In November 1992, FASB issued Statement No. 112, "Employers' Accounting for Postemployment Benefits" for fiscal years beginning after December 15, 1993. The estimated impact of this standard is immaterial to Eastern Edison's results of operations and therefore no liability was recorded.
Long-Term Purchased Power Contracts: Eastern Edison is committed under long-term purchased power contracts, expiring on various dates through September 2021, to pay demand charges whether or not energy is received. Under terms in effect at December 31, 1994, the aggregate annual minimum commitments for such contracts are approximately $129 million in 1995 and 1996 and $128 million in 1997, $132 million 1998, $133 million in 1999 and will aggregate $1.6 billion for the ensuing years. In addition, the EUA System is required to pay additional amounts depending on the actual amount of energy received under such contracts. The demand costs associated with these contracts are reflected as Purchased Power-Demand on the Consolidated Statement of Income. Such costs are recoverable through rates.
Environmental Matters: The Comprehensive Environmental Response, Compensation Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, and certain similar state statutes authorize various governmental authorities to seek court orders compelling responsible parties to take cleanup action at disposal sites which have been determined by such governmental authorities to present an imminent and substantial danger to the public and to the environment because of an actual or threatened release of hazardous substances. Because of the nature of the Eastern Edison business, various by-products and substances are produced or handled which are classified as hazardous under the rules and regulations promulgated by the EPA as well as state and local authorities. The Company generally provides for the disposal of such substances through licensed contractors, but these statutory provisions generally impose potential joint and several responsibility on the generators of the wastes for cleanup costs. Eastern Edison and Montaup have been notified with respect to a number of sites where they may be responsible for such costs, including sites where they may have joint and several liability with other responsible parties. It is the policy of Eastern Edison and Montaup to notify liability insurers and to initiate claims. However, 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, 1994, Eastern Edison and Montaup have incurred costs of approximately $125,000 in connection with the foregoing environmental matters and estimate that additional expenditures may be incurred through 1996 up to $800,000.
As a general matter Eastern Edison and Montaup will seek to recover costs relating to environmental proceedings in their rates. Montaup is currently recovering certain of the incurred costs in its rates. Estimated amounts after 1996 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 their financial position and thus, no loss provision is required at this time.
The Clean Air Act Amendments of 1990 (Clean Air Act) created new regulatory programs and generally updated and strengthened air pollution control laws. These amendments will expand the regulatory role of the United States Environmental Protection Agency (EPA) regarding emissions from electric generating facilities and a host of other sources. Montaup generating facilities will most probably be first affected in 1995, when EPA regulations will take effect. Tests at Montaup's coal-fired Somerset Unit No. 6 indicated it would be able to utilize lower sulfur coal than had been 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 the Somerset Station and therefore has placed it in deactivated reserve. Eastern Edison does not anticipate the impact from the Amendments to be material to its financial position.
In April 1992, NESCAUM, an environmental advisory group for eight Northeast states including Massachusetts and Rhode Island issued recommendations for oxides of nitrogen controls for existing utility boilers required to meet the ozone non-attainment requirements of the Clean Air Act Amendments. The NESCAUM recommendations are more restrictive than EPA's requirements. The DEP has amended its regulations to require that Reasonably Available Control Technology (RACT) be implemented at all stationary sources potentially emitting 50 tons per year or more of oxides of nitrogen. Rhode Island has also issued similar regulations requiring that RACT be implemented at all stationary sources potentially emitting 50 tons or more per year of nitrogen oxide. Montaup has initiated compliance through, among other things, selective, noncatalytic reduction processes.
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 some association between exposure to EMF and health effects, many of the 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 EMF, 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 Facility Siting Board to establish rules and/or regulations governing construction of high voltage transmission lines of 69 KV or more. There is a bill pending in the Massachusetts legislature that would authorize the MDPU to examine the potential health effects of EMF. Management cannot predict the impact, if any, which legislation or other developments concerning EMF may have on Eastern Edison or Montaup.
Guarantee of Financial Obligations: Montaup is a 3.27% equity participant in two companies which own and operate transmission facilities interconnecting New England and the Hydro Quebec system in Canada. Montaup has guaranteed approximately $5.6 million of the outstanding debt of these two companies. In addition, Montaup has a minimum rental commitment which totals approximately $14.2 million under a noncancellable transmission facilities support agreement for years subsequent to 1994.
Other
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). The FERC initiated an action when the EUA subsidiaries and other participants filed an 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 to prevent or delay its effectiveness. Extended settlement discussions have resulted in a settlement signed by substantially all of the parties and intervenors in both actions. The settlement, if fully implemented, will result in (i) a withdrawal of the amendment to the NEPOOL Agreement, (ii) a termination of the FERC proceeding, and (iii) after the FERC action is terminated and no longer subject to appeal, the withdrawal by the settling plaintiffs of their Superior Court complaint. The necessary papers were filed to withdraw the NEPOOL amendment and terminate the FERC proceeding. That withdrawal and termination was contested by three intervenors in the FERC proceeding. On February 10, 1995, FERC issued an order accepting a notice of cancellation of the NEPOOL amendment, effective September 12, 1994. If the settlement agreement is fully implemented, the Superior Court action will be required to be dismissed as to all but one non-settling plaintiff. Management cannot predict the ultimate outcome of this proceeding at this time.
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.
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. Also in January 1994, Aquidneck sought to join EUA and EUA Service as parties to the suit.
The Court has scheduled a hearing in April 1995 on Montaup's motion for default judgement based on Aquidneck's failure to meet its discovery obligations. In addition, Montaup intends to file a motion for summary judgment.
Montaup, EUA and EUA Service intend to defend the counterclaim vigorously and believe that Aquidneck's claims have no basis in law.
Report of Independent Accountants
To the Directors and Shareholder of Eastern Edison Company and Subsidiary:
We have audited the consolidated financial statements 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) of this Form 10-K. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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 the 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.
Coopers & Lybrand L.L.P.
Boston, Massachusetts March 2, 1995