SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 28, 1997
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Commission File Number 0-7624
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WESTERN MASSACHUSETTS ELECTRIC COMPANY
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1961130
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
174 BRUSH HILL AVENUE, WEST SPRINGFIELD, MASSACHUSETTS 01090-0010
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(Address of principal executive offices) (Zip Code)
(413) 785-5871
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events
New Hampshire Restructuring Matter
On February 28, 1997, the New Hampshire Public Utilities Commission
(NHPUC) issued its decision related to restructuring the state'selectric
utility industry and setting interim stranded cost charges for Public Service
Company of New Hampshire (PSNH) pursuant to legislation enacted in New
Hampshire in 1996.
In the decision, the NHPUC announced a departure from cost-based
ratemaking and instead adopted the market-priced approach to stranded cost
recovery advocated by the NHPUC's consultants, LaCapra Associates.
Accordingly, unless the decision is stayed or modified, PSNH will no longer
be able to apply Financial Accounting Standard No. 71, ACCOUNTING FOR THE
EFFECTS OF CERTAIN TYPES OF REGULATION (FAS 71) and will have to remove from
its balance sheet for the quarter ending March 31, 1997 substantially all of
its regulatory assets. The amount of that potential write-off is currently
estimated at over $400 million, after taxes. However, PSNH does not believe
that under the decision it would be required to recognize any impairment of
its long-lived assets under FAS 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF.
The decision also contains rulings on numerous other issues that may
have a substantial effect on the operations of PSNH. Included among these
rulings are a determination that the 1989 Rate Agreement by and between
PSNH's parent company, Northeast Utilities (NU) and the State of New
Hampshire, which was an integral part of NU's acquisition of PSNH in 1992, is
not binding on the State; the requirement that PSNH divest within 2 years all
of its owned-generation and all of its wholesale power purchase contracts
(including its contract with NAEC for Seabrook output); a prohibition on the
remaining distribution company and its affiliates from engaging in retail
marketing or load aggregation services; and a mandate for the filing of
tariffs with the FERC for the provision of unbundled retail transmission
service.
On March 3, 1997, PSNH, NU and its affiliates North Atlantic Energy
Corporation (NAEC) and Northeast Utilities Service Company filed for a
temporary restraining order in the Federal District Court for New Hampshire.
PSNH also intends to pursue claims for damages in State court in New
Hampshire for abrogation of the 1989 Rate Agreement. The damage claims will
be in the hundreds of millions of dollars.
If PSNH is unable to obtain a stay of the NHPUC's decision, the
write-off triggered by the decision could result in defaults which, if not
waived or renegotiated, could give investors and lenders the right to
accelerate the repayment of approximately $686 million of PSNH indebtedness
and $515 million of NAEC indebtedness. These circumstances could force PSNH
and NAEC to seek bankruptcy protection under Chapter 11 of the bankruptcy
laws.
For further information on New Hampshire restructuring issues, see NU's
Forms 8-K dated August 19, 1996 and January 17, 1997 (SEC File No 1-5324,
WMECO's Forms 10-Q for the quarters ended September 30, 1996, June 30, 1996
and March 31, 1996, and "Item 1. Business-Rates-New Hampshire Retail
Rates-Electric Industry Restructuring in New Hampshire" in WMECO's 1995
Form 10-K."
SIGNATURE
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
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Registrant
Date March 3, 1997 By /s/John J. Roman
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John J. Roman
Vice President and Controller
