FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-7624
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WESTERN MASSACHUSETTS ELECTRIC COMPANY
--------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1961130
------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
174 BRUSH HILL AVENUE, WEST SPRINGFIELD, MASSACHUSETTS (01090-0010)
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(413) 785-5871
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
___ ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1994
----- -------------------------------
Common Shares, $25.00 par value 1,072,471 shares
WESTERN MASSACHUSETTS ELECTRIC COMPANY
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1994
and December 31, 1993 2
Statements of Income - Three and Nine
Months Ended September 30, 1994 and 1993 4
Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
PART I. FINANCIAL INFORMATION
WESTERN MASSACHUSETTS ELECTRIC COMPANY
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
- ------
Utility Plant, at original cost:
Electric................................................ $ 1,203,828 $ 1,183,410
Less: Accumulated provision for depreciation......... 419,872 395,190
------------- ------------
783,956 788,220
Construction work in progress........................... 22,660 23,790
Nuclear fuel, net....................................... 35,229 35,727
------------- ------------
Total net utility plant............................. 841,845 847,737
------------- ------------
Other Property and Investments:
Nuclear decommissioning trusts, at market in 1994 and
at cost in 1993 (Note 2)<F2>........................... 56,080 49,155
Investments in regional nuclear generating
companies, at equity................................... 14,915 14,633
Other, at cost.......................................... 3,942 3,840
------------- ------------
74,937 67,628
------------- ------------
Current Assets:
Cash and special deposits............................... 111 185
Notes receivable from affiliated companies.............. 5,000 -
Receivables, net........................................ 34,180 36,437
Accounts receivable from affiliated companies........... 3,936 4,972
Accrued utility revenues................................ 12,874 17,362
Fuel, materials, and supplies, at average cost.......... 3,859 7,057
Recoverable energy costs................................ 1,892 -
Prepayments and other................................... 7,521 9,613
------------- ------------
69,373 75,626
------------- ------------
Deferred Charges:
Deferred charges--SFAS 109.............................. 90,357 94,414
Amortizable property investment--Millstone 3............ 19,601 28,001
Deferred costs--Millstone 3............................. 11,657 22,667
Unrecovered contract obligation--YAEC (Note 3)<F3>...... 21,297 24,150
Deferred DOE assessment................................. 8,247 8,908
Unamortized debt expense................................ 1,783 1,842
Other................................................... 36,923 33,669
------------- ------------
189,865 213,651
------------- ------------
Total Assets........................................ $ 1,176,020 $ 1,204,642
============= ============
</TABLE>
See accompanying notes to financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock--$25 par value.
Authorized and outstanding 1,072,471 shares............ $ 26,812 $ 26,812
Capital surplus, paid in................................ 149,537 149,319
Retained earnings....................................... 107,588 97,627
------------- ------------
Total common stockholder's equity.............. 283,937 273,758
Preferred stock not subject to mandatory redemption..... 73,500 73,500
Preferred stock subject to mandatory redemption......... 24,000 25,500
Long-term debt.......................................... 345,483 393,232
------------- ------------
Total capitalization........................... 726,920 765,990
------------- ------------
Obligations Under Capital Leases.......................... 23,023 24,014
------------- ------------
Current Liabilities:
Notes payable to banks.................................. - 6,000
Long-term debt and preferred stock--current
portion................................................ 36,150 1,500
Obligations under capital leases--current
portion................................................ 13,712 12,888
Accounts payable........................................ 14,586 17,493
Accounts payable to affiliated companies................ 6,154 12,016
Accrued taxes........................................... 7,955 7,022
Accrued interest........................................ 4,491 6,478
Refundable energy costs................................. - 8,676
Refundable conservation costs, net...................... 6,437 2,610
Other................................................... 8,306 9,117
------------- ------------
97,791 83,800
------------- ------------
Deferred Credits:
Accumulated deferred income taxes....................... 252,058 253,547
Accumulated deferred investment tax credits............. 35,145 36,083
Deferred contract obligation--YAEC (Note 3)<F3>......... 21,297 24,150
Deferred DOE obligation................................. 6,608 7,268
Other................................................... 13,178 9,790
------------- ------------
328,286 330,838
------------- ------------
Commitments and Contingencies (Note 4)<F4>
------------- ------------
Total Capitalization and Liabilities........... $ 1,176,020 $ 1,204,642
============= ============
</TABLE>
See accompanying notes to financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1994 1993 1994 1993
--------- --------- --------- ---------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues............................. $102,597 $105,510 $316,769 $306,843
--------- --------- --------- ---------
Operating Expenses:
Operation --
Fuel, purchased and net interchange power. 22,068 19,474 47,986 50,036
Other..................................... 34,322 36,745 101,047 103,752
Maintenance.................................. 8,435 9,669 25,652 25,713
Depreciation................................. 9,248 9,027 27,303 27,083
Amortization of regulatory assets............ 7,280 7,380 21,424 22,208
Federal and state income taxes............... 5,311 6,471 27,112 20,461
Taxes other than income taxes................ 4,559 3,699 14,135 13,357
--------- --------- --------- ---------
Total operating expenses............... 91,223 92,465 264,659 262,610
--------- --------- --------- ---------
Operating Income............................... 11,374 13,045 52,110 44,233
--------- --------- --------- ---------
Other Income:
Deferred Millstone 3 return--other funds..... 170 343 636 1,138
Equity in earnings of regional nuclear
generating companies....................... 519 418 1,514 1,187
Other, net................................... 700 567 1,630 1,847
Income taxes--credit......................... 257 124 794 218
--------- --------- --------- ---------
Other income, net...................... 1,646 1,452 4,574 4,390
--------- --------- --------- ---------
Income before interest charges......... 13,020 14,497 56,684 48,623
--------- --------- --------- ---------
Interest Charges:
Interest on long-term debt................... 6,741 7,229 20,785 22,668
Other interest............................... 12 348 (16) 880
Deferred Millstone 3 return--borrowed funds.. (128) (262) (476) (851)
--------- --------- --------- ---------
Interest charges, net.................. 6,625 7,315 20,293 22,697
--------- --------- --------- ---------
Income before cumulative effect of
accounting change............................ 6,395 7,182 36,391 25,926
Cumulative effect of accounting change......... - - - 3,922
--------- --------- --------- ---------
Net Income..................................... $ 6,395 $ 7,182 $ 36,391 $ 29,848
========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE> Nine Months Ended
<CAPTION> September 30,
----------------------
1994 1993
----------------------
(Thousands of Dollars)
<S> <C> <C>
Cash Flows From Operations:
Net Income ................................................. $ 36,391 $ 29,848
Adjusted for the following:
Depreciation ............................................. 27,303 27,083
Deferred income taxes and investment tax credits, net..... 5,801 (2,473)
Deferred nuclear plants return, net of amortization....... 9,958 9,088
Deferred energy costs, net of amortization................ (10,568) 5,678
Other sources of cash..................................... 12,536 17,906
Other uses of cash........................................ (6,455) (2,262)
Changes in working capital:
Receivables and accrued utility revenues.................. 7,781 2,801
Fuel, materials, and supplies............................. 3,198 1,532
Accounts payable.......................................... (8,769) (6,560)
Accrued taxes............................................. 933 3,016
Other working capital (excludes cash)..................... 3,121 5,152
---------- ----------
Net cash flows from operations................................ 81,230 90,809
---------- ----------
Cash Flows Used For Financing Activities:
Issuance of long-term debt.................................. 90,000 113,800
Net decrease in short-term debt............................. (6,000) (35,500)
Reacquisitions and retirements of long-term debt
and preferred stock....................................... (105,069) (60,900)
Cash dividends on preferred stock........................... (4,316) (4,119)
Cash dividends on common stock.............................. (22,114) (21,589)
---------- ----------
Net cash flows used for financing activities.................. (47,499) (8,308)
---------- ----------
Investment Activities:
Investment in plant:
Electric utility plant.................................... (22,657) (22,028)
Nuclear fuel.............................................. 158 (1,386)
---------- ----------
Net cash flows used for investments in plant................ (22,499) (23,414)
NU System Money Pool, net................................... (5,000) -
Other investment activities, net............................ (6,306) (5,227)
---------- ----------
Net cash flows used for investments........................... (33,805) (28,641)
---------- ----------
Net Increase (Decrease) In Cash for the Period................ (74) 53,860
Cash and special deposits - beginning of period............... 185 165
---------- ----------
Cash and special deposits - end of period..................... $ 111 $ 54,025
========== ==========
</TABLE>
See accompanying notes to financial statements.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
<F1>1. General
The accompanying unaudited financial statements should be read in
conjunction with the Annual Report of Western Massachusetts Electric
Company (the company or WMECO), a wholly-owned subsidiary of Northeast
Utilities (NU), on Form 10-K for the year ended December 31, 1993
(1993 Form 10-K). In the opinion of the company, the accompanying
financial statements contain all adjustments necessary to present
fairly the financial position as of September 30, 1994, the results of
operations for the three and nine months ended September 30, 1994 and
1993, and the statements of cash flows for the nine months ended
September 30, 1994 and 1993. The results of operations for the three
and nine months ended September 30, 1994 and 1993 are not necessarily
indicative of the results expected for a full year.
Certain amounts in the accompanying financial statements of the
company for the period ended September 30, 1993 have been reclassified
to conform with the September 30, 1994 presentation.
<F2>2. Changes in Accounting Principles
Statement of Financial Accounting Standards No. 115 (SFAS 115): In
May 1993, the Financial Accounting Standards Board (FASB) issued SFAS
115, "Accounting for Certain Investments in Debt and Equity
Securities." SFAS 115 addresses the accounting and reporting for
certain investments in debt and equity securities, and expands the use
of fair value accounting for these securities. SFAS 115 is applicable
to WMECO with respect to its investments in nuclear decommissioning
trusts.
SFAS 115 requires investments in decommissioning trusts to be
presented at fair value and was adopted by WMECO on a prospective
basis in the first quarter of 1994.
As a result of the adoption of SFAS 115, WMECO's investment in nuclear
decommissioning trusts increased by approximately $1.0 million as of
September 30, 1994, with a corresponding offset to the accumulated
provision for depreciation. The $1.0 million increase represents
cumulative gross unrealized holding gains of $2.2 million offset by
cumulative unrealized holding losses of $1.2 million. There was no
change in funding requirements of the trusts, nor any impact on
earnings as a result of the adoption of SFAS 115.
<F3>3. Yankee Atomic Electric Company (YAEC)
YAEC owns a 185-MW nuclear power plant in Rowe, Massachusetts. WMECO
has a 7 percent equity investment approximating $1.8 million in YAEC.
WMECO had relied on YAEC for less than one percent of its capacity.
YAEC's owners voted to permanently shut down the YAEC unit in February
1992. Under the terms of the contracts with YAEC, the shareholders-
sponsors are responsible for their proportionate share of the
operating costs of the unit, including decommissioning. The nuclear
decommissioning costs of YAEC are included as part of WMECO's cost of
power.
YAEC has begun decommissioning its nuclear facility. On June 1, 1992,
YAEC filed a rate filing to obtain Federal Energy Regulatory
Commission (FERC) authorization to collect the closing and
decommissioning costs and to recover the remaining investment in the
YAEC nuclear power plant over the remaining period of the plant's
Nuclear Regulatory Commission (NRC) operating license. The bulk of
these costs has been agreed to by the YAEC joint owners and approved,
as a settlement, by the FERC. At September 30, 1994, WMECO's share of
the estimated remaining costs is approximately $21.3 million.
Management expects that WMECO will continue to be allowed to recover
such FERC-approved costs from its customers. Accordingly, WMECO has
recognized these costs as a regulatory asset, with a corresponding
obligation, on its Balance Sheets.
On October 26, 1994, YAEC submitted a revised decommissioning cost
estimate as part of its decommissioning plan with the NRC. Following
the receipt of NRC approval, this estimate will be filed with the
FERC. This revised cost estimate is expected to increase WMECO's
share of estimated remaining costs by $9.4 million over the
$21.3 million that is currently recorded.
For additional information regarding YAEC, see the Notes to Financial
Statements in WMECO's 1993 Form 10-K.
<F4>4. Commitments and Contingencies
Construction Program: For information regarding WMECO's construction
program, see the Notes to Financial Statements in WMECO'S 1993 Form
10-K.
Nuclear Performance: For information regarding the termination of the
Massachusetts Department of Public Utilities' (DPU) performance review
proceedings related to outages at the Millstone nuclear units, see the
Management's Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) and "Part II. Other Information -
Item 1. Legal Proceedings" in WMECO's June 1994 and March 1994 Form
10-Qs.
For further information regarding the performance of WMECO's nuclear
units, see the Notes to Financial Statements in WMECO's 1993 Form
10-K.
Environmental Matters: For information regarding environmental
matters, see "Part II. Other Information - Item 5. Other Information"
in WMECO's June 1994 Form 10-Q and the Notes to Financial Statements
in WMECO's 1993 Form 10-K.
Nuclear Insurance Contingencies: The Price-Anderson Act currently
limits public liability from a single incident at a nuclear power
plant to $8.8 billion. The first $200 million of liability would be
provided by purchasing the maximum amount of commercially available
insurance. Additional coverage of up to a total of $8.4 billion would
be provided by an assessment of $75.5 million per incident, levied on
each of the 111 nuclear units that are currently subject to the
Secondary Financial Protection Program in the United States, subject
to a maximum assessment of $10 million per incident per nuclear unit
in any year. In addition, if the sum of all public liability claims
and legal costs arising from any nuclear incident exceeds the maximum
amount of financial protection, each reactor operator can be assessed
an additional five percent, up to $3.8 million, or $419.0 million in
total, for all 111 nuclear units. The maximum assessment is to be
adjusted at least every five years to reflect inflationary changes.
Based on the ownership interests in Millstone 1, 2, and 3, WMECO's
maximum liability would be $39.8 million per incident. In addition,
through contracts with the three Yankee regional nuclear generating
companies with operating plants, WMECO would be responsible for up to
an additional $11.9 million per incident. Payments for WMECO's
ownership interest in nuclear generating facilities would be limited
to a maximum of $6.5 million per incident per year.
For additional information regarding nuclear insurance contingencies,
see the Notes to Financial Statements in WMECO's 1993 Form 10-K.
Financing Arrangements for the Regional Nuclear Generating Companies:
For information regarding financing arrangements for the regional
nuclear generating companies, see the Notes to Financial Statements in
WMECO's 1993 Form 10-K.
Purchased Power Arrangements: For information regarding purchased
power arrangements, see the Notes to Financial Statements in WMECO's
1993 Form 10-K.
Hydro-Quebec: For information regarding Hydro-Quebec, see the Notes
to Financial Statements in WMECO's 1993 Form 10-K.
Property Taxes: For information on property taxes, see the Notes to
Financial Statements in WMECO's 1993 Form 10-K.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This section contains management's assessment of Western Massachusetts
Electric Company s (WMECO or the company) financial condition and the
principal factors having an impact on the results of operations. The
company is a wholly-owned subsidiary of Northeast Utilities (NU).
This discussion should be read in conjunction with the company's
financial statements and footnotes and the 1993 Form 10-K and the
First and Second Quarter 1994 Form 10-Qs.
FINANCIAL CONDITION
Overview
The company's net income increased to approximately $36 million for
the nine months ended September 30, 1994, from approximately $30
million for the same period in 1993. The 1993 earnings reflect the
cumulative effect of a change in the method of accounting for
Connecticut municipal property tax expense adopted by the company in
the first quarter of 1993. This change resulted in a one-time
contribution to 1993 net income of approximately $4 million. Net
income decreased to approximately $6 million for three months ended
September 30, 1994, from approximately $7 million for the same period
in 1993.
The increase in earnings from 1993 for the nine-month period, before
the effect of the one-time accounting change, are primarily
attributable to the one-time benefits from a settlement agreement
approved in May 1994 which will be offset by lower revenues and costs
over the remainder of the year and the costs of a work force reduction
program in the third quarter of 1993 which reduced 1993 net income by
approximately $2 million.
The decrease in earnings from 1993 for the three-month period is
primarily attributable to the July 1994 retail rate decrease and an
additional amount reserved for environmental exposure, partially
offset by lower operation and maintenance expenses and lower interest
charges.
Retail Wheeling and Utility Restructuring
See Part II. Other Information - Item 5. Legal Proceedings. for
information concerning retail wheeling and utility restructuring.
Nuclear Matters
The composite capacity factor of the five nuclear generating units
that the NU system operates (including the Connecticut Yankee nuclear
unit (CY)) was 64.3 percent for the nine months ended September 30,
1994, as compared with 81.0 percent for the same period in 1993. The
lower 1994 capacity factor was primarily the result of extended
refueling and maintenance outages for Millstone 1. CY, and Millstone
2 were also out of service for varying lengths of time in the first
nine months of 1994 because of some unexpected technical and operating
difficulties. These difficulties included a manual shutdown of CY
when both service water headers were declared inoperable, and a
Millstone Unit 2 shutdown to replace a degraded lower seal on a
reactor coolant pump.
On October 1, 1994, Millstone Unit 2 was shut down for a planned
refueling and maintenance outage that was originally scheduled for 63
days. The outage has encountered several unexpected difficulties
which will lengthen the duration of the outage. The magnitude of the
schedule impact is currently under review.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations decreased approximately $10 million for
the first nine months of 1994, as compared with the same period in
1993, primarily due to higher deferred energy costs in 1994. Cash
used for financing activities was approximately $39 million higher in
1994, as compared with 1993, primarily due to higher reacquisitions
and retirements of long-term debt, partially offset by lower repayment
of short-term debt. Cash used for investment increased approximately
$5 million, primarily due to an increase in loans to other system
companies under the NU system money pool. The company has an ongoing
program to use excess cash to reduce long-term debt levels.
The company s construction program expenditures amounted to
approximately $23 million for the first nine months of 1994, as
compared to approximately $22 million during the same period in 1993.
The system companies have entered into interest-rate cap contracts to
reduce the potential impact of upward changes in interest rates on
certain variable-rate tax-exempt pollution control revenue bonds held
by the company, Public Service Company of New Hampshire and The
Connecticut Light and Power Company, as well as a portion of the PSNH
variable-rate term loan. A total of $567 million of total outstanding
long-term variable-rate debt is hedged by these interest-rate caps.
The fair market value of outstanding interest-rate cap contracts as of
September 30, 1994, is approximately $2.3 million.
RESULTS OF OPERATIONS
Comparison of the Third Quarter of 1994 with the Third Quarter of
- -----------------------------------------------------------------
1993
- ----
Operating revenues decreased approximately $3 million in the third
quarter of 1994, as compared with 1993. The components of the change
in operating revenues are as follows:
Changes in Operating Revenues Increase/(Decrease)
- ----------------------------- -------------------
(Millions of Dollars)
Regulatory decisions $(3)
Fuel and purchased power cost recoveries 5
Retail Sales volume (5)
---
Total revenue change $(3)
===
Revenues related to regulatory decisions decreased primarily because
of the June 1994 retail rate reduction. Fuel and purchased power cost
recoveries increased primarily due to higher fuel expenses.
Fuel, purchased, and net interchange power expense increased
approximately $3 million in the third quarter of 1994, as compared
with 1993, primarily because of a higher level of energy purchases
from other utilities.
Other operation and maintenance expenses decreased approximately $4
million in the third quarter of 1994, as compared with 1993, primarily
due to the one-time charge associated with the work force reduction
program in 1993 and lower 1994 payroll and benefits costs partially
offset by higher 1994 costs associated with the operation and
maintenance activities of the nuclear units, the establishment of a
reserve for excess/obsolete inventory in 1994, and 1994 charges
associated with a targeted early retirement program.
Comparison of the First Nine Months of 1994 with the First Nine Months
- ----------------------------------------------------------------------
of 1993
- -------
Operating revenues increased approximately $10 million in the first
nine months of 1994, as compared with 1993. The components of the
change in operating revenues are as follows:
Changes in Operating Revenues Increase/(Decrease)
- ----------------------------- -------------------
(Millions of Dollars)
Fuel and purchased power cost recoveries $11
Other revenues (1)
___
Total revenue change $10
===
Fuel and purchased power cost recoveries increased because of higher
interchange revenues in 1994.
Fuel, purchased, and net interchange power expense decreased
approximately $2 million in the first nine months of 1994, as compared
with 1993, primarily because of lower nuclear fuel expense, partially
offset by a higher level of energy purchases from other utilities.
Other operation and maintenance expenses decreased approximately $3
million in the first nine months of 1994, as compared with 1993,
primarily due to the one-time charge associated with a work force
reduction program in 1993, lower 1994 payroll and benefit costs, lower
distribution expense, and lower customer information services,
partially offset by higher 1994 costs associated with the operation
and maintenance activities of the nuclear units, a higher reserve for
excess/obsolete inventory in 1994 and 1994 charges associated with a
targeted early retirement program.
Federal and state income taxes increased approximately $7 million in
the first nine months of 1994, as compared with 1993, primarily
because of higher book taxable income.
Interest charges decreased approximately $3 million in the first nine
months of 1994, as compared with 1993, primarily because of lower
average interest rates as a result of the company's refinancing
activities and lower debt levels.
The cumulative effect of the accounting change of approximately $4
million in 1993 represents the one-time change in the method of
accounting for Connecticut municipal property tax expense recognized
in the first quarter of 1993.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
1. On October 18, 1994, the NRC responded to Northeast Nuclear
Energy Company's (NNEC0) response in the Millstone Unit 1 Feedwater
Coolant Injection System (FWCI) matter, stating that, upon
reconsideration by the NRC, the violation's severity level and
calculation of the civil penalty would not change. The NRC also
decided that further action against the NNECO manager was not
warranted. NNECO is a wholly-owned subsidiary of NU.
For additional information on this matter, see "Part II. Other
Information - Item 1. Legal Proceedings" in WMECO s June 1994
Form 10-Q.
2. With respect to proceedings at the FERC on the 30th Amendment
to the New England Power Pool Agreement and related issues concerning
transmission access and discounted rates for pool-planned units, on
August 3, 1994 FERC granted a motion filed by certain of the parties
seeking to suspend the procedural schedule pending the filing of terms
of a settlement reached by the parties. The parties have agreed to
file joint status reports of their progress.
For additional information on this matter, see "Part II. Other
Information - Item 1. Legal Proceedings" in WMECO's March 1994 and
June 1994 Form 10-Qs.
Item 5. Other Information
1. There have been several bills introduced in Massachusetts that
involve the potential for retail wheeling. To date, none of these
bills have been enacted.
For additional information on this matter, see "Item 1. Business -
Retail Wheeling" in WMECO's 1993 Form 10-K and the MD&As in WMECO s
March 1994 and June 1994 Form 10-Qs.<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Listing of Exhibits:
Exhibit
Number Description
------- -----------
18 Letter regarding change in accounting
principles
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during this reporting period.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
WESTERN MASSACHUSETTS ELECTRIC COMPANY
--------------------------------------
Registrant
Date November 9, 1994 By /s/ Bernard M. Fox
-------------------- ------------------------------
Bernard M. Fox
Vice Chairman and Director
Date November 9, 1994 By /s/ John W. Noyes
-------------------- ------------------------------
John W. Noyes
Vice President and
Controller
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000106170
<NAME> WESTERN MASSACHUSETTS ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-3
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 841,845
<OTHER-PROPERTY-AND-INVEST> 74,937
<TOTAL-CURRENT-ASSETS> 69,373
<TOTAL-DEFERRED-CHARGES> 189,865
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,176,020
<COMMON> 26,812
<CAPITAL-SURPLUS-PAID-IN> 149,537
<RETAINED-EARNINGS> 107,588
<TOTAL-COMMON-STOCKHOLDERS-EQ> 283,937
24,000
73,500
<LONG-TERM-DEBT-NET> 345,483
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 34,650
1,500
<CAPITAL-LEASE-OBLIGATIONS> 23,023
<LEASES-CURRENT> 13,712
<OTHER-ITEMS-CAPITAL-AND-LIAB> 376,215
<TOT-CAPITALIZATION-AND-LIAB> 1,176,020
<GROSS-OPERATING-REVENUE> 316,769
<INCOME-TAX-EXPENSE> 26,318
<OTHER-OPERATING-EXPENSES> 237,547
<TOTAL-OPERATING-EXPENSES> 264,659
<OPERATING-INCOME-LOSS> 52,110
<OTHER-INCOME-NET> 3,780
<INCOME-BEFORE-INTEREST-EXPEN> 56,684
<TOTAL-INTEREST-EXPENSE> 20,293
<NET-INCOME> 36,391
4,316
<EARNINGS-AVAILABLE-FOR-COMM> 32,075
<COMMON-STOCK-DIVIDENDS> 22,114
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 81,230
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
November 9, 1994
Western Massachusetts Electric Company
P.O. Box 270
Hartford, CT 06141-0270
Gentlemen:
This letter is written to meet the requirements of Regulation S-K
calling for a letter from a registrant's independent accountants
whenever there has been a change in accounting principle or
practice.
We have been informed that, as of January 1, 1993, Western
Massachusetts Electric Company (the Company) changed from the lien
date method of accounting for municipal property taxes to the fiscal
year method to recognize the expense from July 1 through June 30.
According to the management of the Company, this change was made to
better match the payment and recognition of services provided by the
municipalities.
A complete coordinated set of financial and reporting standards for
determining the preferability of accounting principles among
acceptable alternative principles has not been established by the
accounting profession. Thus, we cannot make an objective
determination of whether the change in accounting described in the
preceding paragraph is to a preferable method. However, we have
reviewed the pertinent factors, including those related to financial
reporting, in this particular case on a subjective basis, and our
opinion stated below is based on our determination made in this
manner.
We are of the opinion that the Company's change in method of
accounting is to an acceptable alternative method of accounting,
which, based upon the reasons stated for the change and our
discussions with you, is also preferable under the circumstances in
this particular case. In arriving at this opinion, we have relied on
the business judgement and business planning of your management.
Very truly yours,
ARTHUR ANDERSEN LLP
Arthur Andersen LLP
