SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission Registrants, State of Incorporation I.R.S. Employer
File Number Address; and Telephone Number Identification
No.
1-5366 EASTERN UTILITIES ASSOCIATES 04-1271872
(A Massachusetts voluntary association)
One Liberty Square
Boston, Massachusetts 02109
Telephone (617) 357-9590
0-2602 Blackstone Valley Electric Company 05-0108587
(A Rhode Island Corporation)
Washington Highway
Lincoln, Rhode Island 02865
Telephone (401) 333-1400
0-8480 Eastern Edison Company 04-1123095
(A Massachusetts Corporation)
110 Mulberry Street
Brockton, Massachusetts 02403
Telephone (508) 580-1213
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Registrant Title of Each Class on which registered
Eastern Utilities Common Shares, New York Stock Exchange
Associates par value $5 per share Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Registrant Title of Each Class
Blackstone Valley 4.25% Non-Redeemable Preferred Stock,
Electric Company $100 Par Value
5.60% Non-Redeemable Preferred Stock,
$100 Par Value
Eastern Edison 6.625% Redeemable Preferred Stock,
Company $100 Par Value
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrants. As of March 18, 1996:
Eastern Utilities Associates Common Shares, $5 par value - $102,183,775
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Eastern Utilities Associates Common Shares
Outstanding at March 18, 1996: 20,436,755
Blackstone Valley Electric Company Common Shares
Outstanding at March 18, 1996: 184,062
Eastern Edison Company Common Shares
Outstanding at March 18, 1996: 2,891,357
Portions of the Annual Reports to Shareholders of Eastern Utilities Associates,
Blackstone Valley Electric Company, and Eastern Edison Company for the year
ended December 31, 1995, are incorporated by reference into Part II. Portions
of the Eastern Utilities Associates Proxy Statement dated March 27, 1996 are
incorporated by reference into Part III.
EASTERN UTILITIES ASSOCIATES
BLACKSTONE VALLEY ELECTRIC COMPANY
EASTERN EDISON COMPANY
1995 Annual Report on Form 10-K
Table of Contents
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . .I
GLOSSARY OF DEFINED TERMS. . . . . . . . . . . . . . . . . . . IV
Item 1. BUSINESS . . . . . .. . . . . . . . . . . . . . . . . .1
System Overview. . . . . . . . . . . . . . . . . . . . . . . .1
General - Core Electric Business . . . . . . . . . . . . . . .1
Electric Utility Industry Restructuring . . . . . . . . .4
General - EUA Cogenex. . . . . . . . . . . . . . . . . . . . .6
Construction . . . . . . . . . . . . . . . . . . . . . . . . .9
Construction Program - EUA. . . . . . . . . . . . . . . .9
Construction Program - Blackstone . . . . . . . . . . . 10
Construction Program - Eastern Edison . . . . . . . . . 10
Fuel for Generation. . . . . . . . . . . . . . . . . . . . . 10
Nuclear Power Issues . . . . . . . . . . . . . . . . . . . 13
General . . . . . . . . . . . . . . . . . . . . . . . 13
Decommissioning . . . . . . . . . . . . . . . . . . . . 14
Yankee Atomic . . . . . . . . . . . . . . . . . . . . . 14
Maine Yankee . . . . . . . . . . . . . . . . . . . . . 15
Recent NRC Actions . . . . . . . . . . . . . . . . . . 15
Public Utility Regulation. . . . . . . . . . . . . . . . . . 15
Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
FERC Proceedings. . . . . . . . . . . . . . . . . . . . 18
Massachusetts Proceedings . . . . . . . . . . . . . . . 19
Rhode Island Proceedings. . . . . . . . . . . . . . . . 21
Environmental Regulation . . . . . . . . . . . . . . . . . . 23
General . . . . . . . . . . . . . . . . . . . . . . . . 23
Electric and Magnetic Fields. . . . . . . . . . . . . . 24
Water Regulation. . . . . . . . . . . . . . . . . . . . 24
Air Regulation. . . . . . . . . . . . . . . . . . . . . 25
Environmental Regulation of Nuclear Power. . . . . . . . . . 27
Item 2. PROPERTIES . . . . . .. . . . . . . . . . . . . . . . 27
Power Supply . . . . . . . . . . . . . . . . . . . . . . . . 27
Other Property . . . . . . . . . . . . . . . . . . . . . . . 30
Item 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . 30
Rate Proceeding . . . . . . . . . . . . . . . . . . . . . . 30
Environmental Proceedings . . . . . . . . . . . . . . . . . 30
EUA WestCoast L.P. . . . . . . . . . . . . . . . . . . . . . 34
Other Proceedings. . . . . . . . . . . . . . . . . . . . . . 34
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. .35
EXECUTIVE OFFICERS OF EASTERN UTILITIES ASSOCIATES . . . . . . 35
PART II
Item 5. MARKET FOR EUA'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS . . . . . . . . . . . . . . . . . . . . . . . 36
Item 6. SELECTED FINANCIAL DATA. . . . . . .. . . . . . . . . 36
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . 37
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . 37
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES. . . . . . . . . 37
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANTS:
Eastern Utilities Associates. . . . . . . . . . . . . . 37
Blackstone and Eastern Edison . . . . . . . . . . . . . 38
Item 11. EXECUTIVE COMPENSATION . . . . . .. . . . . . . . . . 39
Eastern Utilities Associates. . . . . . . . . . . . . . 39
Blackstone and Eastern Edison . . . . . . . . . . . . . 40
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . 40
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . 40
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . 41
(a)(1) Financial Statements . . . . . . . . . . . . . . 41
(a)(2) Financial Statement Schedules . . . . . . . . . 41
(a)(3) Exhibits (*denotes filed herewith).. . . . . . . 41
(b) Reports on Form 8-K. . . . . . . . . . . . . . . . 54
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Reports of Independent Accountants. . . . . . . . . . . . . . . 64
Consent of Independent Accountants . . . . . . . . . . . . . . 66
GLOSSARY OF DEFINED TERMS
The following is a glossary of frequently used abbreviations and/or acronyms
found throughout this report:
The EUA System Companies
Blackstone Blackstone Valley Electric Company
Eastern Edison Eastern Edison Company
EUA Eastern Utilities Associates
EUA Cogenex EUA Cogenex Corporation
EUA Day EUA Day Company, a subsidiary of EUA Cogenex
EUA Nova EUA Nova, a division of EUA Cogenex
EUA Energy EUA Energy Investment Corporation
EUA Ocean State EUA Ocean State Corporation
EUA Service EUA Service Corporation
Montaup Montaup Electric Company
Newport Newport Electric Corporation
Registrants EUA, Blackstone and Eastern Edison
Retail Subsidiaries Blackstone, Eastern Edison
and Newport
Non-Affiliated Companies
Aquidneck Aquidneck Power Limited Partnership
Great Bay Power Great Bay Power Corporation (formerly EUA
Power Corporation)
Maine Yankee Maine Yankee Atomic Power Company
OSP Ocean State Power Project Units 1 and 2
Yankee Atomic Yankee Atomic Electric Company
Regulators/Regulations
1935 Act Public Utility Holding Company Act of 1935
CERCLA Federal Comprehensive Environmental
Response, Compensation and Liability
Act of 1980
Chapter 21E Massachusetts Oil and Hazardous Material
Release Prevention and Response Act
Clean Air Act Amendments Clean Air Act Amendments of 1990
DEP Massachusetts Department of Environmental
Protection
DEQE Massachusetts Department of Environmental
Quality Engineering
GLOSSARY OF DEFINED TERMS (Cont'd)
Regulators/Regulations (continued)
DOE Department of Energy
Energy Policy Act Energy Policy Act of 1992
EPA Federal Environmental Protection Agency
FAS106 Statement No. 106 "Employer's Accounting for
Post-Retirement Benefits Other Than
Pensions"
FERC Federal Energy Regulatory Commission
IRS Internal Revenue Service
MDPU Massachusetts Department of Public
Utilities
NESCAUM Northeast States for Coordinated Air Use
Management
NRC Nuclear Regulatory Commission
NWPA Nuclear Waste Policy Act
Price-Anderson Act The Price-Anderson Act, as amended by the
Price-Anderson Amendments of 1988
PURPA Public Utility Regulatory Policies Act
of 1978
RCRA Resource Conservation and Recovery Act of
1976
RIDEM Rhode Island Department of Environmental
Management
RIDPUC Rhode Island Division of Public Utilities
and Carriers
RIPUC Rhode Island Public Utilities Commission
SEC Securities and Exchange Commission
TEC-RI The Energy Counsel of Rhode Island
TSCA Toxic Substances Control Act
Other
AFUDC Allowance for Funds Used During
Construction
BTU British Thermal Unit
C&LM Conservation and Load Management
DSM Demand Side Management
EMF Electric and Magnetic Fields
EWG Exempt Wholesale Generator
IPP Independent Power Producer
KWH Kilowatthour
GLOSSARY OF DEFINED TERMS (Cont'd)
Other (continued)
MBTU Millions of British Thermal Units
MOU Memorandum of Understanding
MW Megawatt
NEPOOL New England Power Pool
PCB Polychlorinated Biphenyls
PRP Potentially Responsible Party
QF Qualifying cogeneration and small power
production facilities pursuant to PURPA
Seabrook Project Seabrook Nuclear Power Project located in
Seabrook, New Hampshire
PART I
Item 1. BUSINESS
System Overview
Eastern Utilities Associates is 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. Blackstone, a
registered retail electric utility organized under the laws of the State of
Rhode Island in 1912 operates in northern Rhode Island. Eastern Edison, a
registered retail electric utility company is a corporation organized under the
laws of the Commonwealth of Massachusetts in 1883, operates in southeastern
Massachusetts. EUA owns directly all of the shares of common stock of
Blackstone, Eastern Edison and Newport, a retail electric utility which
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, Blackstone, Newport and 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 services company. EUA Energy invests in energy-related projects. EUA
Ocean State owns a 29.9% interest in OSP's two gas-fired generating units.
(See Item 2. PROPERTIES -- Power Supply.) The holding company system of EUA,
the Retail Subsidiaries, Montaup, EUA Service, EUA Cogenex, EUA Energy and EUA
Ocean State is referred to as the EUA System. The EUA System is organized into
a business unit structure. The Core Electric Business consists of the Retail
Subsidiaries and Montaup. The Energy Related Business includes EUA Cogenex,
EUA Energy and EUA Ocean State. The Corporate Business is made up of EUA and
EUA Service.
General - Core Electric Business
As of December 31, 1995, the number of regular employees in the core
electric and corporate business units was 1,077. Blackstone had 126 regular
non-union employees. Eastern Edison and Montaup had 344 regular employees.
Labor bargaining unit contracts covering approximately 161 employees of Eastern
Edison in the Fall River area and of Montaup, and 67 employees of Newport
expire in June 1997, March 1998 and September 1996, respectively. Relations
with employees are considered to be satisfactory.
On March 15, 1995, EUA announced a corporate reorganization which, among
other things, consolidated management of Eastern Edison, Blackstone and
Newport. As part of the reorganization, a voluntary retirement incentive,
effective June 1, 1995, was offered to sixty-six professionals of the
EUA System. Forty-nine of those eligible, including nine employees of
Blackstone and twenty-two employees of Eastern Edison and Montaup, accepted the
incentive and retired effective June 1, 1995.
The Core Electric Business supplies retail electric service in 33 cities
and towns in southeastern Massachusetts and Rhode Island. The largest
communities served are the cities of Brockton and Fall River, Massachusetts.
The retail electric service territory covers approximately 595 square miles and
has an estimated population of approximately 731,000. At December 31, 1995,
Core Electric Business served approximately 297,000 retail customers.
Blackstone serves a territory of about 150 square miles in portions of
northern Rhode Island with a population of approximately 206,000. At December
31, 1995, Blackstone furnished retail electric service to approximately 85,000
customers in the cities of Central Falls, Pawtucket and Woonsocket, and four
surrounding towns.
Eastern Edison supplies retail electric service in 22 cities and towns in
southeastern Massachusetts. The largest communities served are the cities of
Brockton and Fall River, Massachusetts. The retail electric service territory
covers approximately 390 square miles and has an estimated population of
approximately 456,000. At December 31, 1995, Eastern Edison served
approximately 180,000 retail customers.
For 1995, 1994 and 1993, the Core Electric Business accounted for
approximately 86%, 87%, and 88%, respectively, of total operating revenues of
the EUA System. The remaining balance of operating revenues during these
periods were attributable to EUA Cogenex.
Montaup supplies the Retail Subsidiaries with nearly 100% of each
company's electric requirements. About 51% of the net generating capacity of
the EUA System comes from a combination of the following sources: (i) wholly
owned EUA System generating plants, primarily Montaup's 153 MW Somerset
facility located in Somerset, Massachusetts; (ii) Montaup's net entitlement of
257 MW from the 584 MW Canal No. 2 unit, which is located in Sandwich,
Massachusetts and is 50% owned by Montaup; and, (iii) entitlements from units
in which Montaup has partial ownership interests (by joint ownership through
tenancy-in-common or by stock ownership) that are 4.5% or less. The remaining
49% of the net generating capacity of the EUA System comes from units in which
Montaup has long-term or short-term power contracts for shares ranging from
5.94% to 41.67% of the unit's capacity, including 28% of the OSP Units 1 and 2
in which EUA Ocean State has a 29.9% partnership interest, or entitlements from
the Hydro-Quebec Project through NEPOOL. (See Item 2. PROPERTIES -- Power
Supply for further details of the EUA System's sources of power supply).
The Retail Subsidiaries and Montaup hold valid franchises, permits and
other rights which are necessary to allow these companies to conduct electric
business within the territories which they serve. Such franchises, permits and
other rights contain no unduly burdensome restrictions or limitations upon
duration.
The EUA System's electric sales are seasonal to some extent due to
electricity usage for heating and lighting in the winter and air conditioning
in the summer. The EUA System is not dependent on a single customer or a few
customers for its electric sales.
There is no competition from other electric utilities within the retail
territories served by the Retail Subsidiaries at this time. Federal law
permits, however, certain federal facilities to by-pass the local utility and
purchase power directly from another utility. It is probable that in the
future retail competition could be imposed by legislative or regulatory action
at the federal or state level. (See "Electric Utility Industry Restructuring"
below).
At the wholesale level, Montaup faces new sources of competition primarily
as a result of PURPA, the Energy Policy Act and other policies being
implemented by the MDPU and considered by the RIPUC relating to the
solicitation of competitive proposals for new generation sources. Non-utility
wholesale generators, generally known as independent power producers or IPPs,
are subject to FERC regulations under the Federal Power Act as well as various
other federal, state, and local regulations. PURPA was intended, among other
things, to promote national energy independence and diversification of energy
supply and to improve the overall efficiency of energy usage. PURPA created a
class of non-utility power generation facilities called QFs. PURPA allows QFs
to sell power generated by the QFs to local utilities at specified rates based
on each utility's avoided cost. In order to further promote competition in
energy supply, the Energy Policy Act established another class of non-utility
generators, generally referred to as EWGs, which are exempt from the 1935 Act
and increased FERC's power to order transmission access, resulting in FERC's
Regional Transmission Group Policy. As a complement to the federal
initiatives, the MDPU and the RIPUC have implemented regulations which require
utilities to integrate least-cost planning with competitive proposals to meet
requirements for new generation. Both states have also approved a Memorandum
of Understanding among Montaup and the Retail Subsidiaries that establishes a
framework which makes possible a coordinated, regional review of the resource
planning and procurement process of the EUA System Companies. (see Public
Utility Regulation below).
Competition at the wholesale level is likely to increase as a result of
the FERC's pending action on its "Mega-NOPR" regarding open access to
transmission and recovery of stranded costs. Two dockets, being considered
jointly, were initiated by the FERC with the express purpose of promoting
competition in the wholesale electric power industry. A final rule is expected
during the first half of 1996, and will affect the EUA System primarily in the
requirement to file and implement non-discriminatory open access transmission
tariffs. Montaup anticipates filing the required tariffs in advance of the
FERC's final rule-making order. Montaup will face increased competition in the
wholesale generating market, primarily based on price, from QFs and EWGs and in
the future could be affected by such competition supplying generation to its
customers. More recently, non-utility power marketers have become active,
engaging in new and creative power transactions. Power marketers are likely to
become more prevalent in the market as transmission access opens up and
opportunities arise, due to price differentials, to move power inter-
regionally.
Across the country, including the states serviced by EUA's Retail
Subsidiaries, there has been an increasing focus on competitive issues.
Regulators in Massachusetts and Rhode Island are currently examining, among
other things, issues related to incentive regulation and potential electric
industry restructuring including retail wheeling (the transmission of power
from one utility for sale by that system to retail customers of a different
system). The timing and impact of these examinations on the financial
condition of the utility industry in general and EUA's utility operations in
particular are uncertain at this time. EUA will continue to monitor and
participate in all regulatory investigations into the many issues surrounding
this move to a competitive marketplace (see "Electric Utility Industry
Restructuring" below).
The EUA System companies are members of NEPOOL, which is open to any
person or organization engaged in the electric utility business such as
investor-owned, municipal, and cooperative utilities as well a non-utilities
and others such as brokers and marketers. The systems making up NEPOOL own or
purchase the output from virtually all the generation in New England.
Since the EUA System operates an integrated transmission system which, in turn,
is connected to the New England 345 KV grid at three locations, NEPOOL treats
the EUA System as one consolidated participant. This is consistent with the
EUA System's planning and resource management perspective. The objectives of
NEPOOL are: (a) to assure that the bulk power supply of New England and any
adjoining areas served by participants conforms to proper standards of
reliability, and (b) to attain maximum practicable economy in the bulk power
supply consistent with all proper standards of reliability and to provide for
equitable sharing of the resulting benefits and costs. These objectives are
accomplished through joint planning, central dispatching, coordinated
construction, operation, and maintenance of electric generation and
transmission facilities, cooperation in environmental matters, and through
effective coordination with other power pools and utilities situated in the
United States and Canada.
The NEPOOL agreement imposes obligations concerning generating capacity
reserve and the right to use major transmission lines, and provides for central
dispatch of the generating capacity of NEPOOL's members with the objective of
achieving reliable and economical use of the region's facilities. Pursuant to
the NEPOOL agreement, interchange sales to NEPOOL are made at a price
approximately equal to the fuel cost for generation without contribution to the
support of fixed charges. The capacity responsibilities of Montaup and the
Retail Subsidiaries under the NEPOOL agreement are based on an allocated share
of a New England capacity requirement which is determined for each period on
the basis of certain regional reliability criteria. Because of its
participation in NEPOOL, the EUA System's operating revenues and costs are
affected to some extent by the operations of other members. A comprehensive
review of the NEPOOL Agreement was initiated in 1994 and continued through 1995
to look at its current structure and determine what will be done as the
electric utility environment becomes increasingly competitive.
Electric Utility Industry Restructuring:
The electric industry is in a period of transition from a traditional rate
regulated environment to a competitive marketplace. While competition in the
wholesale electric market is not new, electric utilities are facing impending
competition in the retail sector.
In 1995, Eastern Edison, Blackstone and Newport participated with
collaborative groups in their respective states consisting of other utilities,
industrial users, environmental groups, governmental agencies and consumer
advocates in submitting similar sets of interdependent principles with their
respective state regulatory commissions addressing electric utility industry
restructuring. These filings were intended to be statements of the consensus
position by the signatories of the principles that should underlie any electric
industry restructuring proposal and include but are not limited to principles
addressing stranded cost recovery, unbundling of services and demand side
management programs. Each set of principles was submitted on the condition
they be approved in full by the respective Commissions.
The RIPUC accepted all but one of the principles submitted by the Rhode
Island Collaborative with minor modifications to certain language in others and
added a new principle which supports negotiation (as opposed to litigation) to
resolve conflicts as restructuring moves forward and directed the Rhode Island
Collaborative to proceed with negotiations on the issues presented in the
principles and to submit a progress report, which was submitted in February
1996. The one principle that was not accepted provided for subsidization of
renewable energy sources. (See Rates, "Rhode Island Proceedings" for further
discussion).
In February 1996 a bill was introduced in the Rhode Island legislature
that, if enacted, would allow customer choice of electricity supplier
commencing January 1, 1998 for large industrial customers and phasing in all
customers by January 1, 2001. The proposed legislation also provides
for recovery of "stranded investments" through a transition charge initially
set at three cents per KWH.
EUA believes that development of the proposed legislation should have been
conducted in a public forum so that all interested stakeholders could have
participated. EUA believes that competition, if done right, can benefit
customers; however, there are substantial issues about the proposed legislation
which EUA is currently reviewing.
The MDPU issued an order enumerating principles, similar to those
submitted by the Massachusetts Collaborative, that describe the key
characteristics of a restructured electric industry and provides for, among
other things, customer choice of electric service providers, services, pricing
options and payment terms, an opportunity for customers to share in the
benefits of increased competition, full and fair competition in the generation
markets and incentive regulation for distribution services where competition
cannot exist. This order sets out principles for the transition from a
regulated to a competitive industry structure and identifies conditions
for the transition process which will require investor-owned utilities to
unbundle rates, provide consumers with accurate price signals and allow
customers choice of generation services. The order also provides for the
principle of recovery of net, non-mitigable stranded costs by investor-owned
utilities resulting from the industry restructuring.
Each Massachusetts investor-owned utility is required to file
restructuring proposals for moving from the current regulated industry
structure to a competitive generation market. The schedule for the filing
requirement is staggered. The initial group of utilities was required to file
their proposals in February 1996. The second group is required to file within
three months of the MDPU's orders on the first group of submissions. Eastern
Edison Company filed its proposal, "Choice and Competition" (see below) with the
first group of proposals and is awaiting MDPU review. (See Rates,
"Massachusetts Proceedings" for further discussion).
In January 1996, EUA unveiled its preliminary proposal for a restructured
electric utility industry called "Choice and Competition" and began discussions
with the Rhode Island and Massachusetts Collaboratives. The plan proposes,
among other things: choice of power supplier by all customers as early as
January 1998; open access transmission services; performance based rates
for electric distribution services; all utility generation competing for power
sales and; a transition charge allowing regional utilities the opportunity to
recover, among other things, the costs of past commitments to nuclear and
independent power. The company believes the plan, which requires participation
by all New England parties, satisfies the principles adopted in both Rhode
Island and Massachusetts, and provides a fair and equitable transition to a
competitive electric utility marketplace for all parties.
Historically, electric rates have been designed to recover a utility's
full costs of providing electric service including recovery of investment in
plant assets. Also, in a regulated environment, electric utilities are subject
to certain accounting rules that are not applicable to other industries.
These accounting rules allow regulated companies, in appropriate circumstances,
to establish regulatory assets and liabilities, which defer the current
financial impact of certain costs that are expected to be recovered in future
rates. EUA believes that its Core Electric operations continue to meet the
criteria established in these accounting standards. Effects of legislation
and/or regulatory initiatives or EUA's own initiatives such as "Choice and
Competition" could ultimately cause EUA's Core Electric companies to no longer
follow these accounting rules. In such an event, a non-cash write-off of
regulatory assets and liabilities could be required at that time.
In addition, if legislative or regulatory changes and/or competition
result in electric rates which do not fully recover the company's costs, a
write-down of plant assets could be required pursuant to Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (FAS121) issued in March 1995, effective
for fiscal year 1996.
General - EUA Cogenex
EUA Cogenex is a wholly owned subsidiary of EUA. EUA Cogenex is an
energy services company that employs energy efficient technology and equipment
intended to reduce the energy consumption and costs of its customers. Such
technology and equipment include building automation systems, lighting
modifications, boiler and chiller replacements and other mechanical measures
such as motors and drives. EUA Cogenex may design, install, own, operate,
maintain, and finance specific energy efficient applications for its customers.
EUA Cogenex is compensated for these services primarily through energy
services agreements in which EUA Cogenex and the customer who occupies or owns
a facility agree upon a prescribed base year and a set of savings calculations.
EUA Cogenex then receives payments based on a portion of the savings that
result from the installation and maintenance of the energy efficient equipment
in the facility. Some of EUA Cogenex revenues under these agreements are
dependent upon the actual achievement of energy savings; therefore EUA Cogenex
assesses the financial and technical risk of each customer and project. In
addition, EUA Cogenex participates in demand side management (DSM) programs
sponsored by electric utilities as a means to decrease both base load and peak
demand on the utilities' systems. In utility DSM programs, EUA Cogenex
contracts with the utility and its commercial and industrial customers in order
to decrease the overall demand on the utility system or to reduce peak demand,
curtailing the need for costly capacity additions. EUA Cogenex is paid by the
utility based on the reduction in the demand on the utility's system and may
also receive a portion of the customers' savings by entering into energy
services agreements of the type described above with those customers. EUA
Cogenex contracts for utility DSM programs through a bidding process or
participates in the utility's "Standard Offer Program". EUA Cogenex
also may, from time to time, acquire existing DSM contracts or energy services
agreements, or the benefits from those contracts from other energy services
companies.
EUA Cogenex's principal markets include institutional, commercial,
industrial and government entities, and through its EUA Citizens Conservation
Services subsidiary, public and private multi-family housing.
In September 1995, EUA announced that EUA Cogenex was discontinuing its
cogeneration operations because overall, the cogeneration portfolio had not
performed up to expectations. EUA Cogenex's total net investment in its
cogeneration portfolio was $29.2 million. The decision to discontinue its
cogeneration operations resulted in a one-time, after-tax charge of
approximately $10.5 million, or 52 cents per share, to 1995 earnings.
EUA Cogenex also operates a lighting services division, EUA Nova, and a
controls division, EUA Day. EUA Nova provides lighting products designed to
achieve an efficiency gain through the integration of various lamp, ballast and
light reflector products. EUA Day, is primarily engaged in the business of
customization, installation and servicing of building temperature control
systems, monitoring and verification systems and process control systems for
the purpose of energy conservation. These systems are primarily designed for
regulating lighting and heating, ventilation and air-conditioning, but can also
simultaneously be used for security surveillance, building entry and exit,
equipment monitoring and air quality monitoring.
EUA Cogenex also provides consulting services to its customers in the form
of training in the proper use and maintenance of the energy equipment. This
service includes instruction in the use of existing equipment as well as newly
installed equipment so that further energy savings can be realized. In
addition, EUA Cogenex monitors installed projects on a 24-hour basis and
dispatches third party contractors to make repairs and/or adjustments.
In 1995, EUA Cogenex acquired certain energy services assets of Citizens
Conservation Corporation with headquarters in Boston, Massachusetts in exchange
for preferred stock of a newly formed subsidiary of EUA Cogenex, EUA Citizens
Conservation Services, which will utilize those assets. EUA Citizens
Conservation provides energy conservation services to the public and private
multi-family housing sector. EUA Cogenex also acquired the Highland Energy
Group, an energy services company in Boulder, Colorado in exchange for common
shares of EUA. Highland provides energy conservation services in Colorado,
Texas, Ohio, North Carolina and certain other mid-western states.
Also in 1995, EUA Cogenex announced joint ventures with affiliates of the
Allegheny Power System and Western Resources, Inc. to provide energy services
in and around the geographic regions served by those companies. In early 1996,
EUA Cogenex announced a proposed joint venture with Monenco-Agra of Canada to
provide similar services in Canada.
There are no seasonal factors that impact normal business operations of
EUA Cogenex.
As a result of its ownership by EUA, a registered holding company under
the 1935 Act, EUA Cogenex is regulated by the SEC in matters related to
financing and asset acquisitions. On February 15, 1995, the SEC issued an
order lifting its previous requirement that EUA Cogenex earn more than
50% of its revenues in the New England/New York area. There are no current
geographic restrictions on EUA Cogenex operations.
At December 31, 1995, EUA Cogenex employed 253 persons in its operations.
EUA Cogenex's competition is comprised primarily of the manufacturers and
distributors of the energy efficiency equipment which it installs, other energy
services companies, engineering consulting firms and from financial
institutions who provide capital to finance energy efficiency projects.
The potential deregulation of the electric utility industry may have an
effect on EUA Cogenex. Electric industry deregulation may present new markets
and opportunities in which EUA Cogenex may participate. However, some electric
utilities have, or announced plans to establish, subsidiaries that will
compete directly with EUA Cogenex. In addition, the move toward electric
industry deregulation has also resulted in a reduction of electric utility
sponsored DSM programs. Termination of any such DSM programs by one or more
electric utilities in which EUA Cogenex participates could result in a
reduction of EUA Cogenex's revenues.
As of December 31, 1995, EUA Cogenex participated in six partnerships. It
is the managing general partner in all of the partnerships and has limited
partnership interest in certain of the partnerships. EUA Cogenex has provided
virtually all of the capital to the partnerships and is generally entitled to a
return of, and on, this capital before any significant partnership distribution
is made to the other general partners. All partnerships and their customers
are subject to the same selection and screening process to establish acceptable
credit quality.
The rates charged by EUA Cogenex to customers through its energy service
agreements are not subject to the jurisdiction of any regulatory agency.
The following table sets forth the amounts of revenues, pre-tax income,
net earnings and identifiable assets attributable to the consolidated
operations of EUA Cogenex:
Year Ended December 31,
1995 1994 1993
(Thousands)
Operating Revenues $ 79,499 $ 74,480 $ 66,912
Pre-tax Income $(13,885)(1) $ 7,266 $ 5,864
Net Earnings $ (7,904)(1) $ 4,171 $ 3,536
Total Assets $199,115 $ 211,310 $ 191,432
(1) Includes pre-tax charge of $18.1 million, $10.5 million after-tax, related
to discontinuance of cogeneration operations.
See Note I - Financial Information by Business Segment, of Consolidated
Financial Statements contained in the EUA's Annual Report to Shareholders for
the year ended December 31, 1995 (Exhibit 13-1.03 filed herewith).
Construction
Construction Program - EUA:
The EUA System's cash construction expenditures for the year ended
December 31, 1995 were approximately $77.9 million.
Planned cash construction expenditures for 1996, 1997 and 1998, as set
forth below, are estimated to total $269.3 million.
EUA SYSTEM CONSTRUCTION PROGRAM
(Dollars in Thousands)
1996 1997 1998 3-Yr. Total
Generation $ 20,443 $ 16,307 $ 9,128 $ 45,878
Transmission 1,240 942 1,016 3,198
Distribution 17,063 17,446 18,045 52,554
General (41) 1,071 1,106 2,136
Total Utility Construction
Requirements 38,705 35,766 29,295 103,766
EUA Cogenex Capital
Requirements 42,885 58,324 64,320 165,529
Total $ 81,590 $ 94,090 $ 93,615 $ 269,295
Construction Program - Blackstone:
Blackstone's cash construction expenditures for the year ended December 31,
1995 were approximately $5.1 million, related primarily to its electric
distribution system.
Planned cash construction expenditures for 1996, 1997 and 1998, as set forth
below, are estimated to total $13.5 million.
BLACKSTONE CONSTRUCTION PROGRAM
(Dollars in Thousands)
1996 1997 1998 3-Yr. Total
Transmission $ 313 $ 368 $ 379 $ 1,060
Distribution 3,968 3,939 4,069 11,976
General 53 183 189 425
Total $ 4,334 $ 4,490 $4,637 $ 13,461
Construction Program - Eastern Edison:
Eastern Edison's cash construction expenditures for the year ended December
31, 1995 were approximately $23.4 million.
Cash construction expenditures of Eastern Edison and Montaup for 1996, 1997
and 1998 as set forth below, are estimated to total $78.8 million.
<TABLE>
<CAPTION>
EASTERN EDISON CONSTRUCTION PROGRAM
(Dollars in Thousands)
1996 1997 1998 3-Yr. Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eastern Eastern Eastern Eastern
Edison Montaup Edison Montaup Edison Montaup Edison Montaup Combined
Generation $ $20,432 $ $16,254 $ $ 9,073 $ $45,759 $ 45,759
Transmission 290 366 174 159 180 209 644 734 1,378
Distribution 10,191 10,614 10,999 31,804 31,804
General 40 (580) 213 221 474 (580) (106)
Total $10,521 $20,218 $ 11,001 $16,413 $11,400 $ 9,282 $32,922 $45,913 $ 78,835
</TABLE>
Fuel for Generation
The Retail Subsidiaries rely primarily on power purchased from Montaup to
meet their electric energy requirements. Power purchases are arranged on a
system basis, by Montaup, under which power is made available to the EUA System
and allocated to the Retail Subsidiaries in accordance with their peak
requirements.
The rates charged by Montaup for power sold to the Retail Subsidiaries are
those on file from time to time with FERC and are substantially the same as
those charged by Montaup for power sold to its unaffiliated customers. Changes
in the cost to Montaup of power from units in which it has interests are
reflected in the cost of power purchased by the Retail Subsidiaries. The Retail
Subsidiaries recover their cost of fuel and purchased power through the
operation of revenue adjustment clauses which are designed to provide timely
recovery of such costs.
For 1995, the EUA System's sources of energy, by fuel type, were as follows:
28% nuclear, 27% gas, 25% oil, 15% coal and 5% other. During 1995, Montaup had
an average inventory of 63,544 tons of coal for its steam generating unit at
the Somerset Station, the equivalent of 77 days' supply (based on average
daily output at 80% capacity factor for the unit (see Item 2. PROPERTIES --
Power Supply)). The cost of coal averaged about $50.18 per ton in 1995 which
is equivalent to oil at $12.16 per barrel. This was slightly more expensive
than 1994 because 1995's value was measured on a dry weight basis and because
it included a larger amount of compliant coal required for Massachusetts Clean
Air Act testing and compliance. Montaup also maintained an average inventory
of Nos. 2 and 6 oil of 6,690 barrels and 74,713 barrels, respectively. These
fuels are used for start-up and flame stabilization for Montaup's steam
generating unit. The cost of Nos. 2 and 6 oil averaged $21.97 per barrel and
$15.98 per barrel in 1995, respectively. Montaup also maintained an average
inventory of jet oil of 4,639 barrels at an average cost per barrel of $24.24
during 1995 for its two peaking units at the Somerset Station.
Montaup has a one year purchase order effective through December, 1996 with a
coal producer. Barge and rail agreements for coal transportation are also in
place through 1996. The 1995 year-end coal inventory of approximately 102,285
tons is all 0.6% to 0.7% sulfur coal which is compliant with Clean Air Act
requirements.
Canal Electric Company (Canal), on behalf of itself, Montaup and others has
contracts with a supplier for up to 100% of the fuel-oil requirements of Canal
Unit Nos. 1 and 2 for the period ending June 30, 1996 with a unilateral option
of extending it through December 1996. The current contracts permit up to 20%
of fuel oil purchases in the spot market. Fuel prices are based on oil market
posting at the time of delivery. For 1995, the cost of oil per barrel at Canal
averaged $16.16.
Canal and Montaup have entered into agreements with Algonquin Gas
Transmission Company (Algonquin) for Algonquin to provide gas transmission
facilities and services to the Canal facilities. Algonquin has finished the
construction of the pipeline which will connect its existing system with
the pipeline built by Canal and Montaup. Canal and Montaup have successfully
placed a pipeline under the Cape Cod Canal which will bring gas to Canal Unit
No. 2. Boiler modifications which will enable the unit to burn gas will begin
in March, 1996 and are expected to be completed by the beginning of July, 1996.
Gas will be burned at Canal along with No. 6 oil as the prices of each fuel
dictate. In the future it is expected that gas supplies will be available in
an interruptible basis from mid-March until mid-November.
Montaup's costs of fossil and nuclear fuels for the years 1993 through 1995,
together with the weighted average cost of all fuels, are set forth below:
Mills* per KWH
1995 1994 1993
Nuclear . . . . . . . . . 6.3 6.1 7.5
Gas . . . . . . . . 14.3 14.1 15.1
Coal . . . . . . . . . 20.3 20.9 24.1
Oil . . . . . . . . . 30.2 27.1 25.5
All fuels . . . . . . . . . 16.7 14.5 15.5
*One Mill is 1/10 of one cent
The rate schedules of Montaup and the Retail Subsidiaries are designed to
pass on to customers the increases and decreases in fuel costs and the cost of
purchased power, subject to review and approval by appropriate regulatory
authorities (see Rates below).
OSP has two gas supply contracts which expire December 14, 2009 and September
29, 2010, respectively, for its two 250 MW generators. The cost of gas for
1995 averaged $1.11 per MBTU or approximately 9.4 mills per KWH generated.
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 a prescribed fee for the disposal of such wastes and nuclear 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 now estimates that a permanent disposal site
for spent fuel will not be ready to accept fuel for storage or disposal until
as late as 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 which, with rack additions, can accommodate its spent fuel for the
projected life of the unit. At the Seabrook Project, there is on-site storage
capacity which, with rack additions, will be sufficient to at least the year
2011.
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, 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.
Nuclear Power Issues
General:
Nuclear generating facilities, including those in service in which Montaup
participates, as shown in the table under Item 2. PROPERTIES -- Power Supply,
are subject to extensive regulation by the NRC. The NRC is empowered to
authorize the siting, construction and operation of nuclear reactors
after consideration of public health, safety, environmental and anti-trust
matters.
The NRC has promulgated numerous requirements affecting safety systems, fire
protection, emergency response planning and notification systems, and other
aspects of nuclear plant construction, equipment and operation. These
requirements have caused modifications to be made at some of the nuclear units
in which Montaup has an interest. Montaup has been affected, to the extent of
its proportionate share, by the costs of such modifications.
Nuclear units in the United States have been subject to widespread criticism
and opposition. Some nuclear projects have been cancelled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction defects and other difficulties. Various
groups have by litigation, legislation and participation in administrative
proceedings sought to prohibit the completion and operation of nuclear units
and the disposal of nuclear waste. In the event of cancellation or shutdown of
any unit, NRC regulations require that it be completely decontaminated of any
residual radioactivity. The cost of such decommissioning, depending on the
circumstances, could substantially exceed the owners' investment at the time of
cancellation.
The continuing public controversy concerning nuclear power could affect the
operating units in which Montaup has an interest. While management cannot
predict the ultimate effect of such controversy, it is possible that it could
result in the premature shutdown of one or more of the units (see "Yankee
Atomic," below).
The Price-Anderson Act provides, among other things, that the liability for
damages resulting from a nuclear incident would not exceed an amount which at
present is about $8.7 billion. Under the Price-Anderson Act, prior to
operation of a nuclear reactor, the licensee is required to insure against this
exposure by purchasing the maximum amount of liability insurance available from
private sources (currently $200 million) and to maintain the insurance
available under a mandatory industry-wide retrospective rating program. Should
an individual licensee's liability for an incident exceed $200 million, the
difference between such liability and the overall maximum liability, currently
about $8.7 billion, will be made up by the retrospective rating program. Under
such a program, each owner of an operating nuclear facility may be assessed a
retrospective premium of up to a limit of $79.3 million (which shall be
adjusted for inflation at least every five years) for each reactor owned in the
event of any one nuclear incident occurring at any reactor in the United
States, with provision for payment of such assessment to be made over time as
necessary to limit the payment in any one year to no more than $10 million per
reactor owned. With respect to operating nuclear facilities of which it is a
part owner or from which it contracts (on terms reflecting such liability) to
purchase power, Montaup would be obligated to pay its proportionate share of
any such assessment.
Joint owners of nuclear projects are also subject to the risk that one of
their number may be unable or unwilling to finance its share of the project's
costs, thus jeopardizing continuation of the project. On February 28, 1991,
EUA Power (now known as Great Bay Power Corporation), a 12.1% owner of the
Seabrook Project and a former subsidiary of EUA, 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.
Decommissioning:
Each of the three operating nuclear generating companies in which Montaup has
an equity ownership interest (see Item 2. PROPERTIES -- Power Supply) has
developed its estimate of the cost of decommissioning its unit and has received
the approval of FERC to include charges for the estimated costs of
decommissioning its unit in the cost of energy which it sells. From time to
time, these companies re-estimate the cost of decommissioning and apply to FERC
for increased rates in response to increased decommissioning costs. Maine
Yankee has filed a decommissioning financing plan under a Maine statute which
requires the establishment of a decommissioning trust fund. That statute also
provides that if the trust has insufficient funds to decommission the plant,
the licensee (Maine Yankee) is responsible for the deficiency and, if the
licensee is unable to provide the entire amount, the "owners" of the licensee
are jointly and severally responsible for the remainder. The definition of
"owner" under the statute includes Montaup and may include companies affiliated
with Montaup. The applicability and effect of this statute cannot be
determined at this time. Montaup would seek to recover through its rates any
payments that might be required (see Yankee Atomic, below).
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 $19.2 million in
1995 dollars, and Seabrook Unit 1 is $12.5 million in 1995 dollars. These
figures are based on studies performed for the lead owners of the plants. In
addition, pursuant to contractual arrangements with other nuclear generating
facilities in which Montaup has an equity ownership interest or life of the
unit entitlement, Montaup pays into decommissioning reserves. Such expenses
are currently recoverable through rates.
Yankee Atomic:
On February 26, 1992, Yankee Atomic announced that it would permanently cease
power operation of Yankee Rowe and began preparing for an orderly
decommissioning of the facility. Montaup has a 4.5% equity ownership in Yankee
Atomic with a book value of approximately $1.1 million at December 31, 1995.
Under the terms of its purchased power contract with the facility, Montaup must
pay its proportionate share of unrecovered costs and expenses incurred after
the plant is retired. In December 1992, Yankee Atomic received FERC
authorization to recover essentially all unrecovered assets and all costs
incurred after the February 26, 1992 shutdown decision until the plant is
decommissioned. Montaup's share of all unrecovered assets and the total
estimated costs to decommission the unit aggregated approximately $10.1 million
at December 31, 1995.
Maine Yankee:
Montaup owns 4% of the Common Stock of Maine Yankee. During the refueling-
and-maintenance shutdown of the Maine Yankee Nuclear Generating plant that
started in early February of 1995, Maine Yankee, the owner of the plant,
detected an increased rate of degradation of the plant's steam generator tubes
in excess of the number expected and started evaluating several courses of
action.
Although testing of all tubes revealed that approximately 40% of the tubes
are free of defects, Maine Yankee decided to sleeve all of the tubes as a
preventative safety measure. Sleeving involves the inserting of a tube of
slightly smaller diameter into the defective tube, the sleeve is welded in
place and acts as a new tube. Sleeving is a proven technology and must meet
rigorous federal standards of safety and licensing. This sleeving project was
completed in December 1995. Montaup's share of the sleeving project costs was
approximately $1.6 million and was recovered through rates.
In late 1995 technical issues were raised by anonymous allegations of
inadequate safety analyses supporting two license amendments to increase the
rated thermal power at which the Maine Yankee Plant could operate. The NRC
initiated a special technical review of those safety analyses in December,
1995. In January 1996 the NRC issued an order limiting the power output of the
Maine Yankee Plant to 90% of its rated maximum pending their review and
approval of safety analyses. The Plant is currently operating at the 90%
level. EUA cannot predict the ultimate outcome of this review.
Recent NRC Actions:
On January 29, 1996, the NRC notified Northeast Utilities, the operator of
Millstone Unit Nos. 1, 2, and 3 that these units would be placed on the NRC
"watch list." The "watch list" includes nuclear units which the NRC believes
warrant additional regulatory scrutiny.
On March 7, 1996, the NRC required Northeast Utilities to provide, within 30
days, specific information pertaining to Millstone Unit No. 3 and the
Connecticut Yankee nuclear unit. The NRC stated that this information must be
provided to determine whether or not the licenses for these units should be
suspended, modified or revoked.
Management cannot predict what, if any, further action the NRC might take.
However, any shut-down of theses units would require Montaup to seek other
sources of energy and increase its cost of power.
Public Utility Regulation
Eastern Edison and Montaup are subject to regulation by the MDPU with respect
to the issuance of securities, the form of accounts, and in the case of Eastern
Edison, rates to be charged, services to be provided and other matters.
Blackstone and Newport are subject to regulation in numerous respects by the
RIPUC and the RIDPUC, including matters pertaining to financing, sales and
transfers of utility properties, accounting, rates and service. In addition,
by reason of its ownership of fractional interests in certain facilities
located in other states, Montaup is subject to limited regulation in those
states.
IPPs, including OSP in which EUA Ocean State has a 29.9% ownership interest,
do not benefit from the PURPA exemptions and are subject to FERC regulation
under the Federal Power Act as well as various other federal, state and local
regulations.
The EUA System is subject to the jurisdiction of the SEC under the 1935 Act
by virtue of which the SEC has certain powers of regulation, including
jurisdiction over the issuance of securities, changes in the terms of
outstanding securities, acquisition or sale of securities or utility assets or
other interests in any business, intercompany loans and other intercompany
transactions, payment of dividends under certain circumstances, and related
matters. Eastern Edison is a holding company under the 1935 Act by reason of
its ownership of securities of Montaup. As a subsidiary of EUA, a registered
holding Company, Eastern Edison is exempted from registering as a holding
company by complying with the applicable rules thereunder.
The Retail Subsidiaries and Montaup are also subject to the jurisdiction of
FERC under Parts II and III of the Federal Power Act. That jurisdiction
includes, among other things, rates for sales for resale, interconnection of
certain facilities, accounts, service, and property records.
The MDPU and RIPUC have approved a Memorandum of Understanding (MOU) with
Eastern Edison, Blackstone, Newport and Montaup. The MOU establishes a
framework for a coordinated, regional review of the resource planning and
procurement process of those companies. It is based on the assumption that
resource planning and procurement by a regional electric company may be
implemented more effectively under a coordinated, consensual review process
involving the EUA retail companies and the state public utility commissions to
which the EUA retail companies are subject. Pursuant to the terms of the MOU,
at least every two years Montaup and Eastern Edison will file with the MDPU and
Blackstone will file with the RIPUC an integrated resource plan concurrently.
The MOU outlines a mechanism and a timetable by which the reviews by the two
commissions will be coordinated and any inconsistencies among the decisions by
the state commissions will be resolved.
In conjunction with its approval of the MOU, the MDPU granted Eastern Edison
and Montaup an exemption from the MDPU's Integrated Resource Management
regulations, but required them to plan, solicit and procure additional
resources according to newly promulgated regional Integrated Regional Planning
procedures consistent with the MOU. The Integrated Resource Management Plan
of Blackstone and Newport meet the criteria of the RIPUC.
Implementation of the MOU is not expected to have a material effect on the
EUA System. The move to restructure the industry to a more competitive model
may, however, impact the role of the states in reviewing utilities' resource
planning and procurement activities. Massachusetts is currently reviewing the
need for its review of load forecasting and resource planning, recognizing that
resource procurement is now a competitive function. As competition becomes
more prevalent in the electric industry, it is anticipated that regulatory
review will decrease accordingly.
See Rates with respect to regulation of rates charged to customers. See
Environmental Regulation. See Fuel for Generation with respect to the disposal
of spent nuclear fuel. See Environmental Regulation of Nuclear Power and see
Nuclear Power Issues with respect to regulation of nuclear facilities by the
NRC. See also General - Core Electric Business, "Electric Utility Industry
Restructuring."
Rates
Rates charged by Montaup (which sells power only for resale) are subject to
the jurisdiction of FERC. The rates for services rendered by the Retail
Subsidiaries for the most part are subject to approval by and are on file with
the MDPU in the case of Eastern Edison and with the RIPUC in the case of
Blackstone and Newport. For the 12 months ended December 31, 1995, 62% of
EUA's consolidated revenues were subject to the jurisdiction of FERC, 13% to
that of the MDPU and 11% to that of the RIPUC. The remaining 14% of
consolidated revenues are not subject to jurisdiction of utility commissions.
For the twelve months ended December 31, 1995, 82.3% of Eastern Edison's
consolidated revenues were subject to the jurisdiction of the FERC and 17.7% to
MDPU. Additionally, rates charged by OSP are subject to the jurisdiction of
FERC. All OSP (Unit 1 and Unit 2) power contracts have been approved by FERC.
However, pursuant to the OSP unit power agreements, rate supplements are
required to be filed annually subject to FERC approval. This process may
result in rate increases or decreases to OSP power purchasers. Recent general
rate increases (reduction) for Montaup and the Retail Subsidiaries are as
follows (thousands of dollars):
<TABLE>
<CAPTION>
Applied For Effective <F1> Return on
Annual Annual Common
Revenue Date Revenue Date Equity %
<S> <C> <C> <C> <C> <C>
Federal
- Montaup
M-14 $(10,133) 3/21/94 $(13,992) 8/9/94<F2> 11.10 <F3>
Massachusetts
- Eastern Edison
MDPU - 92-148 14,927<F4>6/15/92 8,100 1/12/93 11.50<F3><F5>
Rhode Island
- Blackstone
RIPUC - 2045
- Phase I 2,724 6/26/92<F6> 353 1/1/93
- Phase II 353 11/1/93<F6> 353 1/1/94
- Phase III 353 11/1/94<F6> 353 1/1/95
- Phase IV 152 10/23/95<F6> 152 1/1/96
- Newport
RIPUC - 2045
- Phase I 1,250 6/26/92<F6> 417 1/1/93
- Phase II 417 11/1/93<F6> 417 1/1/94
- Phase III 417 11/1/94<F6> 417 1/1/95
- Phase IV 179 10/23/95<F7> 179 1/1/96
<FN>
<F1> Per final order or settlement agreement.
<F2> Settlement Agreement with all parties with an annual reduction of
$13,992,000 with billing credits to Middleboro over the period January
1995 through October 1999 totaling $496,000.
<F3> Rate used for AFUDC calculation purposes. Settlement contains no
specific finding on allowed common equity return.
<F4> Reduced from $16,401,000 as originally filed.
<F5> Rates approved for consumption of electricity on and after January 1,
1993.
<F6> RIPUC Docket No. 2045 was a generic docket for all Rhode Island
utilities reviewing FAS106 expenses. The effective amount represents
the revenue requirement for one-third of the tax deductible amount of
the FAS106 expenses (see Rhode Island Proceedings below). As this was
a single issue proceeding, the RIPUC made no revisions to the allowed
return on common equity.
<F7> The revenue requirement represents the total FAS106 incremental tax
deductible amount increased by 14.3% for the next seven years. This
annual revenue requirement will be reduced to the 100% level in the
year after the tenth year of the phase-in.
</FN>
</TABLE>
FERC Proceedings:
On December 17, 1992, FERC issued a Statement of Policy regarding the
recovery through rates of the cost of post-retirement benefits other than
pensions (PBOP), as a result of FAS106 issued to address accounting procedures
for these costs. The FERC's policy recognizes allowances for prudently
incurred costs of such benefits of company employees when determined on an
accrual basis that is consistent with the accounting principles set forth in
FAS106. Furthermore, companies must agree to make cash deposits to an
irrevocable external trust fund equal to the annual test period allowance for
the cost of such benefits and they must maximize the use of income tax
deductions for contributions to the trust fund. If tax deductions are not
available for some portion of currently funded amounts, deferred income tax
accounting must be followed for the tax effects of such transactions.
Within three years of their adoption of FAS106, FERC regulated companies
must also file a general rate change and seek inclusion of these costs in their
rates. Companies may defer the jurisdictional portion of the difference
between the costs determined pursuant to accounting principles previously
followed and FAS106 accruals from the time they adopt FAS106 until they file
the general rate case described above. Montaup deferred its incremental FAS106
expenses of approximately $400,000 and $1.4 million for 1994 and 1993,
respectively.
On May 21, 1994 Montaup filed a rate application with the FERC to reduce
annual revenues by $10.1 million. This request was intended to match more
closely Montaup's revenues with its decreasing cost of doing business resulting
from, among other things, a reduced rate base, lower capital costs and
successful cost control efforts. The application also included a request for
recovery of all of Montaup's FAS106 expenses as provided in FERC's generic
order of December 1992, including a five-year amortization of previously
deferred FAS106 costs. Also incorporated in this filing was a request to make
Newport an all requirements customer of Montaup. Settlement agreements have
been made and certified by the Commission with all intervenors with an annual
base rate reduction of approximately $14 million annually, (inclusive of the
filed $10.1 million reduction) effective as of August 1994.
On February 20, 1996, Montaup filed an application with FERC for network
and point-to-point transmission service tariffs. FERC required this tariff
application before granting a concurrent application of Duke/Louis Dreyfus
Energy Services (New England) L.L.C. for permission to charge market based
rates. Montaup has requested that FERC allow the tariffs to become effective
on April 21, 1996.
Massachusetts Proceedings:
In December 1994, the Massachusetts Department of Public Utilities
approved a request made by Eastern Edison to recover through a reconciling
adjustment factor a portion of "lost base revenues." Lost base revenue
represents amounts the company would have collected if it had not offered
demand-side management and conservation and load management programs to its
customers.
On December 31, 1992, the MDPU issued its order in response to a $14.9
million (reduced from the originally filed $16.4 million) rate increase request
of Eastern Edison. The $8.1 million rate relief granted represented 49% of
Eastern Edison's original rate request filed on June 15, 1992 based on a 1991
test year. The new rates filed in compliance with the order became effective
for sales subsequent to January 1, 1993.
In authorizing the increase, the MDPU accepted a settlement proposal
offered jointly by Eastern Edison and the Massachusetts Attorney General, the
sole intervenor. The settlement stipulated the total revenue requirement which
included an amortization of Hurricane Bob costs over a five-year period
without a return on the unamortized amount. The settlement also reflected the
recovery of the full tax deductible amount of post-retirement benefits other
than pensions (FAS106 expenses), without any phasing-in of the increase over
the previous ("pay-as-you-go") level. All FAS106 amounts recovered
were placed in trusts permitted by the IRS to maximize tax deductibility and
provide tax-free benefits to retirees. The depreciation rate and the common
equity component of AFUDC were also specified. The composite rate for the
depreciation calculation was set at 4.13%, up slightly from the 4.07%
previously authorized. Solely for the purpose of calculating AFUDC, the common
equity return component was set at 11.5%.
The MDPU has put all companies on notice that it expects them..."to
consider mergers or acquisitions in order to further optimize least-cost
planning efforts and better fulfill their obligations to serve." Thereafter,
the MDPU instituted an investigation, which was concluded on August 3, 1994,
for the purpose of establishing, among other things, guidelines and standards
for acquisitions and mergers of utilities and evaluating proposals regarding
the recovery of costs associated with such activities. It is not possible to
predict what effects, if any, the MDPU proceeding will have on the EUA System.
On September 20, 1994, the MDPU issued a notice of inquiry and order
seeking comments on incentive regulation. The inquiry was to focus on
incentive regulation, sometimes referred to as performanced-based regulation,
to replace in whole or in part its existing cost-of-service/rate-of-return
regulatory framework. Comments were filed by Eastern Edison and other
interested persons. On February 24, 1995, the MDPU issued an order relating to
implementation of incentive regulation. In the order, the MDPU strongly
encouraged all jurisdictional electric utilities to devise and propose
incentive plans. The objective of incentive regulation is to "provide market-
place benefits to consumers through (1) more efficient utility operations, (2)
stronger utility incentives for better cost control, and (3) enhanced
opportunities for lower rates." While no timetable is specified, the MDPU
stated the largest utilities should commence the incentive plan design process
as soon as possible. EUA can not predict what effect, if any the MDPU's order
will have on the EUA System. (See General - Core Electric Business, "Electric
Utility Industry Restructuring" above).
On February 10, 1995, the MDPU issued a notice of inquiry and order on
electric industry restructuring (MDPU 95-30). The investigation was
established to determine: (1) how a restructuring of the Massachusetts electric
industry would promote competition and economic efficiency while expanding
opportunities that would benefit consumers, (2) whether and how to extend to
customers the option of choosing their own electric suppliers; (3) how such a
restructuring could be implemented; and (4) the appropriate regulatory
mechanisms to apply to a restructured electric industry.
After initial and second round comments were received, the MDPU held
hearings and issued its order on August 16, 1995. The order facilitates
increased competition by requiring investor-owned electric utilities to
unbundle their rates, provide consumers with accurate price signals, and enable
customer choice that allows consumers to purchase generation services
separately from transmission and distribution services. The order provides for
the recovery of net, non-mitigatable stranded costs that will result from the
transition from a regulated to a competitive industry structure.
The order sets forth the MDPU's overall goals for a restructured industry,
the essential characteristics of a restructured industry, as well as principles
to be considered in the transition to a restructured industry. Given the
complexity of the issues, the MDPU supported the multiple requests from
reviewers for a period during which participants can negotiate settlements.
The MDPU stated that consensus and settlements are more likely than litigation
to advance the restructuring process, and directed each company to undertake
negotiations with all interested participants to develop a plan for moving
toward competition in generation and retail customer choice, to decide the
amount and develop a mechanism for stranded cost recovery, and establish
unbundled rates. A collaborative group representing the full spectrum of MDPU
95-30 participants has been meeting in Massachusetts to discuss these issues.
The MDPU noted that while the concepts of competition and customer choice are
fundamental to restructuring, and the basic principles will apply to all
restructuring proposals, specific company corporate structures, service
territories, rate structures and stranded costs may require individual
consideration.
The MDPU established a specific schedule for restructuring proposals.
Massachusetts Electric Company, Boston Edison Company, and Western
Massachusetts Electric Company were required to file their settlements and
proposals by February 16, 1996. The remaining electric utilities are required
to file their settlements and proposals within three months of the issuance of
Department orders related to the restructuring proposals of the former three
companies. Companies are required to file the following information: (1) a
plan for moving from the current regulated industry structure to a competitive
generation market and to increased customer choice; (2) illustrative rates and
supporting information that indicate unbundled charges for generation,
distribution, transmission, and ancillary services; (3) an identifiable charge
reflective of the level of stranded costs to be recovered with all necessary
supporting information; (4) a plan for incentive regulation in the transmission
and distribution systems. Eastern Edison filed its restructuring plan on
February 16, 1996 which was assigned MDPU Docked #96-24. A public hearing was
held on March 6, 1996. EUA can not predict the outcome of this proceeding.
Rhode Island Proceedings:
On April 7, 1992, the RIPUC initiated generic Docket No. 2045 pertaining
to the FAS106 issue for all Rhode Island utility companies. On June 26, 1992,
Newport and Blackstone filed proposed rate increases to reflect the impact of
FAS106 of approximately $1.3 million and $2.7 million, respectively. An order
was issued on December 11, 1992 granting recovery of a tax deductible amount of
FAS106 phased into rates over a three-year period with the initial one-third to
be recovered no earlier than the first fiscal year beginning after December 15,
1992, and the deferrals of the first two years recovered in rates over the
seven-year period following the three-year phase-in. On December 21, 1992,
Newport and Blackstone filed compliance rates representing phase one of the
three-year phase-in. The Phase I revenue requirement, representing one third
of the incremental FAS106 tax deductible amount for Blackstone and Newport was
calculated to be $353,000 and $417,000, respectively. Phase II compliance was
filed November 1, 1993. The revenue requirement, representing two thirds of
the incremental FAS106 tax deductible expense for Blackstone and Newport was
calculated to be $706,000 and $834,000, respectively. Phase III compliance was
filed November 1, 1994. The revenue requirement, representing the full phase-
in of the incremental FAS106 tax deductible expense for Blackstone and Newport
were calculated to be $1,059,000 and $1,251,000, respectively. The RIPUC also
ordered that all amounts recovered be placed in trusts permitted by the IRS
which will maximize tax deductibility. In 1995, total FAS106 expenses for
Blackstone and Newport, net of capitalized amounts were approximately $1.3
million and $0.8 million, respectively.
Also, on January 14, 1994, the RIPUC issued a written order establishing
Docket No. 2167 for a Comprehensive Review of Newport's rate design. A
prehearing conference was held on February 8, 1994 at which time a schedule for
pre-filing testimony was established.
On May 20, 1994, Newport filed its Cost of Service Study (COSS) analysis
of the rates of return by customer class and an alternative rate design
proposal. The RIDPUC filed its recommendations with regard to cost allocation
and rate design on June 23, 1994. The United States Navy, Newport s largest
customer, filed its recommendations on June 24, 1994. On July 29, 1994 the
Company filed a Stipulation and Settlement Agreement (SSA) which had been
executed by the RIDPUC and TEC-RI. The parties signing the SSA agreed on
certain rate class revenue changes. While the settling parties did not agree
with the COSS techniques utilized by Newport, they agreed to accept the SSA
rather than litigating with respect to what might be deemed appropriate study
allocators and techniques. The rate class revenue changes generally reduce,
although they do not eliminate, inequities in the class rate of return.
Newport agreed to perform a new COSS to be submitted no later than July 1,
1996. At an open meeting on October 28, 1994, the RIPUC found that the SSA is
reasonable and in the best interests of the ratepayers. Rates established in
compliance with the RIPUC's October 28, 1994 finding, were effective January 1,
1995.
In December 1994, the United States Navy, filed a petition for a writ of
certiorari with the Rhode Island Supreme Court to review the RIPUC's decision.
Discussions between the Navy and Newport electric and several other interested
parties have been held in an attempt to reach a settlement. It is too early to
tell if a settlement is likely. A second motion to stay was filed by the Navy
on December 21, 1995. It is not possible to predict what effect, if any, the
Court's decision will have on the EUA system.
On June 27, 1994 TEC-RI petitioned the RIDPUC to investigate the propriety
of "the current bundled electric rates," and what might be required to
transition "... from a fully regulated to a more competitive retail electric
industry". A Division hearing officer was appointed on July 24, 1994 and
Docket No. D-94-9 was established. Blackstone and Newport were parties to the
proceeding.
Initial and reply comments were submitted to a comprehensive list of
issues. Many of the comments addressed a broad restructuring of the electric
utility industry. When the parties met on January 9, 1995, they decided that
TEC-RI's proposal for a "cooperative collaborative process," including the
Division as a party, rather than a litigated proceeding before the Division
hearing officer, was appropriate. Hence, the Rhode Island Collaborative
(Collaborative) was formed.
On May 12, 1995, the Collaborative submitted a Report and Set of
Interdependent Principles to the RIPUC. The 17 Interdependent Principles
represented the Collaborative's underpinnings for any restructuring proposal.
The Collaborative requested that the RIPUC establish a docket and conduct a
hearing to explore the settlement principles with a view to issuing an order
indicating whether the principles "provide a suitable basis for further
detailed negotiation by the parties, or in what respects they require
modification" and setting a deadline for the submission of a more detailed
proposal for restructuring.
The RIPUC responded to the Collaborative's request by creating Docket No.
2320, taking administrative notice of Docket No. D-94-9, and declaring that all
parties to the Division docket would be treated as intervenors in this docket.
The RIPUC conducted a technical conference on July 6, 1995 and a Public hearing
on July 11, 1995. On July 19, 1995 three of the principles were modified to
address concerns expressed by the RIPUC at the technical conference. On July
25, 1995, the Collaborative provided additional information on the principle
concerning Renewables, and requested that the RIPUC approve the principles in
full.
On August 16, 1995, the RIPUC accepted the principles as modified,
deleting the principle concerning Renewables and adding a principle concerning
negotiation. The Collaborative was directed to proceed with negotiations to
quantify specific issues involving competition and open access as well
as the other issues presented in the principles. A Collaborative Progress
Report was filed in February, 1996. Blackstone and Newport have been active
participants in the ongoing collaborative meetings. It is not possible to
predict the outcome of this proceeding at this time.
Environmental Regulation
General:
The Retail Subsidiaries and Montaup and other companies owning generating
units from which power is obtained are subject, like other electric utilities,
to environmental and land use regulations at the federal, state and local
levels. The EPA, and certain state and local authorities, have jurisdiction
over releases of pollutants, contaminants and hazardous substances into the
environment and have broad authority in connection therewith, including the
ability to require installation of pollution control devices and remedial
actions. In 1994, an environmental audit program designed to ensure compliance
with environmental laws and regulations and to identify and reduce liability
was instituted for Montaup and the Retail Subsidiaries.
Federal, Massachusetts and Rhode Island legislation requires consideration
of reports evaluating environmental impact of large projects as a prerequisite
to the granting of various permits and licenses with a view of limiting such
impact. Federal, Massachusetts and Rhode Island air quality regulations also
require that plans (including procedures for operation and maintenance) for
construction or modification of fossil fuel generating facilities receive prior
approval from the DEP or RIDEM. In addition, in Massachusetts, certain
electric generation and transmission facilities will be permitted to be built
only if they are consistent with a long-range forecast filed by the utility
concerned and approved by the Massachusetts Energy Facilities Siting Board. In
Rhode Island, siting, construction and modification of major electric
generating and transmission facilities must be approved by the Rhode Island
Energy Facility Siting Board and the Rhode Island Coastal Resource Management
Council.
Generating facilities in which Montaup and Newport have an interest, and
are required to pay a share of the costs, are also subject, like other electric
utilities, to regulation with regard to zoning, land use, and similar controls
by various state and local authorities.
The EPA and state and local authorities may, after appropriate
proceedings, require modification of generating facilities for which
construction permits or operating licenses have already been issued, or impose
new conditions on such permits or licenses, and may require that the operation
of a generating unit cease or that its level of operation be temporarily or
permanently reduced. Such action may result in increases in capital costs and
operating costs which may be substantial, in delays or cancellation of
construction of planned facilities, or in modification or termination of
operations of existing facilities.
Other activities of the EUA System from time to time are subject to the
jurisdiction of various other local, state and federal regulatory agencies. It
is not possible to predict with certainty what effects the above described
statutes and regulations will have on the EUA System.
The EPA has issued regulations relating to the generation, transportation,
storage and disposal of certain wastes under RCRA; in Massachusetts, the
requirements are implemented and enforced by the DEP, whereas in Rhode Island,
RIDEM implements and enforces its own regulations under a state statute
comparable to RCRA as well as pursuant to EPA authorization.
There is an extensive body of federal and state statutes governing
environmental matters, including CERCLA, as amended by the Superfund Amendments
and Reauthorization Act of 1986; in Massachusetts, Chapter 21E, and, in Rhode
Island, the "Industrial Property Site Remediation and Reuse Act" (Brownfield's
Legislation) which permit, among other things, federal and state authorities to
initiate legal action providing for liability, compensation, cleanup, and
emergency response to the release or threatened release of hazardous substances
into the environment and for the cleanup of inactive hazardous waste disposal
sites which constitute substantial hazards. Under CERCLA, Chapter 21E, and the
Rhode Island Brownfield's Legislation, joint and several liability for cleanup
costs may be imposed on, among others, the owners or operators of a facility
where hazardous substances were disposed, the party who generated the
substances, or any party who arranged for the disposition or transport of the
substances. Due to the nature of the business of EUA's utility subsidiaries,
certain materials are generated that may be classified as hazardous under
CERCLA, Chapter 21E and Brownfield's Legislation. As a rule, the subsidiaries
employ licensed contractors to dispose of such materials. See Item 3. LEGAL
PROCEEDINGS -- Environmental Proceedings.
The EPA, pursuant to TSCA, regulates the use, storage, and disposal of
PCBs and other dielectric fluids. Because the EUA System had owned and used
some electrical transformers containing PCBs, it is subject to EPA regulation
under TSCA. These PCB transformers have been either declassified or disposed
of in accordance with TSCA requirements. EUA currently uses mineral oil
transformers which may contain traces of PCB and which may be subject to
regulations pursuant to TSCA.
Electric and Magnetic Fields:
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 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(s) or other developments concerning EMF may have on the EUA
System.
Water Regulation:
The objective of the Federal Water Pollution Control Act is to restore and
maintain the chemical, physical, and biological integrity of the nation's
navigable waters. The elimination of pollutant discharges (including heat)
into navigable waters is one goal aimed at achieving this objective. Another
step mandated by the Federal Water Pollution Control Act was the creation of a
rigorous permit program. All water discharge permits for plants in
Massachusetts, including those for the Somerset and Canal plants, are issued
jointly by the EPA and DEP. These same agencies also regulate certain
industrial stormwater discharges.
Standards have been established to control the dredging and filling of
wetlands under the Federal Water Pollution Control Act, the Massachusetts
Wetland Protection Act, and the Rhode Island Wetland Act. The EPA, the Army
Corps of Engineers, RIDEM, the Rhode Island Coastal Resources Management
Council and the DEP are pursuing a non-degradation (no loss) policy for
wetlands.
Under the Massachusetts Water Management Act, the DEP is responsible for
promulgating regulations relating to water usage and conservation.
Most of the generating units from which Montaup obtains power operate
under permits which limit their effluent discharges into water and which
require monitoring and, in some instances, biological studies and toxicity
testing of the impact of the discharges. Such permits are issued for a period
of not more than five years, at the expiration of which renewal must be sought.
The permit for the Somerset plant was renewed on September 30, 1994 and expires
on September 30, 1998.
The Oil Pollution Act of 1990 was passed after several major oil spills
occurred in waters of the United States. The primary intent of this
legislation is to mandate strong contingency plans to prevent releases of oil
and to require that sufficient resources are in place and ready to respond to
any release. EPA, United States Coast Guard, RIDEM, and DEP have a number of
other rules in place, such as EPA's Spill Prevention, Countermeasures and
Control Plan regulations, which are designed to minimize the release of oil and
other substances into navigable waters and the environment.
Air Regulation:
All fossil fuel plants from which Montaup obtains power operate under
permits which limit their emissions into the air and require monitoring of the
emissions. Air quality requirements adopted by state authorities in
Massachusetts pursuant to the Clean Air Act impose limitations with respect to
pollutants such as sulfur dioxide, oxides of nitrogen and particulate matter.
Montaup's Somerset Station is permitted to burn coal which results in sulfur
dioxide emissions not in excess of 1.2 pounds per million BTU heat release
potential (approximately 0.75% sulfur content coal). The Canal Station Unit 2
is permitted to burn fuel oil which results in sulfur dioxide emissions not in
excess of 1.2 pounds per million BTU heat release potential (approximately 1%
sulfur content fuel oil).
The EPA has established clean air standards for certain pollutants,
including standards limiting emissions from coal-fired and oil-fired
generators. Congress passed amendments to the Clean Air Act in 1990 which
created additional regulatory programs and generally updated and strengthened
air pollution control laws. These amendments will expand the regulatory role
of the EPA regarding emissions from electric generating facilities. Title IV
of the Clean Air Act Amendments addresses acid deposition abatement and
establishes a two-phase utility power plant pollution control program to reduce
emissions of sulfur dioxide and oxides of nitrogen. The first phase began in
1995 and affected approximately 261 large units in 21 eastern and midwestern
states. Phase II, which begins in the year 2000, tightens the emission limits
imposed on these larger plants and also sets restrictions on smaller, cleaner
plants fired by coal, oil and gas. Montaup's Somerset Station is classified as
a Phase II facility with a compliance deadline by the end of 1999. The control
program establishes a national cap of 8.90 million tons per year for sulfur
dioxide emissions. Beginning in the year 2000, the EPA will issue 8.90
million sulfur dioxide allowances to utilities annually. The sulfur allowance
program will not affect Montaup's Somerset Station until January 1, 2000.
Massachusetts DEP regulations establish a statewide cap on sulfur dioxide
emissions and require Montaup's facilities to meet an average emission rate of
1.2 pounds of sulfur dioxide per million BTU of fuel input by the end of 1994.
Under federal standards, Montaup would not be required to meet this sulfur
dioxide emission level until the year 2000 as a result of Title IV of the Clean
Air Act. However, Massachusetts DEP regulations require compliance five years
earlier. As required by state regulations, Montaup submitted and received
approval of a plan detailing how it would meet the 1995 sulfur dioxide
standard. Montaup is achieving compliance by substituting lower sulfur content
fuels.
Other provisions of the Clean Air Act Amendments will likely impact
Montaup. Title I of the Act sets a strategy for states to move toward
attaining national air quality standards, with the emphasis on meeting the
ozone standard. Ozone relates directly to the nation's smog problem. Oxides
of nitrogen are one of the precursors of ozone formation. Title I requires
additional controls on industrial sources of oxides of nitrogen including
utility power plants. The Act creates the Northeast Ozone Transport
Region, covering the area from Virginia to Maine, including Massachusetts and
Rhode Island. Areas within the transport region will become subject to
enhanced controls on oxides of nitrogen emissions.
In April 1992, NESCAUM, an environmental advisory group for eight
Northeast states including Massachusetts and Rhode Island issued
recommendations for nitrogen oxide 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 oxides. Montaup has initiated compliance through, among other things,
selective, noncatalytic reduction processes.
Title V of the Clean Air Act Amendments provides EPA with broad new
permitting authority, with the goal of having states begin to issue federally
enforceable operating permits by 1995 which will outline limits and conditions
necessary to comply with all applicable air requirements. The Clear Air Act
Amendments' permitting program will be phased in over a couple of years.
Montaup submitted its initial Operating Permit Application under this program
on May 5, 1995. On September 20, 1995, DEP issued Montaup an Administrative
Completeness Determination and Application Shield for its Operating Permit
Application. Although individual sources will be required to pay fees to the
various states which will administer the program, the impact of these
requirements is not expected to have a material financial impact on the EUA
System.
Environmental Regulation of Nuclear Power
The NRC has promulgated a variety of standards to protect the public from
radiological pollution caused by the normal operation of nuclear generating
facilities. For example, the NRC requires licensed facilities to develop plans
to respond to unexpected developments.
In some environmental areas the NRC and the EPA have overlapping
jurisdiction. Thus, NRC regulations are subject to all conditions imposed by
the EPA and a variety of federal environmental statutes, including obtaining
permits for the discharge of pollutants (including heat) into the nation's
navigable waters. In addition, the EPA has established standards, and is in
the process of reviewing existing standards, for certain toxic air pollutants,
including radionuclides, under the Clean Air Act Amendments which apply to NRC-
licensed facilities. The effective date for the new radionuclide standards has
been stayed as to nuclear generating units. The EPA has also promulgated
environmental radiation protection standards for nuclear power plants. These
standards regulate the doses of radiation received by the general public.
The NWPA provides for development by the federal government of facilities
for the disposal or permanent storage of civilian nuclear waste. For further
details about NWPA, see Fuel for Generation above. The NRC has also
promulgated regulations regarding the disposal of nuclear waste materials
designed to protect the public from radiological dangers.
Environmental regulation of nuclear facilities in which the EUA System has
an interest or from which they purchase power may result in significant
increases in capital and operating costs, in delays or cancellation of
construction of planned improvements, or in modification or termination of
existing facilities.
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. At the same time, Montaup assumed all of Newport's power contracts
and began leasing all of Newport's generation facilities and a portion of
Newport's transmission facilities. In 1995, the EUA System's wholly owned
generating units referred to in the following table consisted of Montaup's jet-
fueled peaking units (Somerset Jet 1 and Jet 2) and Somerset 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. Current forecasts indicate
that the combination of company owned generation, current long-term
purchased power contracts, expected short-term power opportunities, and the
System's C&LM programs, should meet EUA System capacity requirements through
the year 2000.
Montaup recovered approximately $12.8 million through rates in 1995 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 931 MW experienced
on July 27, 1995.
<TABLE>
EUA SYSTEM CAPABILITY
GENERATING UNITS IN SERVICE AS OF DECEMBER 31, 1995
<CAPTION>
GROSS WINTER MAX GROSS NET
IN SYSTEM CLAIMED SYSTEM UNIT SYSTEM
SERVICE SHARE CAPABILITY SHARE SALES SHARE
DATE UNIT NAME FUEL TYPE OWNER/OPERATOR % MW MW MW MW
<S> <C> <C> <C> <C> <C> <C> <C> <C>
100% OWNERSHIP:
1959 SOMERSET 6 COAL MONTAUP ELECTRIC CO. 100.00 110.00 110.00 0.00 110.00
1970 SOMERSET J1 JET OIL MONTAUP ELECTRIC CO. 100.00 22.00 22.00 0.00 22.00
1971 SOMERSET J2 JET OIL MONTAUP ELECTRIC CO. 100.00 21.20 21.20 0.00 21.20
1985 PAWTUCKET HYDRO HYDRO BLACKSTONE VALLEY ELEC. 100.00 1.24 1.24 0.00 1.24
1961 JEPSON DIESEL NEWPORT ELECTRIC CORP. 100.00 8.00 8.00 0.00 8.00
1978 ELDRED DIESEL NEWPORT ELECTRIC CORP. 100.00 8.25 8.25 0.00 8.25
SUBTOTAL: 171 0.00 171
JOINT OWNERSHIP:
1976 CANAL 2 NO. 6 OIL CANAL ELECTRIC COMPANY 50.00 584.00 292.00 35.00 257.00
1978 WYMAN 4 (YAR 4) NO. 6 OIL CENTRAL MAINE POWER CO. 2.63 <F1> 619.25 16.28 0.00 16.28
1986 MILLSTONE 3 NUCLEAR NORTHEAST UTILITIES 4.01 1145.70 45.93 0.00 45.93
1990 SEABROOK NUCLEAR NORTH ATLANTIC ENERGY CORP 2.90 1158.00 33.58 0.00 33.58
SUBTOTAL: 387.79 35.00 352.79
EQUITY OWNERSHIP:
1968 CONN. YANKEE NUCLEAR CONN. YANKEE ATOMIC POWER 4.50 583.20 26.24 0.00 26.24
1972 MAINE YANKEE NUCLEAR MAINE YANKEE ATOMIC POWER 3.59 880.00 31.61 0.00 31.61
1972 VERMONT YANKEE NUCLEAR VT. YANKEE NUCLEAR POWER 2.25 531.00 11.95 0.00 11.95
SUBTOTAL: 69.80 0.00 69.80
PURCHASED POWER:
1968 CANAL 1 NO. 6 OIL CANAL ELECTRIC COMPANY 25.00 557.00 139.25 0.00 139.25
1972 PILGRIM 1 NUCLEAR BOSTON EDISON COMPANY 11.00 <F2> 668.97 73.59 0.00 73.59
1977 POTTER 2 GAS/OIL BRAINTREE ELEC. LIGHT DEPT 41.67 <F2> 96.00 40.00 0.00 40.00
1975 CLEARY 9 GAS/OIL TAUNTON MUNIC. LIGHTING 13.64 <F2> 110.00 15.00 0.00 15.00
1984 MCNEIL WOOD VERMONT ELECTRIC POWER 15.24 <F2><F3> 53.00 8.08 0.00 8.08
1972 BERLIN A&B JET OIL GREEN MOUNTAIN POWER 26.27 57.10 15.00 0.00 15.00
1974 BEAR SWAMP GT1 HYDRO NEW ENGLAND POWER 5.94 286.38 17.50 0.00 17.50
1974 BEAR SWAMP GT2 HYDRO NEW ENGLAND POWER 5.94 286.38 17.50 0.00 17.50
1990 OSP 1 GAS OCEAN STATE POWER 28.00 <F4> 287.00 80.36 0.00 80.36
1991 OSP 2 GAS OCEAN STATE POWER 28.00 <F4> 281.00 78.68 0.00 78.68
1991 NEA GAS NORTHEAST ENERGY ASSOC. 8.62 333.43 28.74 0.00 28.74
SUBTOTAL: 513.70 0.00 513.70
1991 HYDRO QUEBEC I&II HYDRO HQ / NEPOOL 4.06 <F5> 1215.00 49.31 0.00 49.31
SUBTOTAL: 49.31 0.00 49.31
TOTAL GROSS SYSTEM CAPABILITY (MW) ------------------------------ 1,191.29
LESS: UNIT CONTRACT SALES (MW) --------------------- 35.00
TOTAL NET SYSTEM CAPABILITY (MW) ------------------------------------- 1,156.29
<FN>
<F1> REPRESENTS MONTAUP JOINT OWNERSHIP SHARE OF 1.9618% AND NEWPORT JOINT OWNERSHIP SHARE OF .6666%.
<F2> "LIFE OF UNIT" PURCHASE CONTRACT.
<F3> NEWPORT PURCHASED POWER ASSIGNED TO MONTAUP.
<F4> FOR EACH UNIT, MONTAUP IS A POWER PURCHASER WITH 22% ENTITLEMENT AND A 6% ENTITLEMENT
ASSIGNED FROM NEWPORT. (EUA OCEAN STATE HOLDS A 29.9% EQUITY INTEREST IN OCEAN STATE POWER
PARTNERSHIP.)
<F5> ENTITLEMENT % IS WEIGHTED AVERAGE OF PHASE I & II SHARES (40% PHASE I (4.01987%); 60% PHASE II (4.0842%)).
</FN>
</TABLE>
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 -- Nuclear Power Issues "Yankee Atomic" and "Maine
Yankee.")
Other Property
The EUA System owns approximately 4,600 miles of transmission and
distribution lines and approximately 85 substations located in the cities and
towns served.
Blackstone owns approximately 1,000 miles of transmission and distribution
lines and approximately 23 substations located in the cities and towns served.
Blackstone also owns 100% of a 1.2-MW hydroelectric generating plant located in
Pawtucket, Rhode Island. See Note E of Notes to Financial Statements in
Blackstone's 1995 Annual Report (Exhibit 13-1.01 filed herewith) regarding
encumbrances.
Eastern Edison and Montaup own approximately 3,200 miles of transmission
and distribution lines and approximately 48 substations located in the cities
and towns served. See Note F of Notes to Consolidated Financial Statements in
Eastern Edison's 1995 Annual Report (Exhibit 13-1.08 filed herewith) regarding
encumbrances.
In addition to the above, the Retail Subsidiaries, Montaup, and EUA
Service also own several buildings which house distribution, maintenance or
general office personnel. See Note E of Notes to Consolidated Financial
Statements contained in EUA's Annual Report to Shareholders for the year ended
December 31, 1995, (Exhibit 13-1.03 filed herewith) regarding encumbrances.
Item 3. LEGAL PROCEEDINGS
Rate Proceeding
See descriptions of proceedings under Item 1, BUSINESS -- Rates.
Environmental Proceedings
1. In March 1985, Blackstone was notified by the DEQE, which is now the
DEP, that it had been identified, along with other parties, as a potentially
responsible party under Massachusetts law for a condition of soil and ground
water contamination in Lowell, Massachusetts. The site in question was
occupied by a scrap metal reclamation facility which received transformers and
other electrical equipment from utility companies and others from the early
1960s until 1984. Among the contaminants apparently released at the site were
PCBs. The potentially responsible parties (PRPs), including Blackstone,
performed site studies and proposed a remedial action plan, which was approved
by the DEQE several years ago. Since that time, the PRPs have negotiated over
access, taxes and similar issues with the site owner and other parties. The
remedial option selected but not yet completed is a process of solidification;
however, a risk assessment that may now be required could lead the PRPs to
choose capping as the remedial option. The cost of implementing either remedy
could vary from $250,000 for capping to $600,000 for solidification.
Blackstone is alleged to be the fifth ranked generator out of approximately
twenty potentially responsible parties. However, Blackstone's estimated 2%
share allocation is considerably less than the shares of the four largest
contributors at the site. As a result, Blackstone expects to be offered a de
minimis party buyout settlement from the major members of the site PRPs in the
near future.
2. On July 14, 1987, the Commonwealth of Massachusetts (the Commonwealth)
on behalf of the DEP filed a cost recovery action pursuant to CERCLA and Mass.
Gen. Laws Chapter 21E against Blackstone in the United States District Court
for the District of Massachusetts (District Court). The Complaint seeks $2.2
million in costs incurred by DEP in the cleanup of an alleged coal gasification
waste site at Mendon Road in Attleboro, Massachusetts. In October 1987,
without admitting liability, Blackstone entered into an administrative Consent
Order with DEP regarding the Mendon Road site and another alleged coal
gasification site discovered by the DEP approximately 1/4 mile away known as
the Lawn/Knoll site in Attleboro. Blackstone agreed to perform preliminary
assessments at both sites in order to determine what remediation, if any, was
necessary at the site. In 1988, Blackstone submitted Phase II testing results
for the Lawn/Knoll site to the DEP for review and approval, but Blackstone has
not received a response or DEP authorization to proceed with further studies or
remedial action. On May 26, 1993, the DEP requested Blackstone to submit
additional Phase I testing for the Mendon Road site which was completed and
sent to the DEP on December 20, 1993. Meanwhile, Blackstone has contested
the DEP's cost recovery action, arguing, inter alia, that the waste removed
from the Mendon Road site, ferric ferrocyanide (FFC), was not "hazardous"
within the meaning of CERCLA or Mass. Gen. Laws Chapter 21E and the DEP's
cleanup actions were inconsistent with the National Contingency Plan (NCP).
On November 25, 1991, the District Court held that the waste was "hazardous"
within the meaning of both statutes and on December 20, 1992, the District
Court held Blackstone and a co-defendant, the Courtois Sand & Gravel Co.
(Courtois) liable for an undetermined amount of cleanup costs. The District
Court remanded the case to the DEP to supplement the administrative record with
Blackstone's oral and written comments concerning the cleanup. On March 19,
1993, Blackstone made an oral presentation to the DEP and on April 19, 1993,
Blackstone submitted written comments. On December 13, 1994, the District
Court issued a judgment against Blackstone finding Blackstone liable to the
Commonwealth for the full amount of response costs incurred by the Commonwealth
in the cleanup of the Mendon Road site. The judgment also found Blackstone
liable for interest and litigation expenses calculated to the date of
judgment. The total liability at December 31, 1994 was approximately $5.9
million, including approximately $3.6 million in interest which has accumulated
since 1985.
On January 20, 1995, Blackstone entered into an escrow agreement with the
Commonwealth whereby Blackstone deposited $5.9 million with an escrow agent who
transferred the funds into an interest bearing money market account. The
distribution of the proceeds of the escrow account will be determined upon the
final resolution of the judgment. No additional interest expense will accrue
on the judgment amount.
Blackstone filed a Notice of Appeal of the District Court's judgment and
filed its brief with the United States Court of Appeals for the First Circuit
(Circuit Court) on February 24, 1995. On October 6, 1995, the Circuit Court
vacated the District Court's $5.9 million judgement. Rather than remand the
case to the District Court for a trial on the issue of whether FFC is a
hazardous substance, the Circuit Court exercised its primary jurisdictional
powers to send the matter to the EPA for an administrative determination on the
issue. If the EPA determines that FFC is not a hazardous substance, given the
present posture of the case, Blackstone may not be liable to reimburse the
Commonwealth for the Mendon Road cleanup costs.
On January 28, 1994, Blackstone filed a Complaint in the District Court
seeking, among other relief, contribution and reimbursement from Stone &
Webster Inc., of New York City and several of its affiliated companies (Stone &
Webster), and Valley Gas Company of Cumberland, Rhode Island (Valley) for any
damages incurred by Blackstone regarding the Mendon Road site. Blackstone's
Complaint also seeks a declaratory judgment that Stone & Webster and Valley
owned and/or operated a coal gasification plant on Tidewater Street in
Pawtucket (the Tidewater Plant) where the coal gasification waste allegedly
was generated, and that they individually or collectively arranged for the
disposal of such waste. The District Court has denied motions to dismiss the
complaint filed by Stone & Webster and Valley in 1994. This proceeding was
stayed in December 1995 pending final EPA determination as to whether FFC is a
hazardous substance.
Blackstone has notified certain liability insurers and has filed claims
with respect to the Mendon Road site. Blackstone reached final settlement with
one such insurer for coverage of legal costs related to this proceeding and in
January 1996 received payment of approximately $1.2 million. Blackstone is
actively pursuing coverage from other carriers.
3. On October 28, 1986, RIDEM notified Blackstone that there may have been
a release of hazardous material at the Tidewater Plant site in Pawtucket, Rhode
Island. The site was placed on EPA's CERCLA list in 1987. The site includes
the Tidewater Plant owned by Valley Gas Company (approximately 10 acres), the
No. 1 Station owned by Blackstone (approximately 10 acres), and land formerly
owned by Blackstone that was sold in 1968 to the City of Pawtucket
(approximately 10 acres). RIDEM told Blackstone that the site contained
cyanide-contaminated wastes and petroleum-contaminated soils due to tanks
formerly located at the site. In December, 1990, after obtaining approval
from RIDEM, Blackstone removed approximately 1,000 tons of soil from the site.
On September 3, 1991, RIDEM initiated a site investigation which constitutes
the second step in a site screening and assessment process established by the
EPA to determine whether the site should be listed as a Superfund site. On
February 3, 1993, RIDEM notified Blackstone that it required further assessment
and evaluation of site conditions to determine if the site qualifies for review
pursuant to the Hazardous Ranking System. The EPA is planning to review the
site to determine whether a further investigation and a hazard ranking
should be performed. As previously discussed in item 2 above, on January 28,
1994, Blackstone filed a complaint (previously mentioned in paragraph 2) in the
District Court seeking, inter alia, a declaratory judgment that Stone & Webster
and Valley are responsible for owning and/or operating the Tidewater
Plant and disposing and/or arranging for the disposal of coal gasification
wastes at the Tidewater Plant site. On September 12, 1995, RIDEM notified
Blackstone and Valley of their responsibility regarding the release of
hazardous substances at the Tidewater Plant site. RIDEM ordered Blackstone
and Valley to conduct an environmental study of the Tidewater Plant site and
adjoining lots. Blackstone and Valley have entered into an agreement to share
the expenses of conducting the study and/or retaining an environmental energy
firm to conduct a Phase II site study.
4. 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 the new
Massachusetts Contingency Plan regulations, Montaup must take the initiative to
complete investigative and remedial actions by August 1997. A site
investigation was initiated in September 1995 as the first step in this
process.
5. 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. In August 1994 a transition statement issued by DEP
reclassifying the site from a Tier IA site to a Tier IB site was signed by
Eastern Edison and submitted to DEP. That reclassification enables the site to
be investigated and cleaned up under the guidance of a licensed site
professional without DEP approval for each action taken. Cleanup activities
were nearly completed at the site in 1995. The removal of storage tanks and
excavation of PCB "hot spots" was accomplished. Backfilling and paving to cap
areas of residual soil contamination are expected to commence in the spring of
1996. The total estimated cost of the cleanup including amounts already
incurred, is anticipated to be approximately $550,000.
Blackstone, Eastern Edison, Montaup and EUA Service 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. EUA or a subsidiary could thus be
held fully liable for environmental damages for which they were only partially
responsible. However, EUA might then be entitled to recover costs from other
PRPs.
As of December 31, 1995, the EUA System has incurred costs of
approximately $4.6 million (excluding the Mendon Road judgment) in connection
with the foregoing environmental matters, substantially all of which relate to
Blackstone. EUA estimates that additional expenditures (excluding the Mendon
Road judgment) may be incurred through 1997 of up to $3.0 million of which
approximately $2.5 and $0.5 million relate to Blackstone and Eastern Edison,
respectively.
As a general matter, the EUA System will seek to recover costs relating to
environmental proceedings in their rates. Blackstone is recovering in rates
certain of its incurred costs over a five-year period. Montaup is currently
recovering certain of its incurred costs in its rates. Estimated amounts after
1997 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, EUA does not believe that the ultimate impact of the environmental
costs will be material to the financial position of the EUA System or to any
individual subsidiary and thus, no loss provision is required at this time.
EUA WestCoast L.P.
EUA Cogenex, through its EUA WestCoast (WestCoast) L.P., had under
development a cogeneration facility of approximately 1.5 MW. The cogeneration
facility experienced numerous start-up delays and cost overruns. The host of
the facility has taken the position that the energy services agreement between
WestCoast and itself is terminated due to, among other things, failure to
complete the project. WestCoast disagrees with the host's right to terminate,
but has decided not to contest the host's purported termination.
In June 1993, WestCoast filed a lawsuit against the contractors
responsible for the design and construction of the facility, as well as the
surety which issued a performance bond guaranteeing construction. Certain
defendants in that action have filed cross-complaints against WestCoast and EUA
Cogenex, seeking, among other things, approximately $300,000 for payments
withheld by WestCoast due to the contractor's deficient performance,
contribution and indemnity. A contractor has also filed a cross-complaint
against the host. Additionally, the host has filed a cross-complaint against
Cogenex and the other parties in the litigation, seeking approximately $7
million in damages arising principally from lost economic advantage. EUA
WestCoast filed its own cross complaint against the host affirmatively
seeking damages. EUA WestCoast has secured defense from insurance carriers for
the claims made by the host.
EUA Cogenex intends to vigorously prosecute its claims against the
contractors, surety and host, and defend itself against any cross-complaints.
EUA Cogenex cannot predict the ultimate resolution of this matter. As a result
of EUA Cogenex's decision to discontinue cogeneration operations effective as
of July 1, 1995, EUA Cogenex has recorded a reserve for its total investment in
this project which is included in the one-time after-tax charge to earnings of
approximately $10.5 million.
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. In April 1995 Montaup filed a motion for summary judgement and in
June 1995 the court granted Montaup's motion. In July, Aquidneck filed for
appeal of the court's decision.
Montaup, EUA and EUA Service intend to vigorously contest the appeal and
continue to believe that Aquidneck's claims have no basis in law.
On June 30, 1987, the MDPU commenced a proceeding for the purpose of
investigating 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. EUA cannot predict the outcome of this
matter at this time.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
EXECUTIVE OFFICERS OF EASTERN UTILITIES ASSOCIATES
The names, ages and positions of all of the executive officers of EUA as
of March 18, 1996, are listed below along with their business experience during
the past five years. Officers are elected annually by the Trustees at the
meeting of Trustees next following the annual meeting of shareholders. The
1996 Annual Meeting of Shareholders is scheduled to be held on May 20, 1996.
There are no family relationships among these officers, nor any arrangement or
understanding between any officer and any other person pursuant to which the
officer was selected. The executive officers also serve as officers/or
directors of various subsidiary companies.
Name, Age and Position Business Experience During Past 5 Years
Richard M. Burns, 58 Comptroller since 1976, Assistant Secretary since
Comptroller 1978, and Assistant Treasurer since April 1986.
Chief Accounting Officer of EUA.
John D. Carney, 51 Executive Vice President since April 1995;
Executive Vice President President of Eastern Edison Company since January
1990; President of Blackstone since April 1995.
Responsible for the day-to-day activities of
The EUA System's retail electric operations.
Clifford J. Hebert, Jr., 48 Treasurer since April 1986. Secretary since May,
Treasurer and 1995. Responsible for financial, treasury and
Secretary corporate affairs of the EUA System.
Donald G. Pardus, 55 Chairman since July 1990; Chief Executive
Chairman of the Board, Officer since April 1989. Responsible for
Chief Executive Officer the overall management of the EUA System.
and Trustee
Robert G. Powderly, 48 Executive Vice President since April 1992;
Executive Vice President President of Newport Electric Corporation from
March 1990 to April 1992. Responsible for
purchasing, customer information services,
information systems, human resources, marketing
and rate activities of the EUA System.
John R. Stevens, 55 President since July 1990; Chief Operating
President, Chief Operating Officer since January 1990; Senior Executive Vice
Officer and Trustee President from January 1990 to July, 1990.
Responsible for retail operations and new
ventures of the EUA System.
Except as described below, there have been no events under any bankruptcy
act, no criminal proceedings and no judgments or injunctions material to the
evaluation of the ability and integrity of any director or executive officer
during the past five years.
On February 28, 1991, EUA Power (now Great Bay Power), filed a voluntary
petition with the United States Bankruptcy Court for the District of New
Hampshire for protection under Chapter 11 of the Federal Bankruptcy Code. EUA
Power, a wholly owned subsidiary of EUA prior to February 5, 1993, the date it
redeemed all of its equity securities held by EUA, was organized solely for the
purpose of acquiring an interest in the Seabrook Project and selling in the
wholesale market its share of electricity generated by the project. EUA has no
ownership interest in Great Bay Power.
Messrs. Burns, Hebert, Pardus and Stevens, were officers or directors of EUA
Power since its formation in 1986, resigned their positions effective December
30, 1992, with the exception of Mr. Stevens who resigned as the sole officer
and director of Great Bay Power on November 22, 1994.
PART II
Item 5. MARKET FOR EUA'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "QUARTERLY FINANCIAL AND COMMON
SHARE INFORMATION" included in EUA's Annual Report to Shareholders for the year
ended December 31, 1995 (Exhibit 13-1.03 filed herewith) is incorporated herein
by reference.
The information required by this item for Blackstone and Eastern Edison is
incorporated by reference to information contained under the like captioned
sections of Blackstone's and Eastern Edison's 1995 Annual Reports (Exhibit 13-
1.01 and 13-1.08, respectively, filed herewith).
As of February 1, 1996 there were 12,161 EUA common shareholders of record.
The closing price of EUA's Common Shares as reported by the Wall Street
Journal on March 18, 1996 was $21.125.
Item 6. SELECTED FINANCIAL DATA
The information set forth under the caption "SELECTED CONSOLIDATED FINANCIAL
DATA" included in EUA's Annual Report to Shareholders for the year ended
December 31, 1995, (Exhibit 13-1.03 filed herewith) and the information set
forth under the caption "SELECTED FINANCIAL DATA" included in the Annual
Reports for the year ended December 31, 1995 for Blackstone and Eastern Edison
(Exhibits 13-1.01 and 13-1.08, respectively, filed herewith) are incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference to
pages 9 through 20 in the 1995 EUA Annual Report to Shareholders, pages 3
through 8 in the 1995 Blackstone Annual Report and pages 3 through 9 in the
1995 Eastern Edison Annual Report (Exhibits 13-1.03, 13-1.01 and 13-1.08 for
EUA, Blackstone and Eastern Edison , respectively, filed herewith).
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to
pages 22 through 37 in the 1995 EUA Annual Report to Shareholders, page 2 and
pages 10 through 27 in the 1995 Blackstone Annual Report and, page 2 and pages
12 through 31 in the 1995 Eastern Edison Annual Report (Exhibits 13-1.03, 13-
1.01 and 13-1.08 for EUA, Blackstone and Eastern Edison, respectively, filed
herewith).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
EASTERN UTILITIES ASSOCIATES
The information concerning trustees and executive officers set forth under
the caption "ELECTION OF TRUSTEES AND OWNERSHIP OF COMMON SHARES" in EUA's
definitive Proxy Statement to be mailed to shareholders in connection with the
shareholders' annual meeting to be held on May 20, 1996, and filed with the SEC
is incorporated herein by reference. See also "EXECUTIVE OFFICERS OF EASTERN
UTILITIES ASSOCIATES" following Item 4 herein.
BLACKSTONE AND EASTERN EDISON
The names, ages and positions of all of the directors and executive officers of
Blackstone and Eastern Edison as of March 18, 1996 are listed below with their
business experience during the past five years. The directors of Blackstone
and the directors, Treasurer and Clerk of Eastern Edison are each elected
to serve until the next annual stockholders' meeting. All other officers are
elected to serve until the next meeting of directors following the annual
stockholders' meeting. There is no family relationship between any of the
directors or officers of Blackstone and Eastern Edison. Messrs. Pardus and
Stevens are Trustees of EUA. Certain officers of Blackstone and Eastern
Edison are, or at various times in the past have been, officers and/or
directors of the System Companies with which Blackstone and Eastern Edison have
entered into contracts and had other business relations.
Name, Age and Position Business Experience During Past 5 Years
Richard M. Burns, 58* Vice President, Assistant Treasurer and Assistant
Vice President Clerk/Assistant Secretary of Blackstone and
Eastern Edison since April 1986.
John D. Carney, 51* President and Director of Blackstone since April
Director and President 1995; President and Director of Eastern Edison
since January 1990.
David H. Gulvin, 61 Senior Vice President of Blackstone and Eastern
Senior Vice President Edison since April 1995; President of Blackstone
from November 1989 to April 1995; Director of
Blackstone since November 1989. Director of
Eastern Edison since July 1995. Responsible for
corporate communications, consumer services,
marketing and rate activities.
Barbara A. Hassan, 46 Vice President of Blackstone since April 1995;
Vice President Vice President of Eastern Edison since January
1990. Responsible for the operation and
maintenance of the transmission and distribution
facilities.
Clifford J. Hebert, Jr., 48* Treasurer since April 1986 and Secretary/Clerk
Treasurer and since April 1995 of both Blackstone
Secretary/Clerk and Eastern Edison.
Michael J. Hirsh, 41 Vice President of Blackstone since July 1991;
Vice President Vice President of Eastern Edison since April
1995; Prior to that he was either a Director or
Manager of the Engineering or Resource Planning
Departments of EUA Service for more than five
years. Responsible for all engineering and
technical services.
Kevin A. Kirby, 45 Vice President of Blackstone and Eastern Edison
Vice President since April, 1995; prior to that he was a
Director of the Integrated Resource Management
department of EUA Service for five years;
responsible for the resource planning, power
supply and contract administration activities of
the EUA System.
Donald G. Pardus, 55* Chairman of the Board since July 1989 and
Director and Director since 1979 of both Blackstone and
Chairman of the Board Eastern Edison.
Robert G. Powderly, 48* Executive Vice President and Director since March
Director and Executive 1992 of both Blackstone and Eastern Edison.
Vice President
John R. Stevens, 55* Vice Chairman of the Board since July 1989 and
Director and Vice Director since July 1987 of both Blackstone and
Chairman of the Board Eastern Edison.
* Please refer to the material supplied under the caption "EXECUTIVE OFFICERS
OF EASTERN UTILITIES ASSOCIATES" following Item 4 herein for other information
regarding this officer.
Item 11. EXECUTIVE COMPENSATION
Eastern Utilities Associates
The information concerning executive compensation set forth under the caption
"COMPENSATION AND OTHER TRANSACTIONS" in EUA's definitive Proxy Statement to be
mailed to shareholders in connection with the shareholders' annual meeting to
be held on May 20, 1996 and filed with the SEC is incorporated herein by
reference with the exception of the Report of the Compensation and Nominating
Committee on Compensation of Executive Officers and accompanying Corporate
Performance Graph that appears therein and which are specifically not
incorporated herein by reference.
Blackstone and Eastern Edison
The Chief Executive Officer and the four other most highly compensated
executive officers of Blackstone and Eastern Edison hold the same or similar
positions with EUA and are not paid directly by either Blackstone or Eastern
Edison. The information required by this item is incorporated herein
by reference to the material under the caption "COMPENSATION AND OTHER
TRANSACTIONS" in the definitive Proxy Statement of EUA, dated March 27, 1996,
with the exception of the Report of the Compensation and Nominating Committee
on Compensation of Executive Officers and accompanying Corporate Performance
Graph that appears therein and which are specifically not incorporated herein
by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners of Blackstone and
Eastern Edison.
Amount (number of
Name and Address of shares) and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
Common Stock Eastern Utilities
Associates 2,891,357 of Eastern Edison* 100%
One Liberty Square 184,062 of Blackstone* 100%
Boston, Massachusetts
_______________
*All shares, which are the only voting securities of Eastern Edison and
Blackstone, are registered in the name of the beneficial owner.
(b) Security ownership of certain beneficial owners of EUA and management of
EUA, Blackstone and Eastern Edison.
The statements concerning security ownership of certain beneficial owners
and management set forth under the caption "ELECTION OF TRUSTEES AND OWNERSHIP
OF COMMON SHARES" in EUA's definitive Proxy Statement to be mailed to
shareholders in connection with the shareholders' annual meeting to be held on
May 20, 1996 and filed with the SEC are incorporated herein by reference.
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 response to this portion of Item 14 is set forth under Item 8.
(a)(2) Financial Statement Schedules
The following additional consolidated financial statement schedules filed
herewith for EUA and Blackstone should be considered in conjunction with the
financial statements in the EUA's Annual Report to Shareholders and
Blackstone's Annual Report for the year ended December 31, 1995 (Exhibit 13-
1.03 and 13-1.01, respectively, filed herewith):
1. Financial Statement Schedules:
EUA
Schedule II - Valuation and Qualifying Accounts for the three years
ended December 31, 1995.
Blackstone
Schedule II - Valuation and Qualifying Accounts for the three years
ended December 31, 1995.
(a)(3) Exhibits (*denotes filed herewith).
Articles of Incorporation and By-Laws:
-EUA-
3-1.03 - Declaration of Trust of EUA, dated April 2, 1928, as amended
(Exhibit A-3, File No. 70-3188; Exhibit 1 to EUA's 8-K Reports for
April in each of the years 1957, 1962, 1966, 1968, 1972, and 1973,
File No. 1-5366; Exhibit A-1 (a), Amendment No. 2 to Form U-1,
File No. 70-5997; Exhibit 4-3, Registration No. 2-72589; Exhibit
1 to Certificate of Notification, File No. 70-6713; Exhibit 1 to
Certificate of Notification, File No. 70-7084; Exhibit 3-2, Form
10-K of EUA or 1987, File No. 1-5366).
- Eastern Edison -
3-1.08 - Form of Restated and Amended Articles of Organization (filed as
Exhibit B-1 to Form U5S of EUA for 1993).
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), and twenty-six supplements thereto (Exhibit A, File No.
70-3015; Exhibit A-3, File No. 70-3371; Exhibit C to Certificate
of Notification, File No. 70-3371; Exhibit D to Certificate of
Notification, File No. 3619; Exhibit D to Certificate of
Notification, File No. 70-3798; Exhibit F to Certificate of
Notification, File No. 70-4164; Exhibit D to Certificate of
Notification, File No. 70-4748; Exhibit C to Certificate of
Notification, File No. 70-5195; Exhibit F to Certificate of
Notification, File No. 70-5379; Exhibit C to Certificate of
Notification, File No. 70-5719; Exhibit 5-24 Registration No. 2-
65785; Exhibit F to Certificate of Notification, File No. 70-6463;
Exhibit C to Certificate of Notification, File No. 70-6608;
Exhibit C to Certificate of Notification, File No. 70-6737;
Exhibit F to Certificate of Notification, File No. 70-6851;
Exhibit 4-31, Form 10-K of EUA for 1984, File No. 1-5366; Exhibit
F to Certificate of Notification, File No. 70-7254; Exhibit C
to Certificate of Notification, File No. 70-7373; Exhibit C to
Certificate of Notification, File No. 70-7373; Exhibit C to
Certificate of Notification, File No. 70-7373; Exhibit F to
Certificate of Notification, File No. 20-7511; Exhibit 4-34,
Form 10-K of Eastern Edison for 1990, File No. 0-8480; Exhibit 4-
24, Form 10-K of Eastern Edison for 1992, File No. 0-8480; Exhibit
4-35, Form 10-K of Eastern Edison for 1990, File No. 0-8480;
Exhibit 4-36, Form 10-K of Eastern Edison for 1990, File No. 0-
8480; Exhibit C-33 to Form U5S of EUA for 1993; Exhibit C-34
to Form U5S of EUA for 1993; Exhibit 4-29.08, Form 10-K of Eastern
Edison for 1994, File No. 0-8480).
- 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).
- Blackstone -
4-1.01 - First Mortgage Indenture and Deed of Trust dated as of December 1,
1980 of Blackstone (Exhibit A, Form 8-K of EUA dated January 14,
1981, File No. 1-5366) and two supplements thereto (Exhibit 4-33,
Form 10-K of EUA for 1989, File No. 1-5366; Exhibit 4-3, Form 10-K
of BVE for 1990, File No. 0-2602).
4-4.01 - Loan Agreement between Rhode Island Industrial Facilities
Corporation and Blackstone dated as of December 1, 1984 (Exhibit
10-72, Form 10-K of EUA for 1984, File No. 1-5366).
- EUA Service -
4-1.07 - Note Purchase Agreement dated as of January 13, 1988 of Service
(Exhibit 4-38, Form 10-K of EUA for 1987, File No. 1-5366).
- EUA Cogenex -
4-1.10 - Note Agreement dated as of June 28, 1990 of EUA Cogenex with the
Prudential Insurance Company of America (Exhibit 4-46, Form 10-K
of EUA for 1990, File No. 1-5366).
4-2.10 - Note Agreement dated as of October 29, 1991 between EUA Cogenex
and Prudential Insurance Company of America (Exhibit 4-55, Form
10-K of EUA for 1991, File No. 1-5366).
4-3.10 - Note Purchase Agreement dated as of September 29, 1992 of EUA
Cogenex and the Prudential Life Insurance Company of America
(Exhibit 4-44, Form 10-K of EUA for 1992, File No. 1-5366).
4-4.10 - Indenture dated September 1, 1993 between EUA Cogenex and the Bank
of New York as Trustee (Exhibit 4-4.10, Form 10-K of EUA for 1993,
File No. 1-5366).
- Newport -
4-1.14 - Indenture of First Mortgage dated as of June 1, 1954 of Newport,
as supplemented on August 1, 1959, April 1, 1962, October 1, 1964,
April 1, 1967, September 1, 1969, September 1, 1970, June 1, 1978,
October 1, 1978, May 1, 1986, December 1, 1987 and November 1,
1989 (Exhibit 4-49, Form 10-K of EUA for 1990, File No. 1-5366).
4-2.14 - United States Government Small Business Administration Loan to
Newport entitled, "Base Closing Economic Injury Loan", signed May
30, 1975 and amended on October 6, 1983 (Exhibit 4-50, Form 10-K
of EUA for 1990, File No. 1-5366).
4-3.14 - Indenture of Second Mortgage dated as of September 1, 1982 of
Newport, as supplemented on December 1, 1988 (Exhibit 4-51, Form
10-K of EUA for 1990, File No. 1-5366).
4-4.14 - Loan Agreement between the Rhode Island Port Authority and
Economic Development Corporation and Newport Electric Corporation
dated as of January 6, 1994 (Exhibit 4-4.14, Form 10-K of EUA for
1993, File No. 1-5366).
4-5.14 - Trust Indenture between the Rhode Island Authority and Economic
Development Corporation and Newport Electric Corporation dated as
of January 1, 1994 (Exhibit 4-5.14, Form 10-K of EUA for 1993,
File No. 1-5366).
4-6.14 - Letter of Credit and Reimbursement Agreement dated January 6, 1994
(Exhibit 4-6.14, Form 10-K of EUA for 1993, File No. 1-5366).
- EUA Ocean State -
4-1.12 - Note Purchase Agreement dated as of January 16, 1992 between EUA
Ocean State Corporation and John Hancock Mutual Life Insurance
Company (Exhibit 4-56, Form 10-K of EUA for 1991, File No. 1-
5366).
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 - Eastern Utilities Associates Employees' Savings Plan Trust
Agreement (Exhibit 10-3, Form 10-K of EUA for 1992, File No. 1-
5366).
10-3.03 - Eastern Utilities Associates Employees' Savings Plan as amended
and restated effective January 1, 1989 (Exhibit 10-4, Form 10-K of
EUA for 1992, File No. 1-5366).
10-4.03 - Stock Purchase Agreement dated as of December 10, 1986, among
Eastern Utilities Associates, Citizens Corporation and Citizens
Energy Corporation (Exhibit 10-104, Form 10-K of EUA for 1986,
File No. 1-5366).
10-5.03 - Precedent Agreement dated as of November 29, 1989 between EUA and
NECO Enterprises, Inc. (Exhibit B-4, Form U-1, File No. 70-7677).
10-6.03 - Amendment to and Restatement of Stock Purchase Agreement dated as
of February 1, 1990 between EUA, NECO Enterprises, Inc., Newport
Electric Corporation and a special-purpose subsidiary of EUA for
the acquisition by EUA of the stock of Newport Electric
Corporation (Exhibit B-3, Form U-1, File No. 70-7677).
10-7.03 - Letter of Assurance in connection with the Credit Agreement
between Vermont Electric Transmission Company, Inc. and Bank of
America National Trust and Savings Association dated July 19, 1983
(Exhibit 10-111, Form 10-K of EUA for 1990, File No. 1-5366).
10-8.03 - Amended and Restated Equity Maintenance Agreement dated as of
September 29, 1992 among EUA and The Prudential Insurance Company
of America and Pruco Life Insurance Company (Exhibit 10-9, EUA 10-
K for 1992, File No. 1-5366).
10-9.03 - Guaranty, dated June 28, 1990 made by EUA in favor of The
Prudential Life Insurance Company of America (Exhibit 10-10, EUA
10-K for 1992, File No. 1-5366).
10-10.03 - Guaranty, dated January 16, 1992 made by EUA in favor of John
Hancock Mutual Life Insurance Company (Exhibit 4-125, Form 10-K of
EUA for 1991, File No. 1-5366).
10-11.03 - Form of Service Contract between EUA Service Corporation and each
of the other companies (including EUA) in the EUA System (Exhibit
13-1.03, Registration No. 2-55990).
10-12.03 - Form of EUA Restricted Stock Plan effective July 17, 1989 (Exhibit
10-13, EUA Form 10-K for 1992, File No. 1-5366).
10-13.03 - Eastern Utilities Associates Employees' Share Ownership Plan Trust
Agreement (Exhibit 5, Form 10-K of EUA for 1977, File No. 1-5366).
10-14.03* - Employees' Retirement Plan of Eastern Utilities Associates and Its
Affiliated Companies as amended and restated effective January 1,
1989.
10-15.03* - Eastern Utilities Associates Employees' Savings Plan as amended
and restated effective January 1, 1989 (including amendments
through January 1, 1992).
10-16.03* - First Amendment to the Employees' Retirement Plan of Eastern
Utilities Associates and Its Affiliated Companies dated December
21, 1994.
10-17.03* - First Amendment to Eastern Utilities Associates Employees' Savings
Plan and Its Affiliated Companies dated December 21, 1994.
- Eastern Edison -
10-1.08 - Trust Agreement dated as of July 1, 1993 between Massachusetts
Industrial Finance Agency and Shawmut Bank, N.A. (filed as Exhibit
10-1.08 to Eastern Edison's 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 (filed as Exhibit 10-
2.08 to Eastern Edison's 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 (filed as Exhibit 10-3.08 to Eastern Edison's 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. (filed as Exhibit
10-4.08 to Eastern Edison's 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 Connecticut Yankee Atomic
Power Company and Montaup dated July 1, 1964 as amended and
supplemented March 1, 1978, August 22, 1980, and October 15, 1982
(Exhibit B-1, File No. 70-4245; 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).
10-3.05 - Capital Funds Agreement (composite copy) between Connecticut
Yankee Atomic Power Company and Montaup dated September 1, 1964
(Exhibit B-2, File No. 70-4245).
10-4.05 - 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).
10-5.05 - Contract for sale of power to Montaup by Canal Electric Company
dated December 1, 1965 (Exhibit 2D, File No. 0-688).
10-6.05 - Capital Funds Agreement (composite copy) between Vermont Yankee
Nuclear Power Corporation and Montaup dated as of February 1,
1968, and Amendment thereto dated as at March 12, 1968 (Exhibit B-
2, File No. 70-4611; Exhibit B-3, File No. 70-4611).
10-7.05 - Form of Power Contract between Vermont Yankee Nuclear Power
Corporation and Montaup dated as of February 1, 1968, as amended
June 1, 1972, April 15, 1983, April 24, 1985, June 1, 1985, May 6,
1988 (2), June 15, 1989 and December 1, 1989 (Exhibit B-4, File
No. 70-4591; Exhibit 13-21, Registration No. 2-46612; Exhibit 10-
63, Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-74,
Form 10-K of EUA for 1985, File No. 1-5366; Exhibit 10-78, Form
10-K of EUA for 1986, File No. 1-5366; Exhibits 10-97 and 10-98,
Form 10-K of EUA for 1988, File No. 1-5366; Exhibit 10-95, Form
10-K of EUA for 1989, File No. 1-5366; Exhibit 10-80, Form 10-K of
Eastern Edison for 1990, File No. 0-8480).
10-8.05 - Sponsor Agreement (composite copy) among Vermont Yankee Nuclear
Power Corporation's Sponsors, including Montaup, dated as of
August 1, 1968 (Exhibit 4-0, Registration No. 2-33061).
10-9.05 - Capital Funds Agreement (composite copy) between Maine Yankee and
Montaup dated May 20, 1968 and as amended August 1, 1985 (Exhibit
B-2, File No. 70-4658; Exhibit 10-78, Form 10-K of EUA for 1985,
File No. 1-5366).
10-10.05 - Power Contract (composite copy) between Maine Yankee Atomic and
Montaup dated May 20, 1968, as amended December 19, 1983 and
January 1, 1984 (Exhibit B-3, File No. 70-4658; Exhibit 10-64,
Form 10-K of EUA for 1983, File No. 1-5366; Exhibit 10-66, Form
10-K of EUA for 1984, File No. 1-5366).
10-11.05 - Stockholder Agreement (composite copy) among Maine Yankee
Sponsors, including Montaup, dated May 20, 1968 (Exhibit B-4, File
70-4658).
10-12.05 - Agreement (composite copy) among Vermont Yankee Nuclear Power
Corporation's Sponsors, including Montaup, dated as of April 30,
1969 (Exhibit B-7, File No. 70-4435).
10-13.05 - Form of Agreement among Maine Yankee Atomic Power Company's
Sponsors dated as of May 20, 1969 (Exhibit B-5, File No. 70-4658).
10-14.05 - Form of New England Power Pool Agreement dated as of September 1,
1971, as amended as of July 1, 1972, March 1, 1973, April 2, 1973,
March 15, 1974, June 1, 1975, September 1, 1975, December 31,
1976, January 18, 1977, July 1, 1977, August 1, 1977, August 15,
1978, January 31, 1980, February 1, 1980, September 1, 1981,
December 1, 1981, June 1, 1982, June 15, 1983, October 1, 1983,
August 1, 1985, August 15, 1985, January 1, 1986, September 1,
1986, March 1, 1988, May 1, 1988, March 15, 1989 and October 1,
1990, (Exhibit 13-45, Registration No. 2-41488; Exhibit 13-38,
Registration No. 2-46612; Exhibits 13-39 and 13-40, Registration
No. 2-48966; Exhibit B-3, Form U5S of EUA for year 1974; Exhibit
13-35(a), Registration No. 2-54449; Exhibit 13-35, Registration
No. 2-55990, Exhibits 5-69 and 5-70, Registration Exhibit 13-
35(a), Registration No. 2-54449; Exhibit 13-35, Registration No.
2-55990, Exhibits 5-69 and 5-70, Registration No. 2-58625;
Exhibit 6, Form 10-K of EUA for 1977, File No. 1-5366; Exhibit 1,
Form 10-K of EUA for 1979, File No. 1-5366; Exhibit No. 10-67,
Registration No. 2-80205; Exhibit 10-65, Form 10-K of EUA for
1983, File No. 1-5366; Exhibit 10-66, Form 10-K of EUA for 1983,
File No. 1-5366; Exhibits 10-75, 10-76, and 10-77, Form 10-K of
EUA for 1985, File No. 1-5366; Exhibit 10-79, Form 10-K of
EUA for 1986, File No. 1-5366; Exhibits 10-99 and 10-100, Form
10-K of EUA for 1988, File No. 1-5366; Exhibit 10-96, Form 10-K of
EUA for 1989, File No. 1-5366; Exhibit 10-81, Form 10-K of
Eastern Edison for 1990, File No. 0-8480).
10-15.05 - 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).
10-16.05 - 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).
10-17.05 - 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).
10-18.05 - 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).
10-19.05 - 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).
10-20.05 - 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).
10-21.05 - Agreement for Joint Ownership dated as of October 27, 1970 between
Canal Electric Company and Montaup (Exhibit 13-71, Registration
No. 2-55990).
10-22.05 - 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).
10-23.05 - 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).
10-24.05 - 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).
10-25.05 - 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).
10-26.05 - 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).
10-27.05 - 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).
10-28.05 - 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).
10-29.05 - 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).
10-30.05 - 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).
10-31.05 - 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).
10-32.05 - 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).
10-33.05 - 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).
10-34.05 - 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).
10-35.05 - 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).
10-36.05 - 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).
10-37.05 - 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).
*10-38.05 - Twenty-eighth Amendment to 10-14.05 dated September 15, 1992.
*10-39.05 - Twenty-ninth Amendment to 10-14.05 dated May 1, 1993.
*10-40.05 - Thirty-second Amendment to 10-14.05 dated September 1, 1995.
- Blackstone -
10-1.01 - Trust Indenture between Rhode Island Industrial Facilities
Corporation and the Rhode Island Hospital Trust Company dated as
of December 1, 1984 (Exhibit 10-73, Form 10-K of EUA for 1984,
File No. 1-5366).
10-2.01 - Remarketing Agreement between Rhode Island Hospital Trust Company,
Citibank and Blackstone dated as of December 19, 1984 (Exhibit 10-
74, Form 10-K of EUA for 1984, File No. 1-5366).
10-3.01 - Letter of Credit and Reimbursement Agreement between Blackstone
Valley Electric Company and The Bank of New York dated as of
January 21, 1993 (Exhibit 10-10, Form 10-K of Blackstone for 1992,
File No. 0-2602).
10-4.01 - Interconnection Agreement by and between Blackstone and Ocean
State Power dated November 1, 1988, as amended and restated
effective August 16, 1989 by and among Blackstone, Ocean State
Power I and Ocean State Power II (Exhibit 10-100, Form 10-K of EUA
for 1989, File No. 1-5366).
10-5.01 - Power Purchase Agreement between Blackstone and Blackstone Hydro,
Inc. dated as of January 8, 1989 and assignment to Montaup
(Exhibits 10-101 and 10-102, Form 10-K of EUA for 1989, File No.
1-5366).
- Newport -
10-1.14 - Phase I Vermont Transmission Line Support Agreement dated as of
December 1, 1981 and as amended as of June 1, 1982, November 1,
1982 and January 1, 1986 between Vermont Electric Transmission
Company, Inc. and several New England utilities, including Montaup
(Exhibit 10-65, Form 10-K of EUA for 1981, File No. 1-5366;
Exhibit 10-72, Registration No. 2-80205; Exhibit 10-64, Form 10-K
of EUA for 1982, File No. 1-5366; Exhibit 10-84. Form 10-K of EUA
for 1986, File No. 1-5366).
10-2.14 - Letter amendment dated August 4, 1983 reallocating the
participating shares originally assigned to the Chicopee Municipal
Lighting Plant and the Taunton Municipal Lighting Plant under the
Phase I Vermont Transmission Line Support Agreement between
Vermont Electric Transmission Company, Inc. and several New
England electric utilities, including Newport, dated December 1,
1981, as amended on June 1, 1982 and November 1, 1982 (Exhibit 10-
110, Form 10-K of EUA for 1990, File No. 1-5366).
10-3.14 - Phase I Terminal Facility Support Agreement dated December 1, 1981
and as amended as of June 1, 1982, November 1, 1982 and January
1, 1986 between New England Electric Transmission Corporation and
several New England utilities, including Montaup (Exhibit 10-68,
Form 10-K of EUA for 1981, File No. 1-5366; Exhibit 10-74,
Registration No. 1-5366; Exhibit 10-68. Form 10-K of EUA for
1986, File No. 1-5366).
10-4.14 - Letter amendment dated July 29, 1983 reallocating the
participating shares originally assigned to the Chicopee Municipal
Lighting Plant and the Taunton Municipal Lighting Plant under the
Phase I Terminal Facility Support Agreement between New England
Transmission Corporation and several New England electric
utilities, including Newport, dated December 1, 1981, as amended
on June 1, 1982 and November 1, 1982 (Exhibit 10-112, Form 10-K of
EUA for 1990, File No. 1-5366).
10-5.14 - Purchase Power Contract between Newport and City of Burlington
Electric Department (life of the unit contract) for purchase of
15.24% of net capability of station output from Joseph C. McNeil
Electric Generating Station located in Burlington, Vermont dated
December 19, 1984 (Exhibit 10-115, Form 10-K of EUA for 1990, File
No. 1-5366).
10-6.14 - Firm Energy Contract between Hydro-Quebec and several New England
electric utilities, including Newport, dated as of October 14,
1985 (Exhibit 10-116, Form 10-K of EUA for 1990, File No. 1-5366).
10-7.14 - Unit Power Agreement for the Sale of Unit Capacity and Energy from
Ocean State Power Project to Newport Electric Corporation dated
May 14, 1986, as amended on August 20, 1986, July 12, 1988,
September 23, 1988, October 21, 1988, July 21, 1989, February 7,
1990 and December 21, 1990 (Exhibit 10-117, Form 10-K for 1990,
File No. 1-5366).
10-8.14 - Unit Power Agreement for the Sale of Second Unit Capacity and
Energy from Ocean State Power Project to Newport Electric
Corporation dated July 12, 1988 as amended and supplemented
September 23, 1988, July 21, 1989 and February 7, 1990 (Exhibit
10-118, Form 10-K for 1990, File No. 1-5366).
10-9.14 - 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 Newport (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).
- EUA Ocean State -
10-1.12 - Ocean State Power Amended and Restated General Partnership
Agreement among EUA Ocean State, Ocean State Power Company, TCPL
Power Ltd., Narragansett Energy Resources Company and NECO Power,
Inc. (collectively, the "OSP Partners") dated as of December 2,
1988, as amended March 27, 1989, December 31, 1990, November 12,
1992 and February 23, 1993 (Exhibit 10-107, Form 10-K of EUA for
1989; File No. 1-5366, Exhibits 10-3.12, 10-4.12 and 10-5.12, Form
10-K of EUA for 1994, File No. 1-5366).
10-2.12 - Ocean State Power II Amended and Restated General Partnership
Agreement among EUA Ocean State, JMC Ocean State Corporation,
Makowski Power, Inc., TCPL Power Ltd., Narragansett Energy
Resources Company and Newport Electric Power Corporation
(collectively, the "OSP II Partners") dated as of September 29,
1989 (Exhibit 10-110, Form 10-K of EUA for 1989, File No. 1-5366).
Annual Reports to Shareholders:
*13-1.03 - Annual Report to Shareholders of EUA for 1995, portions of which
are incorporated by reference in this Annual Report on Form 10-K.
Only the portions expressly so incorporated under PART II, Items
5, 6, 7 and 8 are to be deemed filed herewith.
*13-1.01 - Annual Report to Shareholders of Blackstone for 1995, portions of
which are incorporated by reference in this Annual Report on Form
10-K. Only the portions expressly so incorporated under PART II,
Items 5, 6, 7 and 8 are to be deemed filed herewith.
*13-1.08 - Annual Report to Shareholders of Eastern Edison for 1995, portions
of which are incorporated by reference in this Annual Report on
Form 10-K. Only the portions expressly so incorporated under PART
II, Items 5, 6, 7 and 8 are to be deemed filed herewith.
Subsidiaries of EUA:
21-1.03 - Direct subsidiaries of Eastern Utilities Associates and the state
of organization of each are: Blackstone Valley Electric Company
(Rhode Island), Eastern Edison Company (Massachusetts), EUA
Cogenex Corporation (Massachusetts), EUA Service Corporation
(Massachusetts), EUA Ocean State Corporation (Rhode Island), EUA
Energy Investment Corporation (Massachusetts) and Newport Electric
Corporation (Rhode Island). Montaup Electric Company
(Massachusetts) is a subsidiary of Eastern Edison Company. Each
of the above subsidiaries does business under its indicated
corporate name.
Consent of Experts and Counsel:
*23-1.03 - Consent of Independent Accountants.
(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 UTILITIES ASSOCIATES
By /s/Richard M. Burns Comptroller March 18, 1996
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 and Chief Executive Officer
Donald G. Pardus (Principal Executive Officer) and Trustee
/s/John R. Stevens President and Chief Operating Officer
John R. Stevens (Principal Financial Officer) and Trustee
/s/Richard M. Burns Comptroller
Richard M. Burns (Principal Accounting Officer)
/s/Russell A. Boss Trustee
Russell A. Boss
/s/Paul J. Choquette, Jr. Trustee
Paul J. Choquette, Jr.
March 18, 1996
/s/Peter S. Damon Trustee
Peter S. Damon
/s/Peter B. Freeman Trustee
Peter B. Freeman
/s/Larry A. Leibenow Trustee
Larry A. Liebenow
Trustee
Jacek Makowski
/s/Wesley W. Marple, Jr. Trustee
Wesley W. Marple, Jr.
/s/Margaret M. Stapleton Trustee
Margaret M. Stapleton
/s/W. Nicholas Thorndike Trustee
W. Nicholas Thorndike
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
BLACKSTONE VALLEY ELECTRIC COMPANY
By/s/Richard M. Burns Vice President March 18, 1996
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 and
Donald G. Pardus Director (Principal Executive Officer)
/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/David H. Gulvin Senior Vice President
David H. Gulvin and Director March 18, 1996
/s/Robert G. Powderly Executive Vice President and
Robert G. Powderly Director
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 18, 1996
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 and Director (Principal
Donald G. Pardus Executive Officer)
/s/John R. Stevens Vice Chairman and Director
John R. Stevens (Principal Financial Officer)
/s/Richard M. Burns Vice President March 18, 1996
Richard M. Burns (Principal Accounting Officer)
/s/John D. Carney President and Director
John D. Carney
/s/David H. Gulvin Senior Vice President
David H. Gulvin and Director
/s/Robert G. Powderly Executive Vice President and
Robert G. Powderly Director
EASTERN UTILITIES ASSOCIATES AND
SUBSIDIARY COMPANIES
Item 14(a)(2). Financial Statement Schedules
<TABLE>
Schedule II
Eastern Utilities Associates and Subsidiary Companies
Valuation and Qualifying Accounts
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deductions- End of
Description of Period Expenses Accounts Describe Period
<S> <C> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1995:
Allowance for Doubtful Accounts $629 $1,217 $287 <F1> $1,443 <F2> $690
For the Year Ended December 31, 1994:
Allowance for Doubtful Accounts $613 $1,141 $277 <F1> $1,402 <F2> $629
For the Year Ended December 31, 1993:
Allowance for Doubtful Accounts $603 $1,029 $255 <F1> $1,274 <F2> $613
<FN>
<F1> Recoveries of accounts previously written off.
<F2> Principally Accounts Receivable written off.
</FN>
</TABLE>
<TABLE>
Schedule II
Blackstone Valley Electric Company
Valuation and Qualifying Accounts
(In Thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
(1) (2)
Balance at Charged to Charged Balance at
Beginning Costs and to Other Deduction End of
Description of Period Expenses Accounts Describe Period
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1995:
Allowance for Doubtful Accounts $125 $585 $217 <F1> $800 <F2> $127
For the Year Ended December 31, 1994:
Allowance for Doubtful Accounts $158 $710 $213 <F1> $956 <F2> $125
For the Year Ended December 31, 1993:
Allowance for Doubtful Accounts $315 $650 $205 <F1> $1,012 <F2> $158
<FN>
<F1> Recoveries of accounts previously written off.
<F2> Principally Accounts Receivable written off.
Report of Independent Accountants
To the Trustees and Shareholders of
Eastern Utilities Associates:
Our report on the consolidated financial statements of Eastern Utilities
Associates and subsidiaries has been incorporated by reference in this Form
10-K from page 36 of the 1995 Annual Report to Shareholders of Eastern
Utilities Associates. In connection with our audits of such consolidated
financial statements, we have also audited the related consolidated financial
statement schedule listed in Item 14 (a)(2) of this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to
be included therein.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 5, 1996
Report of Independent Accountants
To the Directors and Shareholder of
Blackstone Valley Electric Company:
Our report on the financial statements of Blackstone Valley Electric Company
has been incorporated by reference in this Form 10-K from page 27 of the 1995
Annual Report of Blackstone Valley Electric Company. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed in Item 14 (a)(2) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 5, 1996
[This page left blank intentionally]
</TABLE>
EMPLOYEES' RETIREMENT PLAN OF EASTERN
UTILITIES ASSOCIATES AND ITS AFFILIATED COMPANIES(1)
Amended and Restated
Effective January 1, 1989
Execution Copy
December, 1994
(1) Prior to January 1, 1991 this Plan was known as the Employees' Retirement
Plan of Eastern Utilities Associates and Its Subsidiary Companies.
TABLE OF CONTENTS
PREAMBLE
Section
ARTICLE I DEFINITIONS
"Accrued Benefit" 1.1
"Active Participant" 1.2
"Actuarial Equivalent" 1.3
"Actuary" 1.4
"Affiliated Employer" 1.5
"Annuity Starting Date" 1.6
"Authorized Leave of Absence" 1.7
"Average Earnings" 1.8
"Beneficiary" 1.9
"Board" 1.10
"Code" 1.11
"Contingent Annuitant" 1.12
"Credited Service" or "Years of Credited Service" 1.13
"Early Retirement Date" 1.14
"Earnings" 1.15
"Effective Date" 1.16
"Employee" 1.17
"Employer" 1.18
"Employment Date" 1.19
"ERISA" 1.20
"Fiduciary" 1.21
"Fund", "Trust" or "Trust Fund" 1.22
"Group Annuity Contract" 1.23
"Hour of Service" 1.24
"Inactive Participant" 1.25
"Normal Form" 1.26
"Normal Retirement Age" 1.27
"Normal Retirement Date" 1.28
"One Year Break in Service" 1.29
"Parental Absence" 1.30
"Participant" 1.31
"Participating Employer" 1.32
"Plan" 1.33
"Plan Year" 1.34
"Postponed Retirement Date" 1.35
"Prior Participant Account" 1.36
"Reemployment Date" 1.37
"Retired Participant" 1.38
"Retirement Annuity" 1.39
"Retirement Benefit" 1.40
"Retirement Board" 1.41
"Service Termination Date" 1.42
"Social Security Benefit" 1.43
"Spouse" 1.44
"Trust" 1.45
"Trustee" 1.46
"Year of Eligibility Service" 1.47
"Year of Vesting Service" 1.48
ARTICLE II SERVICE AND PARTICIPATION
Eligibility Requirements 2.1
Years of Service 2.2
Years of Credited Service 2.3
Postponed Retirement or Reemployment After
Benefits Commence 2.4
Suspension of Benefits 2.5
Service With a Former Employer 2.6
Service With Newport Electric Corporation 2.7
Transfers 2.8
ARTICLE III NORMAL RETIREMENT BENEFIT
Normal Retirement Benefit 3.1
Minimum Accrued Benefit 3.2
Maximum Benefit 3.3
Continuing Employment 3.4
ARTICLE IV EARLY RETIREMENT DATE AND EARLY RETIREMENT BENEFIT
Early Retirement Date 4.1
Early Retirement Benefit 4.2
Minimum Benefit 4.3
ARTICLE V POSTPONED RETIREMENT DATE AND
POSTPONED RETIREMENT BENEFIT
Postponed Retirement Date 5.1
Postponed Retirement Benefit 5.2
Death Prior to Postponed Retirement Date 5.3
Death Following Commencement of
Retirement Benefit 5.4
ARTICLE VI TERMINATION OF EMPLOYMENT
Non-Vested Termination 6.1
Vested Termination 6.2
Early Payment 6.3
Prior Participant Account 6.4
ARTICLE VII DEATH BENEFITS
Surviving Spouse Benefit For Death Occurring
On or After Early Retirement Date 7.1
Pre-Retirement Surviving Spouse Benefit
For Death of Active or Inactive Participant
Occurring Before Age 55 7.2
Death Benefits After Retirement Benefits
Have Commenced 7.3
ARTICLE VIII PAYMENT OF RETIREMENT BENEFITS
Automatic Payment Forms 8.1
Election of Optional Forms 8.2
Joint and Survivor Option 8.3
Life Annuity Option 8.4
General Provisions 8.5
Involuntary Cash-Out Provision 8.6
Restrictions on Distributions 8.7
Increased Payments With Respect to
Certain Retired Members 8.8
ARTICLE IX RETIREMENT BOARD
Responsibility for Plan and Trust Administration 9.1
Retirement Board 9.2
Agents of the Retirement Board 9.3
Retirement Board Procedures 9.4
Administrative Powers of the Retirement Board 9.5
Benefit Claims Procedures 9.6
Certification of Benefits 9.7
Designation of Actuary 9.8
Reliance on Reports and Certificates 9.9
Other Retirement Board Powers and Duties 9.10
Compensation of Retirement Board 9.11
Member's Own Participation 9.12
Liability of Retirement Board Members 9.13
Indemnification 9.14
ARTICLE X FUNDING AND CONTRIBUTIONS
Establishment of Fund 10.1
Contribution to the Fund; Plan Expenses 10.2
Contributions Conditional 10.3
Employee Contributions 10.4
ARTICLE XI FIDUCIARY RESPONSIBILITIES
Basic Responsibilities 11.1
Actions of Fiduciaries 11.2
Fiduciary Liability 11.3
ARTICLE XII AMENDMENT AND TERMINATION
Right to Amend or Terminate 12.1
Partial Termination 12.2
Vesting and Distribution of Funds Upon Termination 12.3
Determination of Funds Upon Termination 12.4
Restriction on Benefits 12.5
Right to Accrued Benefits 12.6
ARTICLE XIII GENERAL PROVISIONS
Plan Voluntary 13.1
Payments to Minors and Incompetents 13.2
Non-Alienation of Benefits 13.3
Evidence of Survival 13.4
Use of Masculine and Feminine; Singular and Plural 13.5
Merger, Consolidation, or Transfer 13.6
Leased Employees 13.7
Construction of Agreement 13.8
ARTICLE XIV TOP HEAVY PROVISIONS
General Rule 14.1
Vesting Provisions 14.2
Minimum Benefit Provisions 14.3
Limitation on Benefits 14.4
Top-heavy Plan Definition 14.5
Key Employee 14.6
Non-Key Employee 14.7
ADDENDUM
PREAMBLE
Effective January 1, 1957, Eastern Utilities Associates (the "Employer")
established a defined benefit retirement plan referred to as the Employees'
Retirement Plan of Eastern Utilities Associates and Its Subsidiary Companies
(the "Plan"). The Plan has been amended from time to time thereafter and is
now being amended and restated effective January 1, 1989. The Plan is intended
to provide Eligible Employees with periodic income after retirement. A Trust
Agreement (the "Trust") has been adopted by the Employer and forms a part of
this Plan.
Effective December 31, 1990, this Plan was merged into the Newport Electric
Corporation Pension Plan, the merged plan being known as the Employees'
Retirement Plan of Eastern Utilities Associates and Its Affiliated Companies.
The provisions of the Plan, including the Addendum attached hereto, shall
govern the participation of Employees of both Eastern Utilities Associates and
Newport Electric Corporation.
It is intended that the Plan, as amended and restated herein, will continue to
meet the requirements for qualification under Section 401(a) of the Internal
Revenue Code of 1986 (the "Code") as amended from time to time and that the
Trust shall continue to be exempt from taxation as provided under Code Section
501(a). As such, the Plan contains provisions required by the Tax Reform Act
of 1986 and other pertinent laws and regulations.
Except as otherwise specifically and expressly provided herein:
(a) the provisions of this Plan shall apply only to individuals who are
Eligible Employees after December 31, 1988;
(b) a former Employee's eligibility for and amount of benefits, if any,
payable to or on behalf of such former Employee, shall be determined in
accordance with the provisions of the Plan in effect when his employment
terminated. The benefit payable to or on behalf of a Participant
included under the Plan in accordance with the following provisions shall
not be affected by the terms of any amendment to the Plan adopted after
such Participant's employment terminates, unless the amendment expressly
provides otherwise.
ARTICLE I
DEFINITIONS
The following words and phrases when used in the Plan shall have the meanings
indicated in this Article I unless a different meaning is plainly required by
the context:
1.1 "Accrued Benefit" shall mean the amount of monthly Retirement Benefit
determined under Article III payable in the Normal Form beginning at
a Participant's Normal Retirement Date or, if applicable, beginning
on his Postponed Retirement Date and determined in accordance with
Article V.
The Accrued Benefit shall not be less than the minimum amount
determined under Section 3.2.
1.2 "Active Participant" shall mean an Eligible Employee who has become
covered under the Plan under Section 2.1(a) or (c).
1.3 "Actuarial Equivalent" shall mean a benefit of equivalent value to
another benefit, determined on the following bases and subject to
the factors set forth in Appendix A:
(a) for lump sum payments made pursuant to Section 6.4 or 8.6, the
applicable mortality rate under the UP 1984 Mortality Table and
the interest rate, either immediate or deferred, which would be
used by the Pension Benefit Guaranty Corporation for purposes of
determining the present value of a benefit on plan termination
and which is in effect on the first day of the Plan Year in
which the distribution takes place;
(b) for all other purposes:
(i) Mortality: 1971 TPF&C Forecast Mortality with a six-year age
setback (ii)Interest: 8% annual
1.4 "Actuary" shall mean an actuary who meets the standards and
qualifications established by the Joint Board for the Enrollment of
Actuaries, or an actuarial firm that employs such individuals, as
selected by the Retirement Board from time to time.
1.5 "Affiliated Employer" shall mean any corporation which is a member of
a controlled group of corporations (as defined in Code Section
414(b)) which includes the Employer; any trade or business (whether
or not incorporated) which is under common control (as defined in
Code Section 414(c)) with the Employer; any organization (whether or
not incorporated) which is a member of an affiliated service group
(as defined in Code Section 414(m)) which includes the Employer; and
any other entity required to be aggregated with the Employer
pursuant to regulations under Code Section 414(o).
1.6 "Annuity Starting Date" shall mean the first day of the first period
for which a benefit is payable to the Participant (or to the Spouse
in the case of death before Retirement Benefits commence) under the
Plan.
1.7 "Authorized Leave of Absence" shall mean any absence authorized by an
Employer under the Employer's standard personnel practices, provided
that all persons under similar circumstances are treated alike in
the granting of such Authorized Leave of Absence, and provided
further that the Participant returns or retires within the period
specified in the Authorized Leave of Absence. An absence due to
service in the Armed Forces of the United States shall be considered
an Authorized Leave of Absence provided that the Employee complies
with all of the requirements of federal law in order to be entitled
to reemployment and provided further that the Employee returns to
employment with the Employer or an Affiliated Employer within the
period provided by such law.
1.8 "Average Earnings" shall mean, on any date of determination, the
average of a Participant's Earnings for the 60 (48 effective July 1,
1992) consecutive calendar months of employment in the 120-month
period ending on the date of determination for which his aggregate
Earnings were the highest. In the case of a Participant who has not
received Earnings for 60 (48 effective July 1, 1992) consecutive
calendar months of employment in the aforementioned 120-month
period, Average Earnings means the average of his Earnings during
all of his months of employment during such 120-month period, not to
exceed a total of 60 (48 effective July 1, 1992) months.
Notwithstanding the foregoing, a Participant's Accrued Benefit shall
be determined on the basis of Average Earnings as calculated in (a)
or (b) below, whichever results in the greater benefit:
(a) The Accrued Benefit shall be determined on the basis of a
Participant's Average Earnings, as limited pursuant to Section
1.15, as of his termination of employment; or
(b) The Accrued Benefit shall be equal to (i) plus (ii) below where:
(i) is the Participant's Accrued Benefit determined as of
December 31, 1988, without regard to the Earnings
limitation set forth in Section 1.15; and
(ii) is the Participant's Accrued Benefit for periods of
service after December 31, 1988, with his Earnings for
such periods subject to the limitations set forth in
Section 1.15.
1.9 "Beneficiary" shall mean the individual designated by a Participant
to receive payments upon the death of the Participant prior to his
retirement, subject to the spousal consent requirements set forth in
Section 8.5(c). Death benefits which become payable under Article
VII before Retirement Benefits may only be paid to a Participant's
Spouse.
1.10 "Board" shall mean the Board of Trustees of Eastern Utilities
Associates.
1.11 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any regulations issued thereunder. Reference to
any Code Section shall include any successor provision thereto.
1.12 "Contingent Annuitant" shall mean the person designated by the
Participant to receive lifetime monthly benefit payments in the
event of the Participant's death after Retirement Benefits have
started as provided under the joint and survivor payment forms in
Section 8.3. If the Participant is married on the date Retirement
Benefits are to commence, the Contingent Annuitant is his Spouse,
unless a waiver meeting the requirements of Section 8.5(c) provides
for the designation of a Contingent Annuitant who is not the Spouse.
1.13 "Credited Service" or "Years of Credited Service" shall mean the
Participant's period of service determined in accordance with
Article II.
1.14 "Early Retirement Date" shall mean the date on which a Participant
becomes eligible to retire with an early retirement benefit under
the Plan, as determined in accordance with Article IV.
1.15 "Earnings" shall mean with respect to any Plan Year the regular basic
remuneration paid to the Employee by the Employer for services
rendered plus any pre-tax contributions made at the Participant's
election to a qualified cash or deferred arrangement as defined in
Code Section 401(k) or a cafeteria plan as defined in Code Section
125 sponsored by the Employer or a Participating Employer. Earnings
shall exclude any pay for overtime and any bonuses or special pay,
or the Employer's cost for any public or private employee benefit
plan including this Plan.
Effective for Plan Years commencing after December 31, 1988, Earnings
shall not include any amount in excess of $200,000, or such higher
amount ($150,000 for Plan Years beginning on or after January 1,
1994) as permitted under Code Section 401(a)(17) and regulations
thereunder.
In determining the Earnings of an Employee for purposes of the Code
Section 401(a)(17) limitation, the rules of Code Section 414(q) shall
apply; provided, however, that in applying such rules the term
"family" shall include only the Spouse of the Employee and any lineal
descendants of the Employee who have not attained age 19 before the
close of the Plan Year. If the Earnings of the Employee exceeds the
Code Section 401(a)(17) limitation, then the Code Section 401(a)(17)
limitation shall be pro rated among the Earnings of the Employee and
his family (as determined under this Section prior to the application
of the Code Section 401(a)(17) limitation) in proportion to each such
individual's Earnings (as determined under this Section prior to the
application of the Code Section 401(a)(17) limitation).
1.16 "Effective Date" shall mean January 1, 1989 for this restatement.
The original effective date of the Plan is January 1, 1957.
1.17 "Employee" shall mean a common-law employee of the Employer or an
Affiliated Employer.
1.18 "Employer" shall mean Eastern Utilities Associates, a voluntary
association formed under a Declaration of Trust dated April 2, 1928,
as amended, under the laws of the Commonwealth of Massachusetts, or
its successor or successors.
1.19 "Employment Date" shall mean the first day on which an Employee is
credited with an Hour of Service.
1.20 "ERISA" shall mean the Employee Retirement Income Security Act of
1974 as amended from time to time. References to any section of
ERISA shall include any successor provision thereto.
1.21 "Fiduciary" shall mean any person who exercises any discretionary
authority or discretionary control respecting the management of the
Plan, assets held under the Plan, or disposition of Plan assets; who
renders investment advice for a fee or other compensation, direct or
indirect, with respect to assets held under the Plan or has any
authority or responsibility to do so; or who has any discretionary
authority or discretionary responsibility in the administration of
the Plan. Any person who exercises authority or has responsibility
of a fiduciary nature as described above shall be considered a
Fiduciary under the Plan.
1.22 "Fund", "Trust" or "Trust Fund" shall mean the cash and other
investments of the Plan, and income attributable thereto, held and
administered by the Trustee in accordance with the Trust Agreement.
1.23 "Group Annuity Contract" shall mean the group annuity contract issued
by John Hancock Mutual Life Insurance Company to Fall River Electric
Light Company with respect to certain Employees of the Fall River
Electric Light Company who are now Employees of Eastern Edison
Company, the group annuity contract issued by The Equitable Life
Assurance Society of the United States to Brockton Edison Company
with respect to certain Employees of Brockton Edison Company who are
now Employees of Eastern Edison Company, the group annuity contract
issued by The Equitable Life Assurance Society of the United States
to Montaup Electric Company with respect to certain Employees of
Montaup Electric Company, the group annuity contract issued by The
Equitable Life Assurance Society of the United States to Blackstone
Valley Gas and Electric Company with respect to certain Employees of
Blackstone Valley Electric Company, and the group annuity contract
issued by State Mutual Life Assurance Company with respect to
certain Employees of Newport Electric Corporation.
1.24 "Hour of Service" shall mean:
(a) Each hour for which an Employee is directly or indirectly paid
or entitled to payment by the Employer and any Affiliated
Employer for the performance of duties;
(b) Each hour for which an individual is directly or indirectly paid
or entitled to payment by the Employer and any Affiliated
Employer (including payments made or due from a trust fund or
insurer to which the Employer or Affiliated Employer contributes
or pays premiums) on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to periods of vacation,
holidays, illness, incapacity, disability, layoff, jury duty,
military duty, or leave of absence, provided that:
(i) No more than 501 Hours of Service shall be credited under
this paragraph (b) to an Employee on account of any single
continuous period during which the Employee performs no
duties; and
(ii) Hours of Service shall not be credited under this
paragraph (b) to an Employee for a payment which solely
reimburses the Employee for medically related expenses
incurred by the Employee or which is made or due under a
plan maintained solely for the purpose of complying with
applicable workers' compensation, unemployment
compensation or disability insurance laws; and
(c) Each hour not already included under paragraph (a) or (b) above
for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Employer or by an Affiliated
Employer, provided that crediting of Hours of Service under this
paragraph with respect to periods described in paragraph (b)
above shall be subject to the limitation therein set forth.
The number of Hours of Service to be credited under paragraph (b) or
(c) above on account of a period during which an Employee performs no
duties, and the Plan Years to which Hours of Service shall be
credited under paragraphs (a), (b), or (c) above shall be determined
by the Retirement Board in accordance with Sections 2530.200b-2(b)
and (c) of the Regulations of the U.S. Department of Labor.
To the extent not credited above, Hours of Service shall also be
credited based on the customary work week of the Employee for periods
of military duty (as required by applicable law) and Authorized Leave
of Absence.
1.25 "Inactive Participant" shall mean a former Active Participant, or, if
applicable, his Beneficiary, who is no longer an Eligible Employee
but who is entitled to a benefit under the Plan.
1.26 "Normal Form" shall mean a monthly annuity payable to a Participant
commencing on his designated Annuity Starting Date and ending with
the payment due for the month in which his death occurs.
1.27 "Normal Retirement Age" shall mean the attainment of age 65.
1.28 "Normal Retirement Date" shall mean the first day of the month
coincident with or next following the Participant's Normal
Retirement Age.
1.29 "One Year Break in Service" shall mean, for purposes of Years of
Eligibility and Vesting Service, a computation period (as defined
below) during which an Employee is credited with less than 501 Hours
of Service.
A computation period for the purposes of Years of Eligibility Service
shall mean a 12-consecutive month period of employment commencing on
an Employee's Employment Date (or Reemployment Date, if applicable)
and each anniversary date thereof.
A computation period for the purposes of Years of Vesting Service
shall mean a 12-consecutive month period of employment commencing on
the later of an Employee's Employment Date and his attainment of age
18 and each anniversary date thereof. In the event an Employee
incurs a One Year Break in Service and is later reemployed on a date
that does not coincide with an anniversary date of his vesting
service computation period, he shall be credited with a partial Year
of Vesting Service for hours credited during the balance of that
computation period.
1.30 "Parental Absence" shall mean an Employee's absence from work which
has commenced for any of the following reasons:
(a) the pregnancy of the Employee;
(b) the birth of the Employee's child;
(c) the adoption of a child by the Employee; or
(d) the need to care for the Employee's child immediately following
its birth or adoption.
1.31 "Participant" shall mean an Active Participant currently
participating in the Plan pursuant to Article II or an Inactive
Participant.
1.32 "Participating Employer" shall mean Eastern Utilities Associates and
any Affiliated Employer adopting this Plan and which has been
authorized by the Board to participate in this Plan.
1.33 "Plan" shall mean the Employees' Retirement Plan of Eastern Utilities
Associates and Its Affiliated Companies as set forth in this
document and as it may be amended from time to time.
1.34 "Plan Year" shall mean the calendar year.
1.35 "Postponed Retirement Date" shall mean the date after his Normal
Retirement Date on which a Participant elects to retire, as
determined in accordance with Article V.
1.36 "Prior Participant Account" shall mean Employer Contributions made on
behalf of a Participant prior to July 1, 1973, together with
interest thereon as provided in Article III.
1.37 "Reemployment Date" shall mean the day an Employee returns to work
and is credited with an Hour of Service following a One Year Break
in Service, a Service Termination Date or an Authorized Leave of
Absence from the Employer or an Affiliated Employer.
1.38 "Retired Participant" shall mean a former Employee who is receiving a
Retirement Benefit or a former Employee who has received a lump sum
Retirement Benefit pursuant to Section 8.6.
1.39 "Retirement Annuity" shall mean the annual amount of the annuity
purchased under the Group Annuity Contract as provided by that
contract at Normal Retirement Date, prior to any reduction as the
result of a provision for Retirement Benefit being payable to a
Contingent Annuitant; provided that if the Participant elected not
to become a member under the Group Annuity Contract when he was
first eligible, his Retirement Annuity shall be computed as the
amount of Retirement Annuity at Normal Retirement Date which would
have been payable had he elected to become a member when he was
first eligible.
1.40 "Retirement Benefit" shall mean either:
(a) a lump sum payment made pursuant to Section 8.6, or
(b) an annual pension paid in monthly installments.
For purposes of Section 8.8, Retirement Benefit shall mean an annual
pension paid in monthly installments to a Participant who retired
from active service:
(a) on or after the attainment of age 61 and completion of five or
more Years of Vesting Service, or
(b) on or after meeting the requirements for Special Early
Retirement described in Section 4.4, or
(c) after the attainment of age 55, but before meeting the
requirements of (a) and (b) above, with Board approval
1.41 "Retirement Board" shall mean the persons appointed pursuant to
Article IX to administer the Plan.
1.42 "Service Termination Date" shall mean the earliest of the following:
(a) the date on which the Employee resigns, is discharged,
or retires from employment with the Employer and all
Affiliated Employers;
(b) the date the Employee dies;
(c) except as provided below, the first anniversary of the date on
which the Employee is laid off, starts an Authorized Leave of
Absence, or is absent from work for any other reason other than
a Parental Absence on or after January 1, 1985; or
(d) effective January 1, 1985, the second anniversary of the date on
which the Employee commenced a Parental Absence, if such
Employee has not yet returned to work with the Employer or an
Affiliated Employer.
Notwithstanding subsection (c) above, an Employee who is on an
Authorized Leave of Absence due to military service in the armed
forces of the United States of America shall not incur a Service
Termination Date with respect to such military duty providing he
returns to employment with the Employer or an Affiliate within the
time prescribed by law for reinstatement of employment rights.
Similarly, if an Authorized Leave of Absence is granted for reasons
other than military duty and the period of such authorized leave is
more than 12 months, a Service Termination Date shall not occur if
the Employee returns to work within the time period specified in such
Authorized Leave of Absence. If such individual does not return to
employment with the Employer or an Affiliated Employer within the
time period specified in the Authorized Leave of Absence, a Service
Termination Date shall occur on the date on which the Authorized
Leave of Absence began.
1.43 "Social Security Benefit" shall mean, in the case of any vested
Inactive Participant, the annual primary old-age insurance amount
which the Participant would be entitled to receive commencing on the
first day of the month next following his social security retirement
date (as defined in Section 216(l)) under Title II of the Social
Security Act as in effect on the date the Participant retires or
otherwise terminates employment, computed on the assumption that the
Participant will subsequently receive no income before Social
Security Retirement Age, which would be treated as wages for
purposes of the Social Security Act.
In the case of a Retirement Benefit payable to an Active Participant
who retires prior to his Normal Retirement Date, Social Security
Benefit shall mean the annual primary old-age insurance amount to
which the Participant would first become entitled under Title II of
the Social Security Act as in effect on the date the Participant
retires if the Participant earns no income after retirement and
applies for primary old-age insurance benefits to commence at age 62
or actual retirement if later.
In the case of a Retirement Benefit payable to an Active Participant
who retires on or after his Normal Retirement Date, Social Security
Benefit shall mean the annual primary old-age insurance amount to
which the Participant is entitled to receive under Title II of the
Social Security Act as in effect on the date the Participant retires
if the Participant earns no income after retirement and applies for
primary old-age insurance benefits to commence at his actual date of
retirement if later.
1.44 "Spouse" shall mean the legal spouse to whom a Participant is married
on the Annuity Starting Date under applicable state law. However,
if the Participant should die before his Annuity Starting Date, then
the Spouse shall be the legal spouse to whom the Participant was
married on the Participant's date of death.
1.45 "Trust" shall mean the agreement or agreements governing the
investment of Plan assets as amended from time to time, entered into
between the Employer and the Trustee to carry out the purpose of the
Plan.
1.46 "Trustee" shall mean the trustee or trustees duly appointed by the
Board.
1.47 "Year of Eligibility Service" shall mean the period of an Employee's
employment with a Participating Employer considered for the purposes
of determining his eligibility to participate in the Plan pursuant
to Section 2.1. An Employee's Eligibility Service is determined in
accordance with Article II.
1.48 "Year of Vesting Service" shall mean the period of an Employee's
employment considered for the purposes of determining his vested
interest in his Accrued Benefit. An Employee's Vesting Service is
determined in accordance with Article II.
ARTICLE II
SERVICE AND PARTICIPATION
2.1 Eligibility Requirements.
(a) Each Employee on January 1, 1989 who was an Active Participant
under the Plan on December 31, 1988, shall continue to be an
Active Participant on January 1, 1989.
(b) Each Employee hired prior to January 1, 1988 and on or after his
64th birthday, shall become an Active Participant on the later
of January 1, 1988 and the first day of the month coincident
with or next following the date he satisfies the requirements
set forth in paragraph (c) below.
(c) Each other Employee shall become an Active Participant on the
first day of the month coincident with or next following the
date he satisfies the following requirements:
(i) he is employed by a Participating Employer;
(ii) he has completed one Year of Eligibility Service;
(iii) he has attained age 21;
(iv) he is neither a "leased employee" as defined in Code
Section 414(n)(2) nor a temporary employee as defined by
the Employer; and
(v) he is not a member of a collective bargaining unit, unless
participation in the Plan has been negotiated for and
agreed to in writing by the representatives of the
Participating Employer and the collective bargaining
agent.
2.2 Years of Service.
(a) (i) Years of Eligibility Service shall determine an Employee's
eligibility to participate in the Plan under Section 2.1.
An Employee shall accrue one Year of Eligibility Service
during a "computation period" in which he is credited with
at least 1,000 Hours of Service. For the purposes of this
Section 2.2, a "computation period" shall be as defined in
Section 1.29 with respect to years of Eligibility Service.
(ii) If an Employee fails to earn one Year of Eligibility
Service, incurs a One Year Break in Service, and is
subsequently reemployed by the Employer or an Affiliated
Employer, his Reemployment Date shall be considered his
Employment Date for the purpose of applying the above
computation period rules.
(iii) If an Employee earns one Year of Eligibility Service and
subsequently terminates employment, he shall become a
Participant on the earliest applicable date set forth in
Section 2.1, provided his Reemployment Date occurs prior
to his incurring five consecutive One Year Breaks in
Service and he otherwise meets the participation
requirements of Section 2.1 or he is vested in his Accrued
Benefit pursuant to Section 6.2. If such an Employee
incurs five or more One Year Breaks in Service and he is
not vested in his Accrued Benefit pursuant to Section 6.2,
his Reemployment Date shall be considered his Employment
Date for the purposes of applying the above computation
period rules.
(b) Years of Vesting Service shall determine a Participant's vested
right in retirement benefits accrued under the Plan, except that
at Normal Retirement Date, an Active Participant shall be fully
vested in his Accrued Benefit, irrespective of his Years of
Vesting Service.
(i) Subject to the One Year Break in Service rule under
subparagraph (ii), the transfer provisions of Section 2.8
and the Addendum, one Year of Vesting Service shall be
credited to an Employee for each "computation period"
during which he is credited with at least 1,000 Hours of
Service. For the purposes of this paragraph (b)(i), a
"computation period" shall be as defined in Section 1.29
with respect to Years of Vesting Service.
(ii) If an Employee incurs a One Year Break in Service, he
shall not lose his Years of Vesting Service accumulated
before such break provided:
(A) he was vested in his Accrued Benefit under the Plan
prior to his One Year Break in Service, or
(B) his number of consecutive One Year Breaks in Service
does not exceed five.
Such earlier period of vesting service shall be restored
pursuant to this subparagraph upon completion of a Year of
Vesting Service subsequent to the Employee's Reemployment
Date.
Notwithstanding the foregoing, in no event shall an Employee's Years
of Service hereunder be less than his Years of Service as determined
in accordance with the terms of the Plan as in effect immediately
prior to January 1, 1989.
2.3 Years of Credited Service. Credited Service is used in the
calculation of an Eligible Employee's Accrued Benefit under Section
3.1. Subject to the One Year Break in Service provisions in Section
2.2(b) and the transfer provisions of Section 2.8, an Eligible
Employee shall accrue Credited Service as follows:
(a) One Year of Credited Service shall be credited to an Eligible
Employee for each full calendar year between Employment Date and
Service Termination Date while a Participant, except as
otherwise provided below.
(b) For any calendar year in which employment is interrupted or for
which the individual is not an Eligible Employee for the entire
year, a fractional Year of Credited Service calculated to the
nearest 1/12th shall be credited to an Eligible Employee for
each calendar month during which he earns Hours of Service as a
Participant.
(c) Credited Service earned prior to a One Year Break in Service
shall be reinstated pursuant to the provisions of Sections
2.2(b)(ii) by substituting "Years of Credited Service" for
"Years of Vesting Service" thereunder. Such reinstatement of
prior Credited Service shall be effective, however, upon
completion of a Year of Credited Service subsequent to the
Eligible Employee's Reemployment Date.
In the event a Participant terminates employment, receives a
distribution of his Prior Participant Account and is later
reemployed, upon completion of a Year of Credited Service
subsequent to his Reemployment Date, the portion of his Accrued
Benefit which is the Actuarial Equivalent of such Prior
Participant Account shall be reinstated provided that he repays
to the Plan the amount distributed to him plus interest at the
rate of 2% per annum computed from the date of payment. Such
repayment of the Prior Participant Account, plus interest, must
be made before the earlier of:
(i) the fifth anniversary of the Participant's Reemployment
Date; and
(ii) the date the Participant incurs five consecutive One Year
Breaks in Service.
If such a Participant does not make such repayment of the amount
distributed within the aforementioned period of time, in no
event shall the portion of his Accrued Benefit which is the
Actuarial Equivalent of his Prior Participant Account shall be
reinstated hereunder.
(d) Credited Service shall only be granted hereunder for any period
of time during which an individual is in a class of Employees
which is eligible to participate in the Plan; except that for an
Employee who was hired prior to January 1, 1989, Credited
Service shall be granted for any period of time on and after
such Employee's attainment of age 21 provided he otherwise
satisfied the requirements of Sections 2.1(b) and (c).
(e) Credited Service shall not include any period of Parental
Absence.
Notwithstanding the foregoing, in no event shall a Participant's
years of Credited Service hereunder be less than his years of
Credited Service as determined in accordance with the terms of the
Plan as in effect immediately prior to January 1, 1989.
2.4 Postponed Retirement or Reemployment After Benefits Commence. If an
Employee works beyond his Normal Retirement Date or if a Retired
Participant returns to work with a Participating Employer after
Retirement Benefits had become payable to him, the following rules
shall apply:
(a) if he is a Retired Participant returning to work and he is an
Eligible Employee, he shall become an Active Participant on his
Reemployment Date; if he is an Active Participant continuing to
work he shall remain an Active Participant as long as he is an
Eligible Employee;
(b) (i) if he has attained Normal Retirement Age and his
Retirement Benefit had not yet commenced because of
continued employment, such benefit shall be postponed upon
proper notification, during any calendar month in which he
is scheduled to complete 80 or more Hours of Service.
Retirement Benefits shall commence as herein-after
provided if the Employee is thereafter scheduled to
complete less than 80 Hours of Service in any calendar
month;
(ii) if he has attained Normal Retirement Age at the time of
his reemployment with a Participating Employer, all
retirement benefits shall be suspended, upon proper
notification, during each Plan Year for which he is
scheduled to work 1,000 Hours of Service and shall be
resumed not later than the first day of the first Plan
Year thereafter in which he is scheduled to complete less
than 1,000 Hours of Service;
(iii) if he has not attained Normal Retirement Age at the time
of his reemployment with a Participating Employer, all
Retirement Benefits shall automatically cease upon such
reemployment and his benefit shall be recomputed upon his
subsequent retirement;
(iv) any benefits payable upon a Participant's subsequent
retirement shall be reduced by the Actuarial Equivalent
value of any early retirement benefits he had previously
received.
(c) he shall be eligible for additional Years of Vesting Service and
Years of Credited Service as a result of his reemployment or
continued employment in accordance with the provisions of the
Plan;
(d) if he shall die during the period of subsequent or continuing
employment, death benefits, if any, shall be payable only in
accordance with the provisions of Article VII.
2.5 Suspension of Benefits.
(a) During the first calendar month in which an Employee's benefits
are suspended pursuant to Section 2.4 for any period commencing
after Normal Retirement Date, the Retirement Board shall deliver
to the Employee, by personal delivery or first class mail, a
notice setting forth a description of the specific reasons why
benefit payments are being suspended, a general description of
the Plan provisions relating to the suspension of benefits, a
copy of the Plan provisions relating to the suspension of
benefits, the statement that applicable Department of Labor
Regulations may be found in Section 2530.203-3 of ERISA, a
description of the procedures set forth in the Plan for
obtaining a review of the suspension of benefits, and a
description of any notice procedure (including any forms which
must be filed by the Employee) as a prerequisite for the
Employee's obtaining the resumption or commencement of benefit
payments.
In any event, the Retirement Board shall adopt rules conforming
in all respects to the requirements of Section 2530.203-3 of
ERISA relating to suspension of benefits.
2.6 Service With a Former Employer.
(a) Any Participant who:
(i) rendered service in the employ of another utility company
or a similar company, or a company or corporation engaged
to furnish advisory or supervisory services to any such
companies, and
(ii) received a bona fide offer of employment from the Employer
prior to the termination of his employment with such other
company:
(A) shall be credited under the Plan with all Years of
Credited Service with such other employer rendered
since the first day of the month coincident with or
next following the date he completed one year of such
service and attained the 21st anniversary of his
birth; and
(B) shall be deemed to have been in the employ of the
Employer during all such service with the former
employer from the date of original employment, or
from the date of restoration to such service in the
event of an interruption in such service, for the
purposes of determining his eligibility for
membership and his vested rights under the Plan.
(b) Except for purposes of determining the amount of the spouse's
death benefit under Article VII, the Retirement Benefit provided
under this Plan for any Participant who has been credited with
Years of Credited Service under paragraph (a) of this Section
2.6 shall be reduced by the lesser of:
(i) the full amount of any pension or retirement income which
he is, or would have been but for his own action, entitled
to receive under the plan of his former employer, or
(ii) the amount the Participant would have accrued under this
Plan, based on his Years of Credited Service credited
under said paragraph (a) and his Average Earnings as of
the date of termination of employment with his former
employer.
In no event, however, will a Participant's Retirement Benefit
hereunder be less than the benefit he would have been entitled
to on the basis of his employment solely with the Employer.
For the purpose of computing Equivalent Actuarial Values, the
appropriate factors listed in the Appendix shall be applied after the
determination of such reduced Retirement Benefit.
2.7 Service With Newport Electric Corporation. Any Employee who
transfers his employment from Newport Electric Corporation to the
Employer on or after December 31, 1990, shall be deemed to have been
in the employ of the Employer for all periods of employment with
Newport Electric Corporation for the purposes of determining such
Employee's Years of Eligibility Service, Vesting Service and Credited
Service hereunder.
2.8 Transfers. Any individual who ceases to be an Eligible Employee by
reason of employment with an Affiliated Employer or a change in
employment classification, either prior to or subsequent to
commencement of his participation in this Plan, shall be credited
with Years of Service during such period of employment pursuant to
Sections 2.2, solely for purposes of vesting and eligibility for
benefits. Such Participant shall be entitled only to benefits under
the provisions of the Plan as in effect while he is eligible to
participate in the Plan. Credited Service shall only be earned for
periods during which the Employee is eligible to participate in the
Plan.
2.9 Termination of Participation. A Participant's membership in the Plan
shall terminate if his employment with the Employer terminates other
than by reason of retirement under the Plan; provided, however, that
the Participant shall not be deprived of any vested benefit to which
he may be entitled under Article VI. Membership shall be continued
during a period while on an Authorized Leave of Absence from service
approved by the Employer or an Affiliated Employer or during a period
while he is not an Employee as herein defined but is in the employ of
the Employer or an Affiliated Employer, but in any case of
interruption to service during which a Participant receives a payment
of his Prior Participant Account his membership in the Plan and his
benefits thereunder shall be in accordance with the provisions of
Section 2.3. In no event while a Participant is on an Authorized
Leave of Absence, shall he be retired under the Plan unless the
absence commenced on or after his Normal Retirement Date or unless it
commenced after he reached the 55th anniversary of his birth.
ARTICLE III
NORMAL RETIREMENT BENEFIT
3.1 Normal Retirement Benefit. Subject to the minimum benefit provisions
under Section 3.2 and the maximum benefit limitations under Section
3.3, the amount of monthly Retirement Benefit on the life annuity
basis as described in Section 8.4 to which a Participant is entitled
to receive beginning on his Normal Retirement Date is equal to the
sum of (a) less (b) plus (c) less (d) below:
(a) (i) 1.6% of the Participant's Average Earnings multiplied by
(ii) his Years of Credited Service up to 35 such years.
(b) (i) 1.2% of the Participant's Social Security Benefit
multiplied by
(ii) his Years of Credited Service up to 35 such years.
(c) (i) .75% of the Participant's Average Earnings, multiplied by
(ii) his Years of Credited Service in excess of 35 such years,
but not more than 40 such years.
(d) his Retirement Annuity.
In no event shall a Participant's Retirement Benefit hereunder be
decreased as a result of any increase in his Social Security Benefit
which becomes effective subsequent to his actual retirement or other
termination of employment.
Unless otherwise provided under the Plan, each Section 401(a)(17)
Employee's Accrued Benefit under this plan will be the greater of the
accrued benefit determined for the employee under (e) or (f) below:
(e) the Employee's Accrued Benefit determined with respect to the
benefit formula applicable for the Plan Year beginning January
1, 1994, as applied to the Employee's total Years of Credited
Service taken into account under the Plan, or
(f) the sum of:
(i) the Employee's Accrued Benefit as of December 31, 1993,
frozen in accordance with Section 1.401(a)(4)-13 of the
regulations, and
(ii) the Employee's Accrued Benefit determined under the
benefit formula applicable for the Plan Year beginning
January 1, 1994, as applied to the Employee's Years of
Credited Service credited to the Employee for Plan Years
beginning on or after January 1, 1994.
A Section 401(a)(17) Employee means an employee whose current Accrued
Benefit as of January 1, 1994, is based on Earnings for a year
beginning prior to January 1, 1994, that exceeded $150,000.
The Participant's Retirement Benefit shall be paid pursuant to
Article VIII.
3.2 Minimum Accrued Benefit.
(a) For a Participant who is a "super highly compensated employee"
(an individual described under Code Section 414(q)(1)(A) or (B))
for calendar year 1989, the Accrued Benefit payable at Normal
Retirement Date hereunder shall not be less than such
Participant's Accrued Benefit on December 31, 1988 under the
terms of the Plan on such date;
Further, in no event shall Retirement Benefits for any such
"super highly compensated" Retired Participant be paid from the
Trust Fund for amounts that would have been payable for the
period January 1, 1989 through June 30, 1991, had such benefits
not been frozen pursuant to Model Amendment IID under Internal
Revenue Service Notice 88-131, as adopted by the Employer
effective December 31, 1988. As a result of the revocation of
Model Amendment IID, effective July 1, 1991, Retirement Benefits
for the "super highly compensated" Retired Participants
attributable to the period from January 1, 1989 through June 30,
1991 shall be payable from the Trust Fund for periods on and
after July 1, 1991 only.
(b) For any other individual who was a Participant after December
31, 1988, the Accrued Benefit payable at Normal Retirement Date
shall not be less than the Accrued Benefit of such Participant
determined on December 31, 1988 under the terms of the Plan in
effect immediately prior to January 1, 1989.
(c) Notwithstanding the foregoing, in no event shall the benefit
hereunder for any Participant who was a Participant under the
Newport Electric Corporation Pension Plan as in effect
immediately prior to January 1, 1991, be less than the benefit
accrued to such Participant under the terms of the Newport
Electric Corporation Pension Plan as in effect immediately prior
to January 1, 1991.
3.3 Maximum Benefit. Effective January 1, 1987, notwithstanding any
other provision of the Plan to the contrary, a Participant's annual
retirement benefit under the Plan and any other defined benefit
pension plan of an Employer or an Affiliated Employer may not exceed
the lesser of (a) or (b) below, except as provided in (c) below,
provided that if the applicable limits described below are adjusted
for increases in the cost of living as provided in rules and
regulations adopted by the Secretary of the Treasury after a
Retirement Benefit is in pay status, benefit payments to a Retired
Participant or his Beneficiary, if applicable, shall be increased
automatically to the maximum extent permitted under the revised
limits. This increase shall occur only to the extent that it would
not cause the benefit to exceed the benefit to which the Retired
Participant or Beneficiary would have been entitled in the absence of
the limits of this Section 3.3:
(a) The lesser of (i) or (ii) below, but subject to subparagraphs
(iii) through (x) below:
(i) 100% of his average compensation in the three consecutive
highest paid calendar years while a Participant in the
Plan.
(ii) $90,000 (as adjusted for increases in the cost of living
as provided in rules and regulations adopted by the
Secretary of the Treasury).
(iii) In the case where a benefit is payable prior to the
Participant's Social Security Retirement Age (defined
below), the dollar limitation in subsection (ii) above
shall be adjusted so that it is the actuarial equivalent
of an annual benefit of $90,000 (as adjusted for
increases in the cost of living as provided in rules and
regulations adopted by the Secretary of the Treasury),
beginning at the Social Security Retirement Age,
multiplied by an adjustment factor, as prescribed by the
Secretary of the Treasury. The adjustment provided for
in the preceding sentence shall be made in such manner as
the Secretary of the Treasury may prescribe which is
consistent with the reduction for old-age insurance
benefits commencing before the Social Security Retirement
Age under the Social Security Act. For purposes of
determining actuarial equivalence hereunder, the interest
assumption shall not be less than the greater of 5% per
year or the underlying rate used to determine the
reduction of benefits for early payment under the Early
Retirement provisions of Section 4.2.
(iv) In the case where a benefit commences after a Participant
has attained Social Security Retirement Age, the dollar
limitation in subsection (ii) above shall be adjusted so
that it is the actuarial equivalent of an annual benefit
of $90,000 (as adjusted for increases in the cost of
living as provided in rules and regulations adopted by
the Secretary of the Treasury) beginning at the Social
Security Retirement Age, multiplied by an adjustment
factor as prescribed by the Secretary of the Treasury.
For purposes of determining actuarial equivalence
hereunder, the interest assumption shall not be greater
than the lesser of 5% per year or the rate specified in
Section 1.3.
(v) If a Participant has completed less than ten years of
participation in the Plan, the Participant's Accrued
Benefit shall not exceed the dollar limit in subsection
(ii) above as adjusted by multiplying such amount by a
fraction, the numerator of which is the Participant's
number of years (or part thereof) of participation in the
Plan, and the denominator of which is ten.
(vi) If a Participant has completed less than ten Years of
Vesting Service, the limitations described in Code
Sections 415(b) (1)(B) and 415(b)(4) shall be adjusted by
multiplying such amounts by a fraction, the numerator of
which is the Participant's number of Years of Vesting
Service (or part thereof), and the denominator of which
is ten.
(vii) In no event shall subsections (v) and (vi) above reduce
the limitations provided under Code Sections 415(b)(1)
and (4) to an amount less than one-tenth of the
applicable limitation (as determined without regard to
this section). To the extent provided by the Secretary
of the Treasury, subsections (v) and (vi) above shall
be applied separately with respect to each change in the
benefit structure of the Plan.
(viii) Unless subsection (vi) applies to a Participant, the
limits of subsections (i) and (ii) above shall be deemed
met if:
(A) the annual benefit payable to the Participant from
this Plan and all other qualified defined benefit
plans of the Employer does not exceed $10,000; and
(B) the individual has never participated in a qualified
defined contribution plan sponsored by the Employer
or an Affiliated Employer.
(ix) Except in the case where a benefit is payable pursuant to
Section 8.1(a) or 8.3(a), with the Participant's Spouse
as the Contingent Annuitant, if a benefit is payable in a
benefit form other than a life annuity, the amount
otherwise determined under this subparagraph (a) shall be
the Actuarial Equivalent of the amount payable as a life
annuity. For this purpose, the interest rate assumption
shall not be less than the greater of 5% or the rate
specified in Section 1.3.
(x) For purposes of this Section 3.3, Social Security
Retirement Age shall be as defined in Code Section
415(b)(8).
(b) In the case of a Participant who has participated in a defined
contribution plan maintained by an Employer or an Affiliated
Employer, the amount determined pursuant to subparagraph (a)
above shall be multiplied by 1.40 in the event (a)(i) applies or
by 1.25 in the event (a)(ii) applies and shall further be
multiplied by a fraction equal to one minus a fraction with a
numerator equal to (i) below and a denominator equal to (ii)
below:
(i) The sum of the annual additions made to the Participant's
account under all defined contribution plans maintained
by the Employer and its Affiliated Employers, where the
annual additions are equal to the sum of (A) Employer
contributions allocated to the Employee's account, (B)
any forfeitures allocated to the Employee's account, (C)
the portion of the Employee's after-tax contributions
made prior to January 1, 1987, that represented the
lesser of one-half of such contributions or the amount of
such contributions in excess of 6% of his compensation,
(D) all Employee after-tax contributions made after
December 31, 1986, and (e) amounts described in Code
Sections 415(l)(1) and 419(A)(d)(2).
(ii) The sum for each calendar year of the Participant's
employment with an Employer or an Affiliated Employer of
the lesser of (A) 1.4 multiplied by 25% of the
Participant's compensation for the calendar year, or (B)
1.25 multiplied by $30,000, as adjusted for increases in
the cost of living as provided under rules and regula-
tions adopted by the Secretary of the Treasury.
(c) If, in any limitation year, the benefit under this Plan exceeds
the lesser of (a) or (b) above, then appropriate reductions
shall first be applied to the Participant's Accrued Benefit
under this Plan in order to reduce such benefit to the lesser of
(a) or (b).
For the purpose of this paragraph, an Affiliated Employer shall be
determined by assuming the phrase "more than 50%" is substituted for
the phrase "at least 80%" wherever it appears in Code Section 1563,
as it may be amended from time to time and limitation year shall mean
Plan Year.
3.4 Continuing Employment. The retirement of any Participant under this
Article III shall not become effective while he is in the employment
of an Employer or an Affiliated Employer, except as provided in
Section 2.4. If an Employee continues to work for the Employer or an
Affiliated Employer beyond his Normal Retirement Date, the provisions
of Article V and Article VIII shall be applicable.
ARTICLE IV
EARLY RETIREMENT DATE AND EARLY RETIREMENT BENEFIT
4.1 Early Retirement Date. A Participant may retire prior to his Normal
Retirement Date on the first day of any month coincident with or next
following his attainment of age 55 and his completion of five or more
Years of Vesting Service.
If a Participant intends to retire early under this Article IV, he
must file a written notice of his intent with the Retirement Board.
The date of his retirement must be stated in the notice.
The date on which a Participant retires under this Paragraph 4.1
shall be his Early Retirement Date.
4.2 Early Retirement Benefit. Subject to the minimum benefit provisions
of Sections 3.2 and 4.3 and the maximum benefit limitations of
Section 3.3, a Participant who retires on an Early Retirement Date
may elect to receive either an immediate Retirement Benefit or a
deferred Retirement Benefit as indicated below. The monthly amount
of the Retirement Benefit payable in the Normal Form shall be equal
to either (a) or (b) below, as applicable.
(a) Early Payment. If the Participant terminates on an Early
Retirement Date and elects to commence payment of Retirement
Benefits prior to his Normal Retirement Date, the amount of the
benefit shall be equal to his Accrued Benefit reduced by the
appropriate factor in the Appendix.
Such reduction shall be applied to the Retirement Benefit
determined pursuant to the provisions of Section 3.1(a), (b) and
(c). The value of the Retirement Annuity payable to such
Participant shall be subject to the early retirement factors
under the Group Annuity Contract.
(b) Deferred Payment. If the Participant terminates on an Early
Retirement Date and elects to defer payment of his Retirement
Benefit to his Normal Retirement Date, the amount of his monthly
Retirement Benefit on the life annuity basis (described in
Section 8.4) shall be equal to his Accrued Benefit.
4.3 Minimum Benefit. In no event shall the early retirement income
payable under this Plan be less than the Accrued Benefit determined
under the provisions of the Plan immediately before the adoption of
this amended and restated Plan, adjusted to reflect early receipt
based on the early retirement reduction factors specified in the Plan
as of such date.
4.4 Special Early Retirement. Notwithstanding Sections 4.1 and 4.2,
effective July 1, 1991, an Active Participant who has attained age 55
and whose attained age plus completed Years of Vesting Service equal
at least 85, may retire on a Special Early Retirement Date and elect
to commence payment of his Retirement Benefits prior to his Normal
Retirement Date, the amount of his benefit shall be equal to his
Accrued Benefit reduced by the appropriate Special Early Retirement
factor in the Appendix.
ARTICLE V
POSTPONED RETIREMENT DATE AND POSTPONED RETIREMENT BENEFIT
5.1 Postponed Retirement Date. The Postponed Retirement Date of a
Participant will be the day of his actual retirement after his Normal
Retirement Date.
5.2 Postponed Retirement Benefit.
(a) If a Participant attained age 70-1/2 prior to January 1, 1988 or
if his Postponed Retirement Date occurs during or prior to the
end of the calendar year in which he attained age 70-1/2, his
Accrued Benefit under Section 3.1 shall be determined and
payable as of his Postponed Retirement Date.
(b) If a Participant's Postponed Retirement Date has not occurred by
the end of the calendar year in which he attains age 70-1/2 and
Retirement Benefits must commence pursuant to Section 8.6(b),
then his Retirement Benefit shall be his Accrued Benefit
calculated pursuant to Article III as of the close of the
calendar year in which he attains age 70-1/2. For subsequent
required distributions, his Accrued Benefit shall be
recalculated at the end of each calendar year thereafter until
his actual Postponed Retirement Date or his date of death.
Recalculation of the Accrued Benefit is described in the
following subparagraph (c).
Once Retirement Benefits commence under this Section 5.2, a
Participant may not elect a different form of payment,
Beneficiary or Contingent Annuitant for any additional Accrued
Benefit which is calculated hereunder, except in the event of
death of the Beneficiary or a divorce of the Participant.
(c) The recalculation of the Participant's Accrued Benefit under
Section 5.2(b) shall be performed as follows:
(i) a new Accrued Benefit shall be calculated using the
Participant's Average Earnings, Years of Credited Service,
and Social Security Benefit at the close of the calendar
year;
(ii) the new Accrued Benefit as determined under (i) above
shall be reduced by the Actuarial Equivalent value of the
Retirement Benefit payments previously received by the
Participant during months in which Retirement Benefits
would have been suspended pursuant to Section 2.4,
provided that the resulting benefit shall not be less than
the benefit the Participant is receiving before it is
recalculated under (i) above.
(d) Notwithstanding any provision of this Plan to the contrary, all
distributions made hereunder shall be made in accordance with
the requirements of Code Section 401(a)(9) and regulations
thereunder, including the incidental death benefit requirements
of Treasury Regulation 1.401(a)(9)-2. The provisions of this
section override any distribution options under the Plan if
inconsistent with the requirements of Code Section 401(a)(9).
(e) Postponed Retirement Benefits hereunder shall commence to the
Participant upon the earlier of
(i) his Postponed Retirement Date, or
(ii) if required pursuant to Section 8.6(a), the April 1
following the calendar year in which he has attained age
70-1/2.
The Participant's Postponed Retirement Benefit shall be paid pursuant
to Article VIII.
5.3 Death Prior to Postponed Retirement Date. If a Participant dies
after his Normal Retirement Date, but prior to commencement of his
Retirement Benefit, his Spouse shall be entitled to benefits under
the Plan in accordance with Article VII in the amount which would
have been payable to his Spouse had his benefits commenced on the
first day of the month coincident with or next preceding his death in
the form described in Section 7.1.
5.4 Death Following Commencement of Retirement Benefits. If a
Participant dies while actively employed and after his Retirement
Benefit has commenced pursuant to Section 5.2, any death benefit
payable with respect to any additional accrual he may be entitled to
as a result of his continued employment shall be paid in the same
form as in effect when such Retirement Benefits originally commenced.
ARTICLE VI
TERMINATION OF EMPLOYMENT
6.1 Non-Vested Termination. Effective January 1, 1989, a Participant
whose employment is terminated with the Employer and all Affiliated
Employers prior to:
(a) his completion of five Years of Service subsequent to his
attainment of age 18, and
(b) the complete or partial termination of the Plan with respect to
such Participant, shall have no vested interest in his Accrued
Benefit and shall not be entitled to receive a Retirement
Benefit from the Plan.
Upon the Service Termination Date of a Participant who has no vested
right to his Accrued Benefit, the entire value of his vested benefit
hereunder shall be deemed to be distributed to him. In the event
such Participant is credited with an Hour of Service before incurring
five consecutive One Year Breaks in Service following his Service
Termination Date, his vested benefit previously deemed to be
distributed to him hereunder will be deemed repaid to the Plan.
6.2 Vested Termination. Effective January 1, 1989, an Employee shall
have a nonforfeitable right to his Accrued Benefit upon the earliest
of the following events:
(a) his completion of five Years of Service subsequent to his
attainment of age 18, and
(b) the complete or partial termination of the Plan with respect to
such Participant.
An Inactive Participant who is no longer an Employee shall be
entitled to receive a deferred Retirement Benefit commencing on his
Normal Retirement Date in an amount equal to his Accrued Benefit.
For purposes of determining such Accrued Benefit, only the provisions
of the Plan in effect at the time of the Participant's Service
Termination Date shall be considered. The Participant's Retirement
Benefit shall be paid pursuant to Article VIII.
6.3 Early Payment. In lieu of the deferred benefit described in Section
6.2, an Inactive Participant who has a nonforfeitable right to his
Accrued Benefit may elect in writing to receive a reduced benefit
commencing on the first day of any month between his 55th birthday
and his Normal Retirement Date. If the Participant elects to receive
his Retirement Benefit before his Normal Retirement Date, his Accrued
Benefit shall be reduced by the appropriate factor in the Appendix.
The Participant's Retirement Benefit shall be paid pursuant to
Article VIII.
6.4 Prior Participant Account. A vested Participant whose employment
terminates for reasons other than death prior to his eligibility for
early retirement under Section 4.1 may elect to receive his Prior
Participant Account, plus interest, as determined on his termination
of employment at the rate of 2% per annum once per year as of
December 31, or, in the case of earlier termination of employment as
of the end of the month preceding such termination on the basis of
the balance in such account as of the preceding December 31 or at any
time following his termination of employment and prior to
commencement of payment of his Retirement Benefit, if any, by filing
a written application with the Retirement Board. Upon payment of the
Prior Participant Account, the Participant's deferred Retirement
Benefit shall be reduced by the Actuarial Equivalent value of such
account.
In the event a Participant has no vested interest in his Accrued
Benefit and the value of his Participant Account is $3,500 or less,
payment of his Participant Account shall be subject to the provisions
of Section 8.6.
ARTICLE VII
DEATH BENEFITS
7.1 Immediate Surviving Spouse Benefit For Death Occurring On or After
Age 55. If an Active or an Inactive Participant who has completed at
least five Years of Vesting Service and attained age 55 prior to his
termination of employment dies, a monthly Retirement Benefit shall be
payable to his surviving Spouse. The amount of the benefit is the
amount that would have been payable to the Spouse as Contingent
Annuitant had the Participant retired on the date of his death with
an immediate benefit payable subject to early payment reduction under
Article IV under the 100% Joint and Survivor annuity form described
in Article VIII with his Spouse as Contingent Annuitant.
Unless Section 8.6 applies, such Spouse's benefit shall commence on
the first day of the month next following the Participant's date of
death and continue for the surviving Spouse's lifetime.
If the involuntary cash-out provisions of Section 8.6 are operative,
a monthly death benefit which becomes due hereunder but which has not
yet commenced shall be paid in one lump sum amount to the Spouse in
lieu of all other benefits under the Plan.
7.2 Pre-Retirement Surviving Spouse Benefit For Death Of Active or
Inactive Participant Occurring Before Age 55.
(a) If an Active Participant who has completed ten Years of Vesting
Service dies after his 50th birthday but before age 55, a
monthly Retirement Benefit shall be payable to his surviving
Spouse. The amount of such benefit is the amount that would
have been payable to the Spouse as Contingent Annuitant had:
(i) the Participant terminated employment with the Employer
and all Affiliated Employers on the day before his death
and elected Retirement Benefits to begin on the first day
of the month coincident with or next following his date of
death, and
(ii) his Accrued Benefit had been payable in the 100% Joint and
Survivor annuity form described in Article VIII with his
Spouse as Contingent Annuitant, multiplied by the
appropriate factor below:
Participant's Age
at Nearest Birthday Factor
50.35
51.38
52.41
53.44
54.47
Unless Section 8.6 applies, such Spouse's benefit under this
paragraph (a) shall be payable commencing on the first day of
the month coincident with or next following his date of death
and shall continue for the surviving Spouse's lifetime.
(b) If an Active Participant who has completed at least five Years
of Vesting Service dies prior to age 55, a monthly Retirement
Benefit shall be payable to his surviving Spouse. The amount of
such benefit is the amount that would have been payable to the
Spouse as Contingent Annuitant:
(i) had the Participant terminated employment with the
Employer and all Affiliated Employers on the day before
his death and elected Retirement Benefits to begin at the
later of age 50 or his date of death; and
(ii) shall be equal to 50% of the Member's Accrued Benefit
multiplied by the appropriate factor in the Appendix, as
though the Participant had survived to the later of age 50
or his date of death and had elected the 50% Joint and
Survivor Annuity form described in Article VIII with his
Spouse as Contingent Annuitant. Such amount shall be
multiplied by the appropriate factor set forth in (a)(ii)
above.
Unless Section 8.6 applies, such Spouse's benefit under this
paragraph (b) shall be payable commencing on the first day of
the month coincident with or next following the later of the
date the Participant would have attained age 50 and his date of
death and shall continue for the surviving Spouse's lifetime.
(c) If an Inactive Participant who was vested in his Accrued Benefit
as of his termination of employment dies prior to age 55, a
monthly Retirement Benefit shall be payable to his surviving
Spouse. The amount of such benefit shall be 50% of the amount
of the Inactive Participant's Accrued Benefit that he would have
been entitled to receive in the form of a 50% Joint and Survivor
Annuity and elected Retirement Benefits to commence at age 55.
Unless Section 8.6 applies, such Spouse's benefit under this
paragraph (c) shall be payable commencing on the first day of
the month coincident with or next following the date the
Participant would have attained age 55.
If the involuntary cash-out provisions of Section 8.6 are operative,
a monthly death benefit which becomes due hereunder but which has not
yet commenced shall be paid in one lump sum amount to the Spouse in
lieu of all other benefits.
7.3 Death Benefits After Retirement Benefits Have Commenced. If a
Participant dies at any time after Retirement Benefits have begun,
death benefits, if any, shall be strictly dictated by the form of
payment in which such Retirement Benefit was being paid.
7.4 Prior Participant Account. If a participant dies before Retirement
Benefits have begun and provided that no benefit is payable to his
surviving Spouse, the value of his Participant Account, determined at
his date of death in the same manner as described in Section 6.4,
shall be payable in a single sum to his Beneficiary.
ARTICLE VIII
PAYMENT OF RETIREMENT BENEFITS
8.1 Automatic Payment Forms. Unless the involuntary cash-out provisions
of Section 8.6 apply, the automatic or normal form of Retirement
Benefit shall be as described in this Section 8.1. A Participant
may, however, elect an optional form of Retirement Benefit in
accordance with Section 8.2.
(a) A Participant who has a Spouse on the Annuity Starting Date
shall receive a reduced retirement income which shall be the
Actuarial Equivalent of the Retirement Benefit to which he would
be entitled under the Plan if he had no Spouse, payable monthly
commencing on the first day of the month coincident with or next
following the date his retirement occurs, and if he shall die
prior to such Spouse, continuing to the Spouse at 50% of the
reduced amount and ending with the payment due for the month in
which the death of the Spouse occurs.
(b) A Participant who does not have a Spouse on the Annuity Starting
Date shall receive the Retirement Benefit to which he is
entitled under the Plan, payable monthly commencing on the first
day of the month coincident with or next following the date his
retirement occurs and ending with the payment due for the month
in which his death occurs.
Notwithstanding anything to the contrary hereunder, upon cessation of
payments of the retirement Benefit or other benefit payable to or on
account of any retired Participant or his Spouse, any excess of the
value of the Participant's Participant Account (as determined
pursuant to Section 6.4) at the date of retirement or prior death
over the total benefit payments made to him or on his behalf shall be
paid in one sum to the beneficiary designated by the person last in
receipt of such Retirement Benefit or other benefit, or if no such
beneficiary is living, to the legal representative of such person.
8.2 Election of Optional Forms. At least 30 days, but not more than 90
days, prior to an Annuity Starting Date, a Participant may elect an
optional form of payment for his Retirement Benefit as may be
available under Section 8.3 or 8.4. Such election will not take
effect unless the Participant's Spouse consents to the election if
required under Section 8.5(c). The Retirement Board shall make an
election form available to each such eligible Participant. Such form
shall describe in plain language the terms and conditions of the
normal form of payment described in Section 8.1 and the optional
forms of benefit and shall provide for election of optional forms of
benefit and a benefit commencement date. The completed election form
must be returned to the Retirement Board within the 90 day period
ending on the designated Annuity Starting Date. In addition, the
form will provide a description of the Participant's right to
reinstate coverage under the normal form of benefit described in
Section 8.1 prior to his Annuity Starting Date by revoking an
election of an optional form of benefit. If a Participant files a
subsequent election form prior to the date benefits commence, the
prior form shall be of no effect. If no election has been made at
the expiration of the election period, Retirement Benefits will be
payable in accordance with Section 8.1. Election of optional forms
of benefits under the following Sections 8.3 and 8.4 shall be subject
to the restrictions of Section 8.5. Any such election, whenever
made, may be altered, amended, or revoked by the Participant prior to
the date when the first payment of his retirement income would
normally be made, provided he gives notice in writing to the
Retirement Board. The Retirement Board may, on a uniform and
nondiscriminatory basis, provide for such other election periods as
comply with regulations issued under Code Sections 401(a)(11) and
417. Subject to the provisions of Section 8.5, the Retirement Board
may defer a Participant's Annuity Starting Date for a period of up to
90 days if the Retirement Board determines that the deferral is
desirable in order to provide for an orderly election procedure,
provided that retroactive payment shall be made for any Retirement
Benefits which would have been paid in the absence of the deferral.
8.3 Joint and Survivor Option. Subject to the spousal consent
requirements outlined in Section 8.5(c):
(a) A Participant may elect, by submitting an election form to the
Retirement Board, to have his Retirement Benefit converted to
the Actuarial Equivalent of the normal form under Section 8.1
and paid monthly during his life with the provision that after
his death, any percentage from 50% through 100% of such reduced
Retirement Benefit will be payable to his Contingent Annuitant
during the remaining life of such Contingent Annuitant.
(b) If a Participant elects the Joint and Survivor Option and his
Contingent Annuitant dies before such Participant's benefit
actually commences and the Participant does not change his
election in accordance with Section 8.2, his Retirement Benefit
shall be paid under the normal form under Section 8.1.
(c) If a Participant elects the Joint and Survivor Option and dies
before benefits commence to be paid to him, his Beneficiary will
not be entitled to any rights or benefits under the Plan, except
as provided under Article VII.
(d) If a Participant elects the Joint and Survivor Option and his
Contingent Annuitant dies before his death, but after the
retirement of such Participant, such Participant will continue
to receive the reduced Retirement Benefit payable to him in
accordance with such option.
Notwithstanding the foregoing, however, in the event the Contingent
Annuitant dies before the Participant and within one year of the date
on which payments commenced under the Joint and Survivor Annuity
option, the Participant's Retirement Benefit shall be increased on
the first day of the month following such Contingent Annuitant's
death to the amount which would have been payable to him under the
Life Annuity Option described in Section 8.4) for the balance of his
lifetime.
8.4 Life Annuity Option. Subject to Section 8.5(c), a Participant may
elect, by submitting an election form to the Retirement Board, to
have his Retirement Benefit paid in the normal form under Section
8.1(b). The normal form provides for monthly payments during the
Participant's life, ending with the payment due for the month in
which his death occurs.
8.5 General Provisions.
(a) Notwithstanding any other provisions of the Plan, distribution
of benefits to Participants who attain age 70-1/2 in 1988 or
1989 will commence on April 1, 1990. Distribution to
Participants who attain age 70-1/2 in 1990 and calendar years
thereafter will commence by the April 1 following the year in
which age 70-1/2 is attained. Distribution to Participants who
attained age 70-1/2 prior to January 1, 1988 will be deferred
until the April 1 of the year next following the close of the
calendar year in which the Participant retires; provided,
however, that distribution of benefits to an Employee who owns
5% or more of the outstanding stock of the Employer may not be
deferred beyond the April 1 following the calendar year in which
he attains age 70-1/2. In any event, distributions hereunder
shall be made in accordance with Code Section 401(a)(9) and
regulations thereunder, including Treasury Regulations
1.401(a)(9)-2. Such regulations and applicable rulings or
announcements, including any grandfather provisions delaying the
effective date of Code Section 401(a)(9) are hereby incorporated
by reference.
(b) Upon the death of a Participant any remaining interest he may
have in the Plan shall be distributed within the later of five
years after his death or after the death of his Beneficiary,
unless another form of payment was already in effect at the time
of his death, in which case benefits may be made in accordance
with such form of payment. Benefits may not be immediately
distributed prior to the Participant's Normal Retirement Date
unless the Participant consents in writing, except as provided
in Section 8.6. Anything in this Article VIII to the contrary
notwithstanding, no method of distribution shall be made under
this Article which would result in payment of benefits over a
period longer than the joint life expectancy of the Participant
and his Beneficiary/Contingent Annuitant or which would
otherwise violate the incidental death benefit requirements of
Code Section 401(a)(9) and regulations issued thereunder.
(c) If a married Participant elects to receive his Retirement
Benefit in any form other than the normal form for married
individuals as described in Section 8.1(a) or under the Joint
and Survivor annuity form described in Section 8.3 with his
Spouse as the Contingent Annuitant, then such election shall no
take effect unless either:
(i) the Participant's Spouse consents in writing to such
election and the Spouse's consent acknowledges the effect
of such election and is witnessed by a notary public or
Plan representative, or
(ii) it is established to the satisfaction of the Retirement
Board that the Participant has no Spouse, or that the
Spouse's consent cannot be obtained because the Spouse
cannot be located, or because of such other circumstances
as may be prescribed in regulations issued pursuant to
Code Section 417.
(d) It is the intent of the Plan that all benefits be paid promptly
when due. In the absence of any inability to determine the
amount of benefit payable or the eligibility for a benefit due
to the lack of adequate information on date of birth of
Participant or Spouse, the first benefit shall be paid no later
than the 60th day after the close of the latest Plan Year in
which:
(i) the Participant attains age 65;
(ii) the Participant reaches the 10th anniversary of his date
of commencement of participation in the Plan, or
(iii) the Participant's Service Termination Date occurs.
8.6 Involuntary Cash-Out Provision. If the Actuarial Equivalent present
value of any Retirement Benefit, inclusive of a Participant's Prior
Participant Account, is $3,500 or less and the benefit has not yet
commenced, the Retirement Board shall distribute a lump sum payment
of such Actuarial Equivalent present value to the appropriate
individual as soon as practicable following the Participant's Service
Termination Date, in lieu of all other benefits hereunder.
8.7 Restrictions on Distributions. This Section 8.7 shall apply to the
amount of Benefits under this Plan for any Participant who is
considered a Restricted Participant as defined hereunder. Such
Benefits shall be limited to an amount equal to the payments that
would have been made on behalf of the Restricted Participant under
the life annuity form of payment described in Section 8.4 that is the
Actuarial Equivalent of the Restricted Participant's Accrued Benefit
under the Plan.
For purposes of this Section 8.7, the term Restricted Participant
shall mean all highly compensated employees as defined in Code
Section 414(q) and highly compensated former employees. In any one
Plan Year, the total number of Participants whose benefits are
subject to restriction under this Section 8.7 is hereby limited by
the Plan to a group of not less than 25 highly compensated employees
and highly compensated former employees with the greatest Earnings.
For purposes of this Section 8.7, the term Benefit shall include
Retirement Benefit provided by the Plan plus loans in excess of the
amounts set forth in Code Section 72(p)(2)(A), any periodic income,
any withdrawal values payable to a living Participant and any death
benefits not provided for by insurance on the Participant's life.
The limitations set forth in this Section 8.7 shall not restrict the
current payment of the full amount of Retirement Benefit provided by
the Plan if:
(a) after payment to a Restricted Participant of all of the Benefits
described above, the value of Plan assets equals or exceeds 110%
of the value of current liabilities, as defined in Code Section
412(l)(7),
(b) the value of the Benefits described above for a Restricted
Participant is less than 1% of the value of current liabilities,
as defined in Code Section 412(l)(7), or
(c) the value of the Restricted Participant's benefits does not
exceed three thousand five hundred dollars ($3,500).
8.8 Increased Payments With Respect to Certain Retired Members.
(a) Commencing July 1, 1981, the amount of all Retirement Benefits,
including Contingent Annuitant benefits and Spouse's death
benefits payable with respect to a Participant who had died
prior to January 1, 1980, were increased by 1% for each full 12-
month period elapsed between the effective date of the benefit
and December 31, 1980. In the case of a Participant who had
retired or died prior to July 1, 1973, there was an additional
increase of 15%. The minimum increase payable hereunder shall
be $10 per month.
(b) Commencing January 1, 1984, the amount of all Retirement
Benefits being paid to Participants who retired prior to August
15, 1983, including Contingent Annuitant benefits and Spouse's
death benefits being paid as of that date, were increased by
7%. The minimum increase payable hereunder shall be $10 per
month.
(c) Commencing January 1, 1987, the amount of all Retirement
Benefits being paid to Participants who retired prior to June
15, 1987, including Contingent Annuitant benefits and Spouse's
death benefits being paid as of that date, were increased by 5%.
The minimum increase payable hereunder shall be $10 per month.
(d) Commencing July 1, 1992, the amount of all Retirement Benefits
being paid to Participants who retired under the Plan between
July 1, 1987 and June 30, 1992, including Contingent Annuitant
benefits and Spouse's death benefits being paid as of that date
were increased by 4%. Commencing July 1, 1992, the amount of
all Retirement Benefits being paid to Participants who retired
under the Plan prior to July 1, 1987, including Contingent
Annuitant benefits and Spouse's death benefits being paid as of
that date, were increased by 8%.
The minimum increase hereunder shall be $10 per month.
8.9 Direct Rollover Provision.
(a) This Section 8.9 shall apply to distributions made on or after
January 1, 1993. Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a distributee's election
under this Section 8.9, a distributee may elect, at the time and
in the manner prescribed by the Retirement Board to have any
portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a
direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any
distribution that is one of a series of substantially
equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the
distributee or the joint lives (or the joint life
expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
or more years; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and
the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to Employer
securities).
(ii) Eligible retirement plan: An eligible retirement plan is
an individual retirement account described in Code Section
408(a), an individual retirement annuity described in Code
Section 408(b), an annuity plan described in Code Section
403(a) or a qualified trust described in Code Section
401(a), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the surviving Spouse, an eligible
retirement plan is an individual retirement account or
individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former
Employee's surviving Spouse and the Employee's or former
Employee's Spouse or former Spouse who is the alternate
payee under a qualified domestic relations order, as
defined in Code Section 414(p), are distributees with
regard to the interest of the Spouse or former
Spouse.
(iv) Direct rollover: A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the
distributee.
ARTICLE IX
RETIREMENT BOARD
9.1 Responsibility for Plan and Trust Administration. The Employer shall
save the sole authority to appoint and remove the Trustee, any
investment manager which may be provided for under the Trust, and to
amend or terminate, in whole or in part this Plan or the Trust. The
Employer, through its Retirement Board, shall have the responsibility
for the administration of this Plan, which is specifically described
in this Plan and the related Trust Agreement. The Employer shall be
the "named fiduciary" for purposes of the Code and ERISA.
9.2 Retirement Board. The Plan shall be administered by the Employer
through the Retirement Board which is appointed by the Board of
Trustees. The Retirement Board shall consist of five or more members
who are officers of any Participating Employer or any affiliate or
subsidiary and who are appointed by and serve at the pleasure of the
Board of Trustees. Any member of the Retirement Board may resign by
delivering his written resignation to the Board and the Secretary of
the Retirement Board.
9.3 Agents of the Retirement Board. The Retirement Board may delegate
specific responsibilities to other persons as the Retirement Board
shall determine. The Retirement Board may authorize one or more of
their number, or any agent, to execute or deliver any instrument or
to make any payment in their behalf. The Retirement Board may employ
and rely on the advice of counsel, accountants, the Actuary, and such
other persons as may be necessary in administering the Plan.
9.4 Retirement Board Procedures. The Retirement Board may adopt such
rules as it deems necessary, desirable, or appropriate. All rules
and decisions of the Retirement Board shall be uniformly and
consistently applied to all Participants in similar circumstances.
When making a determination or calculation, the Retirement Board
shall be entitled to rely upon information furnished by a
Participant, Spouse or Beneficiary, the Employer, the legal counsel
of the Employer, the Actuary, or the Trustee.
The Retirement Board may act at a meeting or in writing without a
meeting. The Retirement Board shall elect one of its members as
chairman, appoint a secretary, who may or may not be a Retirement
Board member, and advise the Trustee of such actions in writing. The
secretary shall keep a record of all meetings and forward all
necessary communications to the Employer, the Trustee or the Actuary.
The Retirement Board may adopt such bylaws and regulations as it
deems desirable for the conduct of its affairs. All decisions of the
Retirement Board shall be made by the vote of the majority including
actions in writing taken without a meeting.
9.5 Administrative Powers of the Retirement Board. The Retirement Board
may from time to time establish rules for the administration of the
Plan. Except as otherwise herein expressly provided, the Retirement
Board will have the exclusive right and discretionary authority, to
the fullest extent provided by law, to interpret the Plan and decide
any matters arising hereunder in the administration and operation of
the Plan, and any interpretations or decisions so made will be
conclusive and binding on all persons having an interest in the Plan;
provided, however, that all such interpretations and decisions will
be applied in a uniform and non-discriminatory manner to all
Employees. The Retirement Board shall have no right to modify any
provisions of the Plan as herein set forth.
9.6 Benefit Claims Procedures. All claims for benefits under the Plan
shall be in writing and shall be submitted to the Retirement Board
member designated as Retirement Board Secretary by the Retirement
Board. If any application for payment of a benefit under the Plan
shall be denied, the Retirement Board shall notify the claimant
within 90 days of such application setting forth the specific reasons
therefore and shall afford such claimant a reasonable opportunity for
a full and fair review of the decision denying his claim. If special
circumstances require an extension of time for processing the claim,
the individual will be furnished with a written notice of the
extension prior to the termination of the initial 90-day period. In
no event shall such extension exceed a period of 90 days from the end
of such initial period. The extension notice shall indicate the
special circumstances requiring an extension of time and the date by
which the Retirement Board expects to render its decision.
Notice of such denial shall set forth, in addition to the specific
reasons for the denial, the following:
(a) reference to pertinent provisions of the Plan;
(b) such additional information as may be relevant to the denial of
the claim;
(c) an explanation of the claims review procedure; and
(d) notice that such claimant may request the opportunity to review
pertinent Plan documents and submit a statement of issues and
comments.
Within 60 days following notice of denial of his claim, upon written
request made by any claimant for a review of such denial to the
Retirement Board Secretary, the Retirement Board shall take
appropriate steps to review its decision in light of any further
information or comments submitted by such claimant.
The Retirement Board shall render a decision within 60 days after the
claimant's request for review and shall advise said claimant in
writing of its decision on such review, specifying its reasons and
identifying appropriate provisions of the Plan. If special
circumstances require an extension of time for processing, a decision
will be rendered as soon as possible, but not later than 120 days
after receipt of a request for the review. If the extension of time
for review is required because of special circumstances, written
notice of the extension shall be furnished to the claimant prior to
the commencement of the extension. If the decision is not furnished
within such time, the claim shall be deemed denied on review. The
decision on review shall be in writing and shall include specific
reasons for the decision, written to the best of the Retirement
Board's ability in a manner calculated to be understood by the
claimant without legal or actuarial counsel, as well as specific
references to the pertinent Plan provisions on which the decision is
based. In the event of continued disagreement, the claimant may
thereafter appeal to the Employer, whose decision is final.
9.7 Certification of Benefits. Subject to the provisions of this Plan,
it will be the duty of the Retirement Board to compute and certify to
the Trustees the amount of Retirement Benefit payable hereunder to
any Participant, Spouse, Beneficiary or Contingent Annuitant.
9.8 Designation of Actuary. The Retirement Board will designate an
Actuary to make all actuarial calculations required in connection
with the Plan.
9.9 Reliance on Reports and Certificates. The Employer (or the
Retirement Board if so designated by the Employer) will be entitled
to rely conclusively upon all tables, valuations, certificates,
opinions, and reports which may be furnished by the Actuary, or any
accountant, controller, counsel, or other person who is employed or
engaged for such purposes and shall exercise the authority and
responsibility as it deems appropriate to comply with all of the
legal and governmental regulations affecting this Plan.
9.10 Other Retirement Board Powers and Duties. The Retirement Board shall
have such duties and powers as may be necessary to discharge its
duties hereunder, including, but not by way of limitation, the
following:
(a) to prescribe written procedures to be followed by Participants,
Spouses, Contingent Annuitants and Beneficiaries filing
applications for benefits;
(b) to prepare and distribute, in such manner as the Retirement
Board determines to be appropriate, information explaining the
Plan;
(c) to receive from the Employer and from Participants such
information as shall be necessary for the proper administration
of the Plan;
(d) to furnish the Employer, upon request, such annual reports with
respect to the administration of the Plan as are reasonable and
appropriate;
(e) to receive and review the periodic valuation of the Plan made by
the Actuary; and
(f) to receive, review and keep on file (as it deems convenient or
proper) reports of benefit payments by the Trustee and reports
of disbursements for expenses directed by the Retirement Board.
The Retirement Board shall have no power to add to, subtract from or
modify any of the terms of the Plan, or to change or add to any
benefits provided by the Plan, or to waive or fail to apply any
requirements of eligibility for a retirement benefit under the Plan.
9.11 Compensation of Retirement Board. No member of the Retirement Board
who is an Employee will receive any compensation for his services as
such, but will be reimbursed for reasonable expenses incident to the
performance of such services. The reimbursement of expenses shall be
paid in whole or in part by the Employer, and any expenses not paid
by the Employer shall be paid by the Trustee out of the principal or
income of the Trust Fund.
9.12 Member's Own Participation. No member of the Retirement Board may
act, vote, or otherwise influence a decision of the Retirement Board
specifically relating to his own participation under the Plan.
9.13 Liability of Retirement Board Members. No member of the Retirement
Board will be liable for any act of omission or commission except as
provided by federal law.
9.14 Indemnification. The Board of Trustees of the Employer, the
Retirement Board and the individual members thereof shall be
indemnified by the Employer and not the Trust Fund against any and
all expenses, costs, and liabilities arising by reason of any act or
failure to act, unless such act or failure to act is judicially
determined to be gross negligence or willful misconduct.
ARTICLE X
FUNDING AND CONTRIBUTIONS
10.1 Establishment of Fund. The Fund shall be held and administered by
the Trustee in accordance with the terms of the Trust. The Fund
shall hold all contributions made by the Employer and earnings and
other income attributable thereto. All benefits payable under the
Plan shall be disbursed from the Fund.
10.2 Contributions to the Fund; Plan Expenses. The Employer will
contribute to the Fund such sums and at such times as may be
determined by the Board in accordance with the funding method and
policy to be established by the Board which are consistent with Plan
objectives. The Board, in consultation with the Actuary and the
Retirement Board, shall have the right to change the method of
funding, subject only to any contractual restrictions of the existing
method of funding. Forfeitures arising from termination of service
will be used to reduce Employer contributions and will not be applied
to increase any benefits under the Plan. Except as provided in
Section 10.3 and Article XII, all contributions when made to the Fund
and all property and assets of the Fund, including income from
investments and from all other sources, will be retained for the
exclusive benefit of Participants, Spouses, Contingent Annuitants and
Beneficiaries included in the Plan and will be used to pay benefits
provided hereunder or to pay expenses of administration of the Plan
and the Fund to the extent not paid by the Employer.
10.3 Contributions Conditional. Each Employer contribution to the Plan is
expressly conditioned on its deductibility. If any Employer
contribution is deemed to be nondeductible or made by the Employer by
a mistake of fact, such contribution shall be returned to the
Employer within one year of the date of the disallowance of such
deduction or the date the contribution was made to the Fund,
respectively.
10.4 Employee Contributions. No Employee will be required or permitted to
make any contributions under this Plan.
ARTICLE XI
FIDUCIARY RESPONSIBILITIES
11.1 Basic Responsibilities. Any Fiduciary under the Plan, whether
specifically designated or not, shall:
(a) discharge all duties solely in the interest of Participants,
Spouses, Contingent Annuitants and Beneficiaries and for the
exclusive purpose of providing benefits and defraying reasonable
administrative expenses under the Plan;
(b) discharge his responsibilities with the care, skill, prudence,
and diligence a prudent man would use in similar circumstances;
and
(c) conform with the provisions of the Plan.
No person who is ineligible by law will be permitted to serve as
Fiduciary.
11.2 Actions of Fiduciaries. Any Fiduciary:
(a) may serve in more than one fiduciary capacity with respect to
the Plan;
(b) may employ one or more persons to render advice with regard to
or to carry out any responsibility that such Fiduciary has under
the Plan; and
(c) may rely upon any discretion, information, or action of any
other Fiduciary, acting within the scope of its responsibilities
under the Plan, as being proper under the Plan.
11.3 Fiduciary Liability. No Fiduciary shall be personally liable for any
losses resulting from his action except as provided by federal law.
Each Fiduciary shall have only the authority and duties which are
specifically allocated to him, shall be responsible for the proper
exercise of his own authority and duties, and shall not be
responsible for any act or failure to act of any other Fiduciary.
ARTICLE XII
AMENDMENT AND TERMINATION
12.1 Right to Amend or Terminate. The Employer, with the written approval
of the Board, reserves the right to amend, modify, suspend, or
terminate the Plan in whole or in part at any time. No amendment
will be effective unless the Plan, as so amended, is for the
exclusive benefit of Participants, Spouses, Contingent Annuitants and
Beneficiaries, and no amendment will deprive any Participant without
his consent of any benefit to which he was previously entitled,
provided that any and all amendments may be made which are necessary
to maintain the qualification of the Plan under the Code and provided
further that such amendments may be retroactively effective. The
Plan shall not be automatically terminated by any Employer's
acquisition by or merger or consolidation into any other corporation.
In the event of a reorganization, consolidation, dissolution or
merger of an Employer, the Plan can be continued by the successor,
and in such event the successor shall be substituted for such
Employer and shall assume all of the Plan liabilities and all of the
powers, duties and responsibilities of such Employer under the Plan.
12.2 Partial Termination. Upon a partial termination of the Plan with
respect to a group of Participants, as determined by a ruling of the
Internal Revenue Service as to which all rights to appeal have
expired, the Employer shall direct the Actuary to determine the
proportionate share of the assets for Participants affected by such
partial termination. After such proportionate share has been
determined, the Trustees shall segregate the assets of the Fund
allocable to such group of Participants for payment of benefits in
accordance with the provisions of Section 12.3.
12.3 Vesting and Distribution of Funds Upon Termination. Upon termination
of the Plan by the Employer, in whole or in part, all affected
Participants will become fully vested and entitled to their Accrued
Benefits under the Plan. In such event, the assets in the Fund (or
the portion of the Fund determined in accordance with Section 12.2)
will be allocated pursuant to Regulations as follows:
(a) There shall first be credited to each Participant who was
receiving retirement income or who was eligible to receive
retirement income at least three years prior to the date of Plan
termination and to each Spouse and Beneficiary who was receiving
retirement income or who was eligible to receive retirement
income at least three years prior to the date of Plan
termination an amount which will provide for him the amount of
retirement income then accrued to him under the Plan, but not in
excess of the benefit insured by the Pension Benefit Guaranty
Corporation.
(b) There shall next be credited to each Participant who was
receiving retirement income or who was eligible to receive
retirement income on the date of Plan termination and to each
Spouse and Beneficiary who was receiving retirement income or
who was eligible to receive retirement income on the date
of Plan termination an amount which will provide for him the
amount of retirement income then accrued to him under the Plan,
but not in excess of the benefit insured by the Pension Benefit
Guaranty Corporation.
(c) There shall next be credited to each other Participant who, on
the date on which the Plan shall terminate, is eligible for
Retirement Benefits in accordance with Article VI an amount
which will provide for him the amount of the retirement income
then accrued to him under the Plan, but not in excess of the
benefit insured by the Pension Benefit Guaranty Corporation.
(d) There shall next be credited to each other Participant who would
be entitled to additional retirement income in accordance with
(a), (b), and (c) above, were such additional income not in
excess of the amount insured by the Pension Benefit Guaranty
Corporation, an amount which will provide for him the amount of
retirement income then accrued to him under the Plan.
(e) There shall next be credited to each other Participant an amount
which will provide for him the amount of retirement income then
accrued to him under the Plan.
Allocation in any of the above classes shall be adjusted for any
allocation made to the same Participant under a prior class.
12.4 Determination of Funds Upon Termination.
(a) The application of the Fund on the foregoing basis shall be
calculated as of the date on which the Plan shall terminate.
When the calculation shall be completed, the respective interest
in the Fund will be distributed to or on behalf of the
respective Participants, Spouses and Beneficiaries under the
Plan in the order stated in Section 12.3 only after the Employer
has sent written notice to the Trustee, that all of the
applicable requirements governing the termination of qualified
retirement plans have been, or are being complied with or that
appropriate authorizations, waivers, exemptions or variances
have been, or are being, obtained.
(b) If the assets in the Fund on the date the Plan is terminated are
not sufficient to provide in full the amounts required within
classes (a), (b), (c), and (d) of Section 12.3, any benefit in
excess of $10,000 paid within a 12-month period during the 36-
month period immediately preceding the date of termination of
the Plan to a Participant, Spouse or Beneficiary who owns
10% or more of the outstanding voting stock of any Employer may
be deemed a part of the Fund for purposes of allocation.
(c) If the assets are not sufficient to provide in full for the
amounts required for a class in the order listed in Section
12.3, the balance of the assets shall be allocated to each
member of a class in the proportion which his amount bears to
the total amount in such class.
(d) Distribution upon termination of the Plan may be in the form of
an annuity contract, cash, or securities or other assets in kind
as determined by the Retirement Board in a uniform
nondiscriminatory manner and applicable to all Participants.
(e) Any funds remaining after the satisfaction of all liabilities to
Participants, Spouses and Beneficiaries under the Plan shall be
returned to the Employer.
12.5 Restriction on Benefits. In the event of plan termination, the
benefit of any highly compensated employee as defined in Code Section
414(q) and highly compensated former employee is limited to a benefit
that is nondiscriminatory under Code Section 401(a)(4).
12.6 Right to Accrued Benefits. Any other provision of the Plan
notwithstanding, upon termination or partial termination of the
Plan, the right of each Participant to benefits accrued to the date
of such termination or partial termination to the extent then funded
or to the extent guaranteed by the Pension Benefit Guaranty
Corporation shall be nonforfeitable.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Plan Voluntary. Although it is intended that the Plan shall be
continued and that contributions shall be made as herein provided,
this Plan is entirely voluntary on the part of each Employer and the
continuance of this Plan and the payment of contributions hereunder
are not to be regarded as contractual obligations of any Employer,
and no Employer guarantees or promises to pay or to cause to be paid
any of the benefits provided by this Plan. Each person who shall
claim the right to any payment or benefit under this Plan shall be
entitled to look only to the Fund for any such payment or benefit and
shall not have any right, claim, or demand therefore against any
Employer, except as provided by federal law. The Plan shall not be
deemed to constitute a contract between any Employer and any Employee
or to be a consideration for, or an inducement for, the employment of
any Employee by any Employer. Nothing contained in the Plan shall be
deemed to give any Employee the right to be retained in the service
of any Employer or to interfere with the right of any Employer to
discharge or to terminate the service of any Employee at any time
without regard to the effect such discharge or termination may have
on any rights under the Plan.
13.2 Payments to Minor and Incompetents. If any Participant, Spouse or
Beneficiary entitled to receive any benefits hereunder is a minor or
is deemed by the Retirement Board or is adjudged to be legally
incapable of giving valid receipt and discharge for such benefits,
they will be paid to such person or institution as the Retirement
Board may designate or to the duly appointed guardian. Such payment
shall, to the extent made, be deemed a complete discharge of any
liability for such payment under the Plan.
13.3 Non-Alienation of Benefits. No amount payable to, or held under the
Plan for the account of, any Participant shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or charge, and any attempt to so anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge the
same shall be void; nor shall any amount payable to, or held under
the Plan for the account of, any Participant be in any manner liable
for his debts, contracts, liabilities, engagements, or torts, or be
subject to any legal process to levy upon or attach, except as may be
provided under a qualified domestic relations order as defined in
Code Section 414(p).
The Retirement Board shall establish a procedure to determine the
status of a judgement, decree or order as a qualified domestic
relations order and to administer Plan distributions in accordance
with qualified domestic relations orders. Such procedure shall be in
writing, shall include a provision specifying the notification
requirements enumerated in Code Section 414(p), shall permit an
alternate payee to designate a representative for receipt of
communications from the Retirement Board and shall include such other
provisions as the Retirement Board shall determine, including
provisions describing the interest rate to be used in making present
value determinations as well as provisions required under regulations
promulgated by the Secretary of the Treasury.
13.4 Evidence of Survival. If the Retirement Board, or the Trustees with
the assistance of the Retirement Board, cannot make payment of any
amount to, or on behalf of, a Participant within five years after
such amount becomes payable because the identity or whereabouts of
such Participant cannot be ascertained, the Retirement Board, at the
end of such five-year period, may direct that all unpaid amounts
which would have been payable to or on behalf of such Participant be
paid to the legal Spouse of the Participant if found and living at
such time, or if such legal Spouse cannot be found or is not living
at such time, in equal shares to such of the children of the
Participant who can be found and are living at such time, or if none
of such children can be found or if none are living at such time, to
such other relative or relatives of the Participant as the Retirement
Board may deem proper.
13.5 Use of Masculine and Feminine; Singular and Plural. Wherever used in
this Plan, the masculine gender will include the feminine gender and
the singular will include the plural, unless the context indicates
otherwise.
13.6 Merger, Consolidation, or Transfer. In the event that the Plan is
merged or consolidated with any other plan, or should the assets or
liabilities of the Plan be transferred to any other plan, each
Participant shall be entitled to a benefit immediately after such
merger, consolidation, or transfer if the Plan should then terminate
equal to or greater than the benefit he would have been entitled to
receive immediately before such merger, consolidation, or transfer if
the Plan had then terminated.
13.7 Leased Employees. Any individual who performs services for the
Employer and who, by application of Code Section 414(n)(2) and
regulations issued pursuant thereto, would be considered a "leased
employee", shall, for purposes of the requirements enumerated in Code
Section 414(n)(3), be considered an Employee of the Employer with
regard to services performed after December 31, 1986.
When the total of all leased employees constitutes less than 20% of
the Employer's non-highly compensated work force within the meaning
of Code Section 414(n)(5)(c)(ii), however, a "leased employee" shall
not be considered an Employee of the Employer if the organization
from which the individual is leased maintains a qualified safe harbor
plan (as defined in Code Section 414(n)(5)) in which such individual
participates.
"Leased employees" who are deemed to be Employees of the Employer for
purposes of this Section 13.7 shall not be eligible to participate in
the Plan unless specifically provided for in Article II.
13.8 Construction of Agreement. This Plan shall be administered,
construed, and enforced according to the laws of the Commonwealth of
Massachusetts; provided, however, wherever applicable, the provisions
of ERISA shall govern and in such event the laws of the United States
of America shall be applied and to the extent necessary, its courts
shall have competent jurisdiction.
ARTICLE XIV
TOP-HEAVY PLAN PROVISIONS
14.1 General Rule. For any Plan Year for which this Plan is a "top-heavy
plan" as defined in Section 14.5, any other provisions of the Plan to
the contrary notwithstanding, the Plan shall be subject to the
following provisions:
(a) The vesting provisions of Section 14.2.
(b) The minimum benefit provisions of Section 14.3.
(c) The limitation on benefits set by Section 14.4.
14.2 Vesting Provisions. Each Participant who (i) has completed at least
an Hour of Service during any Plan Year in which the Plan is top-
heavy and (ii) has completed the number of Years of Vesting Service
specified in the following table, shall have a nonforfeitable right
to the percentage of his Accrued Benefit specified as follows:
Nonforfeitable Percentage
Years of Vesting Service of Accrued Benefit
Less than 1 0%
1 but less than 220%
2 but less than 340%
3 but less than 460%
4 but less than 580%
5 or more 100%
If the Plan ceases to be "top-heavy", each Participant with three or
more Years of Service, whether or not consecutive, shall have the right to
elect to remain under the vesting schedule hereunder or to have the vesting
provisions of Section 6.2 be applicable. Each such Participant shall have the
right to elect the applicable schedule within 60 days after the day the
Participant is issued written notice by the Retirement Board, or as otherwise
provided in accordance with regulations issued under the provision of the Code,
relating to changes in the vesting schedule.
For all other Participants, the vesting provisions of Section 6.2
shall be applicable once the Plan ceases to be "top heavy". This provision
shall not cause a Participant's vested percentage to be reduced.
14.3 Minimum Benefit Provisions. Each Participant who (i) is a "non-key
employee" (as defined in Section 14.7) and (ii) has completed 1,000
Hours of Service in any Plan Year shall be entitled to an annual
retirement income equal to 2% of the Participant's average annual
Compensation in the "testing period" multiplied by his Years of
Service during which the Plan is top heavy, up to a maximum of 20%.
For purposes of this Section 14.3, "testing period" means the period
of five consecutive Years of Vesting Service during which the
Participant had the highest aggregate Earnings, provided that
Earnings for any Plan Year after the close of the Plan Year in which
the Plan was last top-heavy shall be disregarded.
14.4 Limitation on Benefits. In the event that the Employer also
maintains a defined contribution plan providing contributions on
behalf of Participants in this Plan, one of the two following
provisions shall apply:
(a) If for the Plan Year this Plan would not be a "top-heavy plan"
(as defined in Section 14.5) if "90 percent" were substituted
for "60 percent," then the minimum benefit described in Section
14.3 means the lesser of 3% of average annual Earnings in the
"testing period" multiplied by the Participant's Years of
Service during which the Plan is "top heavy", up to a maxi-
mum of 30%.
(b) If for the Plan Year this Plan would continue to be a "top-heavy
plan" (as defined in Section 14.5) if "90 percent" were
substituted for "60 percent," then the denominator of both the
defined contribution plan fraction and the defined benefit plan
fraction shall be calculated as set forth in Section 3.3(b)
for such Plan Year by substituting "1.0" for "1.25" in each
place such figure appears, except with respect to any individual
for whom there are no Employer contributions, forfeitures or
voluntary contributions allocated or any accruals for such
individual under the defined benefit plan.
14.5 Top-heavy Plan Definition. This Plan shall be a "top-heavy plan" for
any Plan Year if, as of the determination date, the present value of
the Accrued Benefits under the Plan for Participants (including
former Participants) who are "key employees" (as defined in Section
14.6) exceeds 60 percent of the present value of Accrued Benefits for
all Participants (excluding former "key employees"), or if this plan
is required to be in an aggregation group which for such Plan Year is
a "top-heavy group." For purposes of this Article XIV,
(a) "Determination date" means for any Plan Year the last day of the
immediately preceding Plan Year (except that for the first Plan
Year the determination date means the last day of such Plan
Year).
(b) Present value of Accrued Benefits shall be determined as of the
most recent valuation date that is within the 12-month period
ending on the determination date and as described under the
Code.
(c) "Aggregate of the Accounts" shall mean the sum of (i) the
Accounts determined as of the most recent Valuation Date that is
within the 12-month period ending on the determination date, and
(ii) the adjustment for contributions due as of the
determination date, and as described in the regulations under
the Code.
(d) "Aggregation group" means the group of plans, if any, that
includes both the group of plans that are required to be
aggregated and the group of plans that are permitted to be
aggregated.
(i) The group of plans that are required to be aggregated (the
"required aggregation group") includes: each plan of the
Employer in which a key employee is a participant,
including collectively-bargained plans; and each other
plan of the Employer including collectively-bargained
plans, which enables a plan in which a key employee is a
participant to meet the requirements of the Code
prohibiting discrimination as to contributions or benefits
in favor of Employees who are officers, shareholders or
the highly compensated or prescribing the minimum
participation standards.
(ii) The group of plans that are permitted to be aggregated
(the "permissive aggregation group") includes the required
aggregation group plus one or more plans of the Employer
that is not part of the required aggregation group and
that the Retirement Board certifies as constituting a plan
within the permissive aggregation group. Such plan or
plans may be added to the permissive aggregation group
only if, after the addition, the aggregation group as a
whole continues not to discriminate as to contributions or
benefits in favor of officers, shareholders or the highly-
compensated and to meet the minimum participation
standards under the Code.
(e) "Top-heavy group" means the aggregation group, if as of the
applicable determination date, the sum of the present value of
the cumulative accrued benefits for "key employees" under all
defined benefit plans included in the aggregation group plus the
aggregate of the accounts of "key employees" under all defined
contribution plans included in the aggregation group exceeds 60%
of the sum of the present value of the cumulative accrued
benefits for all employees, excluding former "key employees,"
under all such defined benefit plans plus the aggregate accounts
for all employees, under such defined contribution plans. If
the aggregation group that is a top-heavy group is a required
aggregation group, each plan in the group will be top-heavy. If
the aggregation group that is a top-heavy group is a permissive
aggregation group, only those plans that are part of the
required aggregation group will be treated as top-heavy. If the
aggregation group is not a top-heavy group, no plan within such
group will be top-heavy.
(f) In determining whether this Plan constitutes a "top-heavy plan",
the Retirement Board shall make the following adjustments in
connection therewith:
(i) When more than one plan is aggregated, the Retirement Board
shall determine separately for each plan as of each plan's
determination date the present value of the accrued benefits
or account balance. The results shall then be aggregated by
adding the results of each plan as of the determination
dates for such plans that fall within the same calendar
year.
(ii) In determining the present value of the Accrued Benefit or
the amount of the account of any Employee, such present
value or account shall include the dollar value of the
aggregate distributions made to such Employee under the
applicable plan during the five-year period ending on the
determination date, unless reflected in the value of the
accrued benefit or account balance as of the most recent
valuation date. Such amounts shall include distributions to
Employees which represented the entire amount credited to
their accounts under the applicable plan.
(iii) Further, in making such determination, such present value or
such account shall include any rollover contribution (or
similar transfer), as follows:
(a)If the rollover contribution (or similar transfer) is
initiated by the Employee and made to or from a plan
maintained another employer the plan providing the
distribution shall include such distribution in the
value of such account; the plan accepting the
distribution shall not include such distribution in the
value of such account unless the plan accepted it
before December 31, 1983.
(b) If the rollover contribution (or similar transfer) is
not initiated by the Employee or made from a plan
maintained by another employer the plan accepting the
distribution shall include such distribution in the
present value or such account, whether the plan
accepted the distribution before or after December
31, 1983; the plan making the distribution shall not
include the distribution in the present value or such
account.
(iv) Further, in making such determination, in any case where an
individual is a "non-key employee" (as defined in Section
14.7) with respect to an applicable plan, but was a "key
employee" with respect to such plan for any prior plan
year, any Accrued Benefit and any account of such Employee
shall be altogether disregarded. For this purpose, to the
extent that a key employee is deemed to be a "key employee"
if he met the definition thereof within any of the four
preceding plan years, this provision shall apply following
the end of such period of time.
(v) Further, in making such determination, the accrued benefit
of an Employee other than a Key Employee shall be
determined under (i) the method, if any, that uniformly
applies for accrual purposes under all plans maintained by
the Employer and its Affiliated Employers, or (ii) if
there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under
the fractional accrual rule of Section 411(b)(1)(C) of the
Code.
14.6 Key Employee. The term "key employee" means any Employee or former
Employee who would be considered a key employee under Section
416(i)(1) of the Code excluding any individual who has not performed
services for the Employer or any of its Affiliated Employers during
the five-year period ending on a particular "determination date".
14.7 Non-Key Employee. The term "non-key employee" means any Employee
(and any beneficiary of an Employee) who is not a "key employee". An
individual who has not performed services for the Employer or any of
its Affiliated Employers during the five-year period ending on a
particular "determination date", however, shall not be considered a
"non-key employee".
IN WITNESS WHEREOF, the Employer has caused this instrument to be executed by
its officers thereunto duly authorized and its corporate seal to be hereunto
affixed, as of the 21 day of December, 1994.
EASTERN UTILITIES ASSOCIATES
By /s/John R. Stevens
John R. Stevens
President
ATTEST:
/s/ William F. O'Connor
William F. O'Connor
Secretary
(CORPORATE SEAL)
ADDENDUM NUMBER ONE
TO THE
EMPLOYEES' RETIREMENT PLAN
OF
EASTERN UTILITIES ASSOCIATES AND ITS AFFILIATED COMPANIES
The provisions set forth in the Plan document shall govern participation in the
Plan and the calculation of benefits. The following provisions outlined in
this Addendum shall set forth the rules specifically relating to participation
and benefit accruals for employees of Newport Electric Corporation who are
considered Employees hereunder as a result of the merger of this Plan into the
Newport Electric Corporation Pension Plan effective as of January 1, 1991. To
the extent not specifically indicated otherwise in the Addendum, the provisions
of the Plan shall be applicable with respect to Employees who are employed by
Newport Electric Corporation.
I. DEFINITIONS
A.0.0 "Actuarial Equivalent" shall mean, for the purpose of
determining benefits described in this Addendum Number One, a
benefit of equivalent value to another benefit determined on
the basis of the factors set forth in Appendix B attached
hereto.
A.1.0 "Average Monthly Earnings" shall mean, other than for the
purpose of determining a Participant's Death Benefit and
Termination Benefit, the average of the Employee's Monthly
Earnings received for the 60 consecutive calendar months of
employment, or, in the case of a Participant who becomes or
continues to be employed by the Employer on or after January
1, 1987, the 36 consecutive calendar months of employment, of
his greatest compensation in the 120-month period immediately
preceding his retirement or any earlier date on which he
becomes entitled to an immediate or deferred benefit under the
Plan, excluding from such five or three year period, as the
case may be, any period of absence which does not cause a One
Year Break in Service (for vesting purposes) and for which he
does not receive Monthly Earnings and any period of service
which is excluded from his Credited Service. In the case of a
Participant who has not received Monthly Earnings for 60 (or
36, if applicable) consecutive calendar months of employment in
the aforementioned 120-month period, Average Monthly Earnings
means the average of his Monthly Earnings during all of his
months of employment during such 120-month period, not to
exceed a total of 60 (or 36, if applicable) months.
A.1.1 "Average Annual Earnings" shall mean for purposes of determining
a Participant's Death Benefit and Termination Benefit:
(a) with respect to an Employee's service completed prior to
January 1, 1972, "Average Annual Earnings" means the
average of a Participant's compensation received during
calendar years 1968, 1969 and 1970.
(b) with respect to each calendar year of an Employee's
Credited Service completed on and after January 1, 1972,
"Average Annual Earnings" means 12 times the average of the
Participant's Monthly Earnings received during the calendar
year.
A.1.2 "Death Benefit" shall mean, with respect to each Participant who
has qualified for such benefit in accordance with the further
provisions of this Addendum, an amount equal to the sum of (a)
and (b), where it
(a) is 2.5% of his Average Annual Earnings up to $3,000 plus 5%
of his Average Annual Earnings over $3,000 for each year of
Credited Service completed prior to January 1, 1972; plus
(b) 3.75% of his Average Annual Earnings up to $6,000 plus 5%
of his Average Annual Earnings over $6,000 for each year of
Credited Service completed on and after January 1, 1972.
A.1.3 "Interest". Each Participant's Death Benefit and Termination
Benefit will be credited with interest at the rate of 3% until
January 1, 1976, and 5% thereafter, compounded annually, from
the January 1 next following the date such benefit is accrued
to the first day of the month in which such benefits are
withdrawn, or the Participant's date of retirement if earlier,
provided, however, that if the Participant's date of retirement
is his Early Retirement Date, his Death Benefit will be
credited with interest to the first day of the month in which
the earlier of his death or Annuity Starting Date occurs.
A.1.4 "Monthly Earnings" shall mean an Employee's Earnings as payable
on a monthly basis. If an Employee customarily completes less
than 2,080 Hours of Service in a Plan Year, his Earnings for a
Plan Year shall be deemed to be his Total Monthly Earnings
received for the Plan Year multiplied by a fraction, the
numerator of which is 2,080 and the denominator of which is his
actual Hours of Service for the Plan Year, not in excess of
2,080. The Employee's Monthly Earnings shall be deemed to be
1/12th of such amount.
A.1.5 "Termination Benefit" shall mean, with respect to each
Participant who has qualified for such benefit in accordance
with the further provisions of this Addendum, an amount equal
to the sum of (a), (b) and (c), where it
(a) is 2.5% of his Average Annual Earnings up to $3,000 plus 5%
of his Average Annual Earnings over $3,000 for each year of
Credited Service completed prior to January 1, 1972; plus
(b) 3.75% of his Average Annual Earnings up to $6,000 plus 5%
of his Average Annual Earnings over $6,000 for each year of
Credited Service completed on and after January 1, 1972 and
prior to January 1, 1982; plus
(c) 3.75% of his Average Annual Earnings up to the maximum
amount subject to tax under the Federal Insurance
Contributions Act in each calendar year after December 31,
1981 (for calendar years commencing after December 31,
1990, the amount subject to old-age, survivors and
disability insurance under the Federal Insurance Contribu-
tions Act) plus 5% of his Average Annual Earnings in excess
of such maximum amount during his Credited Service after
December 31, 1981.
II. SERVICE
A.2.0 Years of Service.
(a) One Year of Service shall be credited to an Employee for
each Plan Year during which he is credited with at least
1,000 Hours of Service.
(b) Subject to Section 2.2 of the Plan, Years of Service shall
not include the following periods of employment:
(i) Years of Service prior to September 1, 1974, if such
years would have been disregarded pursuant to the
break in service rules as in effect immediately
prior to such date;
(ii) Years of Service credited prior to January 1, 1971,
unless the Employee is credited with at least three
Years of Service after December 31, 1970;
(iii) Years of Service prior to a One Year Break in
Service unless the Employee is credited with a Year
of Service subsequent to his return to employment;
(iv) Years of Service disregarded under the terms of the
Plan as in effect on December 31, 1985, with respect
to a One Year Break in Service that occurred prior
to January 1, 1986.
(c) For the purposes of this Addendum, a One Year Break in
Service shall mean a Plan Year during which an Employee is
credited with less than 501 Hours of Service.
(d) For the purpose of determining an Employee's eligibility to
participate in the Plan, a Year of Service shall mean a
"computation period" during which an Employee is credited
with at least 1,000 Hours of Service. A computation period
for eligibility purposes is initially the 12-month period
beginning on an Employee's Employment Date. If an Employee
does not complete a Year of Service during his initial
computation period, then computation period shall mean the
first Plan Year commencing on or after an Employee's first
anniversary of employment and each Plan Year thereafter.
(e) In the event that an Employee earns a Year of Service for
eligibility purposes and incurs a One Year Break in
Service, such service shall be recognized hereunder
provided his Years of Service for vesting purposes for the
same period are recognized pursuant to the break in service
rules set forth in Section 2.2 of the Plan.
A.2.1 Credited Service.
(a) A Participant shall be credited with a year of Credited
Service for each Plan Year in which he is credited with at
least 2,080 Hours of Service.
(b) For the purposes of determining Credited Service under this
Addendum, the following periods of service will be
disregarded:
(i) All service completed prior to the date the Employee
completed One Year of Service for eligibility
purposes.
(ii) All service disregarded in computing the Employee's
Years of Service for vesting purposes.
(iii) Any period of lay-off from employment in excess of
six months.
(iv) Service performed by the Employee with respect to
which he received a distribution of his entire non-
forfeitable Accrued Benefit in an amount not more
than $3,500 upon termination of his participation in
the Plan, unless the Employee had received a
distribution in an amount less than the present
value of his Accrued Benefit and upon again becoming
a Participant, elects to repay to the Plan the full
amount of his distribution with interest, and makes
the full repayment, with interest at the rate
prescribed by Section 411(a)(7)(C) of the Code,
within 5 years of his date of reemployment.
(v) Service performed by the Employee with respect to
which he elected to receive a distribution of his
Termination Benefit which was not less than the
present value of his non-forfeitable Accrued Benefit
upon termination of his participation in the Plan,
unless the Employee, upon again becoming a
Participant, elects to repay to the Plan the full
amount of his distribution with interest, and makes
the repayment with interest at the rate prescribed
by Section 411(a)(7)(C) of the Code, within the next
12 months.
(vi) Service performed by the Employee while he is in a
class of employees not eligible to participate under
this Plan.
(c) If, upon termination of his participation in the Plan, an
Employee elected to receive a distribution of his
Termination Benefit which was less than the present value
of his non-forfeitable Accrued Benefit, and he again
becomes a Participant, the portion of his Accrued Benefit
based on Credited Service prior to such distribution shall
be multiplied by a fraction, the numerator of which is a
portion of the present value of his non-forfeitable Accrued
Benefit at the time of such termination of participation
which was not distributed to him and the denominator of
which is the Present Value of his non-forfeitable Accrued
Benefit at the time of such termination of participation,
unless the Employee, upon again becoming a Participant,
elects to repay the Plan the full amount of his
distribution with interest, and makes the repayment with
interest at the rate prescribed by Section 411(a)(7)(C) of
the Code before the earlier of:
(i) the fifth anniversary of the Participant's
Reemployment Date; and
(ii) the date the Participant incurs five consecutive One
Year Breaks in Service.
(d) Except for the year in which an Employee initially becomes
a Participant (or again becomes a Participant upon a
rehire) or for the year in which a Participant retires, if
a Participant completes less than 1,000 Hours of Service in
a Plan Year he shall receive no Credited Service for that
year. If, in the Plan Year in which an Employee initially
becomes a Participant (or again becomes a Participant upon
a rehire) or in which a Participant retires, a Participant
completes less than 2,080 Hours of Service or, if in any
other Plan Year, he completes 1,000 or more Hours of
Service but less than 2,080 Hours, his Credited Service for
such year shall be obtained by dividing his Hours of
Service for such year by 2,080 and by rounding the
resulting quotient up to the next highest tenth of a year,
if such quotient is not an even multiple of a tenth of a
year.
A.3.1 Eligibility Requirements.
(a) Any Employee of Newport Electric Corporation who is not
eligible to participate in the Newport Electric Corporation
Pension Plan on December 31, 1990, shall, subject to the
eligibility requirements set forth in Section 2.1, become
an Active Participant of the Plan. Such Employee shall not
be eligible for any benefits described in this Addendum,
but shall, pursuant to the foregoing provisions and the
transfers provisions in Article II of the Plan, receive
credit for his employment with Newport Electric
Corporation.
(b) Any Employee of Newport Electric Corporation hired on or
after December 31, 1991, shall become an Active Participant
of the Plan pursuant to Section 2.1 of the Plan. Such
Employee shall not be subject to the provisions of this
Addendum.
(c) Notwithstanding the foregoing provisions, any Employee of
Newport Electric Corporation who is a member of a
collective bargaining agreement shall participate in the
Plan, subject to the provisions of this Addendum and the
applicable terms of the collective bargaining
agreement.
(d) Any other Employee of Newport Electric Corporation who is
an Active Participant of the Newport Electric Corporation
Pension Plan on December 31, 1990, shall participate in the
Plan effective January 1, 1991 subject to the provisions of
this Addendum and any applicable collective bargaining
agreement.
A.4.1 Transfers. In the event that an Employee of Newport Electric
Corporation who is an Active Participant of the Newport Electric
Corporation Pension Plan transfers employment to the Employer,
such Active Participant shall cease to accrue any benefits
pursuant to this Addendum and shall be eligible for and
participate in the Plan pursuant to the provisions thereof;
provided, however, if such Active Participant is a member of a
collective bargaining unit, the terms of his participation shall
be subject to the terms of the collective bargaining agreement.
A.5.1 Normal Retirement Benefit. Subject to the minimum benefit
provisions under this paragraph and the maximum benefit
limitations under Section 3.3 of the Plan, the amount of monthly
Retirement Benefit on the life annuity basis as described in
Section 8.4 of the Plan to which a Participant is entitled to
receive on his Normal Retirement Date is equal to:
(a) 1.42% of the Participant's Average Monthly Earnings,
multiplied by
(b) the Participant's years of Credited Service.
In no event shall a Participant's Retirement Benefit be less
than the Retirement Benefit he accrued under the provisions of
the Newport Electric Corporation Pension Plan as in effect on
December 31, 1975.
A.6.1 Early Retirement Benefit.
(a) An Active Participant who either has attained age 55 or has
completed 30 Years of Service may retire after satisfying
such requirement and prior to his Normal Retirement Date,
such date being his Early Retirement Date.
(b) If the Active Participant has attained age 62 on his Early
Retirement Date, the Retirement Benefit commencing on his
Early Retirement Date shall be equal to his Accrued Benefit
determined as of such date.
(c) If the Active Participant has not attained age 62 on his
Early Retirement Date but has attained age 55 and the sum
of his age and Years of Service equals at least 85, the
Retirement Benefit commencing on his Early Retirement Date
shall be equal to his Accrued Benefit determined as of such
date.
(d) If the Active Participant has completed 30 Years of Service
but has not attained age 55 on his Early Retirement Date,
his retirement annuity shall be deferred to commence on the
first day of the month coincident with or next following
the date the Participant attains his 55th birthday and
shall be equal to his Accrued Benefit determined as
of his Early Retirement Date. Such Participant may,
however, elect to have his retirement annuity commence on
the first day of any calendar month between his Early
Retirement Date and the first day of the month coincident
with or next following his 55th birthday in an amount of
Actuarial Equivalent Value to his Accrued Benefit
commencing on the first day of the month coincident with or
next following his 55th birthday. Such Actuarial
Equivalent Value shall be calculated on the basis of the
applicable factors in the Appendix.
(e) If the Participant has attained age 55 but has not attained
age 62 on his Early Retirement Date and the sum of his age
and Years of Service does not equal at least 85, his
Retirement Benefit shall be deferred to commence on his
Normal Retirement Date and shall be equal to his Accrued
Benefit determined as of his Early Retirement Date. Such
Participant may, however, elect to have his Retirement
Benefit commence on the first day of any calendar month
between his Early Retirement Date and his Normal Retirement
Date. In the event of such election, the Participant's
Retirement Benefit shall be equal to the product of (i) and
(ii) below; where:
(i) equals the monthly amount of his Accrued Benefit
determined as of his Early Retirement Date, and
(ii) equals the percentage determined from the schedule
below:
Number of Years
Benefit Commencement
Date Precedes Normal
Retirement Date Percentage
10 75%
9 78
8 81
7 84
6 87
5 90
4 94
3 or less 100
If the number of years by which the commencement
date of the Retirement Benefit precedes Normal
Retirement Date is not an integer, the percentage is
determined by linear interpolation between the
percentages for the two nearer integral
number of years.
(f) Notwithstanding any provision of the Plan and this Addendum
Number One to the contrary, any reduction for a participant
who is eligible for an annuity under a Group Annuity
Contract applied to a Participant's Retirement Benefit as a
result of his early retirement hereunder shall be applied
in the same manner as described in Section 4.2.
A.7.1 Postponed Retirement Benefit. If a Participant retires on a
Postponed Retirement Date, he shall be entitled to a Retirement
Benefit equal to the greater of (a) and (b) below:
(a) his Accrued Benefit determined as of his Postponed
Retirement Date; and
(b) his Accrued Benefit determined as of his Normal Retirement
Date increased by an amount which is Actuarially Equivalent
in value to the monthly payments he would have received
during the period between his Normal and Postponed
Retirement Dates.
A.8.1 Vested Termination.
(a) A Participant who terminates employment with all
Participating Employers prior to his Early Retirement Date
shall be entitled to a paid-up monthly retirement annuity
commencing on the date which otherwise would be his Normal
Retirement Date in the amount which can be provided with
his Termination Benefit with Interest. Each such
Participant will be entitled to an additional monthly
annuity to be provided for such Participant on his Normal
Retirement Date in such amount as is necessary to provide a
total monthly annuity equal to the Participant's Accrued
Benefit as of his date of termination of employment or One
Year Break in Service, if sooner.
(b) (i) A vested Participant shall have the right to elect
to receive
(A) a lump sum payment equal to his Termination
Benefit with Interest as of the date he
terminated employment, or
(B) a paid-up monthly retirement annuity in an
amount which can be provided with his
Termination Benefit with Interest in the form
of the normal form of annuity described in
Section 8.1 of the Plan.
Notwithstanding the foregoing, however, an election
by a married Participant of the lump sum or of an
annuity in the normal form under Section 8.1(b) of
the Plan shall be subject to spousal consent rules
outlined in Section 8.5 of the Plan. Payment shall
be made as soon as practicable following the
Participant's termination of employment. An
election to receive a Retirement Benefit pursuant to
this paragraph shall be made within the 90-day
period preceding payment and shall be made following
the receipt by the Participant of the notice
described in Section 8.2 of the Plan.
(ii) In addition to the Termination Benefit, the
Participant will receive, commencing on his Normal
Retirement Date, a monthly Retirement Benefit, if
any, equal to his Accrued Benefit (determined as of
his termination of employment or One Year Break in
Service, if sooner) reduced by the Actuarial
Equivalent Value of his Termination Benefit with
Interest. Such Actuarial Equivalent Value shall be
computed on the basis of the 1979 George B. Buck
Mortality Table for males rated back one year and an
interest rate of seven percent per year.
(c) If a vested Participant either incurs a One Year Break in
Service or terminates his employment, and he had not
reached the age or completed the service requirement for
early retirement, he may elect to receive his benefit at
any time after the first day of the month coincident with
or next following his 55th birthday and prior to his
Normal Retirement Date and receive a monthly Retirement
Benefit in an amount equal to the product of his Accrued
Benefit as of his date of termination of employment
multiplied by the appropriate percentage from the schedule
below:
Number of Years
Annuity Starting Date
Precedes Normal
Retirement Date Percentage
10 75.0%
9 78.0
8 81.0
7 84.0
6 87.0
5 90.0
4 94.0
3 95.0
2 97.0
1 98.5
0 100.0
A.9.1 Permanent and Total Disability Benefit.
(a) A Participant shall be considered to be permanently and
totally disabled if he is unable to engage in any gainful
activity by reason of a medically determinable physical or
mental impairment which can be expected to result in death
or has lasted, or can be expected to last, for a continuous
period of not less than 12 months, and shall be conditioned
upon the Participant receiving disability benefits from the
Social Security Administration. A Participant who has
applied for disability benefits under the Social Security
Act will be deemed eligible for such benefits pending
disposition of his application by the Social Security
Administration.
(b) A Participant who incurs a permanent and total disability
as defined in paragraph (a) above may elect to retire at
any time prior to his Normal Retirement Date, with such
date being known as his Disability Retirement Date.
(c) A Participant who retires on a Disability Retirement Date
shall be eligible to receive a Retirement Benefit
commencing on his Normal Retirement Date. The amount of
his monthly disability payments will be equal to his
Accrued Benefit based on his Average Monthly Earnings and
Credited Service computed as if he had continued in
service until his Normal Retirement Date with Monthly
Earnings equal to his last rate of Monthly Earnings
immediately prior to his becoming permanently and totally
disabled. In lieu of the benefit commencing on his Normal
Retirement Date, the Participant may elect to receive
monthly disability payments commencing on an Early
Retirement Date which shall be the first day of any
calendar month on or after his attainment of age 55. Such
monthly amount shall be equal to his Accrued Benefit
computed as if he had continued in service to his Early
Retirement Date, multiplied by the applicable Early
Retirement percentage for the number of years that the
Annuity Starting Date precedes his Normal Retirement Date,
as set forth in Paragraph A.6.1 of this Addendum. In the
event of the death, prior to the commencement of disability
benefit payments, a benefit shall be payable to his
surviving Spouse in accordance with Paragraph A.10 of this
Addendum, provided that the Participant became so disabled
after his attainment of age 55 or after his completion of
five Years of Service. If such deceased Participant is not
survived by a Spouse or if he became permanently or totally
disabled prior to age 55 and prior to five Years of
Service, a Death Benefit shall be payable in accordance
with Paragraph A.10(e) of this Addendum. In computing the
amount of the Death Benefit, it shall be assumed that the
Participant continued in service to his date of death with
Monthly Earnings equal to his last rate of Monthly Earnings
immediately prior to his becoming permanently and totally
disabled.
A.10.0 Pre-Retirement Death Benefits.
(a) In the case of the death of a married Participant who
(whose):
(i) dies while in the employ of a Participating Employer
on or after August 23, 1984 after he has attained
age 55 or has completed at least five Years of
Service, or
(ii) retired with a deferred Early Retirement Benefit, or
(iii) employment was terminated on or after January 1,
1976 but before August 23, 1984 after the completion
of 10 Years of Service and who dies on or after
January 1, 1986, or
(iv) employment was terminated on or after August 23,
1984 after he had become vested in his Accrued
Benefit, but in each case before his Annuity
Starting Date, a Spouse benefit will be payable to
his surviving Spouse for life, provided that the
Spouse shall have been married to the Participant
during the one-year period preceding his death.
(b) The spouse benefit shall commence on what would have been
the Participant's Normal Retirement Date. However:
(i) if the Participant dies in active service or while
accruing service under Paragraph A.9.1 of this
Addendum after having met the requirements for early
retirement, or after retiring early but before
payments commence, or in active service on or after
January 1, 1988 after completing 10 or more Years
of Service, the Spouse may elect to begin receiving
payments as of the first day of any month following
the Participant's date of death and prior to what
would have been his Normal Retirement Date; and
(ii) in the case of the death of any other Participant
prior to attaining his Normal Retirement Date, the
Spouse may elect to begin receiving payments as of
the first day of any month following what would have
been the Participant's 55th birthday (or following
his date of death, if later) and prior to what would
have been his Normal Retirement Date.
(c) The spouse benefit shall be equal to:
(i) in the case of the death of an Active Participant
who is in the employ of a Participating Employer on
or after January 1, 1988 and who has completed 10
Years of Service, 1/2 of the Participant's Accrued
Benefit as of the date of his death, reduced by 1/8%
for each month in excess of 60 that the Spouse is
younger than the Participant; and
(ii) in the case of any other Participant, the amount of
benefit the Spouse would have received if the
Retirement Benefit to which the Participant was
entitled at his date of death had commenced on his
Normal Retirement Date in the form of a Joint and
Survivor Option (with a continuation of an amount
equal to 50% of the Participant's adjusted benefit
to his Spouse upon death) and the Participant had
died immediately thereafter, provided, however, if
the Spouse elects to commence payment prior to the
Participant's Normal Retirement Date, the Spouse
benefit shall be determined on the basis of the
amount of Retirement Benefit to which the
Participant would have been entitled if he had
requested benefit commencement at that earlier date,
reduced in accordance with Paragraph A.6.1 or A.8.1
of this Addendum, as applicable.
If prior to his Annuity Starting Date a Participant
has elected an optional form of retirement benefit
which provides for monthly payments to his Spouse
for life in an amount equal to at least 50% but not
more than 100% of the monthly amount payable under
the option for the life of the Participant, the
Spouse benefit shall be determined on the basis of
the amount of benefit the Spouse would have received
if the benefit to which the Participant was entitled
at his date of death had commenced on the date
elected by the Spouse in the optional form of
benefit elected by the Participant, if the resulting
benefit provides the Spouse with a greater benefit
than that provided under clause (i) or (ii) above,
as the case may be.
(d) In lieu of the monthly benefit provided under the foregoing
subparagraphs of this Paragraph A.10.0, the deceased
Participant's Spouse may elect to receive the amount of the
Participant's Death Benefit as of the date of his death.
In addition, a reduced monthly benefit shall be paid to the
Spouse, which shall be equal to the benefit computed under
subparagraph (c) above, reduced by an annuity of Actuarial
Equivalent Value to the Death Benefit. Such Actuarial
Equivalent Value shall be computed on the basis of the UP-
1984 Mortality Table rated back three years and interest
rates specified by the Pension Benefit Guaranty Corporation
as applicable to pension plans terminated as of the date of
the Participant's death.
(e) Except as provided under any optional form of annuity
elected by the Participant, upon a Participant's death (for
whom a Spouse benefit as described in the above
subparagraphs is not in effect), his Beneficiary
or his estate, if no named Beneficiary survives him, will
be entitled to a payment of his Death Benefit with Interest
to the first day of the month in which the earlier of his
death or Retirement Date occurred, reduced by the sum of
any monthly retirement payments the Participant may have
received prior to his death. However, if such Partici-
pant's retirement date is his Early Retirement Date, his
Death Benefit will be credited with Interest to the first
day of the month in which the earlier of his death or the
commencement date of his retirement annuity occurred.
A.11.0 Optional Forms of Payment.
(a) Prior to an Annuity Starting Date, a Participant may elect,
pursuant to the applicable provisions of the Plan, an
optional form of payment for his Retirement Benefit as may
be available under Article VIII of the Plan and this
Paragraph A.11.0 of this Addendum.
(b) Contingent Annuitant Option.
(i) A Participant may elect, by submitting an election
form to the Committee, to have his Retirement
Benefit converted to the Actuarial Equivalent of the
normal form under Section 8.1 of the Plan and paid
monthly during his life with the provision that
after his death, 50%, 66-2/3% or 100% of such
reduced Retirement Benefit will be payable to his
Contingent Annuitant during the remaining life of
such Contingent Annuitant.
(ii) If a Participant elects the Contingent Annuitant
Option and his Contingent Annuitant dies before such
Participant's benefit actually commences and the
Participant does not change his election in
accordance with Section 8.2, his Retirement
Benefit shall be paid under the normal form under
Section 8.1.
(iii) If a Participant elects the Contingent Annuitant
Option and dies before benefits commence to be paid
to him, his Beneficiary will not be entitled to any
rights or benefits under the Plan, except as
provided under Article VII of the Plan or Paragraph
A.10.0 of this Addendum.
(iv) If a Participant elects the Contingent Annuitant
Option and his Beneficiary dies before his death,
but after the retirement of such Participant, such
Participant will continue to receive the reduced
Retirement Benefit payable to him in accordance
with such option.
(c) Life Annuity With 120 Monthly Guaranteed Payment Period
Option. A Participant may elect, by submitting an election
form to the Committee, to have his Retirement Benefit paid
as a life annuity (as described in Section 8.4 of the Plan)
but guaranteed for a period of 120 months, with the
provision that if the Participant dies before payment of
the guaranteed installments, payment of any remaining
installments shall be paid to his Beneficiary. Upon the
death of such Beneficiary before all remaining guaranteed
payments have been made, such remaining payments shall be
paid in an Actuarial Equivalent lump sum value to the
estate of the Beneficiary. In the event that the
Beneficiary is not an individual or if the Participant so
elected, the Actuarial Equivalent lump sum value of any
guaranteed payments remaining as of the Participant's date
of death will be paid to the Beneficiary in lieu of the
continuation of payments. If the Participant dies on or
after his Normal Retirement Date, but prior to his Annuity
Starting Date, his Beneficiary will be paid the present
value of the (120, whichever is elected) monthly payments
certain computed as of the date of death as if his
Retirement Benefit were to commence to him on his date of
death. If the Participant dies prior to his Normal
Retirement Date or Annuity Starting Date, if earlier,
his election of this option will be inoperative.
(d) Social Security Adjustment Option. (This option may be
elected only if the Participant's Annuity Starting Date
precedes his 62nd birthday.)
(i) Under this option the Participant will receive
increased retirement annuity payments payable
between his Annuity Starting Date and his Social
Security Commencement Date and the amount of his
retirement annuity payments payable on and after his
Social Security Commencement Date will be reduced,
taking into consideration the benefit it is expected
he will receive commencing on his Social Security
Retirement Date under the Social Security Act, so as
to provide level retirement benefits during his
lifetime. This option may be elected only if the
application of subparagraph (ii), below, results in
a yearly retirement annuity which is at least $60
more than the yearly amount of Old Age Insurance
Benefit used in subparagraph (ii). The Social
Security Commencement Date shall be the first day of
the month in which a Participant attains his 62nd
birthday.
(ii) The increased monthly amount of retirement annuity
payments payable between the Participant's Annuity
Starting Date and his Social Security Commencement
Date shall be equal to the sum of
(A) the monthly amount of retirement annuity
otherwise payable to the Participant if this
election were not in effect, as determined
under Paragraph A.6.1 of this Addendum, and
(B) the percentage, determined from the table
below, of the monthly amount of the Old Age
Insurance Benefit which it is expected the
Participant will be entitled to receive
commencing on his Social Security Commence-
ment Date under the Social Security Act.
Social Security Adjustment Option Percentages
Age Nearest Birthday
on Retirement Date Percentage
55 50.7%
56 55.6
57 61.0
58 67.1
59 73.9
60 81.5
61 90.2
62 100.0
(iii) The reduced monthly amount of retirement annuity
payments payable on and after the Participant's
Social Security Commencement Date shall be equal to
the excess of
(A) the increase monthly amount of the retirement
annuity payments payable to the Participant
until his Social Security Commencement Date,
and
(B) the monthly amount of Old Age Insurance Benefit
which it is expected the Participant will be
entitled to receive commencing on his Social
Security Commencement Date under the Social
Security Act, as assumed for the purposes of
subparagraph (ii).
ADDENDUM NUMBER TWO
TO THE
EMPLOYEES' RETIREMENT PLAN
OF
EASTERN UTILITIES ASSOCIATES AND ITS AFFILIATED COMPANIES
CERTAIN CHANGES WITH RESPECT TO EMPLOYEES OF NEWPORT ELECTRIC
CORPORATION WHO ARE COVERED BY THE TERMS OF A COLLECTIVE
BARGAINING AGREEMENT
The provisions set forth in the Plan document shall govern participation in the
Plan and the calculation of benefits. The foregoing provisions outlined in
this Addendum Number Two shall set forth certain provisions relating
specifically to employees of Newport Electric Corporation (hereinafter referred
to as NEC) covered by the terms of a collective bargaining agreement and who
are considered Employees hereunder as a result of the merger of this Plan into
the Newport Electric Corporation Pension Plan (hereinafter referred to as the
NEC Plan) effective as of January 1, 1991. These provisions reflect changes
agreed to in the collective bargaining agreement applicable to the period
September 2, 1991 through September 1, 1993 between NEC and the Brotherhood of
Utility Workers of New England, Inc. Local 335 (hereinafter referred to as the
Bargaining Agreement).
B.1.0 Participation and Application of Plan Provisions. Each NEC employee
covered by the terms of the Bargaining Agreement who became a
Participant in the Plan on or prior to September 2, 1991, pursuant to
Section 2.01 of the NEC Plan document, shall continue to be subject to
the terms and provisions of the NEC Plan document, but as modified
pursuant to Sections B.1.1 through B.1.4 below. Each NEC employee
covered by the terms of the Bargaining Agreement who has not become a
Participant in the Plan on or prior to September 2, 1991, pursuant to
Section 2.01 of the NEC Plan document, shall become a Participant of
the Plan pursuant to Section 2.1 of this Plan and shall be subject to
all of the terms and provisions of this Plan rather than the NEC Plan
document.
B.1.1 Termination Benefit. The Termination Benefit described in Section
A.1.5 of this Plan shall cease to accrue effective September 2, 1991
with respect to any NEC employee covered by the Bargaining Agreement.
Any such employee who has accrued a Termination Benefit as of
September 2, 1991 shall continue to retain such Benefit, subject to
the vesting rules with respect thereto, and such accrued Termination
Benefit shall be credited with interest pursuant to Section A.1.3 of
this Plan.
B.1.2 Death Benefit.1 The Death Benefit described in Section A.1.2 of this
Plan is eliminated effective September 2, 1991 with respect to any NEC
employee covered by the Bargaining Agreement.
B.1.3 Special Rules for Contingent Annuitant Annuity.1 In the case of a NEC
employee covered by the Bargaining Agreement who commences receiving
benefits on or after September 2, 1991 in the form of a contingent
annuity option as described in Section A.11.0(b) of this Plan and
whose contingent annuitant predeceases the retired employee within one
year after benefits commence, the amount payable under the contingent
annuitant option shall be increased on the first of the month
following the contingent annuitant's death to the amount which would
have been payable to the retired employee as a single life annuity and
such amount shall be payable to the retired employee for the balance
of his lifetime.
B.1.4 Pre-Retirement Spouse Benefit May Commence On or After Participant's
50th Birthday. In the case of the death of a married Participant
occurring after September 2, 1991 and prior to age 55, the
Participant's spouse may elect to receive the pre-retirement spouse
benefit described in Section 3.04 of the NEC Plan document commencing
as of the first day of any month following the later of the
Participant's date of death or the date the Participant would have
attained age 50. In the event payment of the spouse benefit commences
prior to the date the Participant would have attained age 55, the
amount of the spouse benefit shall be determined as the product of (i)
the amount which would have been payable to the spouse under the 50%
contingent annuitant option had the Participant died at age 65 with
his spouse designated as the contingent annuitant, and (ii) the factor
determined according to the following table:
Participant's Nearest Birthday
at Time Pre-Retirement Spouse
Benefit Commences Factor
50 .35
51 .38
52 .41
53 .44
54 .47
Except as modified pursuant to this Section B.1.4, the pre-retirement
spouse benefit described in the NEC Plan document shall continue to
apply.
ADDENDUM NUMBER THREE
TO THE
EMPLOYEES' RETIREMENT PLAN
OF
EASTERN UTILITIES ASSOCIATES AND ITS AFFILIATED COMPANIES
APPLICATION OF PLAN TO NON-UNION EMPLOYEES
OF NEWPORT ELECTRIC CORPORATION
The provisions set forth in the Plan document shall govern participation in the
Plan and the calculation of benefits. The following provisions outlined in
this Addendum Number Three shall set forth certain provisions relating
specifically to certain non-union employees of Newport Electric Corporation
(hereinafter referred to as NEC) who are considered Employees hereunder as a
result of the merger of this Plan into the Newport Electric Corporation Pension
Plan (hereinafter referred to as the NEC Plan) effective as of January 1, 1991.
The following provisions of this Addendum Number Three are effective March 1,
1992.
C.1.0 Application of Addendum. This Addendum shall apply to all NEC Plan
non-union participants except those participants on March 1, 1992 for
whom, on or prior to December 31, 1996, the sum of their attained age
and Years of Service (as defined in the NEC Plan document) will total
at least eighty-five. A NEC Plan non-union participant to whom this
Addendum does not apply shall be entitled to benefits according to
the NEC Plan as in effect prior to the adoption of this Addendum.
C.1.1 Application of Plan to NEC Non-Union Participants Covered by
Addendum. Effective March 1, 1992, NEC Plan non-union participants
to whom this Addendum applies shall cease to accrue benefits under
the terms and provisions of the NEC Plan. On or after March 1, 1992,
the benefit payable with respect to NEC Plan non-union participants
to whom this Addendum applies shall be determined according to (i) or
(ii) below, whichever produces the greatest benefit:
(a) The benefit calculated under the terms and provisions of this
Plan as in effect prior to December 31, 1990 and as
subsequently amended from time to time taking into
consideration all of his Years of Credited Service, including
Years of Credited Service recognized under the NEC Plan
document for periods prior to March 1, 1992.
(b) The benefit computed with reference to his accrued benefit as
of February 28, 1992, as calculated under the terms and
provisions of the NEC Plan document, plus the benefit, if any,
computed with reference to the benefit accrued under the terms
and provisions of this Plan with respect to Years of Credited
Service after February 28, 1992.
To the extent a benefit is computed according to the terms and
provisions of the NEC Plan document or this Plan document, all terms
and provisions of the document shall apply to the benefit so
computed, including for example, early retirement reduction factors,
actuarial equivalent factors, and rules for determining Years of
Credited Service.
Except as modified by this Addendum Number Three, the terms of the
NEC Plan as in effect prior to the adoption of this Addendum shall
continue to apply.
APPENDIX A
TABLE I - REVISED JULY 1, 1991
EASTERN UTILITIES ASSOCIATES EMPLOYEES' RETIREMENT PLAN
REDUCTION FACTORS FOR EARLY RETIREMENT
TO BE USED IF PARTICIPANTS AGE PLUS SERVICE IS LESS THAN 85
APPENDIX A
TABLE I - REVISED JULY 1, 1991
EASTERN UTILITIES ASSOCIATES EMPLOYEES' RETIREMENT PLAN
REDUCTION FACTORS FOR EARLY RETIREMENT
TO BE USED IF PARTICIPANTS AGE PLUS SERVICE IS GREATER THAN OR EQUAL
TO 85
APPENDIX A
TABLE I - REVISED 8/1/91
FOR USE PRIOR TO 7/1/91
EASTERN UTILITIES ASSOCIATES EMPLOYEES' RETIREMENT PLAN
REDUCTION FOR EARLY RETIREMENT
APPENDIX A
TABLE II - OPTION 1 (EFFECTIVE AUGUST 1, 1983)
EASTERN UTILITIES ASSOCIATES
FACTORS TO BE APPLIED TO EMPLOYEE'S RETIREMENT INCOME TO DETERMINE
INCOME UNDER CONTINGENT ANNUITANT OPTION IF 100% OF SUCH INCOME IS
CONTINUED TO CONTINGENT ANNUITANT
APPENDIX A
TABLE II - OPTION 1 (EFFECTIVE AUGUST 1, 1983)
EASTERN UTILITIES ASSOCIATES
FACTORS TO BE APPLIED TO EMPLOYEE'S RETIREMENT INCOME TO DETERMINE
INCOME UNDER CONTINGENT ANNUITANT OPTION IF 50% OF SUCH INCOME IS
CONTINUED TO CONTINGENT ANNUITANT
APPENDIX B
NEWPORT ELECTRIC CORPORATION
PENSION PLAN
TEN YEAR CERTAIN AND LIFE OPTION FACTORS
APPENDIX B
NEWPORT ELECTRIC CORPORATION
PENSION PLAN
50% JOINT AND SURVIVOR OPTION FACTORS
APPENDIX B
NEWPORT ELECTRIC CORPORATION
PENSION PLAN
66-2/3% JOINT AND SURVIVOR OPTION FACTORS
APPENDIX B
NEWPORT ELECTRIC CORPORATION
PENSION PLAN
100% JOINT AND SURVIVOR OPTION FACTORS
NEWPORT ELECTRIC CORPORATION PENSION PLAN
ACTUARIAL EQUIVALENT FACTORS
FOR DETERMINING BENEFITS PAYABLE UNDER A.6.1(d)
EASTERN UTILITIES ASSOCIATES
EMPLOYEE'S SAVINGS PLAN
Amended and Restated Effective January 1, 1989
(Including Amendments through January 1, 1992)
December, 1994
TABLE OF CONTENTS
Section
PREAMBLE
ARTICLE I- DEFINITIONS
Account 1.1
Affiliated Employer 1.2
After-Tax Participant Contribution(s) 1.3
After-Tax Participant Contribution(s) Account 1.4
Authorized Leave of Absence 1.5
Beneficiary 1.6
Board 1.7
Code 1.8
Committee 1.9
Common Shares 1.10
Disability 1.11
Earnings 1.12
Effective Date 1.13
Eligible Employee 1.14
Employee 1.15
Employer 1.16
Employment Date 1.17
Entry Date 1.18
ERISA 1.19
Fiduciary 1.20
Former Participant 1.21
Highly Compensated Employee 1.22
Highly Compensated Group 1.23
Matching Contribution 1.24
Matching Contribution Account 1.25
Nonparticipating Employer 1.26
One Year Break in Service 1.27
Parental Absence 1.28
Participant 1.29
Participating Employer 1.30
Plan 1.31
Plan Year 1.32
Pre-Tax Participant Contribution(s) 1.33
Pre-Tax Participant Contribution(s) Account 1.34
Qualified Voluntary Employee Contribution(s) 1.35
Section
Qualified Voluntary Employee Contribution(s) Account 1.36
Rollover Contribution 1.37
Rollover Contribution Account 1.38
Service 1.39
Service Termination Date 1.40
Spouse 1.41
Trust or Trust Fund 1.42
Trust Agreement 1.43
Trustee 1.44
Valuation Date 1.45
ARTICLE II - PARTICIPATION
Eligibility to Participate 2.1
Commencement of Participation 2.2
Transfers 2.3
Reemployment of Terminated Employee or Resumption of
Employment Following Leave of Absence 2.4
ARTICLE III - PARTICIPANT CONTRIBUTIONS AND MAXIMUM AMOUNTS
Pre-Tax Participant Contribution(s)s 3.1
After-Tax Participant Contribution(s)s 3.2
Rollover Contributions 3.3
Change in Level of Contributions 3.4
Suspension and Resumption of Contributions 3.5
Change in Earnings 3.6
Remittance of Participant Contributions 3.7
Limitation on Amount and Return of Pre-Tax
Participant Contribution(s)s In Certain Instances 3.8
Limitation on Amount and Return of After-Tax
Participant Contribution(s)s In Certain Instances 3.9
Section
ARTICLE IV - MATCHING CONTRIBUTIONS AND OVERALL CONTRIBUTION LIMITS
Matching Contributions 4.1
Remittance of Matching Contributions 4.2
Limitation on Amount of Matching Contributions and
After-Tax Participant Contribution(s) In
Certain Instances 4.3
Aggregate Limit Test 4.4
Maximum Total Allocations 4.5
Annual Additions 4.6
Contributions Conditioned on Tax Deductibility 4.7
Return of Contributions 4.8
Payment of Expenses 4.9
ARTICLE V - INVESTMENT OF CONTRIBUTIONS
Committee to Establish Accounts 5.1
Investment Options 5.2
Change in Investment Options 5.3
Investment Rules 5.4
ARTICLE VI - TRUST FUND
Trust Fund 6.1
Valuation of Funds 6.2
Valuation of Participant Accounts 6.3
Responsibilities of the Investment Manager 6.4
Statements of Participant Accounts 6.5
Valuation for Distribution 6.6
ARTICLE VII - DEATH AND DISABILITY
Death Benefit 7.1
Payment of Death Benefit 7.2
Designation of Beneficiary 7.3
Payment Other Than to Beneficiary 7.4
Definition of Disability 7.5
Disability Benefit 7.6
Recovery from Disability 7.7
Section
ARTICLE VIII - VESTING AND TERMINATION OF EMPLOYMENT
Vesting of Contributions 8.1
Vesting Prior to August 1, 1983 8.2
Method of Payment 8.3
ARTICLE IX - LOANS AND WITHDRAWALS
Withdrawals from Matching and Rollover
Contribution Accounts 9.1
Withdrawals from After-Tax Participant
Contribution(s) Account 9.2
Withdrawals from Qualified Voluntary Employee
Contribution(s) Account 9.3
Withdrawals from Pre-Tax Participant Contribution(s)
Account 9.4
Hardship Withdrawals 9.5
Rules for Withdrawals 9.6
Debiting of Withdrawals 9.7
Participant Loans 9.8
Rules Relating to Loans 9.9
ARTICLE X - PAYMENT OF BENEFITS
Entitlement to Distribution 10.1
Form of Payment 10.2
Time of Payment 10.3
Amount of Distribution 10.4
Death Benefits 10.5
Limitation on Distributions 10.6
Segregated Accounts 10.7
Missing Persons 10.8
ARTICLE XI - EMPLOYEES' SAVINGS PLAN COMMITTEE
Responsibility for Plan and Trust Administration 11.1
Retirement Plan Committee 11.2
Agents of the Committee 11.3
Committee Procedures 11.4
Administrative Powers of the Committee 11.5
Section
Benefit Claims Procedures 11.6
Reliance on Reports and Certificates 11.7
Other Committee Powers and Duties 11.8
Compensation of Committee 11.9
Member's Own Participation 11.10
Liability of Committee Members 11.11
Indemnification 11.12
ARTICLE XII - FIDUCIARY RESPONSIBILITIES
Basic Responsibilities 12.1
Actions of Fiduciaries 12.2
Fiduciary Liability 12.3
Bonding of Fiduciaries 12.4
Indemnification of Fiduciaries 12.5
ARTICLE XIII - AMENDMENT AND TERMINATION
Internal Revenue Service Qualification 13.1
Employer's Right to Amend or Terminate 13.2
Participating Employer's Right to Terminate 13.3
Valuation of Assets 13.4
Distribution of Assets 13.5
ARTICLE XIV - TOP-HEAVY PLAN REQUIREMENTS
General Rule 14.1
Minimum Contribution Provisions 14.2
Limitation on Contributions 14.3
Coordination With Other Plans 14.4
Top-Heavy Plan Definitions 14.5
Key Employee 14.6
Non-Key Employee 14.7
Change from Top-Heavy Status 14.8
Section
ARTICLE XV - GENERAL PROVISIONS
Plan Voluntary 15.1
Payments to Minors and Incompetents 15.2
Non-Alienation of Benefits 15.3
Use of Masculine and Feminine; Singular and Plural 15.4
Merger, Consolidation or Transfer 15.5
Leased Employees 15.6
Governing Law 15.7
PREAMBLE
Effective January 1, 1982, Eastern Utilities Associates (the "Employer")
established a retirement plan referred to as the Eastern Utilities Associates
Employees' Savings Plan (the "Plan") as provided herein. A Trust Agreement has
been adopted by the Employer and is intended to form a part of this Plan. The
purpose of this Plan is to encourage employee savings for retirement and to
provide a tax qualified facility for accumulation of funds to be used to
provide benefits payable to an Employee upon his retirement, death, disability,
termination of employment, or on certain other occasions.
This Plan constitutes an amendment to, restatement of, and continuation of the
Plan as it was originally effective January 1, 1982, and as amended from time
to time thereafter. This amendment and restatement is effective January 1,
1989, except to the extent otherwise specifically provided herein.
Effective January 1, 1992, the Newport Electric Corporation Deferred
Compensation Thrift Plan was merged into and became a part of this Plan. The
merged plans are maintained as a single plan pursuant to Section 414(l) of the
Internal Revenue Code of 1986 (the "Code") and applicable regulations and
rulings. Except as otherwise provided herein, the terms of this Plan shall
govern the participation of and accounts of those employees formerly employed
by Newport Electric Corporation.
It is intended that this Plan be qualified under Section 401(a) of the Code, as
amended from time to time, and meet the requirements of Code Section 401(k) as
a qualified cash or deferred arrangement. It is also intended that the Trust
be exempt from taxation as provided under Code Section 501(a).
ARTICLE I
DEFINITIONS
The following words and phrases when used in the Plan shall have the following
meanings, unless a different meaning is plainly required by the context:
1.1 "Account" shall mean the credit balance of a Participant in the Trust
Fund represented by his Pre-Tax Participant Contribution(s) Account,
Matching Contribution Account, After-Tax Participant Contribution(s)
Account, Qualified Voluntary Employee Contribution(s) Account and
his Rollover Contribution Account, if any.
1.2 "Affiliated Employer" shall mean any corporation which is included
with the Employer in a controlled group of corporations, as
determined in accordance with Code Section 414(b), any
unincorporated trade or business which, as determined under
regulations of the Secretary of the Treasury, is under common
control of the Employer under Code Section 414(c), any organization
that includes the Employer, which is a member of an affiliated
service group, as defined in Code Section 414(m), and any other
entity required to be aggregated with the Employer pursuant to
regulations under Code Section 414(o). For the purposes of Sections
4.5 and 4.6, Code Sections 414(b) and (c) shall be applied as
modified by Code Section 415(h).
1.3 "After-Tax Participant Contribution(s)" shall mean contributions made
to the Plan by a Participant on an after-tax basis pursuant to
Article III.
1.4 "After-Tax Participant Contribution(s) Account" shall mean a
Participant's interest in the Trust Fund attributable to After-Tax
Participant Contribution(s) made to the Plan including investment
experience thereon.
1.5 "Authorized Leave of Absence" shall mean an Employee's temporary
absence from work which is approved and authorized by the Employer
or Participating Employer according to uniform and nondiscriminatory
rules. An Authorized Leave of Absence shall include a Parental
Absence as defined in Section 1.28.
1.6 "Beneficiary" shall mean the person or persons designated by the
Participant or Former Participant to receive benefits under the Plan
in the event of the Participant's death. If the Participant is
married and designates someone other than his legal Spouse, his
Beneficiary designation must include the written consent of his
legal Spouse at the time the designation is made in order to be
valid. A former Spouse's consent shall not be binding on a
subsequent Spouse.
Such written consent must approve the specific beneficiary
designated, acknowledge the effect of such designation and be
witnessed by a notary public or a Plan representative. If it is
established to the satisfaction of the Committee that the Participant
has no Spouse, or that the Spouse's consent cannot be obtained
because the Spouse cannot be located, or because of such other
circumstances as may be prescribed in regulations issued pursuant to
Code Section 417, such written consent shall not be required. If no
valid Beneficiary designation is in effect at the time of the
Participant's death, Section 7.4 shall apply.
1.7 "Board" shall mean the Board of Trustees of the Employer.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any regulations issued thereunder. Reference to any
Code Section shall include any successor provision thereto.
1.9 "Committee" shall mean the person or persons designated by the
Employer as the Employees' Savings Plan Committee to administer the
Plan in accordance with Article XI.
1.10 "Common Shares" shall mean common shares of the Employer's stock with
voting power and dividend rights no less favorable than the voting
power and dividend rights of any other common shares of stock issued
by the Employer.
1.11 "Disability" shall mean a total and permanent disability as defined
pursuant to Article VII.
1.12 "Earnings" shall mean the regular straight time wages paid by the
Employer to an Employee during a Plan Year, exclusive of overtime,
bonuses, and the Employer's cost for any public or private employee
benefit plan (including this Plan) except that Earnings shall include
any Pre-Tax Participant Contribution(s) made here-under and any
salary deferrals made by the Employee to a plan maintained by a
Participating Employer which meets the requirements of Code Section
125 during the Plan Year.
A Participant's Earnings taken into account under the Plan for any
Plan Year shall not exceed $200,000 ($150,000 for Plan Years
beginning January 1, 1994) or such amount as indexed pursuant to Code
Sections 401(a)(17) and 415(d) and the applicable regulations
thereunder.
In determining the Earnings of an Employee for purposes of the Code
Section 401(a)(17) limitation, the rules of Code Section 414(q)(6)
shall apply except that the term "family" shall include only the
Spouse of an Employee and any linear descendants of the Employee who
have not attained age 19 before the close of the Plan Year.
If the Earnings of the Employee exceeds the Code Section 401(a)(17)
limitation, then such limitation shall be pro-rated among the
Earnings of the Employee and his family (as determined under this
Section 1.12 prior to the application of the Code Section 401(a)(17)
limitation) in proportion to each such individual's Earnings (as
determined under this Section 1.12 prior to the application of the
Code Section 401(a)(17) limitation).
1.13 "Effective Date" shall mean January 1, 1989, the effective date of
the amendment and restatement of the Plan. The original effective
date of the Plan is January 1, 1982.
1.14 "Eligible Employee" shall mean an Employee who is included in the
eligible class described in Section 2.1.
1.15 "Employee" shall mean any common-law employee of the Employer or an
Affiliated Employer, excluding any individual who is an independent
contractor, a consultant, or a Trustee of Eastern Utilities
Associates unless such Trustee is otherwise an Employee of the
Company.
A leased employee as described in Code Section 414(n)(2) shall be
considered an Employee only to the extent required by Section 15.6.
1.16 "Employer" shall mean Eastern Utilities Associates, a voluntary
association formed under a Declaration of Trust dated April 2, 1928
as amended under the laws of the Commonwealth of Massachusetts or its
successor or successors.
1.17 "Employment Date" shall mean the first day for which an Employee
receives credit for an Hour of Service.
1.18 "Entry Date" shall mean any January 1 or July 1. Effective July 1,
1992, Entry Date shall mean the first day of any calendar month.
1.19 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. References to any section of
ERISA shall include any successor provision thereto.
1.20 "Fiduciary" shall mean any person who exercises any discretionary
authority or discretionary control respecting the management of the
Plan, assets held under the Plan, or disposition of Plan assets; who
renders investment advice for a fee or other compensation, direct or
indirect, with respect to assets held under the Plan or has any
authority or responsibility to do so; or who has any discretionary
authority or discretionary responsibility in the administration of
the Plan. Any person who exercises authority or has responsibility
of a fiduciary nature as described above shall be considered a
Fiduciary under the Plan.
1.21 "Former Participant" shall mean an individual who was a Participant,
has terminated employment with the Employer and all Affiliated
Employers, and has received a distribution of his Account under the
Plan.
1.22 "Highly Compensated Employee" shall mean each Employee who at any
time during the current or preceding Plan Year:
(a) was a 5% owner (as defined in Code Section 416(i)(l)) of the
Employer or an Affiliated Employer;
(b) received compensation from the Employer or an Affiliated
Employer in excess of $75,000 (as indexed pursuant to applicable
regulations under the Code);
(c) received compensation from the Employer or an Affiliated
Employer in excess of $50,000 (as indexed pursuant to applicable
regulations under the Code) and was in the group consisting of
the top 20% of all Employees when ranked on the basis of
compensation received during such Plan Year; or
(d) was at any time an officer of the Employer or Affiliated
Employer who received compensation in excess of 50% of the
amount in effect under Code Section 415(b)(1)(A) for such Plan
Year.
Notwithstanding the foregoing, an Employee not described in paragraph
(b), (c), or (d) above for the preceding Plan Year shall only be a
Highly Compensated Employee for the current Plan Year if he is
described in paragraph (b), (c) or (d) for the current Plan Year and
is one of the top 100 Employees when ranked by compensation for such
Plan Year. For purposes of this Section, "compensation" shall mean
compensation as defined in Code Section 414(q)(7).
In any event, the determination of a Highly Compensated Employee
shall be made pursuant to Code Section 414(q) and regulations issued
thereunder. Accordingly, the Committee may elect to use the calendar
year election to determine Highly Compensated Employees as provided
in Treasury Regulation 1.414(q)-1T Q&A 14(b)1 or the simplified
method as described in Revenue Procedure 93-42, Section 4.
1.23 "Highly Compensated Group" shall mean the group of Highly Compensated
Employees who are also Eligible Employees as defined herein.
1.24 "Matching Contribution" shall mean a contribution by a Participating
Employer made to the Plan on behalf of a Participant pursuant to
Article IV.
1.25 "Matching Contribution Account" shall mean a Participant's interest
in the Trust Fund attributable to Matching Contributions made to the
Plan including investment experience thereon.
1.26 "Nonparticipating Employer" shall mean any Affiliated Employer which
is not a Participating Employer.
1.27 "One Year Break in Service" shall mean a consecutive 12-month period
commencing on an Employee's Service Termination Date (or anniversary
thereof) in which such individual is not employed by the Employer or
an Affiliated Employer.
1.28 "Parental Absence" shall mean an Employee's absence from work which
has commenced after December 31, 1984, for any of the following
reasons:
(a) the pregnancy of the Employee;
(b) the birth of the Employee's child;
(c) the adoption of a child by the Employee; or
(d) the need to care for the Employee's child immediately following
its birth or adoption.
1.29 "Participant" shall mean an Employee who is either currently
contributing to the Plan or who has an Account under the Plan.
1.30 "Participating Employer" shall mean the Employer and any other
Affiliated Employer (or a division or subsidiary of either) which
participates in the Plan with the permission of the Employer. A
Participating Employer may elect, with the consent of the Employer,
to adopt the Plan only with respect to a division or other employment
unit rather than with respect to all of its employees.
1.31 "Plan" shall mean the Eastern Utilities Associates Employees' Savings
Plan as set forth in this document and as amended from time to time.
1.32 "Plan Year" shall mean the 12-month period commencing on January 1
and ending on the next following December 31.
1.33 "Pre-Tax Participant Contribution(s)" shall mean a salary reduction
contribution made to the Plan on behalf of a Participant pursuant to
Article III.
1.34 "Pre-Tax Participant Contribution(s) Account" shall mean a
Participant's interest in the Trust Fund attributable to Pre-Tax
Participant Contribution(s) made to the Plan including investment
experience thereon.
1.35 "Qualified Voluntary Employee Contribution(s) (QVEC)" shall mean a
Participant's tax-deductible contributions made under the Plan prior
to January 1, 1987. Qualified Voluntary Employee Contribution(s)
shall not be made to the Plan after December 31, 1986.
1.36 "Qualified Voluntary Employee Contribution(s) Account" shall mean a
Participant's interest in the Trust Fund attributable to Qualified
Voluntary Employee Contribution(s) made to the Plan including
investment experience thereon.
1.37 "Rollover Contribution" shall mean a contribution made to the Plan by
a Participant pursuant to Section 3.3.
1.38 "Rollover Contribution Account" shall mean a Participant's interest
in the Trust Fund attributable to Rollover Contributions made to the
Plan including investment experience thereon.
1.39 "Service" shall mean the completed years and months of an Employee's
employment with the Employer and Affiliated Employers measured from
the individual's date of hire with the Employer or Affiliated
Employer.
Service shall include the following:
(a) the first 12 months of layoff;
(b) any period during which the Employee is on an Authorized Leave
of Absence, with or without pay;
(c) any period of absence because of service in the Armed Forces of
the United States provided the Employee returns to employment
with the Employer or Affiliated Employer within 90 days (or such
longer period as may be provided by law for the protection of
reemployment rights) after his discharge or release from active
duty in the Armed Forces;
(d) any other authorized period of absence, including paid holidays,
paid vacations, and sick leaves; and
(e) any other period of absence not in excess of one year, provided
the Employee returns to work within such one-year period.
For the purpose of determining an Employee's Service, a full calendar
month of employment shall be deemed one month of Service and 12
months of employment shall be deemed one year of Service. All
periods of employment with the Employer and Affiliated Employers
shall be taken into consideration for the purpose of determining an
Employee's Service.
For an Employee who was an employee of Newport Electric Corporation
on December 31, 1991, and who became an Employee hereunder on January
1, 1992, all periods of employment with Newport Electric Corporation
will be deemed Service to the extent such period of employment with
Newport Electric Corporation would have been deemed Service in
accordance with the provisions of this Section 1.39.
1.40 "Service Termination Date" shall mean the earliest of the following:
(a) the date on which the Employee resigns, is discharged, or
retires from Service with the Employer and all Affiliated
Employers;
(b) the date the Employee dies;
(c) the first anniversary of the date on which the Employee is laid
off, starts an Authorized Leave of Absence, or is absent from
work for any other reason other than a Parental Absence; and
(d) the second anniversary of the date on which the Employee
commenced a Parental Absence, if such Employee has not yet
returned to work with the Employer or an Affiliated Employer.
1.41 "Spouse" shall mean the legal spouse to whom a Participant is married
under applicable state law on the date benefits commence. However,
if the Participant should die before the date benefits are to
commence, then the Spouse shall be the legal spouse to whom the
Participant was married on the Participant's date of death. A former
spouse will be treated as the Spouse or surviving Spouse to the
extent required under a qualified domestic relations order as defined
in Code Section 414(p).
1.42 "Trust" or "Trust Fund" shall mean all assets held by the Trustee in
accordance with the Trust Agreement.
1.43 "Trust Agreement" shall mean the trust agreement between the Employer
and a Trustee as provided for in Article XI.
1.44 "Trustee" shall mean the individual, individuals or institution
appointed by the Board of Trustees of the Employer to act in
accordance with the Trust Agreement.
1.45 "Valuation Date" shall mean March 31, June 30, September 30, and
December 31. Effective July 1, 1992, Valuation Date shall mean any
date as of which the investment funds offered under the Plan are
valued, provided that in any event such funds shall be valued no less
frequently than quarterly.
ARTICLE II
PARTICIPATION
2.1 Eligibility to Participate. Each Employee shall be an Eligible
Employee upon satisfying the following requirements:
(a) he is employed by a Participating Employer;
(b) he has completed one year of Service;
(c) he has attained age 18;
(d) he is not a "leased employee" as defined under Code Section
414(n)(2);
(e) in the case of an Employee covered by a collective bargaining
agreement, the bargaining agreement provides for his
participation herein;
(f) effective July 1, 1992, he is not a temporary Employee (an
Employee is a temporary Employee if he is hired for a position
which is expected to terminate in the foreseeable future; and
(g) Notwithstanding the foregoing, an Employee who was an employee
of Newport Electric Corporation as of December 31, 1991, and who
was a participant of the Newport Electric Corporation Deferred
Compensation Thrift Plan on such date shall be considered an
Eligible Employee hereunder as of January 1, 1992. All other
Employees who were employees of Newport Electric Corporation
shall become Eligible Employees upon satisfying the
aforementioned requirements of this Section 2.1.
2.2 Commencement of Participation. Except as provided in Section 2.4,
each Eligible Employee shall become a Participant (or if his
participation has terminated, shall again become a Participant) on
the Entry Date coinciding with or next following the date on which
he:
(a) meets the requirements of Section 2.1; and
(b) enrolls in the Plan by completing an election form to initiate
contributions pursuant to Article III. However, if an Eligible
Employee fails to enroll when first eligible to do so, such
Employee shall be eligible to enroll on any following Entry Date
providing he is then an Eligible Employee.
2.3 Transfers. The following provisions shall govern in the case of an
Employee who changes employment status:
(a) In the event that an Eligible Employee directly transfers to an
ineligible class of Employees, he shall be deemed to continue as
a Participant for all purposes of the Plan except that he shall
not be permitted to direct any further Pre-Tax Participant
Contribution(s) or make any further After-Tax Participant
Contribution(s) on his behalf under the Plan nor shall he
receive any further Matching Contributions unless he again
becomes an Eligible Employee. Such an Employee shall continue
to accrue Service pursuant to Section 1.39.
(b) In the event that an Employee in an ineligible class (i.e.
temporary or leased employees) transfers to an employment
classification as an Eligible Employee, his Service earned
during his employment with all Participating and
Nonparticipating Employers shall be credited under this Plan.
Such Employee shall be eligible to become a Participant on the
first day of the month coinciding with or next following the
transfer or, if later, the Entry Date coinciding with or next
following the date when he meets the requirements of Section
2.1.
2.4 Reemployment of Terminated Employee or Resumption of Employment
Following Leave of Absence. A terminated Employee or an Employee on
an Approved Leave of Absence who resumes active employment with a
Participating Employer as an Eligible Employee may elect to become a
Participant (or shall continue participation if already a
Participant) on the first day of the month coinciding with or next
following his reemployment date, provided he meets the requirements
of Section 2.1 on such reemployment date, or if later, the Entry
Date coinciding with or next following the date on which he meets
such requirements.
ARTICLE III
PARTICIPANT CONTRIBUTIONS AND MAXIMUM AMOUNTS
3.1 Pre-Tax Participant Contribution(s). Each Eligible Employee may
elect, in writing, to authorize a Participating Employer to reduce
his Earnings and make a corresponding Pre-Tax Participant
Contribution(s) on his behalf commencing on any Entry Date. This
reduction in Earnings shall be in any whole percentage from 1% to 12%
(15% effective July 1, 1992) of such Earnings or, if permitted by the
Committee, in a flat dollar amount not less than 1% and not to exceed
12% (15% effective July 1, 1992) of such Earnings. Authorization to
reduce Earnings shall be in writing and shall be delivered to the
Committee no later than 30 days prior to the date as of which the
Pre-Tax Participant Contribution(s) becomes effective, unless the
Committee agrees to accept a later authorization according to
such uniform and nondiscriminatory rules as it may adopt. Such
Earnings reduction shall continue unchanged until the Participant
terminates employment, changes or suspends the Pre-Tax Participant
Contribution(s) in accordance with Section 3.4 or 3.5 or transfers to
the employment of a Nonparticipating Employer or an ineligible class
of Employees.
Pre-Tax Participant Contribution(s) made under this Section 3.1 shall
be subject to the limitations of Sections 3.8, 4.4, and 4.5.
3.2 After-Tax Participant Contribution(s). Each Eligible Employee may
elect, in writing, to contribute a percentage of his Earnings as
nondeductible After-Tax Participant Contribution(s) commencing on any
Entry Date. The contribution rate must be in any whole percentage
from 1% to 10% of such Earnings or, if permitted by the Committee, in
a flat dollar amount not less than 1% and not to exceed 10% of such
Earnings, provided that such After-Tax Participant Contribution(s)
shall not exceed the difference between 12% (15% effective July 1,
1992) and the contribution percentage such Eligible Employee has
currently authorized for Pre-Tax Participant Contribution(s).
Authorization to make After-Tax Participant Contribution(s) shall be
in writing and shall be delivered to the Committee no later than 30
days prior to the date as of which the After-Tax Participant
Contribution(s) becomes effective, unless the Committee agrees to
accept a later authorization according to such uniform and
nondiscriminatory rules it may adopt. Such contributions will be
made on an after-tax basis by payroll deduction which shall continue
unchanged until the Participant terminates employment, changes or
suspends his After-Tax Participant Contribution(s) election in
accordance with Section 3.4 or 3.5 or transfers to the employment of
a Nonparticipating Employer or an ineligible class of Employees.
After-Tax Participant Contribution(s) made under this Section 3.2
shall be subject to the limitations of Sections 4.3, 4.4, and 4.5.
3.3 Rollover Contributions. An Employee who is or who would be an
Eligible Employee except for the Service or age requirement under
Section 2.1 may elect, subject to the written consent of the
Committee, to make a Rollover Contribution to the Trust Fund to the
extent permitted under Code Section 402(c) and other applicable Code
sections and related rulings and regulations. A Rollover Contri-
bution shall be subject to the following rules:
(a) A Rollover Contribution shall consist of a distribution of all
or a portion of the balance to the credit of the Employee:
(i) from a qualified trust under Code Section 401(a), which
trust is exempt from tax under Code Section 501(a) (or
from an annuity plan qualified under Code Section
403(a)), or
(ii) from an individual retirement account, or an individual
retirement annuity (in each case within the meaning of
Code Section 408), all of the assets of which arose from
a distribution described in (i) which was transferred to
such account or annuity within 60 days from the date of
the distribution.
Notwithstanding the foregoing, a Rollover Contribution shall not
consist of: any distribution that is one of a series of
substantially equal periodic payments (not less frequently than
annually) made for the life (or the life expectancy) of the
Employee or the joint lives (or joint life expectancies) of
the Employee and the Employee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the
extent such distribution is required under Code Section
401(a)(9); and the portion of any distribution that is not
includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to
Employer securities).
(b) A Rollover Contribution shall not exceed the fair market value
of the amount described in (a) above;
(c) A Rollover Contribution shall be made in cash;
(d) In the event a Rollover Contribution consists of an amount which
has been paid directly to the individual, such Rollover
Contribution shall be made no later than 60 days following the
date the Participant receives the amount distributed;
(e) A Rollover Contribution must be submitted with supporting
documentation that the Rollover Contribution meets the
requirements of this Section 3.3.
An Employee who makes a Rollover Contribution shall be considered a
Participant under the Plan solely with respect to such Rollover
Contribution until he otherwise becomes a Participant pursuant to
Sections 2.1 and 2.2.
3.4 Change in Level of Contributions. The Pre-Tax and After-Tax
Participant Contribution(s) percentages as designated by the
Participant shall continue in effect, notwithstanding any change in
his Earnings, until he elects to change such percentage. Subject to
the requirements of Sections 3.1 and 3.2, a Participant may change
the rate of such contributions as of any Entry Date by providing 30
days' prior written notice to the Committee or such lesser notice as
the Committee may approve according to such uniform and
nondiscriminatory rules as it may adopt. Notice of any such change
shall be given on a form to be provided by the Committee for this
purpose and shall be signed by the Participant and delivered to
the Committee.
3.5 Suspension and Resumption of Contributions. A Participant may
suspend the making of Pre-Tax Participant Contribution(s) and/or
After-Tax Participant Contribution(s) as of any pay period by
providing at least 30 days' prior written notice to the Committee or
such lesser notice as the Committee may approve according to such
uniform and nondiscriminatory rules as it may adopt. A suspension of
Pre-Tax and/or After-Tax Participant Contribution(s) pursuant to
this Section shall continue for a period of no less than three
months.
Providing he is still an Eligible Employee, a Participant who
suspends his contributions pursuant to the above rules may resume
such contributions effective as of the first day of any month
following the required three month suspension period, with 30 days'
prior written notice to the Committee or such lesser notice as the
Committee may approve according to uniform and nondiscriminatory
rules it may adopt.
3.6 Change in Earnings. In the event of a change in the Earnings of a
Participant, the percentage of his Earnings that he has authorized as
his Pre-Tax Participant Contribution(s) and/or After-Tax Participant
Contribution(s) shall be applied as soon as practicable with respect
to such changed Earnings without action by the Participant. In the
case of a Participant who has elected a flat dollar contribution,
such contribution shall not change on account of a change in his
Earnings.
3.7 Remittance of Participant Contributions. Pre-Tax and After-Tax
Participant Contribution(s) will be remitted to the Trustee by the
Participating Employers as soon as practicable following the date
such contributions are made but in no event later than 30 days
following the end of the Plan Year in which such contributions
are made.
Rollover Contributions shall be remitted to the Trustee as soon as
practicable after they are delivered to a Participating Employer.
All Pre-Tax, After-Tax, and Rollover Contributions shall be invested
in accordance with the Participant's investment direction pursuant to
Article V.
Notwithstanding the foregoing, a Participant's Pre-Tax and After-Tax
Participant Contribution(s) will stop for any period of time during
which he is on an unpaid authorized leave of absence or layoff.
3.8 Limitation on Amount and Return of Pre-Tax Participant
Contribution(s) In Certain Instances.
(a) In no event shall a Participant's Pre-Tax Participant
Contribution(s) for a taxable year under this Plan and any other
cash or deferred arrangement (such as any other plan permitting
contributions under Section 401(k) of the Code) maintained by
the Employer exceed the dollar limit on excludable salary
deferrals under Code Section 402(g)(1) ($9,240 for 1994) as
adjusted for increases in the cost of living pursuant to Code
Section 402(g)(5). In the event a Participant's Pre-Tax
Participant Contribution(s) should exceed such dollar limit for
a taxable year, the excess, together with any investment
earnings attributable thereto, shall be returned to the
Participant no later than April 15 following the close of the
taxable year for which the excess contribution was made.
(b) In the event a Participant's Pre-Tax Participant Contribution(s)
for a taxable year under this Plan, together with his salary
reduction amounts under any other plan which meets the
requirements of Code Section 401(k), exceed the limits set forth
in (a) above, the Participant may treat a portion of such
excess as having been contributed to this Plan and request a
return of such excess together with any investment earnings
attributable thereto. Any such request shall be made no later
than March 1 following the close of the taxable year for which
the excess contribution was made, and the return of such excess
shall be made no later than the immediately following April 15.
(c) Effective January 1, 1987, for each Plan Year, the "average
deferral percentage" authorized by the Highly Compensated Group
as Pre-Tax Participant Contribution(s) must meet one of the
following tests:
(i) The "average deferral percentage" of the Highly
Compensated Group may not exceed 1.25 multiplied by the
"average deferral percentage" of all other Eligible
Employees who are not in such group, or
(ii) The "average deferral percentage" of the Highly
Compensated Group may not exceed 2.0 multiplied by the
"average deferral percentage" of all other Eligible
Employees, who are not in such group, subject to a
maximum differential of two percentage points.
(d) The "average deferral percentage" for a specified group for a
Plan Year shall mean the average of the ratios (calculated
separately for each Employee in such group) of (i) over (ii)
where:
(i) equals the sum of the Pre-Tax Participant Contribution(s)
made on behalf of each Eligible Employee for the Plan
Year pursuant to Section 3.1; and
(ii) equals the Eligible Employee's compensation for such Plan
Year as provided under Code Section 414(s), including any
alternative definitions thereunder.
For purposes of the foregoing, only Pre-Tax Participant
Contribution(s) allocated to the Participant's Account on a date
within a Plan Year and paid to the Trust Fund within 12 months
following the close of such Plan Year shall be considered in
determining his "deferral percentage" for such Plan Year. In
addition, only Pre-Tax Participant Contribution(s) which are
attributable to the Earnings an Employee receives from the
Employer during a Plan Year or within two and one-half months
following the close of such Plan Year shall be considered in
determining the Employee's "deferral percentage" for such Plan
Year.
If the Participating Employer sponsors two or more plans which
include a cash or deferred arrangement but are considered one
plan for purposes of Code Section 401(a)(4) or 410(b), the cash
or deferred arrangements included in such plans shall be treated
as one plan for purposes of determining the "average deferral
percentage".
If any Eligible Employee who is a member of the Highly
Compensated Group is participating in two or more cash or
deferred arrangements (such as any other plan permitting
contributions under Section 401(k) of the Code) sponsored by the
Employer or an Affiliated Employer, such cash or deferred
arrangements shall be treated as one arrangement for purposes of
determining the "deferral percentage" for such Eligible
Employee.
For purposes of determining the "deferral percentage" of an
Eligible Employee who is a 5% owner or one of the ten most
highly-paid Highly Compensated Employees, the Pre-Tax
Participant Contribution(s) and compensation of such Eligible
Employee shall include the Pre-Tax Participant Contribution(s)
and compensation for the Plan Year of "family members" (as
defined in Code Section 414(q)(6)) as may be required pursuant
to the family aggregation rules of Code Section 401(k) and
pertinent regulations issued thereunder. To such extent as
required by regulations, family members, with respect to such
Highly Compensated Employees, shall be disregarded as separate
Employees in determining the "average deferral percentage" both
for Eligible Employees who are non-highly compensated Employees
and for Eligible Employees who are Highly Compensated Employees.
(e) From time to time, the Committee shall review the Pre-Tax
Participant Contribution(s) authorized by Eligible Employees.
If, upon such review, the Committee determines that the average
percentage of such contributions applicable to the Highly
Compensated Group exceeds or is likely to exceed the maximum
average percentage necessary to comply with the above rules,
the Committee may reduce the Pre-Tax Participant Contribution(s)
of the Highly Compensated Group, to the extent necessary to
comply with such rules. Such reduction shall be effected by
successive reductions of the highest Pre-Tax Participant
Contribution(s) percentage authorized by one or more members of
the Highly Compensated Group until the average percentage
applicable to the Highly Compensated Group does not exceed the
maximum average percentage referred to above. Notwithstanding
the foregoing sentence, the Committee may impose a maximum
dollar limitation which is less than the amount specified in
Code Section 402(g) or a maximum percentage which is less than
the percentage in Section 3.1 to all Pre-Tax Participant
Contribution(s) made by the Highly Compensated Group.
(f) If, after the end of the Plan Year, the Committee determines
that the Pre-Tax Participant Contribution(s) made on behalf of
Highly Compensated Employees are in excess of the amounts
allowed under (c)(i) and (c)(ii) above, the Committee shall
return any Pre-Tax Participant Contribution(s) in excess of the
amount permitted above, together with any investment earn-
ings or losses allocable thereto to the affected Participants
until the rules in either (c)(i) or (c)(ii) above are met. The
return of such "excess contributions" shall be made in the same
manner as described in paragraph (e) above. Such "excess
contributions" shall be distributed within 2-1/2 months, if at
all possible, following the end of the Plan Year in which such
Pre-Tax Participant Contribution(s) were made and in no event
later than the close of the following Plan Year. The return of
any excess Pre-Tax Participant Contribution(s) shall be made on
a pro rata basis from the funds in which the Pre-Tax Participant
Contribution(s) are then invested, unless the Committee shall
permit the Participant to elect such other method of return
based on such uniform and nondiscriminatory rules as it may
adopt.
In the case of an Eligible Employee who is subject to the family
aggregation rules of Code Section 414(q)(6) because he is a
member of a family of a 5% owner of the Employer or of one of
the ten most highly paid Highly Compensated Employees, the
determination of and return of excess Pre-Tax Participant
Contribution(s) under this Section shall be made in accordance
with the family aggregation rules of Code Section 401(k) and
pertinent regulations issued thereunder.
(g) For purposes of determining the investment earnings or loss to
be distributed pursuant to paragraphs (a) and (f) hereunder, the
following rules shall apply:
The earnings or loss allocable to Pre-Tax Participant
Contribution(s) is the earnings or losses allocable to the
Participant's Pre-Tax Participant Contribution(s) Account for
the Plan Year multiplied by a fraction, the numerator of which
is the Pre-Tax Participant Contribution(s) to be distributed to
the Participant for the year and the denominator is the
Participant's Account balance attributable to Pre-Tax
Participant Contribution(s) without regard to any earnings or
loss occurring during such Plan Year.
(h) In the event that the Participating Employer made a Matching
Contribution with respect to any Pre-Tax Participant
Contribution(s) returned pursuant to this Section, such Matching
Contribution shall be distributed or forfeited to the affected
members of the Highly Compensated Group, as determined by the
Committee according to such uniform and nondiscriminatory rules
as it may adopt.
3.9 Limitation on Amount and Return of After-Tax Participant
Contribution(s) in Certain Instances. The limitation on the amount
and return of After-Tax Participant Contribution(s) is described in
Article IV.
ARTICLE IV
MATCHING CONTRIBUTIONS AND OVERALL CONTRIBUTION LIMITS
4.1 Matching Contributions. Each Participating Employer shall make a
Matching Contribution on behalf of each of its Participants in an
amount equal to 100% of the first 2% of Earnings and 50% of the next
1% of Earnings with respect to which such Participant makes Pre-Tax
Participant Contribution(s). The level of Matching Contributions for
any Employee whose terms of employment are governed by a collective
bargaining agreement shall be subject to the terms of such collective
bargaining agreement with respect to a Plan Year. Matching Contribu-
tions made under this Section 4.1 shall be subject to the limitations
of Sections 4.3, 4.4, and 4.5.
The Board may change the Matching Contribution from time to time.
In the event Matching Contributions on behalf of a Participant for a
Plan Year would otherwise cease because his Pre-Tax Participant
Contribution(s) for such Year cease on account of the dollar limit
set forth in Section 402(g)(1) of the Code, Matching Contributions
shall be continued on his behalf for the remainder of the Plan Year
in accordance with this Section during his continued employment
as long as his actual Pre-Tax Participant Contribution(s) for the
Plan Year are at least equal to 3% of his Earnings for the Year or
such other amount as eligible for the maximum Matching Contribution.
4.2 Remittance of Matching Contributions. Matching Contributions will be
paid by the Participating Employers to the Trustee no later than 30
days following the end of the Plan Year in which the corresponding
Pre-Tax Participant Contribution(s) are made, but in no event later
than the Participating Employer's tax filing deadline for its fiscal
year in which such Plan Year ends. Matching Contributions shall be
invested in EUA Common Shares pursuant to Article V, except as may
otherwise be provided under the terms of a collective bargaining
agreement. As such, Matching Contributions may be contributed in
cash, common shares or partially in cash and common shares.
4.3 Limitation on Amount of Matching Contributions and After-Tax
Participant Contribution(s) In Certain Instances. Effective January
1, 1987, for each Plan Year, the "average contribution percentage" of
the Highly Compensated Group must meet one of the following tests:
(a) The "average contribution percentage" of the Highly Compensated
Group may not exceed 1.25 multiplied by the "average
contribution percentage" of all other Eligible Employees who are
not in such group.
(b) The "average contribution percentage" of the Highly Compensated
Group may not exceed 2.0 multiplied by the "average contribution
percentage" of all other Eligible Employees who are not in such
group, subject to a maximum differential of two percentage
points.
The "average contribution percentage" for a specified group for
a Plan Year shall mean the average of the ratios (calculated
separately for each Employee in such group) of (i) over (ii)
where:
(i) equals the sum of the Eligible Employee's After-Tax
Participant Contribution(s) for the Plan Year pursuant to
Section 3.2 plus the Matching Contribution made on behalf
of the Eligible Employee for the Plan Year pursuant to
Section 4.1; and
(ii) equals the Eligible Employee's compensation for such Plan
Year as provided in Code Section 414(s), including any
alternative definitions thereunder.
For purposes of determining the "contribution percentage" of an
Eligible Employee who is a 5% owner or one of the ten most
highly- paid Highly Compensated Employees, the After-Tax
Participant Contribution(s), Matching Contributions and
compensation of such Eligible Employee shall include
the After-Tax Participant Contribution(s), Matching
Contributions and compensation for the Plan Year of "family
members" (as defined in Code Section 414(q)(6)) as may be
required pursuant to the family aggregation rules of Code
Section 401(m) and pertinent regulations issued thereunder.
To such extent as required by regulations, family members with
respect to Highly Compensated Employees shall be disregarded as
separate Employees in determining the "contribution percentage"
both for Eligible Employees who are non-highly compensated
Employees and for Eligible Employees who are Highly Compensated
Employees.
If the Participating Employer sponsors two or more plans to
which After-Tax and matching Employer Contributions are made and
which are subject to Code Section 401(m), but are considered one
plan for purposes of Code Section 401(a)(4) or 410(b), such
plans shall be treated as one plan for purposes of determining
the "average contribution percentage".
If any Eligible Employee who is a member of the Highly
Compensated Group is participating in two or more plans
sponsored by the Employer or an Affiliated Employer that include
After-Tax and/or matching Employer Contributions subject to Code
Section 401(m), all such contributions will be treated as made
under one plan for purposes of this paragraph (b).
(c) If for any Plan Year the "average contribution percentage" for
the Highly Compensated Group exceeds the limits set forth in (a)
and (b) above, the "excess aggregate contributions" (as defined
in Code Section 401(m)(6)(B)) shall be distributed to the Highly
Compensated Group within 2-1/2 months, if at all possible,
following the end of the Plan Year in which such contributions
were made and in no event later than the close of the following
Plan Year. The distribution of such "excess aggregate
contributions" shall be effected by successive reductions of the
After-Tax and/or Matching Contribution percentage(s) of one or
more members of the Highly Compensated Group with the highest
"average contribution percentage" until the "average
contribution percentage" applicable to the Highly Compensated
Group does not exceed the maximum "average contribution
percentage" referred to above. The distributable amount for
each affected member of the Highly Compensated Group shall be
determined in accordance with the following provisions:
(i) After-Tax Participant Contribution(s) made during the Plan
Year shall be returned to the Highly Compensated Employee
until he has no remaining "excess aggregate contributions"
or until all of his After-Tax Participant Contribution(s)
for the Plan Year have been distributed; then
(ii) Matching Contributions made during the Plan Year to the
Highly Compensated Employee shall be distributed to such
Highly Compensated Employee or forfeited at the
Committee's discretion until he has no remaining "excess
aggregate contributions" or until all of his Matching
Contributions for the Plan Year have been
distributed/forfeited. In the event that any "excess
aggregate contributions" are forfeited, such amounts shall
be used to reduce future Matching Contributions to the
Plan.
The return of any "excess aggregate contributions" shall be made
on a pro-rata basis from the funds in which the "excess
aggregate contributions" are then invested, unless the Committee
shall permit the Participant to elect such other method of
return based on such uniform and nondiscriminatory rules as it
may adopt.
In the case of an Eligible Employee who is subject to the family
aggregation rules of Code Section 414(q)(6) because he is a
member of a family of a 5% owner of the Employer or of one of
the ten most highly paid Highly Compensated Employees, the
determination of and return of "excess aggregate contributions"
under this Section shall be made in accordance with the family
aggregation rules of Code Section 401(m) and pertinent
regulations issued thereunder.
(d) The "excess aggregate contributions" to be distributed to a
Participant shall be adjusted for investment earnings or losses
applicable thereto.
(e) For purposes of determining the investment earnings or losses to
be distributed pursuant to the foregoing paragraphs, the
following rules shall apply:
The earnings or loss is the sum of earnings or losses allocable
to the Participant's After-Tax Participant Contribution(s)
Account and Matching Contribution Account for the Plan Year
multiplied by a fraction, the numerator of which is After-Tax
Participant Contribution(s) and Matching Contributions
to be returned to the Eligible Employee for the year and the
denominator is the Eligible Employee's Account balance(s)
attributable to After-Tax Participant Contribution(s) and
Matching Contributions without regard to any earnings or loss
occurring during such Plan Year.
4.4 Aggregate Limit Test.
(a) For any Plan Year commencing on or after January 1, 1989, in
which the "average deferral percentage" (as defined in Section
3.8) and the "average contribution percentage" (as defined in
Section 4.3) of the Highly Compensated Group can only satisfy
the limitations set forth in Sections 3.8(c)(ii) and 4.3(b)
respectively, but neither can satisfy the limitations set forth
in Sections 3.8(c)(i) and 4.3(a), respectively, and all
corrective measures have been taken under Sections 3.8 and 4.3
to ensure compliance with the provisions of Code Sections 401(k)
and 401(m), the "aggregate limit test" prescribed under proposed
Treasury Regulation 1.401 (m)-2(b)(3), or pertinent final
regulations shall be applicable. The "aggregate limit test"
shall be deemed met if (i) below is greater than or equal to
(ii) below where:
(i) equals the sum of (A) and (B) below where:
(A) equals 1.25 multiplied by the greater of (1) and (2)
where:
(1) equals the "average deferral percentage" of the
non-highly compensated group of Eligible
Employees; and
(2) equals the "average contribution percentage" of
the non-highly compensated group of Eligible
Employees;
(B) equals the lesser of (1) and (2) above plus two
percentage points. In no event, however, shall this
amount exceed 2.0 multiplied by the lesser of (1) and
(2) above.
(ii) equals the sum of (C) and (D) below where:
(C) equals the "average deferral percentage" of the
Highly Compensated Group; and
(D) equals the "average contribution percentage" of the
Highly Compensated Group.
(b) An "alternative aggregate limit test" may be used in place of
the "aggregate limit test" set forth in (a) above for any Plan
Years commencing on or after January 1, 1989, as long as such
test is permitted by the Internal Revenue Service. This
"alternative aggregate limit test" shall be deemed met if (i)
below is greater than or equal to (ii) below where:
(i) equals the sum of (A) and (B) below where:
(A) equals 1.25 multiplied by the lesser of (1) and (2)
where:
(1) equals the "average deferral percentage" of the
non-highly compensated group of Eligible
Employees; and
(2) equals the "average contribution percentage" of
the non-highly compensated group of Eligible
Employees;
(B) equals the greater of (1) and (2) above plus two
percentage points. In no event, however, shall this
amount exceed 2.0 multiplied by the greater of (1)
and (2) above.
(ii) equals the sum of (C) and (D) below where:
(C) equals the "average deferral percentage" of the
Highly Compensated Group; and
(D) equals the "average contribution percentage" of the
Highly Compensated Group.
(c) The Committee shall determine each Plan Year the appropriate
reductions, distributions, or forfeitures to be made in order to
satisfy the applicable limits set forth in this Section 4.4 and
in Sections 3.8 and 4.3. Any such reductions, distributions or
forfeitures shall be made in accordance with the applicable
provisions of Sections 3.8 and 4.3 and the nondiscrimination
requirements of Code Section 401(a)(4).
(d) In the event that the "average deferral percentage", the
"average contribution percentage" and the "aggregate limit" of
the Highly Compensated Group does not satisfy the requirements
set forth in Sections 3.8, 4.3, and this 4.4, respectively, the
Employer may for any Plan Year perform such testing by
restructuring the Plan into component plans as may be permitted
in regulations under Code Section 401(a)(4), provided such
component plans meet the coverage requirements of Code Section
410(b).
4.5 Maximum Total Allocations.
(a) Effective January 1, 1987, anything to the contrary herein
notwithstanding, in no event shall the Annual Additions, as
defined in Section 4.6, for any Employee for any Plan Year
exceed the lesser of:
(i) $30,000 or, if greater, 1/4 of the dollar limitation in
effect under Code Section 415(b)(1)(A) (which amount shall
be subject to adjustments as provided by Treasury
regulations under Code Section 415), or
(ii) 25% of the Employee's compensation (as defined by Treasury
regulations under Code Section 415(c)) from the
Participating Employer.
For purposes of this Section 4.5(a), the Plan Year shall be the
limitation year.
In the event an Annual Addition in excess of the lesser of (i)
or (ii) above is allocated to an Employee for a Plan Year, such
excess shall be corrected in the following order to the extent
required to eliminate the excess:
(iii) After-Tax Participant Contribution(s) plus any allocable
interest shall be refunded to the Employee, if such
contributions were made to this Plan or any other
qualified plan of the Employer for the Plan
Year.
(iv) Matching Contributions shall be reduced. Any reduction in
Matching Contributions shall be credited to a suspense
account and treated as the first allocation of Matching
Contributions on behalf of such Employee for the following
Plan Year and, if not fully utilized for such allocation,
the remainder shall be allocated prorata to the Matching
Contribution Accounts of the other Employees on the last
day of the following Plan Year.
(v) Pre-Tax Participant Contribution(s) shall be reduced. Any
reduction of Pre-Tax Participant Contribution(s) shall be
credited to a suspense account and treated as the first
allocation of Pre-Tax Participant Contribution(s) on
behalf of such Employee for the following Plan Year (and
succeeding Plan Years as necessary) or, any such
contribution shall be refunded in accordance with Section
415 of the Code. In the event that any Pre-Tax
Participant Contribution(s) in the suspense account have
not been allocated as Pre-Tax Participant Contribution(s)
to the Employee as of his Service Termination Date, the
Employer shall directly reimburse the Employee for such
remaining amounts, including any investment earnings
thereon as may be required under pertinent regulations.
No contributions shall be made to the Plan on behalf of an
Employee for any period during which a suspense account is in
existence for such Employee.
(b) In the case of an Employee who has participated in a defined
benefit plan maintained by the Employer or an Affiliated
Employer, the sum of the "defined benefit plan fraction" and the
"defined contribution plan fraction," determined as of the close
of any Plan Year, shall not exceed one. An Employee's defined
benefit plan fraction and defined contribution plan fraction
shall be determined as follows:
(i) The "defined benefit plan fraction" is a fraction with a
numerator equal to the Employee's projected annual
retirement benefit determined (other than any benefit
attributable to Employee contributions) under the defined
benefit plan and a denominator equal to the lesser of (A)
1.25 multiplied by the dollar limitation in effect under
Code Section 415(b)(1)(A) for such Plan Year, or (B) 1.4
multiplied by 100% of the Employee's compensation which
may be taken into account for such Plan Year.
(ii) The "defined contribution plan fraction" is a fraction
with a numerator equal to the sum of the Annual Additions
to the Employee's Account and a denominator equal to the
sum for each calendar year of the Employee's employment
with the Employer, any predecessor of the Employer, or an
Affiliated Employer of the lesser of (A) 1.25 multiplied
by the amount determined in accordance with Code Section
415(e)(3)(B)(i) for each such Plan Year, or (B) 1.4 multi-
plied by 25% of the Employee's compensation (as defined by
Treasury Regulations under Code Section 415) which may be
taken into account for each such Plan Year.
For the purpose of applying this Section 4.5(b), all defined benefit
plans and all defined contribution plans maintained by the Employer and all
Affiliated Employers shall be aggregated.
It is intended that this Section 4.5 shall be applied in a manner
which will be in the best interest of an Employee, as determined by the
Committee. Accordingly, the Committee shall reduce an Employee's Annual
Additions under this Plan so that such fraction equals one only if the terms of
the defined benefit plan in which the Employee is participating does not allow
for a reduction of the Employee's benefit so that such fraction equals one.
4.6 Annual Additions. Effective January 1, 1987, the Annual Addition
with respect to an Employee for any Plan Year shall be the sum of the following
amounts allocated to his Account for the Plan Year:
(a) All After-Tax Participant Contribution(s) made subsequent to
December 31, 1986, and prior to January 1, 1987, the lesser of
one-half of an Employee's After-Tax Participant Contribution(s),
or the amount of his After-Tax Participant Contribution(s) in
excess of 6% of his Earnings, plus (b) Matching Contributions
plus any other Employer contributions made to a qualified plan,
plus
(c) Pre-Tax Participant Contribution(s), plus
(d) Any forfeitures allocated to the Employee's Account, plus
(e) Any amount applied from the suspense account (pursuant to
Section 4.5),
plus
(f) Excess contributions and excess aggregate contributions as
defined in Code Sections 401(k)(8)(B) and 401(m)(6)(B),
respectively, plus (g) Excess deferrals, as defined in Code
Section 402(g), to the extent such excess deferrals have not
been returned to the affected Employee by the April 15 following
the taxable year in which such excess deferral was made; plus
(h) Amounts described in Code Sections 415(l)(1) and 419A(d)(2).
For purposes of applying this Section 4.6, all defined contribution
plans maintained by the Employer and all Affiliated Employers shall
be aggregated.
The term Annual Additions shall not include any Rollover
Contributions.
4.7 Contributions Conditioned on Tax Deductibility. All Pre-Tax
Participant Contribution(s) and Matching Contributions shall be
conditioned upon their deductibility by the Participating Employer
for federal income tax purposes; provided, however, that no
contributions shall be returned to a Participating Employer,
except as provided in Section 4.8.
4.8 Return of Contributions. Notwithstanding any other provision of this
Plan, a Pre-Tax Participant Contribution(s), or Matching Contribution
upon request by the Participating Employer may be returned to the
Participating Employer who made the contribution if:
(a) the contribution was made by reason of a mistake of fact; or
(b) the contribution was conditioned upon its deductibility for
income tax purposes and the deduction was disallowed; and
Such contribution shall be returned to the Participating Employer
within one year of the mistaken payment of the contribution or the
disallowance of such deduction, as the case may be.
The amount which may be returned to the Participating Employer is the
excess of the amount contributed over the amount that would have been
contributed had there not occurred the circumstances causing the
excess. Earnings attributable to the excess contribution may not be
returned to the Participating Employer, but losses thereto shall
reduce the amount to be returned. Furthermore, if the withdrawal of
the amount attributable to the excess contribution would cause the
balance of the Account of any Participant to be reduced to less than
the balance which would have been in the Account had the excess
amount not been contributed, then the amount to be returned to the
Participating Employer shall be limited to avoid such reduction. In
the event any Pre-Tax Participant Contribution(s) are returned to a
Participating Employer pursuant to this Section 4.8, the
Participating Employer shall directly reimburse affected Participants
for the amounts so returned. Any After-Tax Participant
Contribution(s) (exclusive of earnings) made by mistake of fact shall
be returned to the affected Participants.
4.9 Payment of Expenses. In addition to its contributions, the Employer
(or Participating Employer, if applicable) may elect to pay the
administrative expenses of the Plan and fees and retainers of the
Plan's Trustees, consultants, administrators, recordkeepers,
auditors, counsel, and other advisors or service providers so long as
the Plan or Trust Fund remains in effect. If the Employer does not
elect to pay all or part of such expenses, the Trustee may pay these
expenses and charge the payment thereof against the Trust Fund for
the Plan Year in which the expenses were incurred. All investment
expenses including investment management fees, brokerage fees, taxes
and other expenses associated with Plan investments shall be paid
from the investment fund assets.
The Trustee, if so authorized by the Committee, may apportion the
administrative expenses to be paid from the Trust Fund. Such
expenses will be allocated to Participants according to procedures
and methodologies to be established by the Committee so long as such
procedures and methodologies of apportioning the expenses are
executed under rules uniformly applied in a nondiscriminatory
manner.
ARTICLE V
INVESTMENT OF CONTRIBUTIONS
5.1 Committee to Establish Accounts. The Committee shall establish and
maintain a separate accounting in the name of each Participant,
Former Participant or, if applicable, Beneficiary which shall reflect
all contributions by the Participant or Former Participant, all
amounts contributed by the Participating Employer under the Plan on
his behalf, investment experience on all such contributions, any
distributions, withdrawals, and any expenses charged against such
contributions. The separate accounting in the name of each
Participant, Former Participant or Beneficiary shall include a
separate accounting for Pre-Tax Participant Contribution(s), After-
Tax Participant Contribution(s), Qualified Voluntary Employee
Contribution(s), Rollover Contributions, and Matching Contributions.
5.2 Investment Options. Subject to the provisions of Sections 5.3 and
5.4, a Participant, (including any Employee who is a Participant
solely with respect to Rollover Contributions) and any Former
Participant shall direct the Committee to invest his Pre-Tax
Participant Contribution(s), After-Tax Participant Contribution(s),
Qualified Voluntary Employee Contribution(s) and Rollover
Contributions, if any, in Funds available under the Plan as described
below other than EUA Common Shares. Matching Contributions and any
Rollover Contributions from a terminated plan maintained by the
Employer which were invested in Common Shares of Eastern Utilities
Associates shall be invested wholly in EUA Common Shares. For
Participants who are members of a collective bargaining agreement,
the investment of contributions hereunder shall be governed by the
terms of such collective bargaining agreement.
Fund shall mean the amounts held by any insurance company and/or
Trustee in accordance with this Plan. The Employer shall maintain:
(a) Capital preservation funds consisting of a money market fund or
similar fund invested primarily in short-term fixed income
securities, including investment contracts and annuity contracts
(issued by insurance companies) or certificates of deposit
issued by banks.
(b) Growth and income funds invested primarily in stocks and/or
bonds selected to offer the potential for capital growth and
current income.
(c) Growth funds invested primarily in domestic and foreign
securities designed to achieve above average capital growth by
assuming above average investment risk.
(d) EUA Common Shares is an unsegregated investment together with
earnings thereon invested in Common Shares of Eastern Utilities
Associates. Contributions made to and dividends received by
this Fund shall, to the extent practicable, be reinvested
through the Dividend Reinvestment and Common Share Purchase Plan
of Eastern Utilities Associates.
For periods prior to July 1, 1992 (the date the above described Funds
were offered under the Plan) the investment options and the rules
applicable thereto, as described in the predecessor to this document,
shall apply.
The Committee may, with the approval of the Board, eliminate one or
more investment funds, offer additional investment funds, or alter
the underlying investments of one or more funds from time to time.
Participants shall be notified of any changes in investment funds
prior to the effective date of such changes.
5.3 Change in Investment Options. Subject to Section 5.4, a Participant
may change the investment allocation of his future Pre-Tax
Participant Contribution(s), After-Tax Participant Contribution(s),
Rollover Contributions, if any, on a monthly basis by phone in
accordance with the rules of the Trustee. Subject to Sections
5.2 and 5.4, a Participant or Former Participant may also change the
investment allocation of his existing Pre-Tax Participant
Contribution(s) Account, After-Tax Participant Contribution Account,
Qualified Contribution Account and Rollover Contribution(s) Account,
on a daily basis by phone in accordance with the rules of the
Trustee.
The Committee may elect to change the Trustee and/or recordkeeper
relationship at any time. Upon such change, the Committee may
temporarily suspend the right of Participants to change or make
elections regarding the investment of Accounts and the Committee may
temporarily direct the investment of all or a portion of their
Accounts into a money market fund or similar fund consisting
primarily of short term fixed income securities or other fund deemed
appropriate to effect an efficient transition to the new recordkeeper
and investment funds. Notice of such suspension will be provided to
all eligible participants.
5.4 Investment Rules. The following rules shall govern all aspects of
this Article V:
(a) A Participant shall direct the Committee to invest his current
Pre-Tax Participant Contribution(s), After-Tax Participant
Contribution(s), and Rollover Contributions, if any, in
multiples of 5%, in Funds A, B, C, D, E, or F. Reallocation of
the Participant's or Former Participant's existing Account
pursuant to Section 5.3 shall also be made to Funds A, B, C, D,
E, or F in multiples of 5%.
(b) A Participant's or Former Participant's Matching Contribution
Account and Rollover Contribution Account attributable to
amounts distributed from a terminated plan maintained by the
Employer which was invested in Common Shares of Eastern
Utilities Associates shall be invested exclusively in EUA Common
Shares.
Notwithstanding the foregoing, for Participants who are members
of a collective bargaining agreement, the investment rules with
respect to Employee and Employer contributions hereunder shall
be governed by the terms of such collective bargaining
agreement.
(c) Any investment direction given by a Participant or Former
Participant shall continue in effect until changed by such
Participant or Former Participant as provided hereunder.
(d) In the absence of any written designation of investment
preference by the Participant or Former Participant, Pre-Tax
Participant Contribution(s), After-Tax Participant
Contribution(s), Qualified Voluntary Employee Contribution(s),
Rollover Contributions (other than Rollover Contributions
described in (b) above), if any, shall be invested 100% in
short-term fixed income investments.
(e) Notwithstanding any instruction from any Participant or Former
Participant for investment of funds as provided in this Article
V, the Trustee shall have the right to hold uninvested, or
invested in short-term fixed income investments, any funds
intended for investment or reinvestment as otherwise provided in
this Article for such time as the Trustee, in its sole
discretion, deems advisable.
(f) The Committee may limit changes otherwise permitted hereunder in
the investment allocation of a Participant's or Former
Participant's Account to the extent a change is precluded as a
result of a temporary period of adverse liquidity with respect
to an investment fund or to the extent a change would adversely
affect the investment return of Accounts of other Participants
or Former Participants.
(g) For periods prior to July 1, 1992 (the date the Funds described
in Section 5.2 were offered under the Plan) the investment
options, and the rules applicable thereto, as described in the
predecessor to this document shall apply.
ARTICLE VI
TRUST FUND
6.1 Trust Fund. All Accounts shall be held in the Trust Fund and each
Participant's and Former Participant's interest in the investment
funds shall be valued in accordance with the further provisions of
this Article VI.
The Trust Fund shall be held and administered under a Trust Agreement
between the Employer and the Trustee. The Employer, in its sole
discretion, shall have the right to change the method of funding or
the designation of Trustee, subject only to any contractual
restrictions of the existing method of funding. The Trust shall
hold all contributions made under the Plan and all earnings and other
income attributable thereto. All amounts payable under the Plan
shall be disbursed from the Fund.
6.2 Valuation of Funds. The current market value of each Fund shall be
separately determined by the Trustee as of every Valuation Date.
(a) For those securities traded on a national stock exchange, the
current market value shall be the closing price on the Valuation
Date.
(b) For those securities not traded on a national stock exchange,
the current market value shall be the average of the latest
available bid and ask quotes as of the Valuation Date.
If there is no trading of a security on a national stock exchange on
the Valuation Date or if bid and ask quotes are not available for a
security for a substantial amount of time, the current market value
of such security shall be determined on the basis of such market
quotations or other method as the Trustee shall deem appropriate.
6.3 Valuation of Participant Accounts. The Trustee shall maintain a
separate account for each Participant and Former Participant,
including a separate record of the share of each Participant or
Former Participant in each Fund attributable to contributions by the
Employer and to Pre-Tax, After-Tax, Qualified and Rollover
Contributions by the Participant. Each Participant's or Former
Participant's share in a Fund shall be determined as of each
Valuation Date and shall reflect contributions credited to his
Account and all withdrawals and forfeitures from his Account
since the last Valuation Date.
6.4 Investment Responsibilities of the Committee Relating to Investments.
The Committee, with the approval of the Board, shall invest and
reinvest the Trust Fund in such securities and other property in
accordance with the provisions of this Plan; provided, however, that
the Committee shall not engage in any "prohibited transaction" as
defined under ERISA. The Committee shall have such powers as may be
necessary to discharge its duties under the Plan, including, but not
limited to, the power:
(a) to make, execute, acknowledge, and deliver any and all deeds,
leases, assignments, and instruments;
(b) to cause any investments from time to time held by it to be
registered in, or transferred into, its name or in the name of
its nominee or nominees or to retain them unregistered or in
form permitting transferability by delivery, but the books and
records of the Committee shall at all times show that such
investments are part of the Fund;
(c) except in the case of Common Shares of Eastern Utilities
Associates, to vote in person or by proxy on any stocks, bonds
or other securities held by it; to exercise any options
appurtenant to any stocks, bonds, or other securities for
the conversion thereof into other stocks, bonds or securities,
or to exercise any rights to subscribe for additional stocks,
bonds, or other securities and to make any and all necessary
payments therefore; to join in, or to dissent from, and to
oppose, the reorganization, recapitalization, consolidation,
liquidation sale, or merger of corporations or properties in
which it may be interested as investment manager, upon such
terms and conditions as it may deem wise;
(d) in the case of Common Shares of Eastern Utilities Associates, to
carry out, or cause to be carried out, the voting instructions
of Participants respecting their interests in such Shares;
(e) to select depositories for the care, custody, and safekeeping of
any and all securities or other property of the Fund;
(f) to select, replace and/or eliminate one or more of the
investment funds offered under the Plan;
(g) to delegate investment management responsibilities to one or
more persons;
(h) to perform all acts which they deem necessary or proper for the
protection of the property of the Fund.
6.5 Statements of Participant Accounts. No less frequently than is
practicable after the completion of a Plan Year, an individual
statement will be issued to each Participant showing the value of his
interests in any of the investment funds which may be offered under
the Plan.
6.6 Valuation for Distribution. All withdrawals and distributions shall
be valued as of a Valuation Date and paid out as soon as practicable
thereafter or at such other time as the Committee may permit under
uniform and nondiscriminatory rules it may adopt.
ARTICLE VII
DEATH AND DISABILITY
7.1 Death Benefit. Upon the death of a Participant or Former
Participant, his Beneficiary shall be entitled to 100% of the
Participant's or Former Participant's remaining Account. Such
Account shall be held and maintained for the benefit of the
Beneficiary and the Beneficiary shall be entitled to exercise the
Participant's or Former Participant's rights respecting investment of
such Account and full and immediate repayment of any outstanding
loan, provided that the Beneficiary may not elect to take a new loan
from such Account or to make a partial withdrawal.
7.2 Payment of Death Benefit. After receipt by the Committee of due
notice of the death of the Participant, the benefit payable under
this Article shall be paid in one lump sum in accordance with the
provisions of Article X.
7.3 Designation of Beneficiary. Each Participant shall have the right,
by written notice to the Committee, to designate or to change the
Beneficiary to receive any benefit payable in the event of his death,
subject to the spousal consent requirements of Section 1.6, if he is
then married.
7.4 Payment Other Than to Beneficiary. If a Participant has not
designated a Beneficiary, or the Participant's designated Beneficiary
dies before the Participant, or if the Beneficiary dies after the
death of the Participant, but prior to receiving the full death
benefit hereunder, any remaining benefit shall be paid to the Benefi-
ciary's designated beneficiary. In the absence of such designation,
any remaining benefit will be paid to the Beneficiary's estate,
unless specified otherwise by the Participant.
7.5 Definition of Disability. A Participant will be deemed to have
suffered a total and permanent disability for purposes of the Plan if
he is eligible to receive Social Security disability benefits or
disability benefits under a long-term disability plan sponsored by
the Employer or an Affiliated Employer.
7.6 Disability Benefit. A Participant who has suffered a Disability
shall be entitled to distribution of 100% of the value of his Account
upon written request pursuant to the provisions of Article X.
7.7 Recovery from Disability.
(a) If it is subsequently determined that a Participant who had
become permanently disabled is no longer disabled, and if he
should return to employment with a Participating Employer
immediately upon recovery from Disability, he shall resume
membership in the Plan pursuant to Article II. In the event
his Account has not been distributed prior to his recovery from
Disability, he shall not be entitled to a distribution of his
Account prior to his Service Termination Date except as may be
permitted under Article IX.
(b) If it is subsequently determined that a Participant who had
become permanently disabled is no longer disabled, and if he
should fail to return to employment with a Participating
Employer or an Affiliate immediately upon recovery from
Disability, he shall be considered to have a Service Termina-
tion Date upon such recovery. In the event his Account has not
been distributed upon his recovery from Disability, his Account
shall be distributed pursuant to the provisions of Article X.
ARTICLE VIII
VESTING AND TERMINATION OF EMPLOYMENT
8.1 Vesting of Contributions. Subject to the further provisions of this
Article VIII, a Participant shall at all times be 100% vested in his
Account hereunder.
8.2 Vesting Prior to August 1, 1983.
(a) Any Participant who is actively employed on or after August 1,
1983 shall be 100% vested in his Account, except to the extent
that any portion of his Account may have been forfeited pursuant
to the further provisions of this Article.
(b) Any Participant who terminated employment with the Employer and
all Affiliated Employers prior to August 1, 1983 and who does
not subsequently return to employment with the Employer or an
Affiliated Employer shall not have any interest in that portion
of his Account that may have been forfeited as a result of such
termination of employment.
(c) If an Employee has a Service Termination Date prior to August 1,
1983, and is reemployed on or after August 1, 1983 by a
Participating Employer or an Affiliated Employer:
(i) before he has incurred a number of consecutive One Year
Breaks in Service equal to the greater of five and his
Service as of his Service Termination Date, or, if he was
at least partially vested pursuant to the provisions of
the Plan as in effect prior to August 1, 1983 on his
Service Termination Date, he shall be reinstated in the
portion of his Matching Contribution Account that may have
been forfeited pursuant to the Plan as in effect prior to
August 1, 1983. Any amounts reinstated in accordance with
this paragraph shall be paid by the applicable
Participating Employer with an additional contribution to
the Plan. Upon reemployment, the Employee shall be
100% vested in his Account.
(ii) after he has incurred a number of consecutive One Year
Breaks in Service equal to the greater of five and his
Service as of his Service Termination Date, and he was not
partially or fully vested pursuant to the provisions of
the Plan as in effect prior to August 1, 1983 on his
Service Termination Date, he shall have no further right
to the portion of his Matching Contribution Account that
may have been forfeited pursuant to the Plan as in effect
prior to August 1, 1983. The Employee shall be 100%
vested in his Matching Contribution Account attributable
to contributions made subsequent to his return to
employment only.
8.3 Method of Payment. When a Participant incurs a Service Termination
Date, his Account shall be distributed pursuant to the provisions of
Article X.
ARTICLE IX
WITHDRAWALS
9.1 Withdrawals from Matching and Rollover Contribution Accounts.
Subject to the further provisions of this Article IX, a Participant
who has been a Participant in the Plan for at least five full years
shall have the right to withdraw any portion of his Account
attributable to Matching and Rollover Contributions at any time. A
Participant who has not completed five full years of participation
may withdraw at any time any amount from the vested portion of his
Matching and Rollover Contribution Accounts other than Matching and
Rollover Contributions made during the 24 months preceding the date
of such withdrawal.
Notwithstanding the foregoing, subject to the further provisions of
this Article IX, a Participant may withdraw all or a portion of his
Matching and Rollover Contributions to the extent necessary to meet a
financial hardship.
9.2 Withdrawals from After-Tax Participant Contribution(s) Account.
Subject to the further provisions of this Article IX, a Participant
may withdraw any portion of his Account attributable to After-Tax
Participant Contribution(s) for any reason. Any hardship withdrawal
made from a Participant's After-Tax Account shall be subject to the
provisions of Sections 9.5 and 9.6.
9.3 Withdrawals from Qualified Voluntary Employee Contribution(s)
Account. Subject to the further provisions of this Article IX, a
Participant may withdraw all or a portion of his Account attributable
to Qualified Voluntary Employee Contribution(s) for any reason.
9.4 Withdrawals from Pre-Tax Participant Contribution(s) Account.
Subject to the further provisions of this Article IX, specifically
with reference to Section 9.6, a Participant may withdraw all or a
portion of his Account attributable to Pre-Tax Participant
Contribution(s) to the extent necessary to meet a financial hardship
as outlined in Section 9.5.
9.5 Hardship Withdrawals. For the purposes of this Article IX, a
"financial hardship" shall mean an immediate and heavy financial need
which cannot be met from any other available resource and which is
due to:
(a) unreimbursed medical expenses described in Code Section 213(d)
for which payment is necessary in advance in order to obtain
medical services for the Participant, his Spouse, or dependents
or for such medical expenses already incurred by the
Participant, his Spouse, or dependents;
(b) the purchase of the Participant's principal residence (not
including mortgage payments, remodeling or investment property
purchase);
(c) the need to prevent eviction from, or foreclosure on the
Participant's principal residence;
(d) tuition payments and related educational expenses for the next
12 months, semester, or quarter of post-secondary education for
the Participant, his Spouse or dependents; or
(e) such additional immediate and heavy financial needs as may be
approved by the Committee on a uniform and nondiscriminatory
basis.
The Committee shall determine in its sole discretion whether a
financial hardship exists to warrant a withdrawal, and if such
hardship exists, the amount of the withdrawal necessary to meet the
hardship. Such determination shall be made on the basis of written
documentation, provided by the Participant, which demonstrates the
existence and amount of the financial hardship. In any event, the
Committee's determination shall be made according to such uniform and
non-discriminatory rules as it may adopt.
A Participant shall be deemed to lack other resources to satisfy the
"financial hardship" if the following conditions are satisfied:
(f) the Participant has withdrawn all After-Tax, Matching, Rollover
and Qualified Voluntary Employee Contribution(s) available
hereunder and all amounts available to him under all other of
the Employer's (or Affiliated Employer's) qualified plans;
(g) the Participant has borrowed, through a loan, any amounts
available to him from any qualified plans of the Employer and
Affiliated Employers, unless the repayment of the amount
borrowed would constitute a "financial hardship" to the
Participant; and
(h) the amount of the withdrawal does not exceed the amount
necessary to meet the Participant's "financial hardship".
9.6 Rules For Withdrawals. The following rules shall apply to
withdrawals made pursuant to this Article IX:
(a) No more than one non-hardship withdrawal may be made in any
three-month period unless otherwise permitted in accordance with
such uniform and nondiscriminatory rules as the Committee may
adopt.
(b) The minimum amount of any non-hardship withdrawal from the Plan
shall be $500 or, if less, 100% of the amount in the
Participant's Account that is available as a withdrawal under
the provisions of this Article.
(c) A Participant who has not attained age 59-1/2 may not withdraw
that portion of his Pre-Tax Participant Contribution(s) Account
which is attributable to investment earnings which are credited
to such Account after December 31, 1988.
(d) In the event of a non-hardship withdrawal from the Participant's
After-Tax Participant Contribution(s) Account or from his
Matching and/or Rollover Contribution Account that does not
exceed 50% of the value of the Participant's Account, exclusive
of his Qualified Voluntary Employee Contribution(s) Account, the
Participant shall be suspended from making any further Pre-Tax
or After-Tax Participant Contribution(s) under the Plan for a
period of six months from the date of the withdrawal. No
Employer Matching Contributions will be made during the
suspension period.
(e) In the event of a non-hardship withdrawal from the Participant's
After-Tax Participant Contribution(s) Account or from his
Matching and/or Rollover Contribution Account that exceeds 50%
of the value of the Participant's Account, exclusive of his
Qualified Voluntary Employee Contribution(s) Account, the
Participant shall be suspended from making any further Pre-Tax
or After-Tax Participant Contribution(s) under the Plan for a
period of 12 months from the date of the withdrawal. No
Employer Matching Contributions will be made during the
suspension period.
(f) In the event a withdrawal is on account of a financial hardship,
the Participant shall be suspended from making any further Pre-
Tax or After-Tax Participant Contribution(s) under the Plan for
a period of 3 months from the date of the withdrawal. No
Employer Matching Contributions will be made during the
suspension period.
(g) In the event a withdrawal consists of a withdrawal from more
than one of a Participant's investment funds within his Account,
such withdrawal shall be considered a single withdrawal for the
purpose of applying paragraph (d) or (e) above.
(h) Any suspension of Pre-Tax and After-Tax Participant
Contribution(s) resulting from the application of paragraph (d),
(e) or (f) above shall be in addition to rather than coincident
with any suspension which may apply pursuant to Article III. No
more than one 12-month suspension shall be required, however,
for a single withdrawal under this Article IX.
(i) Any withdrawal made from a Participant's After-Tax Participant
Contribution(s) and/or investment earnings thereon shall be made
in a manner which corresponds with the tax treatment of such a
withdrawal under the Code.
(j) A Participant shall request a withdrawal hereunder by providing
the Committee with at least 30 days' advance written request of
the withdrawal, except that the Committee may agree to accept a
later request in the case of a withdrawal for "financial
hardship". The Participant will receive such payment as soon as
practicable after the Committee receives the request.
(k) Withdrawals shall be effective as of the Valuation Date next
following the date the Committee approves the withdrawal
request, unless the Committee agrees to another date according
to uniform and nondiscriminatory rules it may adopt.
(l) Any withdrawal shall be paid in cash, except that a Participant
electing a non-hardship withdrawal may elect to receive Common
Shares of Eastern Utilities Associates for such non-hardship
withdrawal with respect to the portion of his Account invested
in such Shares.
(m) If the Participant has made a withdrawal from his Pre-Tax
Participant Contribution(s) Account, the Participant's Pre-Tax
and After-Tax Contributions to the Plan are suspended for the 3-
month period immediately following the date of the hardship
withdrawal.
(n) The Participant's maximum Pre-Tax Participant Contribution(s)
permitted under Section 3.8(a) for the Plan Year following the
Plan Year in which the hardship withdrawal was made is reduced
by the amount of the Participant's Pre-Tax Participant
Contribution(s) made during the Plan Year in which the hardship
withdrawal occurred.
9.7 Debiting of Withdrawals. To the extent otherwise permitted by this
Article IX, all withdrawals shall be debited to a Participant's
Account in the following hierarchy; first from his After-Tax
Participant Contribution(s) Account, next from his Rollover
Contribution Account, next from his Qualified Voluntary Employee
Contribution(s) Account, next from his Matching Contribution Account.
In the case of Hardship withdrawals only, after the above sources
have been exhausted, withdrawals shall be debited next to a
Participant's Pre-Tax Contribution Account.
In the event that the provisions of this Article IX prohibit a
withdrawal from a Participant's Account in the sequence described in
the preceding sentence, the amounts withdrawn shall follow such
sequence only to the extent otherwise permitted by the provisions of
this Article IX. Except in the case of a withdrawal from a
Participant's Matching Contribution Account, a withdrawal will be
debited to his interest in the Funds offered under this Plan on a
pro-rata basis.
9.8 Participant Loans. The Plan may lend a Participant who is actively
employed an amount not in excess of the lesser of (a) $50,000 reduced
by the Participant's highest outstanding loan balance from the Plan
during the preceding 12-month period; and (b) 50% of the value of his
Rollover, Pre-Tax and Matching Contribution Accounts as of the date
on which the loan is approved. A loan may be made only from a
Participant's Rollover Account (but not from any portion of such
Account invested in Common Shares of Eastern Utilities Associates)
and/or his Pre-Tax Participant Contribution(s) Account.
9.9 Rules Relating to Loans. All loans shall comply with the following
terms and conditions:
(a) The minimum amount that may be borrowed under the Plan is
$1,000.
(b) Loans may be applied for as of any date with prior written
notice as the Committee may approve according to uniform and
nondiscriminatory rules it may adopt.
(c) No more than one regular loan (a loan for a purpose other than
the purchase of the Participant's principal residence) and one
housing loan (a loan for the purpose of purchasing the
Participant's principal residence) may be outstanding to a
Participant at any time.
(d) An application for a loan by a Participant shall be made in
writing to the Committee whose action thereon shall be final.
Furthermore, appropriate documentation for the purchase of a
home, such as a purchase and sale agreement, must be provided.
(e) Repayment of a loan shall be made based on level amortization of
the loan amount, including interest, and shall be made no less
frequently than quarterly over the term of the loan. The
Participant shall authorize the Participating Employer to deduct
from his pay the level amount sufficient to accomplish the
repayment. A Participant who is on an Authorized Leave of
Absence or layoff shall continue to repay any outstanding loan
by submitting payments to the committee responsible for plan
administration.
(f) The period of repayment for any loan shall be arrived at by
mutual agreement between the Committee and the Participant, but
subject to a maximum repayment period of five years for a
regular loan and 20 years for a housing loan.
(g) Loans may be prepaid in full at any time without penalty, but at
no time will a partial payment of principal or interest only be
allowed.
(h) Each loan shall be made against the collateral assignment of the
Participant's right, title and interest in the portion of his
Account against which the loan is taken, evidenced by such
Participant's collateral promissory note for the amount of the
loan, including interest, payable to the order of the Plan.
(i) Each loan shall bear a reasonable rate of interest, which shall
be the highest prime rate of interest, as published in the
"money rate" section of the Wall Street Journal as of the last
day of the calendar quarter preceding the effective date of the
loan. The Committee shall review from time to time the rate of
interest to determine if it is consistent with commercial rates
for similar loans, and if not, the Committee shall have the
authority to modify such rate of interest for new loans to be
consistent with such commercial rates.
(j) In the event a loan repayment is not made or is not paid at
maturity, the loan shall be deemed to be in default and the
Committee shall give written notice of such default to such
Participant to his last known address. If the default is not
cured within a reasonable period of time from the date of such
notice as determined by the Committee, according to uniform and
nondiscriminatory rules it may adopt and set forth in the
notice, the Participant's Account shall be reduced by the amount
of the unpaid balance of the loan, together with the interest at
the time of default thereon, and the Participant's indebtedness
shall thereupon be discharged. This reduction shall occur as
soon as the Participant could have received a distribution of
the portion of the Account balance so reduced under applicable
law, disregarding the provisions of (k) below.
(k) Upon termination or retirement, no distribution shall be made to
any Participant or Former Participant or to a Beneficiary of any
such Participant or Former Participant unless and until all
unpaid loans, including accrued interest thereon, have been
liquidated; provided, however, if any unpaid balance is due on a
loan of such Participant or Former Participant at the time of
such distribution which has not been satisfied through
collection or liquidation of his Account, the Plan shall
distribute to such Participant or Former Participant or
Beneficiary the collateral promissory note evidencing the loan,
and his Account, reduced by the unpaid balance of the loan,
including accrued interest thereon, shall be distributed.
(l) All loans shall be debited to a Participant's Account first from
his Rollover Contribution Account and next from his Pre-Tax
Participant Contribution(s) Account.
(m) Subject to the provisions of paragraph (l) above, all loans
shall be debited on a pro-rata basis to the investment funds in
which the Account is invested, provided that the proceeds for a
loan shall in no event be withdrawn from amounts invested in
Common Shares of Eastern Utilities Associates or any other
Company Matching Contributions.
(n) Upon receipt of a loan repayment and associated interest, the
Trustee shall deposit such repayment in the investment funds in
accordance with the Participant's investment designation at the
time of the repayment. The Trustee shall also credit such
repayment to the Participant's Accounts in the same proportion
as the Participant's investment designation at the time of the
repayment.
(o) The Committee shall make loans available hereunder on a
reasonably equivalent basis. The Committee shall apply
objective criteria in a uniform and nondiscriminatory manner to
determine whether a loan application should be approved. Such
criteria shall be limited to those factors which would be
considered by a commercial lender in the business of making
similar types of loans. Decisions by the Committee regarding
loans shall be final and shall be communicated to the
Participant as soon as practicable.
(p) The Committee may adopt such other rules and regulations
relating to loans as it may deem appropriate, including imposing
reasonable loan expense charges to the Accounts of Participants
electing loans.
ARTICLE X
PAYMENT OF BENEFITS
10.1 Entitlement to Distribution. A Participant (or, if applicable, his
Beneficiary) shall be entitled to a distribution upon his termination
of employment, his total and permanent disability or his death as
provided herein.
10.2 Form of Payment.
(a) An Account whose value is $3,500 or less must be distributed in
one lump sum payment, upon completion of written instructions by
the Participant.
(b) The normal form of payment for an Account whose value is more
than $3,500 shall also be one lump sum payment. The
distribution of any Account, the value of which exceeds $3,500,
shall require the written consent of the Participant.
10.3 Time of Payment.
(a) To the extent practicable, and unless otherwise elected by the
Participant or Former Participant pursuant to Section 10.3(c)
(or, if applicable, his Beneficiary pursuant to Section 10.5)
any distributions shall be made as soon as practicable after the
event which gave rise to the distribution or after all
contributions are credited. The value of the Participant's or
Former Participant's Account for this purpose shall be
determined as of the Valuation Date immediately preceding the
date of distribution. Notwithstanding the foregoing,
distributions shall not commence prior to the applicable date
described in Section 10.3(b), unless otherwise required under
Section 10.6, until the Participant, Former Participant or
Beneficiary returns a completed form to the Committee with 30
days prior written notice or such lesser notice as the Committee
shall approve according to uniform and nondiscriminatory rules
it may adopt. However, if the Participant, Former Participant
or Beneficiary fails to return the completed election form to
the Committee, benefits will automatically commence within the
period described in Section 10.3(b), unless prior commencement
is required under Section 10.6.
(b) Unless a Participant or Former Participant elects a deferred
payment in accordance with Section 10.3(c), distribution shall
commence no later than 60 days after the close of the Plan Year
in which: (i) the Participant or Former Participant attains age
65, or (ii) the 10th anniversary of the Participant's or Former
Participant's commencement of participation occurs, or (iii) the
Participant or Former Participant terminates employment,
whichever is latest.
(c) A Participant or Former Participant who has an Account balance
which is greater than $3,500 may elect, in writing, to defer the
commencement of a distribution under this Article X to a date
which is not later than the April 1 which follows the year in
which he attains age 70-1/2. In the event a Participant or
Former Participant elects to defer receipt of his Account
pursuant to this paragraph, his Account shall continue to be
valued in accordance with Article VI and shall be invested in
accordance with the Participant's or Former Participant's
election under Article V.
(d) If a Participant or Former Participant has elected a deferred
payment under Section 10.3(c), he may at any time thereafter
elect to change the time or manner of payment of the unpaid
portion of his Account in accordance with the further provisions
of this Article X, provided that 60 days advance written notice,
or lesser period if agreed upon by the Committee, is given to
the Committee.
10.4 Amount of Distribution. The amount of any distribution shall be
determined by the amount in the Participant's or Former Participant's
Account as of the Valuation Date coinciding with or otherwise
immediately preceding the distribution.
10.5 Death Benefits. In the event of the death of a Participant prior to
the date his Account has been distributed, his remaining Account
shall be paid to his Beneficiary in one lump sum pursuant to the
following rules:
(a) In the event the value of the Account is $3,500 or less, such
Account shall be paid to the Beneficiary as soon as practicable
following the Participant's or Former Participant's death.
(b) Except as otherwise provided in (a) above, in the event the
Beneficiary is the Participant's or Former Participant's Spouse,
the Beneficiary may elect to defer payment to a date no later
than April 1 following the calendar year in which the
Participant or Former Participant would have attained age 70-
1/2.
(c) Except as otherwise provided in (a) above, in the event the
Beneficiary is not the Spouse of the Participant or Former
Participant, the Beneficiary may elect to defer payment to a
date no later than five years following the Participant's or
Former Participant's death.
Upon the death of a Participant, his Beneficiary shall be considered
a Participant of the Plan, subject to the rules of the Plan
hereunder.
10.6 Limitation on Distributions. Distribution of benefits to a
Participant or Former Participant shall not be deferred beyond the
April 1 following the calendar year in which the Participant attains
age 70-1/2. In any event, distributions hereunder shall be made in
accordance with Code Section 401(a)(9), including the incidental
death benefit requirements of such Code Section, and regulations
thereunder, including Treasury Regulation 1.401(a)(9)-2. Such
regulations and applicable rulings or announcements, including any
grandfather provisions or provisions delaying the effective date of
Code Section 401(a)(9), are hereby incorporated by reference.
10.7 Segregated Accounts. If a Participant or Beneficiary has elected to
have his Account distribution deferred to a later date pursuant to
Section 10.3(c) or Section 10.6, the Account of the Participant will
continue to be invested in accordance with the most recent investment
direction on file with the Committee. If there is no investment
direction on file, the Committee shall direct the Trustee to
segregate the Participant's or Beneficiary's interest in the Plan and
invest such interest in Fund A as described in Section 5.2. Amounts
invested in this manner shall share the earnings, on a pro rata
basis, attributable to such fund. Effective July 1, 1992, the
investment of any Account whose distribution has been deferred
shall be made according to the rules relating to investments as
established by the Committee and investment funds.
10.8 Missing Persons. If the Committee shall be unable, within five years
after any amount becomes due and payable from the Plan to a
Participant, Former Participant or Beneficiary, to make payment
because the identity or whereabouts of such person cannot be
ascertained, the Committee may mail a notice by registered mail
to the last known address of such person outlining the action to be
taken unless such person makes written reply to the Committee within
60 days from the mailing of such notice. The Committee may direct
that such amount and all further benefits with respect to such person
shall be forfeited and all liability for the payment thereof shall
terminate. However, in the event of the subsequent reappearance of
the Participant, Former Participant or Beneficiary prior to
termination of the Plan, the benefit which was forfeited (but not any
earnings attributable to such forfeiture) shall be reinstated in
full. Any benefits forfeited shall be applied to reduce future
Matching Contributions to the Plan, or to pay expenses under the Plan
as determined by the Committee.
Reinstatement of any benefit forfeited under this Section 10.8 shall
be made by the applicable Participating Employer with an additional
contribution to the Plan.
ARTICLE XI
EMPLOYEES' SAVINGS PLAN COMMITTEE
11.1 Responsibility for Plan and Trust Administration. The Board shall
have the sole authority to appoint and remove the Trustee, appoint
and remove members of the Committee, approve any investment fund
which may be provided for under the Trust, and to amend or terminate,
in whole or in part this Plan or the Trust. The Employer, through
its Committee, shall have the responsibility for the administra-
tion of this Plan, which is specifically described in this Plan and
the related Trust Agreement. The Employer shall be the "named
fiduciary" for purposes of the Code and ERISA.
11.2 Employee Savings Plan Committee. The Plan shall be administered by
the Employer through a Committee of not less than three persons to be
appointed by and to serve at the pleasure of the Board. Any person
appointed as a member of the Committee may resign from the Committee
by delivering his written resignation to both the Board and the
Secretary of the Committee. The Committee shall be the "Plan
Administrator" within the meaning of Section 3(16)A of ERISA.
11.3 Agents of the Committee. The Committee may delegate specific
responsibilities to other persons as the Committee shall determine.
The Committee may authorize one or more of their number, or any
agent, to execute or deliver any instrument or to make any payment in
their behalf. The Committee may employ and rely on the advice of
counsel, accountants, and such other persons as may be necessary in
administering the Plan.
11.4 Committee Procedures. The Committee may adopt such rules as it deems
necessary, desirable, or appropriate. All rules and decisions of the
Committee shall be uniformly and consistently applied to all
Participants in similar circumstances. When making a determination
or calculation, the Committee shall be entitled to rely upon
information furnished by a Participant, Former Participant or Benefi-
ciary, the Employer, the legal counsel of the Employer or the
Trustee.
The Committee may act at a meeting or in writing without a meeting.
The Committee shall elect one of its members as chairman, appoint a
secretary, who may or may not be a Committee member, and advise the
Trustee of such actions in writing. The secretary shall keep a
record of all meetings and forward all necessary communications to
the Employer and the Trustee. The Committee may adopt such bylaws
and regulations as it deems desirable for the conduct of its affairs.
All decisions of the Committee shall be made by the vote of the
majority including actions in writing taken without a meeting.
11.5 Administrative Powers of the Committee. The Committee may from time
to time establish rules for the administration of the Plan. Except
as otherwise herein expressly provided, the Committee will have the
exclusive right and discretionary authority, to the fullest extent
provided by law, to interpret the Plan and decide any matters arising
hereunder in the administration and operation of the Plan, and any
interpretations or decisions so made will be conclusive and binding
on all persons having an interest in the Plan; provided, however,
that all such interpretations and decisions will be applied in a
uniform and nondiscriminatory manner to all Employees. The Committee
shall have no right to modify any provisions of the Plan as herein
set forth.
11.6 Benefit Claims Procedures. All claims for benefits under the Plan
shall be in writing and shall be submitted to the Committee member
designated as Committee Secretary by the Committee. If any
application for payment of a benefit under the Plan shall be denied,
the Committee shall notify the claimant within 90 days of such
application setting forth the specific reasons therefor and shall
afford such claimant a reasonable opportunity for a full and fair
review of the decision denying his claim. If special circumstances
require an extension of time for processing the claim, the claimant
will be furnished with a written notice of the extension prior
to the termination of the initial 90-day period. In no event shall
such extension exceed a period of 90 days from the end of such
initial period. The extension notice shall indicate the special
circumstances requiring an extension of time and the date by which
the Committee expects to render its decision.
Notice of such denial shall set forth, in addition to the specific
reasons for the denial, the following:
(a) reference to pertinent provisions of the Plan;
(b) such additional information as may be relevant to the denial of
the claim;
(c) an explanation of the claims review procedure; and
(d) notice that such claimant may request the opportunity to review
pertinent Plan documents and submit a statement of issues and
comments.
Within 60 days following notice of denial of his claim, upon written
request made by any claimant for a review of such denial to the
Committee Secretary, the Committee shall take appropriate steps to
review its decision in light of any further information or comments
submitted by such claimant.
The Committee shall render a decision within 60 days after the
claimant's request for review and shall advise said claimant in
writing of its decision on such review, specifying its reasons and
identifying appropriate provisions of the Plan. If special
circumstances require an extension of time for processing, a decision
will be rendered as soon as possible, but not later than 120 days
after receipt of a request for the review. If the extension of time
for review is required because of special circumstances, written
notice of the extension shall be furnished to the claimant prior to
the commencement of the extension. If the decision is not furnished
within such time, the claim shall be deemed denied on review. The
decision on review shall be in writing and shall include specific
reasons for the decision, written to the best of the Committee's
ability in a manner calculated to be understood by the claimant
without legal counsel, as well as specific references to the
pertinent Plan provisions on which the decision is based.
11.7 Reliance on Reports and Certificates. The Employer (or the Committee
if so designated by the Employer) will be entitled to rely
conclusively upon all valuations, certificates, opinions, and reports
which may be furnished by the recordkeeper, or any accountant,
controller, counsel, or other person who is employed or engaged for
such purposes and shall exercise the authority and responsibility as
it deems appropriate to comply with all of the legal and governmental
regulations affecting this Plan.
11.8 Other Committee Powers and Duties. The Committee shall have such
duties and powers as may be necessary to discharge its duties
hereunder, including, but not by way of limitation, the following:
(a) to prescribe written procedures to be followed by Participants,
Former Participants, or Beneficiaries filing applications for
benefits;
(b) to prepare and distribute, in such manner as the Committee
determines to be appropriate, information explaining the Plan;
(c) to receive from the Employer, Participants and Former
Participants such information as shall be necessary for the
proper administration of the Plan;
(d) to furnish the Employer, upon request, such annual reports with
respect to the administration of the Plan as are reasonable and
appropriate;
(e) to receive and review the periodic valuations of the Plan made
by the recordkeeper;
(f) to receive, review and keep on file (as it deems convenient or
proper) reports of benefit payments by the Trustee and reports
of disbursements for expenses directed by the Committee; and
(g) to invest and reinvest the Trust Fund, to select, replace and/or
eliminate one or more of the investment funds offered under the
Plan, and to exercise certain other powers respecting the
investment of the Trust Fund, in each case in accordance with
Section 6.4 hereof.
The Committee shall have no power to add to, subtract from or modify
any of the terms of the Plan, or to change or add to any benefits
provided by the Plan, or to waive or fail to apply any requirements
of eligibility for a benefit under the Plan.
11.9 Compensation of Committee. No member of the Committee who is an
Employee will receive any compensation for his services as such, but
will be reimbursed for reasonable expenses incident to the
performance of such services. The reimbursement of expenses shall be
paid in whole or in part by the Employer, and any expenses not paid
by the Employer shall be paid by the Trustee out of the principal or
income of the Trust Fund.
11.10 Member's Own Participation. No member of the Committee may act,
vote, or otherwise influence a decision of the Committee specifically
relating to his own participation under the Plan.
11.11 Liability of Committee Members. No member of the Committee will be
liable for any act of omission or commission except as provided by
federal law.
11.12 Indemnification. The Board, the Committee and the individual members
thereof shall be indemnified by the Employer and not the Trust Fund
against any and all expenses, costs, and liabilities arising by
reason of any act or failure to act, unless such act or failure to
act is judicially determined to be gross negligence or willful
misconduct.
ARTICLE XII
FIDUCIARY RESPONSIBILITIES
12.1 Basic Responsibilities. Any Plan Fiduciary, whether specifically
designated or not, shall:
(a) discharge all duties solely in the interest of Participants,
Former Participants, and Beneficiaries and for the exclusive
purpose of providing benefits and defraying reasonable
administrative expenses under the Plan;
(b) discharge his responsibilities with the care, skill, prudence,
and diligence a prudent man would use in similar circumstances;
and
(c) conform with the provisions of the Plan.
No person who is ineligible by law will be permitted to serve as
Fiduciary.
12.2 Actions of Fiduciaries. Any Plan Fiduciary:
(a) may serve in more than one fiduciary capacity with respect to
the Plan;
(b) may employ one or more persons to render advice with regard to
or to carry out any responsibility that such Fiduciary has under
the Plan; and
(c) may rely upon any discretion, information, or action of any
other Plan Fiduciary, acting within the scope of its
responsibilities under the Plan, as being proper under the Plan.
12.3 Fiduciary Liability. No Fiduciary shall be personally liable for any
losses resulting from his action except as provided by federal law.
Each Fiduciary shall have only the authority and duties which are
specifically allocated to him, shall be responsible for the proper
exercise of his own authority and duties, and shall not be respon-
sible for any act or failure to act of any other Fiduciary.
12.4 Bonding of Fiduciaries. Notwithstanding any other provision of the
Plan to the contrary, every Fiduciary shall be bonded to the extent
required by law.
12.5 Indemnification of Fiduciaries. The Employer shall indemnify and
hold harmless the other named Fiduciaries, and any Trustee of the
Employer or Employee held to be a Fiduciary with respect to the Plan
from any liability, claim, demand, suit or action of any type arising
from any action or failure to act; provided, however, that such
person acted in good faith and in a manner he reasonably believed to
be in the best interests of the Participants and Beneficiaries and
consistent with the provisions of the Plan and, with respect to any
criminal action or proceeding, that he had no reasonable cause to
believe his conduct was unlawful.
ARTICLE XIII
AMENDMENT AND TERMINATION
13.1 Internal Revenue Service Qualification. It is the intention of the
Employer that the Plan shall be and remain qualified and exempt under
Code Sections 401(a) and 501(a) and meet the requirements of Code
Sections 401(k) and 401(m). The Employer may authorize any
modification or amendment of this Plan, which is deemed necessary or
appropriate to qualify or maintain the qualification and exemption of
the Plan within the requirements of Code Sections 401(a), 401(k),
401(m), and 501(a), or any other applicable provisions of the Code as
now in effect or hereafter amended or adopted.
13.2 Employer's Right to Amend or Terminate. The Employer, with the
written approval of the Board of Directors, reserves the right to
modify, suspend or terminate the Plan in whole or in part (including
the provisions relating to contributions). Any modification,
suspension, or termination of the Plan shall be set forth in a
written Plan amendment executed by an officer of the Employer. The
Employer shall not have the power to modify, suspend, amend or
terminate the Plan in such manner as will cause or permit any part of
the Trust Fund to be used for or diverted to purposes other than the
exclusive benefit of Participants, Former Participants or their
Beneficiaries, or for the payment of expenses pursuant to the
provisions of the Plan. Further, except as otherwise specifically
provided in Sections 4.5 and 4.8, no portion of the Trust Fund may
revert to or become the property of the Employer, so as to divest a
Participant or Former Participant from or deprive him of any benefits
which may have accrued to him. Upon termination or partial
termination of the Plan or "complete discontinuance of contributions"
as such term is defined in Code Section 411, the amounts credited to
the Accounts of Participants affected by such termination or partial
termination shall be nonforfeitable.
Notwithstanding anything to the contrary contained herein, upon such
termination of the Plan, the Employer shall have no obligation or
liability whatsoever to make any further payments to the Trustee.
13.3 Participating Employer's Right to Terminate. Each Participating
Employer by action of its Board of Directors or other governing
authority, subject to the approval of the Board, shall have the right
to terminate, as to itself, the Plan hereby created, by delivering
written notice authorizing the termination to the Board, the
Committee, and the Trustee.
13.4 Valuation of Assets. In determining the value of the Accounts of the
Participants or Former Participants as of the date of the termination
of the Plan, the assets of the Trust Fund shall be valued by the
Trustee at fair market value as of the close of business on the
distribution date. The Accounts of the Participants and Former
Participants shall be adjusted in the manner provided in Article VI.
13.5 Distribution of Assets. If the Plan is terminated, the Trustee, at
the direction of the Employer shall continue to maintain the Trust
Fund, as permitted by applicable law, until all assets remaining in
the Trust Fund after payment of any expenses properly chargeable to
the Trust Fund are distributed to Participants, Former Participants
or their Beneficiaries. Such distribution shall be equal to the
value of the Accounts of the Participants as of the date of the
termination of the Plan adjusted for any earnings and expenses of the
Trust Fund and Plan between such date and the date of distribution.
Payment will be made in cash or in kind, or partly in cash and partly
in kind, in such manner as the Committee shall determine and as may
be required by applicable law. The Committee's determination shall
be final and binding on all persons.
ARTICLE XIV
TOP-HEAVY PLAN REQUIREMENTS
14.1 General Rule. For any Plan Year for which this Plan is a Top-Heavy
Plan as defined in Section 14.4, any other provisions of the Plan to
the contrary notwithstanding, the Plan shall be subject to the
following provisions:
(a) The minimum contribution provisions of Section 14.2, and
(b) The limitation on contributions set by Section 14.3.
14.2 Minimum Contribution Provisions. Subject to the provisions of
Sections 14.3 and 14.4, each Eligible Employee who (a) is a Non-Key
Employee (as defined in Section 14.7) and (b) is employed on the last
day of the Plan Year shall be entitled to have an Employer
Contribution (exclusive of any Matching Contributions) allocated to
his Account of not less than 3% (the "Minimum Contribution
Percentage") of his compensation (as defined for purposes of applying
the limits of Code Section 415) or such other amount, if any, as may
be necessary to comply with the rules established by the Internal
Revenue Service.
The Minimum Contribution Percentage set forth above shall be reduced
for any Plan Year to the percentage at which contributions are made
(or required to be made) under the Plan for the Plan Year for the Key
Employee (as defined in Section 14.6) for whom such percentage is the
highest for such Plan Year.
For this purpose, the percentage with respect to a Key Employee shall
be determined by dividing the contributions made for such Key
Employee by his total compensation for the Plan Year not to exceed
$200,000 ($150,000 for the Plan Year beginning January 1, 1994)
adjusted in the same manner as set forth in Section 1.12.
Contributions taken into account under the immediately preceding
sentence shall include contributions under this Plan and under all
other defined contribution plans required to be included in an
Aggregation Group (as defined in Section 14.5), but shall not include
any plan required to be included in such Aggregation Group if such
plan enables a defined benefit plan required to be included in such
Group to meet the requirements of the Code prohibiting discrimination
as to contributions or benefits in favor of Employees who are
officers, shareholders or the highly-compensated or prescribing the
minimum participation standards.
Contributions taken into account under this Section 14.2 shall not
include any contributions under the Social Security Act or any other
federal or state law.
14.3 Limitation on Contributions. In the event that the Employer also
maintains a defined benefit plan providing benefits on behalf of
Participants of this Plan, one of the two following provisions shall
apply:
(a) If for the Plan Year this Plan would not be a Top-Heavy Plan if
"90%" were substituted for "60%," then Section 14.2 shall apply
for such Plan Year as if amended so that "4%" were substituted
for the "3%".
(b) If for the Plan Year (i) this Plan is subject to paragraph (a)
above but does not provide the required additional minimum
contribution or (ii) this Plan would continue to be a Top-Heavy
Plan if "90%" were substituted for "60%," then the denominator
of both the defined contribution plan fraction and the defined
benefit plan fraction shall be calculated as set forth in
Section 4.5 for the limitation year ending in such Plan Year by
substituting "1.0" for "1.25" in each place such figure appears,
except with respect to any individual for whom there are no
Matching Contributions, forfeitures or voluntary nondeductible
contributions allocated or any accruals for such individual
under the defined benefit plan.
14.4 Coordination With Other Plans. In the event that another defined
contribution or defined benefit plan maintained by the Employer or an
Affiliated Employer provides contributions or benefits on behalf of
Participants in this Plan, such other plan shall be treated as a part
of this Plan pursuant to the applicable principles set forth in
Revenue Ruling 81-202 in determining whether the plans are providing
benefits at least equal to the minimum benefit required under the
defined benefit plan. If the Plan is subject to Section 14.3(b) but
the Employer does not substitute "1.0" for "1.25" as required, the
applicable percentage under the defined benefit plan shall be
increased by one percentage point (up to a maximum of ten percentage
points). Such determination shall be made by the Committee.
14.5 Top-Heavy Plan Definitions. This Plan shall be a Top-Heavy Plan for
any Plan Year if, as of the Determination Date, the aggregate of the
Accounts under the Plan for Participants and Former Participants who
are Key Employees exceeds 60% of the present value of the aggregate
of the Accounts for all Participants, or if this Plan is required to
be in an Aggregation Group which for such Plan Year is a Top-Heavy
Group. For purposes of making this determination, the present value
of the aggregate of the Accounts for a Participant who is not a Key
Employee, but who was a Key Employee in a prior year, or who has not
performed any service for the Employer at any time during the five-
year period ending on the Determination Date, shall be disregarded.
(a) "Determination Date" shall mean for any Plan Year the last day
of the immediately preceding Plan Year (except that for the
first Plan Year the Determination Date means the last day of
such Plan Year).
(b) "Aggregate of the Accounts" shall mean the sum of (i) the
Accounts determined as of the most recent Valuation Date that is
within the 12-month period ending on the Determination Date, and
(ii) the adjustment for contributions due as of the
Determination Date, and as described in the regulations under
the Code.
(c) "Aggregation Group" shall mean the group of plans, if any, that
includes both the group of plans that are required to be
aggregated and, if the Committee so elects, the group of plans
that are permitted to be aggregated.
(i) The group of plans that are required to be aggregated (the
"Required Aggregation Group") includes: (a) each plan of
the Employer in which a Key Employee is a Participant,
including collectively-bargained plans, and (b) each other
plan of the Employer or an Affiliated Employer including
collectively-bargained plans, which enables a plan in
which a Key Employee is a Participant to meet the
requirements of the Code prohibiting discrimination as
to contributions or benefits in favor of Employees who are
officers, shareholders or the highly-compensated or
prescribing the minimum participation standards.
(ii) The group of plans that are permitted to be aggregated
(the "Permissive Aggregation Group") includes the Required
Aggregation Group plus one or more plans of the Employer
or an Affiliated Employer that is not part of the Required
Aggregation Group and that the Committee certifies as
constituting a plan within the Permissive Aggregation
Group. Such plan or plans may be added to the Permissive
Aggregation Group only if, after the addition, the
Aggregation Group as a whole continues not to discriminate
as to contributions or benefits in favor of Employees who
are officers, shareholders or the highly-compensated and
to meet the minimum participation standards under the
Code.
(d) "Top-Heavy Group" shall mean the Aggregation Group, if as of the
applicable Determination Date, the sum of the present value of
the cumulative accrued benefits for Key Employees under all
defined benefit plans included in the Aggregation Group plus the
aggregate of the accounts of Key Employees under all defined
contribution plans included in the Aggregation Group exceeds 60%
of the sum of the present value of the cumulative accrued
benefits for all Employees under all such defined benefit plans
plus the aggregate accounts for all Employees under such defined
contribution plans. For purposes of making this determination,
the present value of the accrued benefits for a Participant (i)
who is not a Key Employee, but who was a Key Employee in a prior
year or (ii) who has not performed services for the Employer at
any time during the five-year period ending on the Determination
Date, shall be disregarded. If the Aggregation Group that is
a Top-Heavy Group is a Required Aggregation Group, each plan in
the Group will be Top-Heavy. If the Aggregation Group that is a
Top-Heavy Group is a Permissive Aggregation Group, only those
plans that are part of the Required Aggregation Group will be
treated as Top-Heavy. If the Aggregation Group is not a Top-
Heavy Group, no plan within such Group will be Top-Heavy.
(e) In determining whether this Plan constitutes a Top-Heavy Plan,
the Committee shall make the following adjustments in connection
therewith:
(i) When more than one plan is aggregated, the Committee shall
determine separately for each plan as of each plan's
determination date the present value of the accrued
benefits or the sum of Account balances. Such accrued
benefits shall be determined by using the method which is
used for accrual purposes for all plans of the Employer,
or, if there is no such method, as if such benefit accrued
not more rapidly than the slowest accrual rate permitted
under Code Section 411(b)(1)(C).
(ii) In determining the present value of the cumulative accrued
benefit or the amount of the Account of any Employee, such
present value or Account shall include the dollar value of
the aggregate distributions made to such Employee under
the applicable plan during the five-year period ending on
the determination date, unless reflected in the value of
the accrued benefit or account balance as of the most
recent valuation date. Such amounts shall include
distributions to Employees which represented the entire
amount credited to their Accounts under the applicable
plan, and distributions made on account of the death of a
Participant to the extent such death benefits do not
exceed the present value of the accrued benefit or
Account.
(iii) Further, in making such determination, such present value
or such Account shall include any rollover contribution
(or similar transfer), as follows:
(A) If the rollover contribution (or similar transfer) is
initiated by the Employee and made to or from a plan
maintained by another employer, the plan providing
the distribution shall include such distribution in
the value of such account; the plan accepting the
distribution shall not include such distribution in
the value of such account unless the plan accepted it
before December 31, 1983.
(B) If the rollover contribution (or similar transfer) is
not initiated by the Employee or made from a plan
maintained by another employer, the plan accepting
the distribution shall include such distribution in
the present value of such account, whether the plan
accepted the distribution before or after December
31, 1983; the plan making the distribution shall not
include the distribution in the present value of such
account. (f) Solely for the purpose of determining
if the Plan, or any other plan included in the
required aggregation group of which this Plan is a
part, is top-heavy (within the meaning of Code
Section 416(g)) the accrued benefit of an Employee
other than a "Key Employee" (as defined in Section
14.6 below) shall be determined under the method, if
any, that uniformly applies for accrual purposes
under all plans maintained by the Employer.
14.6 Key Employee. The term "Key Employee" shall mean any Employee (and
any Beneficiary of an Employee) under this Plan who is a key employee
as determined in accordance with Code Section 416(i)(1), excluding in
any event individuals who have not performed services for the
Employer during the five-year period ending on the date on which the
Top-Heavy determination is made.
14.7 Non-Key Employee. The term "Non-Key Employee" shall mean any
Employee (and any Beneficiary of an Employee) who is not a Key
Employee, excluding in any event individuals who have not performed
services for the Employer during the five-year period ending on the
date on which the Top-Heavy determination is made.
14.8 Change from Top-Heavy Status. In the event the Plan should become a
Top-Heavy Plan for a Plan Year and subsequently reverts to a Plan
which is not Top-Heavy, the change from a Top-Heavy Plan to a Plan
which is not Top-Heavy shall not reduce a Participant's Account.
ARTICLE XV
GENERAL PROVISIONS
15.1 Plan Voluntary. Although it is intended that the Plan shall be
continued and that contributions shall be made as herein provided,
this Plan is entirely voluntary on the part of the Employer and the
continuance of this Plan and the payment of contributions hereunder
are not to be regarded as contractual obligations of any
Participating Employer, and no Participating Employer guarantees or
promises to pay or to cause to be paid any of the benefits provided
by this Plan. Each person who shall claim the right to any payment
or benefit under this Plan shall be entitled to look only to the Fund
for any such payment or benefit and shall not have any right, claim,
or demand therefore against any Employer, except as provided by
federal law. The Plan shall not be deemed to constitute a contract
between any Participating Employer and any Employee or to be a
consideration for, or an inducement for, the employment of any
Employee by any Participating Employer. Nothing contained in the
Plan shall be deemed to give any Employee the right to be retained in
the service of any Employer or to interfere with the right of any
Employer to discharge or to terminate the service of any Employee at
any time without regard to the effect such discharge or termination
may have on any rights under the Plan.
15.2 Payments to Minors and Incompetents. If any Participant, Former
Participant, or Beneficiary entitled to receive any benefits
hereunder is a minor or is deemed by the Committee or is adjudged to
be legally incapable of giving valid receipt and discharge for such
benefits, they will be paid to such person or institution as the
Committee may designate or to the duly appointed guardian. Such
payment shall, to the extent made, be deemed a complete discharge of
any liability for such payment under the Plan.
15.3 Non-Alienation of Benefits. No amount payable to, or held under the
Plan for the account of, any Participant or Former Participant shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or charge, and any attempt to so
anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; nor shall any amount payable to, or
held under the Plan for the account of, any Participant be in any
manner liable for his debts, contracts, liabilities, engagements, or
torts, or be subject to any legal process to levy upon or attach,
except as may be provided under a qualified domestic relations order
as defined in Code Section 414(p).
The Committee shall establish a procedure to determine the status of
a judgement, decree or order as a qualified domestic relations order
and to administer Plan distributions in accordance with qualified
domestic relations orders. Such procedure shall be in writing, shall
include a provision specifying the notification requirements
enumerated in Code Section 414(p), shall permit an alternate payee
to designate a representative for receipt of communications from the
Committee and shall include such other provisions as the Committee
shall determine, including provisions describing the interest rate to
be used in making present value determinations as well as provisions
required under regulations promulgated by the Secretary of the
Treasury.
15.4 Use of Masculine and Feminine; Singular and Plural. Wherever used in
this Plan, the masculine gender will include the feminine gender and
the singular will include the plural, unless the context indicates
otherwise.
15.5 Merger, Consolidation or Transfer. In the event that the Plan is
merged or consolidated with any other plan, or should the assets or
liabilities of the Plan be transferred to any other plan, each
Participant shall be entitled to a benefit immediately after such
merger, consolidation, or transfer if the Plan should then terminate
equal to or greater than the benefit he would have been entitled to
receive immediately before such merger, consolidation, or transfer if
the Plan had then terminated.
15.6 Leased Employees. Any individual who performs services for the
Employer or an Affiliated Employer and who, by application of Code
Section 414(n)(2) and regulations issued pursuant thereto, would be
considered a "leased employee", shall, for purposes of determining
the number of Employees of the Employer and its Affiliated Employers
and for purposes of the requirements enumerated in Code Section
414(n)(3), be considered an Employee with regard to services
performed after December 31, 1986.
When the total of all leased employees constitutes less than 20% of
the Employer's non-highly compensated work force within the meaning
of Code Section 414(n)(5)(c)(ii), however, a "leased employee" shall
not be considered an Employee if the organization from which the
individual is leased maintains a qualified safe harbor plan (as
defined in Code Section 414(n)(5)) in which such individual
participates.
"Leased employees" who are deemed to be Employees for purposes of
this Section 15.6 shall not be eligible to participate in the Plan
unless specifically provided for in Article II.
15.7 Governing Law. The Plan shall be administered, construed, and
enforced according to the laws of the State of/Commonwealth of
Massachusetts; provided, however, wherever applicable, the provisions
of ERISA shall govern and in such event the laws of the United States
of America shall be applied and to the extent necessary, its courts
shall have competent jurisdiction.
IN WITNESS WHEREOF, Eastern Utilities Associates has caused this instrument to
be executed by its officers thereunto duly authorized and its corporate seal to
be hereunto affixed, as of the 21 day of December, 1994.
EASTERN UTILITIES ASSOCIATES
By/s/John R. Stevens
John R. Stevens
President
ATTEST:
/s/W. F. O'Connor
W. F. O'Connor
Secretary
(CORPORATE SEAL)
EMPLOYEES' RETIREMENT PLAN OF EASTERN UTILITIES ASSOCIATES
AND ITS AFFILIATED COMPANIES
FIRST AMENDMENT TO THE 1989 RESTATED PLAN
WHEREAS, Eastern Utilities Associates amended and restated its pension plan
known as the "Employees' Retirement Plan of Eastern Utilities Associates and
its Affiliated Companies" effective as of January 1, 1989 (hereinafter
sometimes referred to as the "Plan"); and
WHEREAS, the Association wishes to make certain additional amendments to said
Plan; and
WHEREAS, by Article 12 of the Plan the power to modify or amend the Plan is
reserved to the Board of Trustees of Eastern Utilities Associates subject to
certain conditions not here applicable.
NOW THEREFORE, said Plan is hereby further amended effective as of June 1, 1995
by adding a new section 4.5 to read as follows:
4.5 Special 1995 Voluntary Retirement Incentive.
(a) Subject to the maximum benefit limitation of Section 3.3, a
Special 1995 Voluntary Retirement Incentive shall be available
to a Participant who is not employed at Newport Electric
Corporation who:
(i) is an Active Participant on January 1, 1995;
(ii) will have attained at least age 55 during 1995;
(iii) will have completed at least 10 Years of Vesting Service during
1995; and
(iv) is less than 61 years of age during 1995 or will have completed
less than 35 Years of Vesting Service during 1995;
or to a Participant who is employed at Newport Electric Corporation
who:
(i) will have attained at least age 55 during 1995;
(ii) will have completed at least 10 Years of Vesting Service during
1995; and is either case, such Participant:
(i) is employed in a job classification of "monthly paid exempt
employee" which the Employer has designated as eligible for this
special benefit;
(ii) is not a highly compensated employee, which within the meaning
of section 414(q) of the Code; and
(iii) elects to retire hereunder effective no later than June 1, 1995
(or such later date as determined by the Company, but in no
event later than May 31, 1996) in accordance with procedures
established by the Retirement Board.
(b) The monthly Special 1995 Voluntary Retirement Incentive of an
eligible Participant who elects to retire hereunder shall be
equal to his Voluntary Retirement Incentive determined under
Section 4.2 or Section A.6.1, whichever is applicable, as of his
Early Retirement Date, based on:
(i) his Years of Benefit Service on such date plus five additional
years of such service, and
(ii) his age on such date plus five additional years for purposes of
determining the appropriate early retirement reduction factor in
the Appendix.
(c) A participant who elects to retire hereunder may be entitled to
an additional supplemental monthly benefit of $600. Such
supplemental monthly benefit shall be payable for the period
beginning on the Participant's Early Retirement Date and ending
on the earlier of his death or with the payment due for the
month before which the Participant attains age 62. No
supplemental monthly benefit shall be payable for a Participant
who has attained age 62 as of his Early Retirement Date.
(d) For participants (a) above who retire after June 1, 1995, the
actuarial equivalent at retirement of the increased benefits
provided under (b) and (c) above shall not be less than the
actuarial equivalent of such amounts calculated as of June 1,
1995.
(e) For participants who retired on or after March 1, 1995, and who
elected such retirement prior to the announcement of this
Section 4.5 and who met the applicable requirements described in
(a) above will be eligible for the benefits described in (b) and
(c) above with such increases in benefit amounts payable
beginning June 1, 1995.
(f) The Special 1995 Voluntary Retirement Incentive shall be in lieu
of any other benefit payable under the Plan and shall be payable
in accordance with Article VII and Section A.11.0 if applicable,
except that the additional supplemental monthly benefit of $600
will be paid in accordance with (c) above.
IN WITNESS WHEREOF, the Employer has caused this instrument to be executed by
its officers thereunto duly authorized and its corporate seal to be hereunto
affixed, as of the 30 Day of November, 1995.
EASTERN UTILITIES ASSOCIATES
By/s/ John R. Stevens
John R. Stevens
President
ATTEST:
/s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Secretary
(CORPORATE SEAL)
EASTERN UTILITIES ASSOCIATES EMPLOYEES' SAVINGS PLAN
FIRST AMENDMENT TO THE 1989 RESTATED PLAN
WHEREAS, Eastern Utilities Associated (the "Employer") previously adopted the
Eastern Utilities Associates Employees' Savings Plan (the "Plan") effective
January 1, 1982;
WHEREAS, the Employer amended and restated the Plan effective January 1, 1989;
WHEREAS, TransCapacity Limited Partnership has become an Affiliated Employer
under Section 1.2 of the Plan;
WHEREAS, EUA has reserved the right to amend the Plan from time to time under
Section 13.2 of the Plan;
NOW THEREFORE, in accordance with and pursuant to the foregoing, the Plan is
amended, effective July 1, 1995, as follows:
1. Section 1.30 of the Plan is hereby amended by deleting the same in its
entirety and by substituting therefore the following:
1.30 "Participating Employers" shall mean the Employer and any other
Affiliated Employer which has elected to participate in the Plan pursuant to
the provisions under Article XVI.
2. Section 2.1 of the Plan is hereby amended by adding the following paragraph
(h) thereto:
(h) Notwithstanding paragraph (b) above, an Employee who was an employee of
TransCapacity Limited Partnership after December 31, 1994 who are not
otherwise ineligible to participate in the Plan under Paragraphs (a),
(c), (d), (e) or (f) of this Section 2.1 shall become Eligible Employees
after completing three months of Service following December 31, 1994,
but in no event earlier than July 1, 1995.
3. Section 4.1 of the Plan is hereby amended by adding the following sentence
at the end of the first paragraph of such section:
Notwithstanding anything to the contrary in this Article IV, TransCapacity
Limited Partnership shall not make a Matching Contribution on behalf of each of
its Participants under the Plan who make a Pre-Tax Participant Contribution.
4. A new Article XVI is added to the plan as follows:
ARTICLE XVI PARTICIPATING EMPLOYERS
16.1 Adoption of Plan by a Participating Employer.
Any Affiliated Employer, whether or not presently existing, may adopt the
Plan with respect to all or some of its employees after the Board authorizes
the participation of such employer in the Plan. The Board authorization shall
set forth the date on which the Affiliated Employer may begin to participate in
the Plan and any special restrictions or requirements applicable to the
Affiliated Employer's participation in the Plan. An Affiliated Employer
becomes a Participating Employer under the Plan following such authorization by
appropriate action of its board of directors (or noncorporate counterpart) to
adopt the Plan.
16.2 Plan Provisions Applicable to Participating Employer. The provisions of
the Plan shall apply equally to each Participating Employer and its Employees
except as specifically set forth in the Plan.
16.3 Termination of Participation in the Plan.
(a) Any Participating Employer may terminate its participation in the Plan
as provided in Section 13.3 of the Plan.
(b) The Board may, in its sole discretion, terminate a Participating
Employer's participation in the Plan at any time without consent or
approval of such employer.
16.4 Single Plan. For purposes of the Code and ERISA, the Plan as adopted by
the Participating Employer shall constitute a single plan rather than a
separate plan of each Participating Employer. All assets in the Trust Fund
shall be available to pay benefits to all Participants and their Beneficiaries.
IN WITNESS WHEREOF, the Employer has caused this instrument to be executed and
delivered on behalf by the undersigned on this 30th day of November, 1995.
EASTERN UTILITIES ASSOCIATES
By /s/ John R. Stevens
John R. Stevens
Its President
ATTEST:
/s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Secretary
(CORPORATE SEAL)
Exhibit 10-38.05
TWENTY-EIGHTH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
THIS AGREEMENT, dated as of the 15th day of September, 1992
is entered into by the signatories hereto for the amendment by
them of the New England Power Pool Agreement dated as of
September 1, 1971 (the "NEPOOL Agreement"), as previously amended
or proposed to be amended by twenty-seven (27) amendments, the
most recent of which was dated as of October 1, 1990.
WHEREAS, in response to the factors specified in Section
5.10 of the NEPOOL Agreement regarding election of members of the
Management Committee to serve as an Executive Committee, the
member of the Management Committee representing Public Service
Company of New Hampshire has been elected to serve as a member of
the Executive Committee since the formation of NEPOOL; and
WHEREAS, Northeast Utilities has recently acquired Public
Service Company of New Hampshire, Public Service Company of New
Hampshire has elected to be treated as a single Participant with
the other Entities controlled by Northeast Utilities, and
Public Service Company of New Hampshire is no longer entitled to
be separately represented by a member of the Management
Committee; and
WHEREAS, the signatory Participants have determined to amend
the NEPOOL Agreement in the manner specified below in order to
reflect the fact that the considerations specified in Section
5.10 for membership on the Executive Committee can now be
satisfied by election of only ten members.
NOW THEREFORE, the signatories hereby agree as follows:
SECTION I
TEXT OF AMENDMENT
Section 5.10 of the NEPOOL Agreement is amended to read as
follows:
Election of Executive Committee Members
Unless there are less than eleven members of
the Management Committee, the Management
Committee; at each annual meeting, shall
elect ten of its members to serve as an
Executive Committee. In electing the
Executive Committee, the Management Committee
shall give such consideration as it shall
deem advisable to qualifications for the
office, geographic distribution, the relative
sizes of Participants and the public and
private sectors of the electric utility
industry. Each member so selected may
designate an alternate who is acceptable to
the Management Committee.
SECTION II
EFFECTIVENESS OF AGREEMENT
Following its execution by the requisite number of
Participants, this Agreement, and the amendment provided for
above, shall become effective on December 1, 1992, or on such
later date as the Federal Energy Regulatory Commission shall
provide that such amendment shall become effective.
SECTION III
USAGE OF DEFINED TERMS
The usage in this Agreement of terms which are defined in
the NEPOOL Agreement shall be deemed to be in accordance with the
definitions thereof in the NEPOOL Agreement.
SECTION IV
COUNTERPARTS
This Agreement may be executed in any number of counterparts
and each executed counterpart shall have the same force and
effect as an original instrument and as if all the parties to all
the counterparts had signed the same instrument. Any signature
page of this Agreement may be detached from any counterpart of
this Agreement without impairing the legal effect of any
signatures thereof, and may be attached to another counterpart of
this Agreement identical in form hereto but having attached to it
one or more signature pages.
IN WITNESS WHEREOF, each of the signatories has caused a
counterpart signature page to be executed by its duly authorized
representative, as of the 15th day of September, 1992.
CONFORMED COPY
COUNTERPART SIGNATURE PAGE
TO TWENTY-EIGHTH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF SEPTEMBER 15, 1992
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-seven (27) amendments, the
most recent prior amendment being an amendment dated as of October 1,
1990.
Ashburnham Municipal Light Department
By: /s/ Robert W. Gould
Manager
86 Central Street
Ashburnham, MA 01430
Bangor Hydro-Electric Company
By: /s/ Robert S. Briggs
President & CEO
33 State Street
Bangor, Maine 04402-0932
Belmont Municipal Light Department
By: /s/ Timothy L. McCarthy
Acting Manager
450 Concord Avenue
Belmont, MA 02178
Boston Edison Company
By: /s/ Cameron H. Daley
Senior Vice President
800 Boylston Street
Boston, MA 02199
Boylston Municipal Light Department
By: /s/ H. Bradford White, Jr.
Manager
P.O. Box 560
Boylston, MA 01505
Central Maine Power Company
By: /s/ Donald F. Kelly
Senior Vice President
Edison Drive
Augusta, Maine 04336
City of Chicopee Municipal Lighting
Plant
By: /s/ Barry W. Soden
General Manager
725 Front Street
Chicopee, MA 01021-0405
Commonwealth Energy System Companies
Commonwealth Electric Company
Cambridge Electric Light Company
Canal Electric Company
By: /s/ Harold N. Scherer, Jr.
President and CEO
2421 Cranberry Highway
Wareham, MA 02571
Concord Municipal Light Plant
By: /s/ Daniel J. Sack
Superintendent
135 Keyes Road
Concord, MA 01742
Connecticut Municipal Electric
Energy Cooperative
By: /s/ Maurice R. Scully
Executive Director
30 Stott Avenue
Norwich, CT 06360-1526
Eastern Utilities
By: /s/ Donald G. Pardus
Chairman/CEO
One Liberty Square
Boston, MA 02109
Groton Electric Light Department
By: /s/ Roger H. Beeltje
Manager
P.O. Box 679
Groton, MA 01450
Hingham Municipal Lighting Plant
By: /s/ Joseph R. Spadea, Jr.
General Manager
19 Elm Street
Hingham, MA 02043
Holden Municipal Light Department
By: /s/ Edla Ann Bloom
Director of Electric Services
94 Reservoir Street
Holden, MA 01520
Holyoke Gas & Electric Department
By: /s/ George E. Leary
Manager
70 Suffolk Street
Holyoke, MA 01040
Ipswich Municipal Light Department
By: /s/ Donald R. Stone
Director of Utilities
P.O. Box 151
Ipswich, MA 01938
Mansfield Municipal Electric
By: /s/ John Larch
Manager
50 West Street
Mansfield, MA 02048
Marblehead Municipal Light Department
By: /s/ Richard L. Bailey
General Manager
80 Commercial Street
Marblehead, MA 01945
Merrimac Municipal Light Department
By: /s/ David Vance
Commissioner
2 School Street
Merrimac, MA 01860
Middleton Municipal Electric
Department
By: /s/ William E. Kelly
Manager
197 North Main Street
Middleton, MA 01949
The Narragansett Electric Company
By: /s/ Robert L. McCabe
President
280 Melrose Street
Providence, Rhode Island
New England Power Company
By: /s/ Jeffrey D. Tranen
Vice President
25 Research Drive
Westborough, MA 01582
Massachusetts Electric Company
By: /s/ John H. Dickson
President
25 Research Drive
Westborough, MA 01582
Granite State Electric Company
By: /s/ Lydia M. Pastuszek
President
33 West Lebanon Road
Lebanon, New Hampshire
The Connecticut Light and Power
By: /s/ Bernard M. Fox
President
P.O. Box 270
Hartford, CT 06141-0270
Western Massachusetts Electric
By: /s/ Bernard M. Fox
President
P.O. Box 270
Hartford, CT 06141-0270
Holyoke Water Power Company
By: /s/ Bernard M. Fox
President
P.O. Box 270
Hartford, CT 06141-0270
Holyoke Power and Electric Company
By: /s/ Bernard M. Fox
President
P.O. Box 270
Hartford, CT 06141-0270
Public Service Company of New
Hampshire
By: /s/ Bernard M. Fox
President
P.O. Box 270
Hartford, CT 06141-0270
Pascoag Fire District - Electric
Department
By: /s/ James E. Daniels
Chairman, Operating Committee
55 South Main Street
Pascoag, RI 02859
Princeton Municipal Light
Department
By: /s/ Sharon A. Staz
Manager
P.O. Box 247
Princeton, MA 01541-0247
Rowley Municipal Lighting Plant
By: /S/ G. Robert Merry
Manager
47 Summer Street
Rowley, MA 01969
Taunton Municipal Lighting Plant
By: /s/ Joseph M. Blain
General Manager
55 Weir Street
Taunton, MA 02780
The United Illuminating Company
By: /s/ Richard J. Grossi
Chairman and CEO
157 Church Street
New Haven, CT 06506-0901
Vermont Electric Power Company, Inc.
By: /s/ Richard W. Mallary
President
P.O. Box 548
Rutland, Vermont 05702-0548
Central Vermont Public Service
Corporation
By: /s/ Robert de R. Stein
Vice President
77 Grove Street
Rutland, VT 05701
Citizens Utilities Company
By: /s/ James P. Avery
Vice President
High Ridge Park
Stamford, CT 06905
City of Burlington Electric
Dept.
By: /s/ Dale L. Pohlman
General Manager
585 Pine Street
Burlington, VT 05401
Franklin Electric Light Co.
By: /s/ Hugh H. Gates
President
P.O. Box 96
Franklin, VT 05457-0096
Green Mountain Power Corporation
By: /s/ John V. Cleary
President & CEO
P.O. Box 850
S. Burlington, Vermont 05402
Rochester Electric Light & Power
Company
By: /s/ Thomas Pierce
President
P.O. Box 6
Rochester, Vermont 05767
Vermont Marble Company
By: /s/ John M. Mitchell
President
61 Main Street
Proctor, Vermont 05765
Vermont Public Power Supply Authority
By: /s/ William J. Gallagher
General Manager
512 St. George Road
Williston, VT 05495
Village of Hardwick Electric
Department
By: /s/ Jack E. Young
General Manager
Box 516
Hardwick, Vermont 05843
Village of Ludlow Electric Light
Department
By: /s/ Donald Ellison
Commissioner, Chairman
P.O. Box 289
Ludlow, Vermont 05149
Village of Morrisville Water and Light
Department
By: /s/ James C. Fox
Superintendent
18 Portland Street
Morrisville, VT 05661
Village of Northfield Electric
Department
By: /s/ Kevin O'Donnell
Municipal Manager
26 South Main Street
Northfield, Vermont 05663
Village of Orleans Electric Department
By: /s/ Slayton R. Marsh
Superintendent
Memorial Square
Orleans, VT 05860
Village of Readsboro Electric
Light Department
By: /s/ Annette Caruso
Utility Clerk
P.O. Box 247
Readsboro, Vermont 05350
Wakefield Municipal Light Department
By: /s/ William J. Wallace
Manager
11 Albion Street
Wakefield, MA 01880
Exhibit 10-39.05
TWENTY-NINTH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
THIS AGREEMENT, dated as of the 1st day of May, 1993 is
entered into by the signatories hereto for the amendment by them
of the New England Power Pool Agreement dated as of September 1,
1971 (the "NEPOOL Agreement), as previously amended by twenty-
eight (28) amendments, the most recent of which was dated as of
September 15, 1992.
WHEREAS, Participant generation resources, other than
hydroelectric units, whose annual hours of operation are
restricted by regulatory requirements, contract terms or
engineering or operating constraints, may require treatment
different from that otherwise provided in the NEPOOL Agreement
for Capability Responsibility and energy billing purposes; and
WHEREAS, the signatory Participants have determined to amend
the NEPOOL Agreement in the manner specified below in order to
provide for a modified Capability Responsibility and energy
billing treatment for restricted generation resources
NOW THEREFORE, the signatories hereby agree as follows:
Section I
TEXT OF AMENDMENTS
A. Amendment of Section 9.2(b)(2)
Section 9.2(b)(2) of the NEPOOL Agreement is amended by
inserting the following additional provisions immediately
following the present final paragraph of Section 9.2(b)(2):
The New Unit Adjustment Factor for any Restricted Unit
for which proposed plans were submitted subsequent to
November 1, 1990 for review pursuant to Section 10.4
(or, in the case of a unit with a rated capacity of
less than SMW, for which notification was first given
to NEPOOL subsequent to November 1, 1990) and for the
Peabody Municipal Light Plant's Waters River #2 unit
shall be determined in accordance with the formula
previously specified in this Section 9.2(b)(2),
modified as follows:
n = (K to the 1st base)(c-C) + (K to the 2nd base)(f-F) + (K
to the third base)(m-M) + (K to the fourth base)(d-D) +
(K to the fifth base)(f-Fc) + (K to the sixth
base)(2500-a)
The symbols used in the above formula, as modified,
shall have the meanings previously specified, except
that the symbols "K to the 6th base" and "a" shall have the
following meanings:
K to the 6th base is a scaling factor of 0.0001.
a is as follows:
for units with more than 2500 annual
hours available for operation, "a" =
2500,
for units with annual hours available
for operation between 500 and 2500,
inclusive, "a" = annual hours available
for operation, and
for units with annual hours available
for operation less than 500 hours, "a" =
-7500;
provided, however, that a Participant may elect to
avoid, in whole or part, the effect on its Capability
Responsibility of a Restricted Unit's availability
being limited to 2500 hours or less a year by agreeing
to leave unfilled a portion of its dispatchable load
allocation in accordance with rules to be adopted by
the Operations Committee.
B. Amendment of Section 12.6
The first two sentences of Section 12.6 of the NEPOOL
Agreement are amended to read as follows:
If pursuant to Section 12.5A, a Participant is deemed
to have received energy service in any hour when the
Participant (i) had Entitlements in one or more
generating units which were available for service but
were not scheduled for operation by NEPEX at their full
available Reserve Capability (or, to the extent
applicable, at their full available Temporary Reserve
Capability) and which, in the case of any Restricted
Unit, had an unused portion of an available Restricted
Unit Operational Allowance and/or (ii) had Scheduled
Outage Service Entitlements, the Participant shall be
deemed to have received Economy Flow Service and/or
Scheduled Outage Service in an amount equal to the
lesser of:
(a) the amount of energy service the Participant is
deemed to have received pursuant to Section 12.5A,
or
(b) the amount of energy service which could have been
provided from its share of (1) the unused portion
of the available Reserve or Temporary Reserve
Capabilities of the units described in (i) above,
as limited in the case of any Restricted Unit by
the unused portion of its available Restricted
Unit Operational Allowance, plus (2) its Scheduled
Outage Service Entitlements.
Economy Flow Service is service which a Participant is
deemed to receive at any time to replace service which
it could have provided at the time from units described
in (i) above, and the amount of Economy Flow Service
which it is deemed to receive at the time shall not
exceed the amount of energy service which could have
been provided from its share of the unused portions of
the available Reserve Capabilities (or, to the extent
applicable, the unused portion of the available
Temporary Reserve Capabilities or the unused portion of
the available Restricted Unit Operational Allowances,
whichever is controlling) of such units.
C. Addition of Definitions of "Restricted Unit" and "Restricted
Unit Operational Allowance".
The NEPOOL Agreement is amended by adding the following
definitions following the definition of "Reserve Savings Shares"
in Section 15 37A:
15.37B. Restricted Unit is a generating unit,
other than a hydroelectric unit, that is
restricted in annual hours available for
operation by regulatory requirements,
contract terms or actual engineering or
operating constraints Planned or
forced outages due to maintenance
requirements are not considered
restrictions in annual hours available
for operation.
15.37C. Restricted Unit Operational Allowance
("Allowance") for a Participant's
Entitlement in a Restricted Unit for any
calendar year (or for the term of the
Entitlement in any year, if such term is
for a shorter period than the year) is
the number of hours for which the
Restricted Unit is available for
operation during the year or such
shorter period, whichever is applicable.
The Allowance for a Participant's
Entitlement in a Restricted Unit for any
year or shorter period shall be deemed
to be exhausted when (i) the number of
hours that the Operations Committee
determines the Participant would have
used its Restricted Unit Entitlement to
minimize the Participant's overall
energy costs in the absence of NEPEX
dispatch, plus (ii) the number of hours
that the Participant is deemed to
receive Scheduled Outage Service with
respect to its Entitlement in the
Restricted Unit during the year or such
shorter period pursuant to Section 12.6,
equals the Allowance.
D. Modification of Definition of "Scheduled Outage Service
Entitlement".
The definition of "Scheduled Outage Service Entitlement" in
Section 15.38B of the NEPOOL Agreement is amended to read as
follows:
15.38B Scheduled Outage Service Entitlement of
a Participant is the amount of Scheduled
Outage Service which the Participant is
entitled to receive in any hour with
respect to a generating unit which is
scheduled by the Operations Committee to
be out of service, in whole or in part,
for maintenance during a period approved
for it by the Operations Committee for
Scheduled Outage Service and is in fact
out of service, in whole or in part, for
any reason during the approved period.
Such amount is equal to the lesser of
(i) the portion of the Participant's
share of the Reserve Capability of such
unit which is unavailable for service
times an estimated average availability
of such unit between its periodic
scheduled outages or (ii) in the case of
any generating unit with a currently
applicable Temporary Reserve Capability,
the portion of the Participant's share
of the Temporary Reserve Capability
which is unavailable for service;
provided, however, that (a) in the case
of any Limited Fuel Unit, the amount of
a Participant's Scheduled Outage Service
Entitlement shall be reduced, if
appropriate, to take account of any
limit on the availability of stream flow
or fuel to operate the unit during the
outage period, and (b) in the case of
any Restricted Unit, the Participant's
Scheduled Outage-Service Entitlement
shall be limited to the unused portion,
if any, of its currently available
Restricted Unit Operational Allowance
for the unit The Operations Committee
shall develop rules for establishing the
estimated average availability of each
unit between scheduled outages. Such
rules shall become effective upon
approval by the Management Committee.
SECTION II
EFFECTIVENESS OF AGREEMENT
Following its execution by the requisite number of Participants,
this Agreement, and the amendments provided for above, shall
become effective on August 1, 1993, or on such later date as the
Federal Energy Regulatory Commission shall provide that such
amendment shall become effective.
SECTION III
USAGE OF DEFINED TERMS
The usage in this Agreement of terms which are defined in the
NEPOOL Agreement shall be deemed to be in accordance with the
definitions thereof in the NEPOOL Agreement.
SECTION IV
COUNTERPARTS
This Agreement may be executed in any number of counterparts and
each executed counterpart shall have the same force and effect as
an original instrument and as if all the parties to all the
counterparts had signed the same instrument Any signature page
of this Agreement may be detached from any counterpart of this
Agreement without impairing the legal effect of any signatures
thereof, and may be attached to another counterpart of this
Agreement identical in form hereto but having attached to it one
or more signature pages.
IN WITNESS WHEREOF, each of the signatories has caused a
counterpart signature page to be executed by its duly authorized
representative, as of the 1st day of May, 1993.
CONFORMED COPY
COUNTERPART SIGNATURE PAGE
TO TWENTY-NINTH AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF MAY 1, 1993
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-eight (28) amendments, the
most recent prior amendment being an amendment dated as of
September 15, 1992.
Ashburnham Municipal Light Department
By: /s/ Robert W. Gould
Manager
86 Central Street
P.O. Box 823
Ashburnham, MA 01430
Bangor Hydro-Electric Company
By: /s/ Carroll R. Lee
Vice President, Operations
33 State Street
P O. Box 932
Bangor, ME 04402-0932
Boston Edison Company
By: /s/ B.W. Reznicek
Chairman, President and Chief
Executive Officer
800 Boylston Street
Boston, MA 02199
Boylston Municipal Light Department
By: /s/ H. Bradford White Jr.
Manager
Tivnan Road, P.O. Box 560
Boylston, MA 01505
Braintree Electric Light Department
By: /s/ Walter R. McGrath
General Manager
44 Allen Street
Braintree, MA 02184
Central Maine Power Company
By: /s/ Donald F. Kelly
Senior Vice President
Edison Drive
Augusta, ME 04336
Commonwealth Electric Company
By: /s/ James J. Keane
Vice President - Power Supply and
Transmission
2421 Cranberry Highway
Wareham, MA 02571
Concord Municipal Light Plant
By: /s/ Daniel J. Sack
Superintendent
135 Keyes Road
Concord, MA 01742
Connecticut Municipal Electric
Energy Cooperative
By: /s/ Maurice R. Scully
Executive Director
30 Stott Avenue
Norwich, CT 06360
Eastern Utilities Associates
By: /s/ Donald G. Pardus
Chairman/CEO
P.O. Box 2333
Boston, MA 02107
Fitchburg Gas and Electric
Light Company
By: /s/ David K. Foote
Senior Vice President
216 Epping Road
Exeter, NH 03833
Georgetown Municipal Light Department
By: /s/ Edward Stanley
Manager
Moulton and West Main Streets
Georgetown, MA 01833
Groton Electric Light Department
By: /s/ Roger H. Beeltje
Manager
P.O. Box 679
Groton, MA 01450
Hingham Municipal Lighting Plant
By: /s/ Joseph R. Spadea, Jr.
General Manager
19 Elm Street
Hingham, MA 02043
Holden Municipal Light Department
By: /s/ Edla Ann Bloom
Director
94 Reservoir Street
Holden, MA 01520
Holyoke Gas & Electric Department
By: /s/ George E. Leary
Manager
70 Suffolk Street
Holyoke, MA 01040
Littleton Electric Light and Water
Department
By: /s/ Curtis J. Lanciani
General Manager
39 Ayer Road
Littleton, MA 01460
Marblehead Municipal Light Department
By: /s/ Richard L. Bailey
General Manager
80 Commercial Street, Box 369
Marblehead, MA 01945
Middleborough Gas & Electric Department
By: /s/ John W. Dunfey
General Manager
32 South Main Street
Middleboro, MA 02346
Middleton Municipal Electric Department
By: /s/ William E. Kelley
Interim Manager
197 North Main Street
Middleton, MA 01949
New England Electric System
By: /s/ Jeffrey D. Tranen
Vice President
25 Research Drive
Westborough, MA 01582
Northeast Utilities Companies
The Connecticut Light and Power
Company
By: /s/ Bernard M. Fox
President and Chief Operating
Officer
P.O. Box 270
Hartford, CT 06141-0270
Western Massachusetts Electric
Company
By: /s/ Bernard M. Fox
President and Chief Operating
Officer
P.O Box 270
Hartford, CT 06141-0270
Holyoke Water Power Company
By: /s/ Bernard M. Fox
President and Chief Operating
Officer
P.O. Box 270
Hartford, CT 06141-0270
Holyoke Power and Electric Company
By: /s/ Bernard M. Fox
President and Chief Operating
Officer
P.O. Box 270
Hartford, CT 06141-0270
Public Service Company of New
Hampshire
By: /s/ W. T. Frain, Jr
Senior Vice President
1000 Elm Street
Manchester, NH 03105
Pascoag Fire District
By: /s/ Thomas J. Beauregard
Chairman
P.O. Box 107
Pascoag, Rhode Island 02859
Paxton Light Department
By: /s/ Harold L. Smith
Manager
578 Pleasant Street
Paxton, MA 01612
Princeton Municipal Light Department
By: /s/ Sharon A. Staz
General Manager
P.O. Box 247
Princeton, MA 01541-0247
Rowley Municipal Lighting Plant
By: /s/ G. Robert Merry
Manager
47 Summer Street
Rowley, MA 01969
Shrewsbury's Electric Light Plant
By: /s/ Thomas R. Josie
General Manager
100 Maple Avenue
Shrewsbury, MA 01545
Town of South Hadley Electric
Light Department
By: /s/ Wayne D. Doerpholz
Manager
85 Main Street
South Hadley, MA 01015
Taunton Municipal Lighting Plant
By: /s/ Joseph M. Blain
General Manager
P O. Box 870
Taunton, MA 02780
Templeton Municipal Light Plant
By: /s/ Gerald Skelton
Manager/Engineer
2 School Street
Baldwinville, MA 01436
The United Illuminating Company
By: /s/ Richard J. Grossi
Chairman and Chief Executive
Officer
157 Church Street
New Haven, CT 06506-0901
UNITIL Power Corporation
By: /s/ David K. Foote
Senior Vice President
216 Epping Road
Exeter, NH 03833
Vermont Electric Power Company, Inc.
By: /s/ Richard W. Mallary
President
P.O. Box 548
Rutland, VT 05702-0548
Central Vermont Public
Service Corporation
By: /s/ Robert de R. Stein
Senior Vice President
Engineering & Energy Resources
77 Grove Street
Rutland, VT 05701
Franklin Electric Light Company
By: /s/ Hugh H. Gates
President
P.O Box 96
Franklin, VT 05457
Green Mountain Power Corporation
By: /s/ John V. Cleary
President & Chief Executive
Officer
P.O Box 850
South Burlington, VT 05402
Vermont Marble Power Division of
OMYA, Inc.
By: /s/ John M. Mitchell
Executive Vice President
61 Main Street
Proctor, VT 05765
Village of Jacksonville
By: /s/ Earle S. Holland
President Board of Trustees
P.O. Box 73
Jacksonville, VT 05342
Village of Ludlow Electric Light
Department
By: /s/ Donald Ellison
Chairman, Board of
Commissioners
P.O. Box 289
Ludlow, VT 05109
Village of Morrisville Water and
Light Department
By: /s/ James C Fox
Superintendent
P.O. Box 325
Morrisville, VT 05661-0325
Village of Northfield Electric
Department
By: /s/ Kevin O'Donnell
Municipal Manager
26 South Main Street
Northfield, VT 05663
Readsboro Electric
By: /s/ Annette Caruso
Clerk
P.O. Box 247
Readsboro, VT 05350
Wakefield Municipal Light Department
By: /s/ William J. Wallace
General Manager
9 Albion Street
Wakefield, MA 01880
Westfield Gas & Electric Light
Department
By: /s/ Daniel Golubek
General Manager
Elm Street
Westfield, MA 01085
Exhibit 10-40.05
THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
THIS THIRTY-SECOND AGREEMENT, dated as of the 1st day of
September, 1995, is entered into by the signatory Participants
for the amendment by them of the New England Power Pool Agreement
dated as of September 1, 1971 (the "NEPOOL Agreement"), as
previously amended by twenty-nine (29) amendments, the most
recent of which was dated as of May 1, 1993; as previously
proposed to be amended by a thirtieth amendment dated as of June
1, 1993 which has been withdrawn; and as proposed to be amended
by a pending thirty-first amendment dated as of July 1, 1995.
NOTE: Because Section I of the Thirty-Second Agreement is the
only Section that amends the NEPOOL Agreement, only
that Section is reproduced and compared to the language
in the currently effective NEPOOL Agreement. All other
text of the Thirty-Second Amendment has been deleted
for purposes of this compare document.
NOW THEREFORE, the signatory Participants hereby agree as
follows:
SECTION I
AMENDMENTS TO NEPOOL AGREEMENT
1. The definition of "Entity" in Section 15.14 of the
NEPOOL Agreement, as heretofore amended, is amended to read as
follows:
Entity is any person or organization engaged in the electric
utility business (the generation and/or transmission and/or
distribution of electricity for consumption by the public,
or the purchase, as principal or broker, of electric energy
and/or capacity for resale at wholesale), whether the United
States of America or Canada or a state or province or a
political subdivision thereof or a duly established agency
of any of them, a private corporation, a partnership, an
individual, an electric cooperative or any other person
or organization recognized in law as capable of owning
property and contracting with respect thereto. No person or
organization shall be deemed to be an Entity if the
generation, transmission and, or distribution of
electricity by such person or organization is primarily
conducted to provide electricity for consumption by such
person or organization or an affiliated person or
organization.
2. Section 5.15 of the NEPOOL Agreement, as heretofore
amended, is amended to re-letter paragraph (h) as paragraph (i)
and by inserting the following new paragraph (h) after present
paragraph (g):
(h) The Management Committee shall have the authority, at
the time that it acts on an Entity's application
pursuant to Section 1.2 to become a Participant, to
waive conditionally or unconditionally, compliance by
such Entity with one or more of the obligations imposed
by this Agreement if the Committee determines that such
compliance would be unnecessary or inappropriate for
such Entity and the waiver for such Entity will not
impose an additional burden on other Participants.
3. Section 5.16 of the NEPOOL Agreement, as heretofore
amended, is hereby amended to read as follows:
Each member of the Management Committee or that member's
designee shall be entitled to attend any meeting of the
Executive Committee, Operations Committee, and Policy
Planning Committee and shall have a reasonable opportunity
to express views on any matter to be acted upon at the
meeting.
THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
THIS THIRTY-SECOND AGREEMENT, dated as of the 1st day of
September, 1995, is entered into by the signatory Participants
for the amendment by them of the New England Power Pool Agreement
dated as of September 1, 1971 (the "NEPOOL Agreement"), as
previously amended by twenty-nine (29) amendments, the most
recent of which was dated as of May 1, 1993; as previously
proposed to be amended by a thirtieth amendment dated as of June
1, 1993 which has been withdrawn; and as proposed to be amended
by a pending thirty-first amendment dated as of July 1, 1995.
WHEREAS, the NEPOOL Review Committee has been reconstituted,
in response to a general invitation issued in early 1995 by the
NEPOOL Participants, to include representatives of independent
power producers ("IPPs"), power marketers, power brokers, utility
regulators, environmental groups and others, and the Committee is
currently discussing a restructuring of NEPOOL in light of the
emerging changes in the electric utility industry;
WHEREAS, the NEPOOL Review Committee's January 1995 Phase
One Report concluded as part of the NEPOOL restructuring that
"NEPOOL membership should be open to a broad spectrum of
entities";
WHEREAS, IPPs are permitted to become Participants under
current NEPOOL provisions and the Participants are willing,
consistent with the NEPOOL Review Committee's Phase One Report,
to amend the NEPOOL Agreement also to permit power marketers and
power brokers to become Participants;
WHEREAS, as an interim step in the restructuring of NEPOOL
the Participants are willing to amend the NEPOOL Agreement to
permit power marketers and power brokers to become Participants
now, even before the completion of the restructuring of NEPOOL,
to facilitate their participation in bulk power transactions in
New England and more directly in the day-to-day activities of
NEPOOL;
WHEREAS, certain New England utilities that have chosen so
far not to become Participants have expressed their interest in
amending language to the NEPOOL Agreement in order to make
membership in NEPOOL more desirable to them;
WHEREAS, the amendments proposed herein do not change the
voting and governance provisions of the NEPOOL Agreement;
WHEREAS, representatives of certain of the IPPs and power
marketers have expressed in NEPOOL Review Committee discussions
(1) the belief that any amendments to the NEPOOL Agreement
designed to effect the restructuring of NEPOOL should be preceded
by an amendment to the NEPOOL voting and governance structure so
that IPPs and power marketers can participate fully and have a
separate vote on all restructuring matters placed before the
NEPOOL Executive Committee, (2) the concern that the interests
of IPPs and power marketers may not be adequately addressed in the
restructuring discussions in the NEPOOL Executive Committee
during the interim period when the terms of NEPOOL restructuring
are being discussed, and (3) the position that the issue of
whether and, if so, how to amend the definition of the term
"Entity" under Section 15.14 of the NEPOOL Agreement to include
end-users should be addressed and resolved during the NEPOOL
restructuring process;
WHEREAS, during NEPOOL Review Committee discussions, various
NEPOOL Participants have expressed (1) their belief that the
NEPOOL voting and governance structure (a) should be fair, (b)
should take into account the interests of all members and reflect
votes that are appropriately weighted in relationship to each
member's responsibilities and obligations (i.e. transmission,
generation and/or load), and (c) should minimize the
opportunities for gridlock, (2) their desire to involve
substantively the IPPs, power marketers, power brokers, Federal
and state regulators, and any other interested entities in the
restructuring effort, but not to impede the operations of NEPOOL
during the restructuring process, and (3) the desire first to
assure the opportunity for broader membership by all entities
transacting business in the wholesale bulk power market in New
England before addressing whether and, if so, how to involve end-
users in the Pool;
WHEREAS, in order to address the IPPs' and power marketers'
beliefs, concerns, positions, desires, and interests, the
Participants have invited IPPs, power marketers, and power
brokers that elect to become Participants after this Thirty-
Second Agreement is effective to select a common representative
to receive notice of all meetings of the NEPOOL Executive
Committee, NEPOOL Operations Committee, and NEPOOL Policy
Planning Committee and to attend those meetings and act as their
common spokesperson at such meetings;
WHEREAS, those IPPs and power marketers involved in the
NEPOOL Review Committee effort which are listed in Attachment 1
to this Thirty-Second Agreement have provided the Participants
assurances that these IPPs and power marketers support or do not
oppose acceptance of this Thirty-Second Agreement by the Federal
Energy Regulatory Commission (the "Commission");
WHEREAS, in reliance on and subject to the assurances of the
IPPs and power marketers described in the preceding paragraph,
the Participants, IPPs and power marketers participating in the
NEPOOL Review Committee effort have agreed that governance and
voting issues relative to IPPs and power marketers are among the
priority issues identified in the NEPOOL Review Committee's Phase
One Report and that they will continue to use their best efforts
to resolve these issues expeditiously through the NEPOOL Review
Committee; and
WHEREAS, Participants, IPPs and power marketers have also
agreed that the issue of whether and, if so, how to amend the
NEPOOL Agreement to permit membership by those not eligible for
NEPOOL membership after this Thirty-Second Agreement becomes
effective should be addressed before completion of the NEPOOL
restructuring process;
NOW THEREFORE, the signatory Participants hereby agree as
follows:
SECTION 1
AMENDMENTS TO NEPOOL AGREEMENT
1. The definition of "Entity" in Section 15.14 of the
NEPOOL Agreement, as heretofore amended, is amended to read as
follows:
Entity is any person or organization engaged in the electric
utility business (the generation and/or transmission and/or
distribution of electricity for consumption by the public,
or the purchase, as principal or broker, of electric energy
and/or capacity for resale at wholesale), whether the United
States of America or Canada or a state or province or a
political subdivision thereof or a duly established agency
of any of them, a private corporation, a partnership, an
individual, an electric cooperative or any other person or
organization recognized in law as capable of owning property
and contracting with respect thereto. No person or
organization shall be deemed to be an Entity if the
generation, transmission, or distribution of electricity by
such person or organization is primarily conducted to
provide electricity for consumption by such person or
organization or an affiliated person or organization.
2. Section 5.15 of the NEPOOL Agreement, as heretofore
amended, is amended to re-letter paragraph (h) as paragraph (i)
and by inserting the following new paragraph (h) after present
paragraph (g):
(h) The Management Committee shall have the authority, at
the time that it acts on an Entity's application
pursuant to Section 1.2 to become a Participant, to
waive, conditionally or unconditionally, compliance by
such Entity with one or more of the obligations imposed
by this Agreement if the Committee determines that such
compliance would be unnecessary or inappropriate for
such Entity and the waiver for such Entity will not
impose an additional burden on other Participants.
3. Section 5.16 of the NEPOOL Agreement, as heretofore amended, is
hereby amended to read as follows:
Each member of the Management Committee or that member's
designee shall be entitled to attend any meeting of the
Executive Committee, Operations Committee, and Policy
planning Committee and shall have a reasonable opportunity
to express views on any matter to be acted upon at the
meeting.
SECTION II
PARTICIPATION ON NEPOOL COMMITTEES
The Participants that are the signatories to this Thirty-
Second Agreement agree that they will cause their representatives
to take action in the NEPOOL Executive Committee, the NEPOOL
Operations Committee and the NEPOOL Policy Planning Committee to
authorize the IPPs, power marketers and power brokers that become
Participants (collectively, such IPPs, power marketers, and power
brokers are hereinafter referred to as "non-utility Participants") to
designate as a group after this Thirty-Second Agreement becomes
effective, a non-voting representative for each of the NEPOOL
Executive Committee, NEPOOL Operations Committee, and NEPOOL Policy
Planning Committee. The right to designate such representatives to
the NEPOOL Executive Committee, NEPOOL Operations Committee, and
NEPOOL Policy Planning Committee shall be in addition to, and not in
lieu of, such non-utility Participants' rights under the existing
provisions of the NEPOOL Agreement to be represented by members on the
NEPOOL Operations Committee and NEPOOL Policy Planning Committee. If
the non-utility Participants designate a representative for the NEPOOL
Executive Committee, NEPOOL Operations Committee or NEPOOL Policy
Planning Committee, that representative shall be treated as if he
or she were a member of that Committee for purposes of notice of
and participation in Committee meetings, but shall not be entitled to
vote, and shall not be deemed a member of the Committee for purposes
of determining the number of votes required for Committee action.
SECTION III
EFFECTIVENESS OF THE THIRTY-SECOND AGREEMENT
This Thirty-Second Agreement, and the amendments provided
for above, shall become effective on November 15, 1995, or on
such other date as the Federal Energy Regulatory Commission shall
provide that such amendments shall become effective.
SECTION IV
USAGE OF DEFINED TERMS
The usage in this Thirty-Second Agreement of terms which are
defined in the NEPOOL Agreement shall be deemed to be in
accordance with the definitions thereof in the NEPOOL Agreement.
SECTION V
COUNTERPARTS
This Thirty-Second Agreement may be executed in any number
of counterparts and each executed counterpart shall have the same
force and effect as an original instrument and as if all the
parties to all the counterparts had signed the same instrument.
Any signature page of this Thirty-Second Agreement may be
detached from any counterpart of this Thirty-Second Agreement
without impairing the legal effect of any signatures thereof, and
may be attached to another counterpart of this Thirty-Second
Agreement identical in form thereto but having attached to it one
or more signature pages.
IN WITNESS WHEREOF, each of the signatories has caused a
counterpart signature page to be executed by its duly authorized
representative, as of the 1st day of September, 1995.
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Boston Edison Company
(Participant)
By: /s/ Douglas S. Horan
Title: Vice President &
General Counsel
Address: 800 Boylston Street (P360)
Boston, MA 02199-8001
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF SEPTEMBER 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1995, and as proposed
to be amended by a pending amendment dated as of July 1, 1995
Boylston Light Department
(Participant)
By: /s/ H. Bradford White, Jr.
Name: H. Bradford White, Jr.
Title: Manager
Address:
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Blackstone Valley Electric Company
Eastern Edison Company
Montaup Electric Company
Newport Electric Corporation
(Participant)
By: /s/ Kevin A. Kirby
Title: Vice President
Address: 750 West Center Street
West Bridgewater, MA 02379-0543
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Cambridge Electric Light Company
Canal Electric Company
Commonwealth Electric Company
(Participant)
By: /s/ Russell D. Wright
Title: President and C.O.O.
Address: 2421 Cranberry Highway
Wareham, MA 02571-1002
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Central Maine Power Company
(Participant)
By: /s/ Arthur Adelberg
Title: Vice President
Address: 83 Edison Drive
Augusta, ME 04336-0001
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971, and
being previously amended by twenty-nine (29) amendments the most
recent of which was dated as of May 1, 1993 and as proposed to be
amended by a pending amendment dated as of July 1, 1995.
Central Vermont Public Service
Corporation
(Participant)
By: /s/ Robert Stern
Name: Robert Stern
Title: Senior Vice President
Address: 77 Grove Street
Rutland, VT 05701-3400
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Chicopee Municipal Lighting Plant
(Participant)
By: Barry W. Soden
Title: General Manager
Address: 725 Front Street
Chicopee, MA 01021-0405
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as
proposed to be amended by a pending amendment dated as of July
1, 1995.
The Connecticut Light and Power Company
Western Massachusetts Electric Company
Holyoke Water Power Company
Holyoke Power and Electric Company
Public Service Company of New Hampshire
(Participant)
By: /s/ Frank P. Sabatino
Title: Vice President
Address: 107 Selden Street
Berlin, CT 06037-1616
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Conn. Municipal Electric Energy Cooperative
(Participant)
By: /s/ Maurice R. Scully
Title: Executive Director
Address: 30 Stott Avenue
Norwich, CT 06360-1535
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Fitchburg Gas and Electric Light Company
(Participant)
By: /s/ David K. Foote
Title: Senior Vice President
Address: 216 Epping Road
Exeter, NH 03833-4575
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Village of Hardwick Electric Department
(Participant)
By: /s/ Jack E. Young
Name: Jack E. Young
Title: General Manager
Address: P.O. Box 516
Hardwick, VT 05843-0516
SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Hingham Municipal Lightinq Plant
(Participant)
By: Joseph R. Spadea, Jr.
Title: General Manager
Address: 19 Elm Street
Hingham, MA 02043-2518
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF SEPTEMBER 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993, and as proposed to
be amended by a pending amendment dated as of July 1, 1995.
New England Power Company
(Participant)
By: /s/ Jeffrey D. Tranen
Name: Jeffrey D. Tranen
Title: President
Address: 25 Research Drive
Westborough, MA
01582
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF SEPTEMBER 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971, and
being previously amended by twenty-nine (29) amendments the most
recent of which was dated as of May 1, 1993, and as proposed to be
amended by a pending amendment dated as of July 1, 1995.
Massachusetts Electric Company
(Participant)
By: /s/ Richard P. Sergel
Name: Richard P. Sergel
Title: Chairman
Address: 25 Research Drive
Westborough, MA 01582
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF SEPTEMBER 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993, and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
The Narragansett Electric Company
(Participant)
By: /s/ Richard P. Sergel
Name: Richard P. Sergel
Title: Chairman
Address: 25 Research Drive
Westborough, MA 01582
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF SEPTEMBER 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993, and as proposed
to be amended by a pending amendment dated as of July 1, 1995
Granite State Electric Company
(Participant)
By: /s/ Richard P. Sergel
Name: Richard P. Sergel
Title: Chairman
Address: 25 Research Drive
Westborough, MA 01582
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
New Hampshire Electric Cooperative, Inc.
(Participant)
By: /s/Steven Kaminski
Title: Director, Energy Services
Address: Tenney Mountain Highway
Plymouth, NH 03264-9420
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Paxton Municipal Light Department
(Participant)
By: /s/ Harold L. Smith
Name: Harold L. Smith
Title: Manager
Address: 578 Pleasant Street
Paxton, MA 01612-1365
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
The United Illuminating Company
(Participant)
By: /s/ James F. Crowe
Title: Vice President
Address: 157 Church Street, 16th Fl.
New Haven, CT 06506-0901
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
UNITIL Power Corp.
(Participant)
By: /s/ David K. Foote
Name: David K. Foote
Title: Senior Vice President
Address: 216 Epping Road
Exeter, NH 03833-4575
COUNTERPART SIGNATURE PAGE
TO THIRTY-SECOND AGREEMENT AMENDING
NEW ENGLAND POWER POOL AGREEMENT
DATED AS OF September 1, 1995
The NEPOOL Agreement, being dated as of September 1, 1971,
and being previously amended by twenty-nine (29) amendments the
most recent of which was dated as of May 1, 1993 and as proposed
to be amended by a pending amendment dated as of July 1, 1995.
Vermont Electric Power Company Inc.
(Participant)
By: /s/ Richard M. Chapman
Title: President/CEO
Address: P.O. Box 548
Rutland, VT 05702-0548
APPENDIX 1
The following independent power producers and power
marketers who are participating in the work of the NEPOOL Review
Committee have provided the Participants assurances that they
support or do not oppose acceptance of the foregoing Agreement by
the Federal Energy Regulatory Commission:
Enron Power Marketing, Inc.
Coastal Electric Services Corp.
North American Energy Conservation, Inc.
KCS Power Marketing, Inc.
Electric Clearing House, Inc.
American National Power, Inc.
Associated Power Service, Inc.
Citizens Lehman Power Sales
Eastern Utilities
1995 Annual Report
EUA System Profile
Eastern Utilities Associates is a diversified energy services company whose
shares are traded on the New York and Pacific Stock Exchanges under the ticker
symbol EUA. Its subsidiaries are engaged in the generation, transmission,
distribution and sale of electricity; energy related services such as energy
management and conservation and efficient use of energy.
To better reflect the competitive business environment in which it
operates, EUA is organized in four distinct business units.
Core Electric Business
EUA's core electric business comprises two business units. The retail business
unit provides electric service to approximately 297,000 customers in
southeastern Massachusetts, and northern and coastal Rhode Island. Retail
electric subsidiaries are Blackstone Valley Electric Company, Eastern Edison
Company and Newport Electric Corporation. The wholesale business unit is
Montaup Electric Company, EUA's generation and transmission subsidiary, which
provides electricity at wholesale to the retail electric subsidiaries and two
other non-affiliated municipal electric utilities.
"Map of Southern New England Depicting Montaup Electric Wholesale Territory,
Blackstone Valley Electric Service Area, Eastern Edison Service Area and
Newport Electric Service Area."
Energy Related Business
EUA's energy related business unit includes EUA Cogenex Corporation, EUA Ocean
State Corporation and EUA Energy Investment Corporation. EUA Cogenex is the
most active of our energy related companies with energy services contracts
throughout the United States and Canada (map). EUA Ocean State owns a 29.9%
partnership interest in the Ocean State Power electric generating station in
northern Rhode Island. EUA Energy makes investments in energy related
businesses.
Corporate
The corporate business unit is made up of Eastern Utilities Associates - the
System's parent company - and EUA Service Corporation which provides
professional and technical services to all EUA System companies.
On The Cover: Competition is on the horizon for the electric utility industry.
Just as the race goes to the most prepared runner, so too, the company which is
best prepared for competition is in a stronger position to win. Eastern
Utilities intends to be a winner! Throughout this Annual Report, artist Paul
Zwolak interprets factors we consider most important to our growth and the
changing utility industry.
"Map of United States and Southern Canada Depicting Areas of EUA Cogenex
Activity"
<TABLE>
HIGHLIGHTS
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
FINANCIAL DATA ($ in thousands)
Operating Revenues $ 563,363 $ 564,278 $ 566,477
Consolidated Net Earnings(1) 32,626 47,370 44,931
Return on Average Common Equity 8.8% 13.6% 15.0%
Common Shareholder Equity-
% of Capitalization (Year-End) 44.5% 42.8% 38.7%
Total Assets 1,200,273 1,234,049 1,203,137
Cash Construction Expenditures 77,923 50,519 76,391
COMMON SHARE DATA
Consolidated Earnings per Share<F1> $ 1.61 $ 2.41 $ 2.44
Dividends Paid per Share $ 1.585 $ 1.515 $ 1.42
Annual Dividend Rate $ 1.60 $ 1.54 $ 1.44
Total Common Shares Outstanding 20,436,764 19,936,980 19,032,598
Average Common Shares Traded Daily 58,573 35,359 42,854
Book Value per Share (Year-End) $ 18.36 $ 18.33 $ 17.50
Market Price -High 25 27 3/8 29 7/8
-Low 21 1/2 21 3/8 23 7/8
-Year-End 23 5/8 22 28
OPERATING DATA
Total Primary Sales (MWH) 4,441,000 4,410,000 4,352,000
System Requirements (MWH) 4,668,000 4,643,000 4,599,000
System Peak Demand (MW) 931 921 854
System Reserve Margin (At Peak) 24.2% 22.4% 37.1%
System Load Factor 57.2% 57.5% 61.5%
Customers (Year-End) 297,331 293,707 291,799
Employees (Year-End) - Core Electric<F2> 541 720 766
- Energy Related 253 240 238
- Corporate<F2> 536 437 440
<FN>
<F1> See Management's Discussion and Analysis of Financial Condition and Results of
Operations for details of one-time impacts to earnings.
<F2> Reflects employee shift resulting from corporate reorganization completed in
1995.
</FN>
</TABLE>
To Our Shareholders
Dear Shareholder:
The waves of change continued rolling through the electric utility industry in
1995. Our management team continued its proactive involvement in the formation
of the framework for an orderly transition from the age of regulated monopoly
to the new world of competition. As this transition plays out over the next
year or two we will be challenged to be flexible and innovative.
During 1995 we made a number of decisions to better position ourselves in both
the new competitive electric utility business and the energy services business.
Some of these decisions had a negative impact on current earnings but we
believe they were in the best long-term interests of all stakeholders. The
balance of this letter will summarize some of our key activities within our
Core Electric and Energy Related Businesses.
Consolidated earnings per share of $1.61 were 33% below the $2.41 per share
reported for the year 1994. Consolidated net earnings were $32.6 million
versus $47.4 million in 1994. These decreases were driven primarily by two
unusual charges which amounted to $13.2 million or 66 cents per share. These
charges are more fully discussed in "Management's Discussion and Analysis." As
stated earlier, we believe that these actions were in the best long-term
interests of all stakeholders.
Your dividend was increased 3.9% - about double the electric utility average -
to an annual rate of $1.60. This increase was consistent with our goal of
providing annual dividend increases above the industry average while
maintaining a conservative payout ratio.
CORE ELECTRIC BUSINESS The Retail and Wholesale Business units that comprise
our Core Electric Business improved their 1995 earnings. This improvement came
about despite a full year's impact of a reduction in electric rates to all
customers implemented in mid 1994 and a one-time after-tax charge of $2.7
million for a voluntary retirement incentive. Consolidation of the Core
Electric Business under a single management team enabled us to continue our
practice of paring costs wherever possible without adversely affecting the
quality of our service. As part of the consolidation, we were able to
reduce the number of professional personnel by 49 through a voluntary
retirement incentive. Since 1990 we have reduced the workforce of our Core
Electric and Corporate Businesses by 20%.
Introduction of our Choice and Competition proposal for the restructuring of
the electric utility industry in Massachusetts and Rhode Island continued EUA's
proactive involvement in this most important issue. The era of electric
utility competition is upon us! Massachusetts and Rhode Island, the states
where our utility subsidiaries do business, are at the forefront of this
wave of industry reform. Choice and Competition is predicated on a regional
approach to competition and envisions all customers in New England being able
to choose their electricity supplier.
ENERGY RELATED BUSINESS The decision to sell EUA Cogenex's portfolio of
cogeneration installations was based on their poor financial performance and
resulted in a one-time after-tax charge of $10.5 million. The sale enables our
most active non-utility energy related subsidiary to refocus itself for the
long term on the broader based, more profitable market for energy-efficiency
services and products.
The EUA Cogenex refocusing includes a consolidation of marketing
activities designed to improve the "hit rate" of signed contracts from project
proposals. In addition, new strategic alliances with major utilities in
Pennsylvania and Kansas will expand EUA Cogenex's field of operations to 11
additional states.
Our agreement with Duke/Louis Dreyfus LLC to market energy and related
services throughout the six-state New England region provides us with the
opportunity to become a meaningful player in the competitive New England
marketplace as it develops.
Two additional energy related opportunities in which we are investing also
show promise for the future.
TransCapacity L.P. has developed software to be used by participants in
the gas industry. While we are disappointed that the progress of TransCapacity
slowed in 1995, we still believe this investment has the potential to
contribute positively to system earnings in the near future.
The BIOTEN Partnership has developed a prototype bio-mass-fueled electric
generating unit which is currently going through its initial test phase.
These two energy related opportunities represent relatively modest
investments with the potential for meaningful contributions to our earnings.
Our medium size means that an investment that contributes as little as $1
million to earnings represents 5 cents per common share.
WE PLAN TO SUCCEED The unprecedented restructuring of the electric utility
industry will occupy a significant amount of our resources for the foreseeable
future. However, it will not reduce the importance of our Energy Related
Business activities.
The key to EUA's future success will continue to be pursuit of strategies
that will maximize the potential of each of our business units.
It is our intention to succeed!
We extend our thanks to our dedicated workforce who are being called upon each
day to do more with less. We also thank you for your continued loyalty as
shareholders and assure you that we will provide our strongest efforts to
enhance the value of your investment.
"Picture of Donald G. Pardus Chairman and Chief Executive Officer"
"Picture John R. Stevens President and Chief Operating Officer"
Donald G. Pardus
Chairman and Chief Executive Officer
John R. Stevens
President and Chief Operating Officer
March 8, 1996
BUSINESS AND STRATEGIES
COMPETITION. COMPETITION. COMPETITION.
... a word that has been synonymous with many industries for centuries... a
word that is sending shock waves through the electric utility industry today.
At EUA we've operated in the competitive arena for ten years in the Energy
Related businesses we own. Whether one views the coming of competition in the
electric utility industry as the dawn of a bright new day or as thunder clouds
in the distance, the reality is that the age of utility competition is here.
The approach of a competitive marketplace led us to adopt our current
Business Unit structure, a solid framework for the future.
Our Core Electric Business includes two business units:
Retail and Wholesale. These continue to be the foundation on which we
build.
Our Energy Related Business unit combines our energy related
diversification efforts. It provides us with the vehicle to invest in
opportunities that can enhance shareholder value and provide non-utility
synergies to our Core Electric Business.
Our Corporate Business unit provides professional and technical services
to all EUA System companies. The remainder of this section briefly
describes how EUA is taking a proactive position in the move to a
competitive utility industry and the steps that have been taken at our
Energy Related businesses in light of disappointing results in 1995.
AN INDUSTRY IN TRANSITION There are many forces working toward a competitive
marketplace in the electric utility industry - federal and state regulators,
coalitions of utility stakeholders, state legislatures, as well as electric
utility companies. EUA is taking a proactive stance in proposing principles
that move us towards competition, while keeping in mind the interests of our
shareholders, customers, employees and the communities we serve.
Massachusetts and Rhode Island, the home states of our Core Electric
Business, are at the forefront of the charge to a competitive electric
industry. While both states retain their individuality, the goal of regulators
and collaboratives of utilities and other industry stakeholders in each is the
same: negotiate the transition to competition rather than litigate.
The move to competition is not being driven only at the state level. The
Federal Energy Regulatory Commission, which regulates our Wholesale Business
unit, has been a primary catalyst by proposing new rules to require open access
to bulk power transmission lines.
Eastern Utilities has participated from the start at both the federal and
state levels, and we'll continue our active role. We reinforced our commitment
to establishing new relationships between service and energy providers and
customers by introducing our Choice and Competition plan for a competitive
industry. Our proposal would put all utilities in New England on an equal
footing to compete head-to-head for power sales with each other and with other
market alternatives.
By envisioning New England-wide participation, Choice and Competition
ensures access to all retail markets for all utilities and access to a variety
of energy sources for all customers.
Key components of Choice and Competition include:
- Customer choice of supplier as early as 1998.
Fossil-fueled and hydroelectric generating units enter the competitive
arena without guaranteed cost recovery.
- Performance-based rates governing the distribution costs of delivering
energy to customers. The retail distribution companies would be measured
against standards of performance and rewarded or penalized based on actual
performance related to the standards.
- Open, equal access to transmission facilities consistent with FERC
policies.
- Continued commitment to energy-efficiency and low-income programs.
- Competitively-priced power for customers who choose not to choose. While
we will do everything we can to spur competition, we accept the challenge
of retaining our current customers with our traditional reliable service
at the same time we actively pursue new business.
These are but a few of our plan's highlights. We suspect the final
outcome of the collaborative and/or legislative processes may not include all
of our recommendations, but we intend to be proactive throughout the transition
to a competitive electric industry.
In positioning EUA for the future, our efforts have not been limited to
the changing regulatory environment. We continue to look for innovative ways
in which Eastern Utilities can gain access to market share which today is
limited. For example, our Retail Business unit customers represent only 4% of
the New England energy market. Our challenge is how, in a competitive market,
we can gain access to the other 96%. In December we agreed to form a joint-
venture with the Duke Energy subsidiary of Duke Power and the Louis Dreyfus
Group - Duke/Louis Dreyfus Energy Services (New England) - which, once all
regulatory authorizations are received, will provide the vehicle for us to
participate in the marketing of energy and other services to the other 96% of
New England.
The new company should be ready to begin marketing electric power and
other energy services to customers throughout New England when competition
becomes a reality. Initial efforts of Duke/Louis Dreyfus Energy Services (New
England) will focus on linking power buyers and sellers. Over the longer term,
Duke/Louis Dreyfus Energy Services (New England) has the potential of
controlling - by buying, leasing or building - its own generating capacity.
We believe our knowledge of the New England market, our activities with
the New England Power Pool, and our entrepreneurial skills within the region
combined with the trading skills of Louis Dreyfus and Duke Energy's skills in
developing and operating power plants make us a strong team, ready to play in
the competitive arena.
ENERGY RELATED COMPETITIVE IMPACTS Competition is not new to our Energy
Related Business unit. In fact, it was increased competition and changes in
the marketplace that had a negative impact on the financial results of the
Energy Related Business unit in 1995. The competitive market changes impacted
EUA Cogenex, our integrated energy services company, while a more demanding
marketplace negatively impacted EUA TransCapacity, our subsidiary that holds
an investment in a gas industry software developer.
First, during 1995 EUA Cogenex saw continued poor results in its
cogeneration business, an erosion of utility-supported demand-side management
programs nationwide, and aggressive pricing pressures from competitors in the
energy management market. The result was a disappointing year for our most
active Energy Related business. Our challenge has been to refocus EUA Cogenex
for 1996 so that it can retain its position as one of the major energy services
companies in the country.
Some of the steps EUA Cogenex has taken and will take as part of its
refocusing efforts include:
- Divest its cogeneration portfolio. This action was completed in September
1995 and resulted in a one-time after-tax $10.5 million reduction in
consolidated net earnings. Elimination of this underperforming portion of
its business enables EUA Cogenex to concentrate on its more profitable
energy-efficiency business.
- Concentrate on traditional markets. EUA Cogenex will concentrate on
market sectors where it has been most successful: private educational
institutions, hospitals, medium and large industrial and commercial
facilities. Sectors such as federal and state facilities and utility
demand side management programs have been de-emphasized.
- Restructure sales and marketing. Consolidate marketing activities and
improve the success, or "hit rate," of turning proposals into signed
contracts.
- Develop strategic alliances. In 1995, such alliances were announced with
Allegheny Power Systems and Western Resources. These alliances are
designed to provide EUA Cogenex with a significant presence in states
where it historically has done little or no business and provide
customers of these utilities an immediate and comprehensive selection of
integrated energy services. A third strategic alliance with Monenco-Agra,
a major provider of engineering and related services in Canada, awaits
regulatory approval.
These refocusing efforts should enable EUA Cogenex to enhance its
profitability and contribution to EUA system earnings in 1996. Implementation
of its redefined strategies should firmly establish EUA Cogenex's leadership
position in its traditional markets while maintaining its strong reputation
for customer service.
A second segment of EUA's Energy Related business is our interest in the
TransCapacity Limited Partnership, held by our EUA Energy Investment
subsidiary. TransCapacity is a gas industry software developer in which we
started making investments in 1993. The software, known as Capacity Scout TM,
was designed to computerize the gathering and distribution of millions of
pieces of natural gas pipeline capacity data needed to be competitive in
the gas industry.
We had expected our investment in TransCapacity to produce positive
financial results in 1995, but developing market hurdles slowed the progress of
this venture. The market indicated that providing data alone was not
sufficient to entice users to utilize the Capacity Scout TM system. The market
dictated that enhancements that had been planned for the future would be needed
immediately in order to entice users. In addition, pipeline companies, the
providers of much of the information, have been slow to fully implement FERC-
mandated standards.
In response to these market pressures, TransCapacity increased its
activity at the Gas Industry Standards Board (GISB) to develop standard data
and has now introduced its new T/Nominatr TM service. T/Nominatr TM enables
clients to better use their pipeline capacity by providing a single interface
for making electronic data interchange nominations, or notifications to move
gas, to multiple pipelines. Pre-commercial user testing of T/Nominatr TM
started in late 1995. Commercial installations began in the first quarter of
1996. T/Nominatr TM should provide TransCapacity with a distinct advantage
over its competition.
While we do not anticipate that TransCapacity will make a positive
contribution to EUA earnings for the full year in 1996 we believe it is
possible for its monthly contribution to be positive by year's end.
TransCapacity continues to have the potential of being a meaningful contributor
to EUA earnings in 1997 and beyond.
Finally, EUA Energy Investment also has a 40% ownership interest in the
BIOTEN Partnership. Test generation will begin in early 1996 at a prototype
biomass-fired combustion turbine generating unit being developed in Tennessee.
Additional investments in this venture are dependent upon the success of the
prototype, which will not only generate electricity but also help alleviate an
environmental disposal problem. The preliminary nature of this undertaking
makes assessment of long-term earnings potential premature.
Diversification will continue to play a significant role in EUA's future
financial success. The long-term goals of our Energy Related Business unit are
to provide an increasing percentage of EUA System earnings, maintain EUA
Cogenex's leadership in the energy services industry, and investigate and
develop new energy related business opportunities that will enhance shareholder
value.
WE PLAN TO SUCCEED IN THE COMPETITIVE WORLD EUA has already come far in the
metamorphosis from utility holding company to diversified energy services
company.
We have positioned our Core Electric Business to be a positive force in
the development of a competitive electric industry, and we will continue to
search out niche-type energy related investments to support our non-core
diversification efforts. The goal of these efforts is to strengthen our
position in the marketplace and sharpen our competitive edge.
Our emergence as a leader in diversified energy services gives us the
opportunity to offer our customers a variety of energy options and to provide
you, our shareholders, enhanced value for your EUA shares.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
Years Ended December 31,
(In Thousands Except Common Share Data) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues $ 563,363 $ 564,278 $ 566,477 $ 541,964 $ 522,583
Operating Income 71,728 73,795 75,649 64,347 66,336
Consolidated Net Earnings(1) 32,626 47,370 44,931 34,111 26,260
BALANCE SHEET DATA:
Plant in Service 1,037,662 1,020,859 1,016,453 1,002,717 990,726
Construction Work in Progress 7,570 8,389 8,728 4,943 6,881
Gross Utility Plant 1,045,232 1,029,248 1,025,181 1,007,660 997,607
Accumulated Depreciation and
Amortization 324,146 304,034 296,995 274,725 251,503
Net Utility Plant 721,086 725,214 728,186 732,935 746,104
Total Assets 1,200,273 1,234,049 1,203,137 1,203,320 1,163,776
CAPITALIZATION:
Long-Term Debt - Net 434,871 455,412 496,816 462,958 488,452
Redeemable Preferred Stock - Net 26,255 25,390 25,053 28,496 29,980
Non-Redeemable Preferred Stock - Net 6,900 6,900 6,900 15,850 15,850
Common Equity 375,229 365,443 333,165 266,855 248,598
Total Capitalization 843,255 853,145 861,934 774,159 782,880
Short-Term Debt 39,540 31,678 37,168 109,936 72,449
COMMON SHARE DATA:
Consolidated Earnings per Average
Common Share(1) $ 1.61 $ 2.41 $ 2.44 $ 2.00 $ 1.58
Average Number of Shares Outstanding 20,238,961 19,671,970 18,391,147 17,039,224 16,608,090
Return on Average Common Equity 8.8% 13.6% 15.0% 13.2% 10.8%
Market Price -High 25 27 3/8 29 7/8 25 1/4 25
-Low 21 1/2 21 3/8 23 7/8 20 3/8 15 3/4
-Year-End 23 5/8 22 28 24 3/4 20 5/8
Dividends Paid per Share $ 1.585 $ 1.515 $ 1.42 $ 1.36 $ 1.45
(1) See Management's Discussion and Analysis of Financial Condition and Results of Operations for
details of one-time impacts to earnings.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REVIEW OF
OPERATIONS
Net Earnings and Earnings Per Share by business unit for 1995 and 1994 were as
follows:
1995 1994
Net Net
Earnings Earnings Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
(000's) Per Share (000's) Per Share
Core Electric Business $ 42,062 $ 2.08 $ 36,897 $ 1.88
Energy Related Business 3,658 0.18 7,390 0.37
Corporate 151 0.01 (817) (0.04)
From Operations $ 45,871 $ 2.27 $ 43,470 $ 2.21
One-Time Impacts:
VRI (2,747) (0.14)
Cogen Discontinuance (10,498) (0.52)
Tax Credits 3,900 0.20
Consolidated $ 32,626 $ 1.61 $ 47,370 $ 2.41
Major impacts on earnings by business unit are described in the following
paragraphs.
VOLUNTARY RETIREMENT INCENTIVE (VRI) OFFER In March 1995, Eastern Utilities
Associates (EUA) announced a corporate reorganization which, among other
things, consolidated management of Eastern Edison Company (Eastern Edison),
Blackstone Valley Electric Company (Blackstone) and Newport Electric
Corporation (Newport). As part of the reorganization, a VRI was offered to
66 professionals of the EUA System. Forty-nine of those eligible for the
program accepted the incentive and retired effective June 1, 1995. This
incentive program resulted in a one-time $4.5 million pre-tax ($2.7 million
after-tax, or 14 cents per share) charge to second quarter 1995 earnings of the
Core Electric Business. The estimated payback period is approximately 18
months.
DISCONTINUATION OF COGENERATION OPERATIONS In September 1995, EUA announced
that EUA Cogenex Corporation (EUA Cogenex) was discontinuing its cogeneration
operations because overall, the cogeneration portfolio had not performed up to
expectations. EUA Cogenex's total net investment in its cogeneration portfolio
was $29.2 million. The decision to discontinue cogeneration operations
resulted in a one-time, after-tax charge of approximately $10.5 million, or 52
cents per share, to third quarter 1995 earnings.
NON-RECURRING TAX CREDITS In 1994 EUA Ocean State Corporation (EUA Ocean
State) recognized $3.9 million of Investment Tax Credits (ITC) related to its
investment in Ocean State Power (OSP). In 1993 EUA recognized income of
approximately $4.9 million, representing a portion of the expected utilization
of EUA Power Corporation's (now known as Great Bay Power Corporation) ITC to
reduce EUA's 1993 consolidated tax liability. These credits, for both years,
are included in Other Income and Deductions-Net on the "Consolidated Statement
of Income." The System has no remaining ITC carryforwards available.
OPERATING REVENUES The following table sets forth estimates of the factors
which contributed to the change in Operating Revenues from 1993 through 1995:
Increase (Decrease)
From Prior Years
($ in millions) 1995 1994
Operating Revenue change attributable to:
Core Electric Business:
Purchased Power Recovery $ (2.5) $ (8.0)
Recovery of Fuel Costs 11.8 (1.4)
Effect of Rate Changes (4.9) (6.4)
Unit Contracts and Sales to NEPOOL (8.2) 1.8
Kilowatthour (KWH) Sales and Other (2.1) 4.2
Energy Related Business:
EUA Cogenex 5.0 7.6
Total $ (0.9) $ (2.2)
Core Electric Business: The revenues attributable to Purchased Power Recovery
reflect our retail companies' recovery of purchased power capacity costs.
Revenues attributable to Recovery of Fuel Costs result from the operation
of fuel adjustment clauses. The change in such revenues reflects corresponding
underlying changes in fuel costs.
The Effect of Rate Changes reflects a base rate decrease for Montaup
Electric Company (Montaup) implemented on May 21, 1994.
Revenues attributable to Unit Contracts and sales to the New England Power
Pool (NEPOOL) reflect revenues from such short-term contracts and interchange
sales with NEPOOL.
The change in revenues associated with KWH Sales and Other reflects the
effect of KWH sales on base revenues and changes in other operating revenues
including conservation and load management (C&LM) expense recoveries.
Energy Related Business: Revenues of this business unit were generated
entirely by EUA Cogenex. The 1995 change is due primarily to the impact of EUA
Cogenex's acquisitions of Highland Energy Group (Highland) and Citizens
Conservation Corporation (Citizens) in 1995. See "Energy Related Businesses"
below.
The 1994 increase of $7.6 million was due primarily to increased revenues
of James L. Day Co. Inc., renamed EUA Day and Northeast Energy Management, Inc.
(NEM) aggregating approximately $8.5 million. EUA Cogenex acquired EUA Day and
NEM in December 1993 and January 1994, respectively. Partnership revenues and
paid-from-savings contract revenues also increased in 1994. These increases
were offset somewhat by a decline in project sales revenues recognized in 1994.
CORE ELECTRIC BUSINESS KWH SALES Primary KWH sales of electricity by EUA's
Core Electric Business unit increased by a modest 0.7% in 1995 compared to
1994. A 2.0% improvement in 1995 industrial sales is an indication of the
continued slow improvement in economic conditions in EUA's service territory.
Economic indicators suggest that this moderate trend will continue for the
foreseeable future. Total energy sales decreased 11.1% in 1995, due mainly to
decreased energy sales to NEPOOL and decreased short-term unit contract
sales. Purchased power contracts of Montaup totaling 41 MW which expired in
October 1994 resulted in lower KWH available to Montaup for interchange and
short-term energy sales. These interchange and short-term energy sales
essentially recover fuel costs only and have little or no earnings impact.
Total primary sales of electricity increased 1.3% in 1994, despite the
fourth quarter's mild weather which caused an 18.7% decrease in heating degree
days compared to those of the fourth quarter 1993. An on-going review of our
customer classes resulted in the reclassification of certain customers from the
commercial class to the residential and industrial classes in 1994. The impact
of these reclassifications is reflected in the following table. Removing
the impacts of these reclassifications results in 1994 sales increases of 1.1%,
0.6% and 3.0% to our residential, commercial and industrial customers,
respectively.
Percentage Changes in KWH Sales by Class of Customer for the past two years
were as follows:
Percent
Increase (Decrease)
From Prior Year
1995 1994
Residential 1.1 3.3
Commercial 0.2 (1.9)
Industrial 2.0 4.2
Other Electric Utilities 1.4 20.4
Other (5.7) (7.0)
Total Primary Sales 0.7 1.3
Losses and Company Use (2.6) (5.3)
Total System Requirements 0.5 1.0
Unit Contracts (59.8) 20.2
Total Energy Sales (11.1) 4.2
EXPENSES 1995 VS. 1994
Fuel and Purchased Power: The EUA System's most significant expense items
continue to be fuel and purchased power expenses of our Core Electric Business
which together comprised about 43.9% of total operating expenses for 1995.
Fuel expense of the Core Electric Business increased by $3.3 million, or
3.8%, in 1995 compared to 1994. This change was caused by a 14.1% increase in
the average cost of fuel, offset by an 11.1% decrease in total energy generated
and purchased, as discussed above. Also, purchased power-energy costs,
previously recorded as purchased power expense by Newport, were recorded as
fuel expense by Montaup as a result of Newport becoming an all-requirements
customer of Montaup effective May 21, 1994. This resulted in a classification
adjustment which increased fuel expense and decreased purchased power expense
by approximately $1.8 million in 1995.
Purchased Power demand expense for 1995 decreased $4.5 million, or 3.4%.
This change was due primarily to decreases of $6.7 million related to 41
megawatts (MW) of purchased power contracts which expired in October 1994 and
the classification adjustments discussed above. These decreases were partially
offset by increased billings from OSP and the Yankee nuclear units aggregating
$5.2 million.
Other Operation and Maintenance: Other Operation and Maintenance (O&M)
expenses for 1995 totaled $187.4 million, an increase of $2.9 million, or 1.6%,
over 1994.
Total O&M expenses are comprised of three components:
Direct Controllable, Indirect and Energy Related. Changes in these components
for 1995 were as follows:
Increase
($ in millions) 1995 1994 (Decrease)
Direct Controllable $ 83.4 $ 87.7 $ (4.3)
Indirect 41.3 46.7 (5.4)
Energy Related 62.7 50.1 12.6
Total O&M $ 187.4 $ 184.5 $ 2.9
Direct Controllable expenses of our Core Electric and Corporate Business
units represent 44.5% of total 1995 O&M and include expense items such as:
salaries, fringe benefits, insurance and maintenance. Indirect expenses
include items over which we have limited short-term control.
Indirects include such expense items as: O&M expenses related to
Montaup's joint ownership interests in generating facilities such as Seabrook
Unit 1 and Millstone Unit 3 (see Note H of Notes to Consolidated Financial
Statements for other jointly-owned units), power contracts where transmission
rental fees are fixed, C&LM expenses that are fully recovered in revenues, and
expenses related to accounting standards such as Statement of Financial
Accounting Standard No. 106, "Accounting for Post-Retirement Benefits Other
Than Pensions" (FAS 106).
The Energy Related component relates to O&M expenses of our Energy Related
Business unit where increases are tied to new and expanded business activity.
EUA Cogenex continues to be the most active of our Energy Related businesses
and incurred 93% of the total O&M expenses of this business unit in 1995.
The changes in 1995 O&M expenses were due primarily to the following:
Direct Controllable: Direct controllable expenses of our Core Electric and
Corporate Business units decreased by $4.3 million. One-time computer software
development and hardware buy-out costs aggregating $1.9 million expensed in
1994, decreased insurance expense of approximately $1.2 million and strict
attention to cost control were major components of that change. We reduced
our Core Electric and Corporate units' workforce level by 6.9% in 1995 which
will mitigate future labor cost increases. We remain committed to our efforts
to control costs wherever possible.
Indirect: Indirect expenses of the Core Electric and Corporate Business units
decreased $5.4 million due primarily to $4.2 million of decreased C&LM expense
and lower litigation expense.
Energy Related: EUA Cogenex's O&M expenses for 1995 increased by $10.4 million
and are directly related to increased revenues, the acquisition of Citizens and
Highland and costs related to new product development of the EUA Day division.
Operating and development expenses of EUA Energy Investment Corporation (EUA
Energy) increased $2.2 million in 1995 due primarily to development expenses
related to the discontinued Home and Family venture and operating costs of EUA
Transcapacity.
Interest Charges: Net interest charges for 1995 decreased approximately $2.3
million compared to 1994. This change was due primarily to decreased long-term
debt interest resulting from normal cash sinking fund payments, increases in
capitalized interest of EUA Cogenex related to increased construction
activity in 1995, and decreased Other Interest Expense. Other Interest Expense
in 1994 included approximately $1.0 million related to Internal Revenue Service
audits of prior years' consolidated income tax returns.
Income Taxes: EUA files a consolidated federal income tax return for the EUA
System. EUA's 1995 composite federal and state effective tax rate was
approximately 30.1%, versus 29% in 1994. In 1994 EUA Ocean State recognized
$3.9 million of ITC as previously discussed.
Taxes Other Than Income: Taxes other than income decreased $3.6 million in
1995 compared to 1994. The 1995 reversal of previously over-accrued property
taxes and lower Rhode Island gross receipts taxes, related to lower revenues
and a decrease in the gross receipts tax rate, account for most of this change.
Other Items: Depreciation and Amortization expense decreased by $1.0 million,
or 2.1%, in 1995. Decreased EUA Cogenex depreciation and amortization expense
resulting from the disposal of cogeneration assets was the primary factor.
Other Income (Deductions) - Net decreased by $4.3 million in 1995 from
1994. The 1994 amount included: (i) ITC recognized by EUA Ocean State of
approximately $3.9 million as previously discussed; (ii) a settlement of
$900,000 received in 1994 from the Vermont Electric Generation and Transmission
Cooperative, Inc. (Vermont Co-op) related to Seabrook Nuclear Project payments
previously withheld; and (iii) the 1994 income recognition of $900,000 of
capitalized costs related to nuclear fuel buyouts which were previously
deferred. EUA Cogenex interest income and management fee income increased by
approximately $1.1 million in 1995.
EXPENSES 1994 VS. 1993
Fuel and Purchased Power: Fuel expense for 1994 increased $2.4 million from
1993 due primarily to fuel expense previously recorded as purchased power-
demand expense by Newport as previously discussed. A 4.8% decrease in the
average cost of fuel in 1994 essentially offset the 4.2% increase in total
energy sales.
Purchased Power expense decreased from 1993 by $9.4 million, or 6.8%. This
decrease was due primarily to expiring contracts totaling approximately 41 MW,
lower billings by Montaup's suppliers aggregating approximately $8.6 million
and the recognition of purchased power-energy as fuel expense (see above).
These decreases were offset somewhat by a $1.0 million increase in C&LM
expenses recorded as purchased power expense.
Other Operation and Maintenance: O&M expenses for 1994 totaled $184.5 million,
an increase of $2.4 million over 1993.
Changes by O&M components for 1994 were as follows:
Increase
($ in millions) 1994 1993 (Decrease)
Direct Controllable $ 87.7 $ 86.0 $ 1.7
Indirect 46.7 47.1 (0.4)
Energy Related 50.1 49.0 1.1
Total O&M $ 184.5 $ 182.1 $ 2.4
The changes in 1994 O&M expenses were due primarily to the following:
Direct Controllable: Direct controllable expenses increased by $1.7 million in
1994 due to our decision to expense one-time computer software development and
hardware buy-out costs aggregating $1.9 million. Cost control efforts
continued to be successful in 1994, and we reduced our Core Electric workforce
by 6.0%.
Indirect: Indirect expenses decreased slightly in 1994 due to the offsetting
impacts of decreased jointly owned generating unit expenses and pension
expenses aggregating $3.8 million and increased FAS 106, C&LM and power
contract expenses totaling $3.2 million.
Energy Related: EUA Cogenex's O&M expenses for 1994 increased by $1.7 million.
This increase was due primarily to the operations of EUA Day and NEM offset by
a reduction in expenses related to lower project sales recognized in 1994.
Research and development expenses of EUA Energy decreased $700,000 in 1994.
Interest Charges: Interest on long-term debt for 1994 decreased approximately
$2.5 million, or 6.1%, compared to 1993. This decrease was due primarily to
the full year impact of Eastern Edison's 1993 refinancing of $195 million of
long-term debt at lower rates and Newport's January 1994 issuance of $7.9
million of variable rate Electric Energy Facilities Revenue Refunding Bonds due
2011.
Offsetting these declines somewhat was the issuance by EUA Cogenex of $50
million of 7% Unsecured Notes in October 1993.
Income Taxes: EUA's 1994 composite federal and state effective tax rate was
approximately 29%, versus 27.3% in 1993. This increase is primarily
attributable to the net decrease in the income recognition of ITC in 1994
versus 1993.
Other Items: Depreciation and Amortization expense increased by $1.7 million,
or 3.9%, in 1994. Increased EUA Cogenex depreciation and amortization expense
of $2.4 million was offset somewhat by a decrease in amortization expense of
Montaup related to its Seabrook Unit II loss amortization which was completed
in 1993. The EUA Cogenex increase was due primarily to the
operations of EUA Day and NEM.
Equity in Earnings of Jointly Owned Companies decreased in 1994 by
approximately $1.7 million due primarily to lower earnings on EUA Ocean State's
investment in OSP.
Other Income (Deductions) - Net increased by $3.2 million in 1994 due to:
(i) a decrease in tax expense recorded as other deductions of approximately
$1.6 million; (ii) increased EUA Cogenex interest income and management fee
income aggregating approximately $900,000; (iii) the $900,000 Vermont Co-op
settlement as previously discussed; and (iv) the 1994 income recognition of
$900,000 of capitalized costs previously discussed. These impacts were
partially offset by a net decrease of $1.0 million in ITC utilized in 1994
versus 1993.
The Preferred Dividend requirement of the retail subsidiaries decreased by
approximately $1.0 million, or 29.6%, in 1994 due to a full-year impact of
Eastern Edison's 1993 Preferred Stock financing activity.
1995 SYSTEM FINANCING ACTIVITY
Core Electric Business: On December 1, 1995, Eastern Edison used available
cash to fund maturities of $10 million of First Mortgage Bonds and $25 million
of unsecured Medium Term Notes.
Corporate: EUA received proceeds of approximately $6.0 million in 1995 from
the issuance and sale of 262,115 common shares primarily through its Dividend
Reinvestment and Common Share Purchase Plans.
In May 1995 EUA issued 176,258 common shares in connection with the
acquisition of Highland Energy Group, Inc. by EUA Cogenex. See "Energy Related
Businesses" below for more details.
"Bar Graph Depicting Cash Construction Expenditures and Internally Generated
Funds for the Years 1991 Through 1995 as follows: "
$ in Millions
1991 1992 1993 1994 1995
Cash Construction expenditures 57.57 71.365 76.391 50.519 77.922
Internally Generated Funds 63.681 48.933 79.691 79.274 90.883
Financial Condition and Liquidity: The EUA System's need for permanent capital
is primarily related to investments in facilities required to meet the needs of
its existing and future customers.
Core Electric Business: For 1995, 1994 and 1993, the Core Electric Business
cash construction expenditures were $31.5 million, $33.0 million and $32.4
million, respectively.
Internally generated funds available after the payment of dividends supplied
approximately 210%, 150% and 160% of these cash construction requirements in
1995, 1994 and 1993, respectively. Various laws, regulations and contract
provisions limit the use of EUA's internally generated funds such that the
funds generated by one subsidiary are not generally available to fund the
operations of another subsidiary.
Cash construction expenditures of the Core Electric Business for 1996,
1997 and 1998 are estimated to be approximately $38.3 million, $35.3 million
and $28.8 million, respectively and are expected to be financed with internally
generated funds.
In addition to construction expenditures, projected requirements for
scheduled cash sinking fund payments and mandatory redemption of securities of
the Core Electric Business in 1996, 1997, 1998, 1999 and 2000 are $9.3 million,
$2.3 million, $62.2 million, $11.6 million and $2.3 million, respectively.
Energy Related Business: Capital expenditures of our Energy Related Business
amounted to $44.7 million, $17.2 million and $43.6 million in 1995, 1994 and
1993, respectively. Internally generated funds supplied 68.8%, 111.9% and
29.6% of cash capital requirements in 1995, 1994 and 1993, respectively.
Estimated capital expenditures of the Energy Related Business are $42.8
million, $58.3 million and $64.3 million in 1996, 1997 and 1998, respectively.
Internally generated funds are expected to supply approximately 60% of 1996
estimated capital requirements. Continued growth at EUA Cogenex may require
some external financing in the 1997-1998 time frame.
In addition to capital expenditures and energy related investments,
projected requirements for scheduled cash sinking fund payments and mandatory
redemption of securities of the Energy Related Business in 1996, 1997, 1998,
1999 and 2000 are $9.2 million, $24.2 million, $9.2 million, $9.2 million and
$59.2 million, respectively.
Corporate: Construction activity of the Corporate Business unit is minimal.
Projected requirements for scheduled cash sinking fund payments for the
corporate operations for each of the five years following 1995 are $1.1
million.
Short-Term Lines of Credit: At December 31, 1995, EUA System companies
maintained short-term lines of credit with various banks aggregating
approximately $150 million.
Year-End Short-Term Debt Outstanding by business unit:
($ in thousands) 1995 1994
Core Electric Business $ 6,761 $ 0
Energy Related Business 14,421 23,476
Corporate 18,358 8,202
Total $ 39,540 $ 31,678
EUA expects to repay the outstanding balances of short-term indebtedness
through internally generated funds and the possible issuance of additional EUA
Cogenex debt securities.
ENERGY RELATED BUSINESSES Net Earnings and Earnings Per Share contributions
of EUA's Energy Related Businesses for 1995 and 1994, excluding one-time
impacts, were as follows:
1995 1994
Net Net
Earnings Earnings Earnings Earnings
(Loss) (Loss) (Loss) (Loss)
(000's) Per Share (000's) Per Share
EUA Cogenex $ 2,704(1) $ 0.13(1) $ 4,171 $ 0.21
EUA Ocean State 4,617 0.23 4,456(2) 0.22(2)
EUA Energy Investment (3,663) (0.18) (1,237) (0.06)
Energy Related Business $ 3,658 $ 0.18 $ 7,390 $ 0.37
(1) Excludes one-time charge of $10.5 million, or 52 cents per share, related
to discontinuance of cogeneration operations.
(2) Excludes one-time recognition of $3.9 million, or 20 cents per share, of
Investment Tax Credits.
EUA Cogenex: EUA Cogenex's earnings from continuing operations decreased by
approximately $1.5 million in 1995 due to, among other things, lower earnings
on project sales and costs related to new product development by its EUA Day
division. Also, 1995 saw a significant reduction in demand-side management
activity as electric utilities nationwide prepare themselves for the evolution
to a competitive marketplace. The discontinuance of its cogeneration
operations will allow EUA Cogenex to devote maximum resources to providing
integrated energy services. In addition EUA Cogenex has refocused its national
sales force toward the private sector. Though governmental projects, such as
the Department of Energy, have proven profitable for EUA Cogenex, securing such
contracts is significantly more cumbersome, time consuming, and costly than
private sector contracts.
EUA Cogenex implemented various strategies in 1995 designed to leverage
existing resources to broaden its markets, to reduce costs, and to bring new
products to market. These efforts will continue in 1996. Specifically, EUA
Cogenex will continue to develop its sales and marketing organization, evaluate
and enter into strategic alliances, and emphasize cost control.
In early 1995, EUA Cogenex completed its acquisitions of Highland Energy
Group, Inc. of Boulder, Colorado, and the principal energy services operations
of Citizens Conservation Corporation of Boston. Highland engages in
conservation and energy management programs principally in Colorado, Texas,
Ohio and North Carolina. The renamed EUA Citizens Conservation Services
provides energy management services to the public and private multi-family
housing sector. Also in 1995, EUA Cogenex announced joint ventures with
affiliates of the Allegheny Power System and Western Resources, Inc. to provide
energy services in and around the geographic regions served by those companies.
In early 1996, EUA Cogenex announced a proposed joint venture with Monenco-Agra
of Canada to provide similar services in Canada.
EUA Ocean State: EUA Ocean State owns 29.9% of each of the partnerships which
developed and operate Units I and II of OSP, twin 250-megawatt, gas-fired
generating units in northern Rhode Island. Both units have provided a premium
return since their respective in-service dates of December 31, 1990, and
October 1, 1991. The change in EUA Ocean State's earnings contribution, net
of the $3.9 million of ITC utilized in 1994, was minimal.
EUA Energy Investment: EUA Energy was organized to seek out investments in
energy related businesses. The 1995 results reflect an increase in operating
and development expenses versus 1994, in particular, expenses related to the
Home and Family, L.P. pilot program, operating expenses of EUA Transcapacity,
and development costs of BIOTEN's biomass-fired combustion turbine electric
generation system. Market analysis results of the Home and Family pilot
program led management to discontinue that venture in mid 1995.
POWER MARKETING In December 1995, EUA and Duke/Louis Dreyfus LLC signed an
agreement to form a company to market energy related services in New England.
The new entity - Duke/Louis Dreyfus Energy Services (New England) LLC - plans
to engage in electric power and fuels marketing and associated market hedges;
own or lease generating facilities; and participate in other energy related
activities such as energy-efficiency services and management of energy assets,
upon receipt of required regulatory authorizations. This partnership
will give EUA the opportunity to increase its share of New England's energy
market.
ELECTRIC OPERATIONS The 1995 peak demand for electricity, 931 MW on July 27,
1995, surpassed the previous all-time high, 921 MW, set in July 1994. Current
forecasts indicate that the combination of company owned generation, current
long-term purchased power contracts, expected short-term power opportunities,
and the System's C&LM programs, should meet EUA System capacity requirements
through the year 1999. As shown in the accompanying chart the EUA System's
fuel mix continues to be diverse and is projected to remain that way in the
future.
"Three Pie Charts Depicting EUA Fuel Mix for the Years 1990, 1995, and
estimated 2000 as follows: "
1990 1995 2000
Oil 38% 25% 21%
Gas 2% 27% 29%
Coal 22% 15% 13%
Nuclear 38% 28% 33%
Other 5% 4%
The EUA System offers customers a comprehensive group of C&LM programs.
These programs provide EUA with a flexible, cost-effective resource option,
while serving customers with valued cost control opportunities to develop and
maintain a competitive advantage. The programs also offer opportunities to
EUA and its customers to comply with environmental standards and reduce air
emissions.
During 1995, more than 19,000 customers participated in one or more of the
EUA System C&LM programs, resulting in 27,000 megawatthours of annual energy
savings. In addition, the programs reduced customers' demand by 6,000
kilowatts in 1995 and provided the long-term benefits of reducing the need to
invest in costly new generating facilities.
ELECTRIC UTILITY INDUSTRY RESTRUCTURING The electric industry is in a period
of transition from a traditional rate-regulated environment to a competitive
marketplace. While competition in the wholesale electric market is not new,
electric utilities now face impending competition in the retail sector.
In 1995, Eastern Edison, Blackstone and Newport participated with
collaborative groups in their respective states consisting of other utilities,
industrial users, environmental groups and consumer advocates in submitting
similar sets of interdependent principles addressing electric utility industry
restructuring to their respective state regulatory commissions. These filings
were intended to be statements of the consensus position by the signatories of
the principles that should underlie any electric industry restructuring
proposal and include but are not limited to principles addressing stranded cost
recovery, unbundling of services and demand side management programs. Each set
of principles was submitted on the condition they be approved in full by the
respective Commissions.
The Rhode Island Public Utilities Commission (RIPUC) accepted all but one
of the principles submitted by the Rhode Island Collaborative with minor
modifications to certain language in others and added a new principle which
supports negotiation (as opposed to litigation) to resolve conflicts as
restructuring moves forward. The RIPUC also directed the Rhode Island
Collaborative to proceed with negotiations on the issues presented in the
principles and to submit a progress report to the RIPUC, which was submitted in
February of 1996. The one principle that was not accepted provided for
subsidization of renewable energy sources.
In February 1996 a bill was introduced in the Rhode Island legislature
that, if enacted, would allow customer choice of electricity supplier
commencing January 1, 1998 for large industrial customers and phasing in all
customers by January 1, 2001. The proposed legislation also provides for
recovery of "stranded investments" through a transition charge initially set
at 3 cents per KWH.
EUA believes that the development of the proposed legislation should have
been conducted in a public forum so that all interested stakeholders could have
participated. EUA believes that competition, if done right, can benefit
customers. However, there are substantial issues about the proposed
legislation which EUA is currently reviewing.
The Massachusetts Department of Public Utilities (MDPU) issued an order
enumerating principles, similar to those submitted by the Massachusetts
Collaborative, that describe the key characteristics of a restructured electric
industry and provide for, among other things, customer choice of electric
service providers, services, pricing options and payment terms, an opportunity
for customers to share in the benefits of increased competition, full and fair
competition in the generation markets and incentive regulation for distribution
services where competition cannot exist. This order sets out principles for
the transition from a regulated to a competitive industry structure and
identifies conditions for the transition process which will require investor-
owned utilities to unbundle rates, provide consumers with accurate price
signals and allow customers choice of generation services. The order also
provides for the principle of recovery of net, non-mitigable stranded costs by
investor-owned utilities resulting from the industry restructuring.
Each Massachusetts investor-owned utility is required to file
restructuring proposals for moving from the current regulated industry
structure to a competitive generation market. The schedule for the filing
requirement is staggered. The initial group of utilities was required to file
their proposals in February 1996. The second group is required to file within
three months of the MDPU's orders on the first group of submissions. Eastern
Edison Company filed its proposal, Choice and Competition (see below) with the
first group of proposals and is awaiting MDPU review.
In January 1996, EUA unveiled its preliminary proposal for a restructured
electric utility industry called Choice and Competition and began discussions
with the Rhode Island and Massachusetts Collaboratives. The plan proposes,
among other things: choice of power supplier by all customers as early as
January 1998; open access transmission services; performance based rates for
electric distribution services; all utility generation competing for power
sales; and a transition charge allowing regional utilities the opportunity to
recover, among other things, the costs of past commitments to nuclear and
independent power. We believe the plan, which requires participation by all
New England parties, satisfies the principles adopted in both Rhode Island and
Massachusetts, and provides a fair and equitable transition to a competitive
electric utility marketplace for all parties.
Historically, electric rates have been designed to recover a utility's
full costs of providing electric service including recovery of investment in
plant assets. Also, in a regulated environment, electric utilities are subject
to certain accounting rules that are not applicable to other industries. These
accounting rules allow regulated companies, in appropriate circumstances, to
establish regulatory assets and liabilities, which defer the current financial
impact of certain costs that are expected to be recovered in future rates. EUA
believes that its Core Electric operations continue to meet the criteria
established in these accounting standards. Effects of legislation and/or
regulatory initiatives or EUA's own initiatives such as Choice and Competition
could ultimately cause EUA's Core Electric companies to no longer follow these
accounting rules. In such an event, a non-cash write-off of regulatory assets
and liabilities could be required at that time.
In addition, if legislative or regulatory changes and/or competition
result in electric rates which do not fully recover the company's costs, a
write-down of plant assets could be required pursuant to Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" (FAS 121) issued in March 1995,
effective for fiscal year 1996. See "Notes to Consolidated Financial
Statements," Note A, for further discussion of FAS 121.
ENVIRONMENTAL MATTERS EUA's Core Electric Business subsidiaries and other
companies owning generating units from which power is obtained are subject,
like other electric utilities, to environmental and land use regulations at the
federal, state and local levels. The federal Environmental Protection Agency
(EPA), and certain state and local authorities, have jurisdiction over releases
of pollutants, contaminants and hazardous substances into the environment and
have broad authority to set rules and regulations in connection therewith,
such as the Clean Air Act Amendments of 1990, which could require installation
of pollution control devices and remedial actions. In 1994, EUA instituted an
environmental audit program to ensure compliance with environmental laws and
regulations and to identify and reduce liability.
Because of the nature of the EUA System's business, various by-products
and substances are produced or handled which are classified as hazardous under
the rules and regulations promulgated by such authorities. The EUA System
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 clean-up costs.
Subsidiaries of EUA 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 the EUA System companies to notify liability insurers and to initiate
claims. However, EUA is unable 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, 1995, the EUA System had incurred costs of
approximately $4.6 million in connection with these sites. These amounts have
been financed primarily by internally generated cash. The EUA System is
currently amortizing substantially all of its incurred costs over a
five-year period consistent with prior regulatory recovery periods and is
recovering certain of those costs in rates.
EUA estimates that additional costs of up to $3.0 million may be incurred
at these sites through 1997 by its subsidiaries and the other responsible
parties. Estimates beyond 1997 cannot be made since site studies, which are
the basis of these estimates, have not been completed.
In addition to the previously discussed costs, Blackstone is currently
litigating responsibility for clean-up costs and related interest aggregating
$5.9 million incurred by the Commonwealth of Massachusetts at a site in which
Blackstone has been named as the responsible party. See Note J of "Notes to
Consolidated Financial Statements" for further discussion.
A number of scientific studies in the past several years have examined the
possibility of health effects from electric and magnetic fields (EMF) that are
found everywhere there is electricity. Research to date has not conclusively
established a direct causal relationship between EMF exposure and human health.
Additional studies, which are intended to provide a better understanding of the
subject, are continuing. Management cannot predict the ultimate outcome of the
EMF issue.
OTHER Montaup is recovering through rates its share of estimated
decommissioning costs for the Millstone Unit 3 and Seabrook Unit 1 nuclear
generating units. Montaup's share of the currently allowed estimated total
costs to decommission Millstone Unit 3 is approximately $19.2 million in 1995
dollars and Seabrook Unit 1 is approximately $12.5 million in 1995 dollars.
These figures are based on studies performed for the lead owners of the units.
Montaup also pays into decommissioning reserves, pursuant to contractual
arrangements, at other nuclear generating facilities in which it has an equity
ownership interest or life-of-unit entitlement. Such expenses are currently
recovered through rates.
EUA occasionally makes forward-looking projections of expected future
performance or statements of our plans and objectives. These forward-looking
statements may be contained in filings with the Securities and Exchange
Commission, press releases and oral statements. Actual results could differ
materially from these statements. Therefore, no assurances can be given that
such forward-looking statements and estimates will be achieved.
"Management's Discussion and Analysis of Financial Condition and Review of
Operations" provides a summary of information regarding the Company's financial
condition and results of operation and should be read in conjunction with the
"Consolidated Financial Statements" and "Notes to Consolidated Financial
Statements" to arrive at a more complete understanding of such matters.
Financial Table of Contents
Consolidated Statement of Income 22
Consolidated Statement of Cash Flows 23
Consolidated Balance Sheet 24
Consolidated Statement of Retained Earnings 25
Consolidated Statement of Equity Capital and Preferred Stock 25
Consolidated Statement of Indebtedness 26
Notes to Consolidated Financial Statements 27
Report of Independent Accountants 36
Report of Management 36
Quarterly Financial and Common Share Information 37
Consolidated Operating and Financial Statistics 38
Shareholder Information 40
Trustees and Officers Inside Back Cover
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
Years Ended December 31,
<S> <C> <C> <C>
1995 1994 1993
(In Thousands Except Common Shares and per Share Amounts)
OPERATING REVENUES $ 563,363 $ 564,278 $ 566,477
OPERATING EXPENSES:
Fuel 90,888 87,573 85,218
Purchased Power-Demand 125,616 130,080 139,524
Other Operation 163,907 160,985 156,972
Voluntary Retirement Incentive 4,505
Maintenance 23,468 23,510 25,148
Depreciation and Amortization 45,492 46,455 44,722
Taxes - Other Than Income 20,744 24,337 24,468
Income Taxes 17,015 17,543 14,776
Total Operating Expenses 491,635 490,483 490,828
Operating Income 71,728 73,795 75,649
Equity in Earnings of Jointly Owned Companies 12,063 12,485 14,140
Allowance for Other Funds Used
During Construction 538 351 379
Loss on Disposal of Cogeneration Operations (18,086)
Income Tax Impact of Loss on Disposal of Cogeneration
Operations 7,588
Other Income (Deductions) - Net 2,574 6,847 3,655
Income Before Interest Charges 76,405 93,478 93,823
INTEREST CHARGES:
Interest on Long-Term Debt 38,216 38,987 41,530
Amortization of Debt Expense and Premium - Net 2,752 2,729 1,904
Other Interest Expense 3,167 3,849 4,137
Allowance for Borrowed Funds Used During
Construction (Credit) (2,677) (1,788) (1,989)
Net Interest Charges 41,458 43,777 45,582
Net Income 34,947 49,701 48,241
Preferred Dividends of Subsidiaries 2,321 2,331 3,310
Consolidated Net Earnings $ 32,626 $ 47,370 $ 44,931
Average Common Shares Outstanding 20,238,961 19,671,970 18,391,147
Consolidated Earnings per Share $ 1.61 $ 2.41 $ 2.44
Dividends Paid per Share $ 1.585 $ 1.515 $ 1.42
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31, (In Thousands) 1995 1994 1993
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 34,947 $ 49,701 $ 48,241
Adjustments to Reconcile Net Income
to Net Cash Provided from Operating Activities:
Depreciation and Amortization 52,413 54,091 50,492
Amortization of Nuclear Fuel 3,647 3,310 5,136
Deferred Taxes (985) 8,017 11,099
Non-cash (Gains)/Expenses on Sales of Investments in
Energy Savings Projects (1,264) 382 (4,731)
Loss on Disposal of Cogeneration Operations 18,086
Investment Tax Credit, Net (1,212) (181) (1,279)
Allowance for Other Funds Used During Construction (538) (351) (379)
Collections and Sales of Project Notes and Leases Receivable 17,748 11,115 3,512
Other - Net 5,129 (10,360) 6,058
Changes in Operating Assets and Liabilities:
Accounts Receivable 5,729 (4,509) (9,609)
Materials and Supplies (1,280) (2,035) 452
Accounts Payable 1,543 (2,668) (1,885)
Taxes Accrued (1,921) (5,834) 3,382
Other - Net (19,079) 9,641 (8,405)
Net Cash Provided from Operating Activities 112,963 110,319 102,084
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (77,923) (50,519) (76,391)
Collections on Notes and Lease Receivables of EUA Cogenex 3,125 1,635 1,210
Proceeds from Disposal of Cogeneration Assets 11,501
Increase in Other Investments (2,300) (11,329)
Net Cash (Used in) Investing Activities (65,597) (60,213) (75,181)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Common Shares 5,985 9,538 46,313
Long-Term Debt 7,925 245,000
Preferred Stock 30,000
Redemptions:
Long-Term Debt (42,725) (13,233) (214,809)
Preferred Stock (100) (100) (41,700)
Premium on Reacquisition and
Financing Expenses (63) (689) (14,956)
EUA Common Share Dividends Paid (32,050) (29,795) (26,101)
Subsidiary Preferred Dividends Paid (2,324) (2,333) (3,316)
Net Increase (Decrease) in Short-Term Debt 7,862 (5,490) (72,768)
Net Cash (Used in) Financing Activities (63,415) (34,177) (52,337)
NET (DECREASE) INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS: (16,049) 15,929 (25,434)
Cash and Temporary Cash Investments at Beginning of Year 20,109 4,180 29,614
Cash and Temporary Cash Investments at End of Year $ 4,060 $ 20,109 $ 4,180
Cash Paid during the year for:
Interest (Net of Amounts Capitalized) $ 39,306 $ 39,650 $ 45,057
Income Taxes $ 9,412 $ 15,233 $ 12,919
Conversion of Investments in Energy Savings Projects
to Notes and Leases Receivable $ 19,324 $ 10,914 $ 16,591
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
December 31, (In Thousands) 1995 1994
<S> <C> <C>
ASSETS
Utility Plant and Other Investments:
Utility Plant in Service $ 1,037,662 $ 1,020,859
Less Accumulated Provisions for Depreciation and
Amortization 324,146 304,034
Net Utility Plant in Service 713,516 716,825
Construction Work in Progress 7,570 8,389
Net Utility Plant 721,086 725,214
Non-utility Property - Net 82,347 107,803
Investments in Jointly Owned Companies 70,210 70,675
Other 67,157 55,416
Total Utility Plant and Other Investments 940,800 959,108
Current Assets:
Cash and Temporary Cash Investments 4,060 20,109
Accounts Receivable:
Customers, Net 61,096 63,709
Accrued Unbilled Revenues 11,311 10,178
Other 11,969 15,461
Notes Receivable 18,663 13,906
Materials and Supplies (at average cost):
Fuel 7,450 6,413
Plant Materials and Operating Supplies 9,066 8,755
Other Current Assets 11,804 8,517
Total Current Assets 135,419 147,048
Other Assets 124,054 127,893
Total Assets $1,200,273 $ 1,234,049
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Equity $ 375,229 $ 365,443
Non-Redeemable Preferred Stock of Subsidiaries - Net 6,900 6,900
Redeemable Preferred Stock of Subsidiaries - Net 26,255 25,390
Long-Term Debt - Net 434,871 455,412
Total Capitalization 843,255 853,145
Current Liabilities:
Notes Payable - Banks 39,540 31,678
Long-Term Debt Due Within One Year 19,506 41,601
Accounts Payable 35,769 33,442
Redeemable Preferred Stock Sinking Fund Requirement 50 50
Taxes Accrued 4,544 6,465
Interest Accrued 10,861 10,889
Other Current Liabilities 19,931 29,566
Total Current Liabilities 130,201 153,691
Other Liabilities 86,077 89,313
Accumulated Deferred Taxes 140,740 137,900
Commitments and Contingencies (Note J)
Total Liabilities and Capitalization $1,200,273 $ 1,234,049
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
1995 1994 1993
<S> <C> <C> <C>
Years Ended December 31, (In Thousands)
Retained Earnings - Beginning of Year $ 56,617 $ 39,642 $ 21,434
Consolidated Net Earnings 32,626 47,370 44,931
Total 89,243 87,012 66,365
Dividends Paid - EUA Common Shares 32,050 29,795 26,101
Other 965 600 622
Retained Earnings - Accumulated since June 1991 Accounting
Reorganization $ 56,228 $ 56,617 $ 39,642
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF EQUITY CAPITAL & PREFERRED STOCK
December 31, (Dollar Amounts In Thousands)
1995 1994
<S> <C> <C>
EASTERN UTILITIES ASSOCIATES:
Common Shares:
$5 par value 36,000,000 shares authorized, 20,436,764 shares
outstanding in 1995 and 19,936,980 shares in 1994 $ 102,184 $ 99,685
Other Paid-In Capital 220,730 212,990
Common Share Expense (3,913) (3,849)
Retained Earnings - Accumulated since June 1991 Accounting
Reorganization 56,228 56,617
Total Common Equity 375,229 365,443
CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES:
Non-Redeemable Preferred:
Blackstone Valley Electric Company:
4.25% $100 par value 35,000 shares (1) 3,500 3,500
5.60% $100 par value 25,000 shares (1) 2,500 2,500
Premium 129 129
Newport Electric Corporation:
3.75% $100 par value 7,689 shares (1) 769 769
Premium 2 2
Total Non-Redeemable Preferred Stock 6,900 6,900
Redeemable Preferred:
Eastern Edison Company:
6 5/8% $100 par value 300,000 shares (2) 30,000 30,000
Expense, Net of Premium (335) (335)
Preferred Stock Redemption Costs (3,447) (4,408)
Newport Electric Corporation:
9.75% $100 par value 900 shares (1) 90 190
Expense (3) (7)
Sinking Fund Requirement Due Within One Year (50) (50)
Total Redeemable Preferred Stock 26,255 25,390
Total Preferred Stock of Subsidiaries $ 33,155 $ 32,290
(1) Authorized and Outstanding.
(2) Authorized 400,000 shares. Outstanding 300,000 at December 31, 1995.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INDEBTEDNESS
December 31, (In Thousands) 1995 1994
<S> <C> <C>
EUA Service Corporation:
10.2% Secured Notes due 2008 $ 12,300 $ 14,500
EUA Cogenex Corporation:
7.22% Unsecured Notes due 1997 15,000 15,000
7.0% Unsecured Notes due 2000 50,000 50,000
9.6% Unsecured Notes due 2001 19,200 20,000
10.56% Unsecured Notes due 2005 35,000 35,000
EUA Ocean State Corporation:
9.59% Unsecured Notes due 2011 33,544 36,020
Blackstone Valley Electric Company:
First Mortgage Bonds:
9 1/2% due 2004 (Series B) 13,500 15,000
10.35% due 2010 (Series C) 18,000 18,000
Variable Rate Demand Bonds due 2014(1) 6,500 6,500
Eastern Edison Company
First Mortgage and Collateral Trust Bonds:
8.9% Secured Medium Term Notes due 1995 10,000
4 7/8% due 1996 7,000 7,000
5 7/8% due 1998 20,000 20,000
5 3/4% due 1998 40,000 40,000
7.78% Secured Medium Term Notes due 2002 35,000 35,000
6 7/8% due 2003 40,000 40,000
6.35% due 2003 8,000 8,000
8.0% due 2023 40,000 40,000
Pollution Control Revenue Bonds:
5 7/8% due 2008 40,000 40,000
Unsecured Medium Term Notes:
9-9 1/4% due 1995 (Series A) 25,000
Newport Electric Corporation:
First Mortgage Bonds:
9.0% due 1999 1,386 1,400
9.8% due 1999 8,000 8,000
8.95% due 2001 3,900 4,550
Small Business Administration Loan:
6.5% due 2005 809 894
Variable Rate Revenue Refunding Bonds due 2011(2) 7,925 7,925
Unamortized (Discount) - Net (687) (776)
454,377 497,013
Less Portion Due Within One Year 19,506 41,601
Total Long-Term Debt - Net $ 434,871 $455,412
(1) Weighted average interest rate was 3.9% for 1995 and 2.9% for 1994.
(2) Weighted average interest rate was 3.9% for 1995 and 2.6% for 1994.
</TABLE>
The accompanying notes are an integral part of the financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(A) Nature of Operations and Summary of Significant Accounting Policies:
General: Eastern Utilities Associates (EUA) is a diversified energy services
holding company. Its subsidiaries are principally engaged in the generation,
transmission, distribution and sale of electricity; energy related services
such as energy management; and promoting the conservation and efficient use of
energy.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications: Certain prior period amounts on the financial statements
have been reclassified to conform with current presentation.
Basis of Consolidation: The consolidated financial statements include the
accounts of EUA and all subsidiaries. All material intercompany transactions
between the consolidated subsidiaries have been eliminated.
System of Accounts: The accounts of EUA and its consolidated subsidiaries are
maintained in accordance with the uniform system of accounts prescribed by the
regulatory bodies having jurisdiction.
Jointly Owned Companies: Montaup Electric Company (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%.
Montaup is entitled to electricity produced from these facilities based on its
ownership interests and is billed for its entitlement pursuant to contractual
agreements which are approved by the Federal Energy Regulatory Commission
(FERC).
One of the four 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 $10.1 million at December 31,
1995 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 two companies
which own and operate certain transmission facilities between the Hydro Quebec
electric system and New England.
EUA Ocean State Corporation (EUA Ocean State) follows the equity method of
accounting for its 29.9% partnership interest in the Ocean State Power Project
(OSP). EUA Ocean State's investment in OSP and Montaup's stock ownership
investments are included in "Investments in Jointly Owned Companies" on the
Consolidated Balance Sheet.
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. On a consolidated basis, provisions
for depreciation on utility plant were equivalent to a composite rate of
approximately 3.3% in 1995 and 1994, and 3.4% in 1993 based on the average
depreciable property balances at the beginning and end of each year. Non-
utility property and equipment of EUA Cogenex Corporation (EUA Cogenex) is
stated at original cost. For financial statement purposes, depreciation on
office furniture and equipment, computer equipment and real property is
computed on the straight-line method based on estimated useful lives ranging
from five to forty years. Project equipment is depreciated over the term of
the applicable contracts or based on the estimated useful lives, whichever is
shorter, ranging from five to fifteen years.
Other Assets: The components of Other Assets at December 31, 1995 and 1994 are
detailed as follows:
(In Thousands) 1995 1994
Regulatory Assets:
Unamortized losses on reacquired debt $ 15,894 $ 17,709
Unrecovered plant and
decommissioning costs 10,100 18,400
Deferred FAS 109 costs (Note B) 48,196 43,535
Deferred FAS 106 costs 4,583 4,941
Mendon Road judgment (Note J) 6,591 5,857
Other regulatory assets 5,650 9,505
Total regulatory assets 91,014 99,947
Other deferred charges and assets:
Unamortized debt expenses 5,349 6,197
Goodwill 7,054 7,260
Other 20,637 14,489
Total Other Assets $ 124,054 $ 127,893
Regulatory Accounting: EUA's Core Electric companies are subject to certain
accounting rules that are not applicable to other industries. These accounting
rules allow regulated companies, in appropriate circumstances, to establish
regulatory assets and liabilities which defer the current financial impact of
certain costs that are expected to be recovered in future rates. EUA believes
that its Core Electric operations continue to meet the criteria established in
these accounting standards. Effects of legislation and/or regulatory
initiatives or EUA's own initiatives such as "Choice and Competition" could
ultimately cause the Core Electric companies to no longer follow these
accounting rules. In such an event, a non-cash write-off of regulatory assets
and liabilities could be required at that time.
Allowance for Funds Used During Construction (AFUDC) and Capitalized Interest:
AFUDC represents the estimated cost of borrowed and equity funds used to
finance the EUA System'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 9.2% in 1995, 9.7% in 1994, and
9.5% in 1993. The caption "Allowance for Borrowed Funds Used During
Construction" also includes interest capitalized for non-regulated entities in
accordance with Financial Accounting Standards Board (FASB) Statement No. 34.
Operating Revenues: Utility revenues are based on billing rates authorized by
applicable federal and state regulatory commissions. Eastern Edison Company
(Eastern Edison), Blackstone Valley Electric Company (Blackstone) and Newport
Electric Corporation (Newport) (collectively, the Retail Subsidiaries) accrue
the estimated amount of unbilled base rate revenues at the end of each month to
match costs and revenues more closely. In addition they also record the
difference between fuel costs incurred and fuel costs billed. Montaup
recognizes revenues when billed. Montaup, Blackstone, and Newport also record
revenues related to rate adjustment mechanisms.
EUA Cogenex's revenues are recognized based on financial arrangements
established by each individual contract. Under paid-from-savings contracts,
revenues are recognized as energy savings are realized by customers. Revenue
from the sale of energy savings projects and sales-type leases are recognized
when the sales are complete. Interest on the financing portion of the
contracts is recognized as earned at rates established at the outset of the
financing arrangement. All construction and installation costs are recognized
as contract expenses when the contract revenues are recorded. In circumstances
in which material uncertainties exist as to contract profitability, cost
recovery accounting is followed and revenues received under such contracts are
first accounted for as recovery of costs to the extent incurred.
Federal Income Taxes: EUA and its subsidiaries generally reflect in income the
estimated amount of taxes currently payable, and provide for deferred taxes on
certain items subject to temporary timing differences to the extent permitted
by the various regulatory agencies. EUA's rate-regulated subsidiaries defer
recognition of annual investment tax credits (ITC) and amortize these credits
over the productive lives of the related assets.
Cash and Temporary Cash Investments: EUA considers all highly liquid
investments and temporary cash investments with a maturity of three months or
less when acquired to be cash equivalents.
New Accounting Standard: In March 1995, the FASB issued Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (FAS 121), effective for
fiscal year 1996. FAS 121 requires all regulatory assets, assets which were
established as a result of high probability of recovery in a regulated
environment, to continue to meet that high probability of recovery at each
balance sheet date. Based on the current regulatory framework, management does
not expect that adoption of this standard will have a material effect on EUA's
financial position or results of operation. However, this assumption may
change in the future as changes are made in the current regulatory framework or
as competitive factors influence wholesale and retail pricing in the electric
utility industry.
(B) Income Taxes:
EUA adopted FASB statement No. 109, "Accounting for Income Taxes" (FAS 109)
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, 1995 and 1994, no valuation allowance was deemed necessary for
total deferred tax assets. Total deferred tax assets and liabilities for 1995
and 1994 are comprised as follows:
Deferred Tax Deferred Tax
($ in thousands) Assets ($ in thousands) Liabilities
1995 1994 1995 1994
Plant Related Plant Related
Differences $21,028 $19,072 Differences $170,562 $164,130
Alternative Refinancing
Minimum Tax 9,302 9,446 Costs 1,919 2,196
Litigation 41 902 Pensions 1,496 1,769
Bad Debts 125 234
Pensions 3,392 1,907
Acquisitions 4,281 4,575
Other 7,143 5,127 Other 11,684 10,627
Total $45,312 $41,263 Total $185,661 $178,722
As of December 31, 1995 and 1994, EUA has recorded on its Consolidated Balance
Sheet a regulatory liability to ratepayers of approximately $27.2 million and
$29.2 million, respectively. These amounts primarily represent excess deferred
income taxes resulting from the reduction in the federal income tax rate and
also include deferred taxes provided on investment tax credits. Also at
December 31, 1995 and 1994, a regulatory asset of approximately $48.2 million
and $43.5 million, respectively, has been recorded, representing the cumulative
amount of federal income taxes on temporary depreciation differences which were
previously flowed through to ratepayers.
EUA has $9.3 million of alternative minimum tax credits which have no
expiration and can be utilized to reduce the consolidated regular tax
liability. Under the terms of the December 1992 settlement agreement with
EUA Power Corporation (EUA Power, now known as Great Bay Power Corporation),
EUA was entitled to utilize EUA Power's tax credits to reduce the 1993
consolidated tax liability without compensation to EUA Power. Approximately
$6.9 million of such credits were utilized in 1993 of which $4.9 million was
charged against 1993 federal income tax expense.
In 1994, EUA Ocean State utilized $3.9 million of investment tax credits
related to its investment in OSP, which were charged against 1994 federal
income tax expense and reduced the consolidated regular tax liability. EUA has
no remaining ITC carryforwards available.
Components of income tax expense for the year 1995, 1994, and
1993 are as follows:
($ in thousands) 1995 1994 1993
Federal:
Current $ 10,335 $ 5,986 $ 9,203
Deferred 6,456 9,199 4,148
Investment Tax Credit, Net (1,130) (99) (1,197)
15,661 15,086 12,154
State:
Current 2,579 1,154 2,289
Deferred (1,225) 1,303 333
1,354 2,457 2,622
Charged to Operations 17,015 17,543 14,776
Charged to Other Income:
Current 4,353 9,243 1,770
Deferred (6,217) (2,486) 6,618
Investment Tax Credit, Net (82) (3,972) (5,049)
(1,946) 2,785 3,339
Total $ 15,069 $ 20,328 $ 18,115
Total income tax expense was different from the amounts computed by applying
federal income tax statutory rates to book income subject to tax for the
following reasons:
($ in thousands) 1995 1994 1993
Federal Income Tax Computed at Statutory Rates $ 17,506 $ 24,510 $ 23,224
(Decrease) Increase in Tax From:
Equity Component of AFUDC (187) (123) (133)
Depreciation Differences 118 50 1,230
Amortization and Utilization of ITC (1,212) (5,115) (6,295)
State Taxes, Net of Federal Income Tax Benefit (44) 2,285 2,237
Cost of Removal (36) (404) (583)
Other (1,076) (875) (1,565)
Total Income Tax Expense $ 15,069 $ 20,328 $ 18,115
(C) Capital Stock:
The changes in the number of common shares outstanding and related increases in
Other Paid-In Capital during the years ended December 31, 1995, 1994, and 1993
were as follows:
<TABLE>
<CAPTION>
Number of Common Shares Issued
<S> <C> <C> <C> <C> <C> <C>
Dividend Northeast Highland Common Other
Reinvestment Energy Energy Shares Paid-In
Public and Employee J.L. Day Co. Management Group At Par Capital
Offering Savings Plans Acquisition Acquisition Acquisition (000) (000)
1995 323,526 176,258 $ 2,499 $ 7,683
1994 427,304 12,499 464,579 4,522 10,209
1993 1,300,000 385,825 108,985 8,974 40,339
</TABLE>
The preferred stock provisions of the Retail Subsidiaries place certain
restrictions upon the payment of dividends on common stock by each company. At
December 31, 1995 and 1994, each company was in excess of the minimum
requirements which would make these restrictions effective.
In the event of involuntary liquidation, the holders of non-redeemable
preferred stock of the Retail Subsidiaries are entitled to $100 per share plus
accrued dividends. In the event of voluntary liquidation, or if redeemed at
the option of these companies, each share of the non-redeemable preferred stock
is entitled to accrued dividends plus the following:
Company Issue Amount
Blackstone: 4.25% issue $104.40
5.60% issue 103.82
Newport: 3.75% issue 103.50
(D) Redeemable Preferred Stock:
Eastern Edison's 65/8% Preferred Stock issue is entitled to an annual mandatory
sinking fund sufficient to redeem 15,000 shares commencing September 1, 2003.
The redemption price is $100 per share plus accrued dividends. All outstanding
shares of the 65/8% issue are 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 65/8% Preferred
Stock are entitled to $100 per share plus accrued dividends.
Newport's 9.75% Preferred Stock issue is entitled to a mandatory sinking fund
sufficient to redeem 500 shares during each twelve-month period until the year
1999. The balance of any shares outstanding must be redeemed by the year
2000. The redemption price is $100 per share plus accrued dividends. In the
event of involuntary liquidation, the holders of Newport's redeemable preferred
stock are entitled to $100 per share plus accrued dividends. In the event of
voluntary liquidation, or if redeemed at the option of Newport, the holders of
the 9.75% issue are entitled to $102.44 per share plus accrued dividends prior
to October 1, 1998; thereafter no premium is payable upon such redemption.
The aggregate amount of redeemable preferred stock sinking fund requirements
for each of the five years following 1995 are $50,000 for 1996, $40,000 for
1997 and zero for 1998, 1999 and 2000.
(E) Long-Term Debt:
The various mortgage bond issues of Blackstone, Eastern Edison, and Newport 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 $236
million.
Blackstone's Variable Rate Demand Bonds are collateralized by an irrevocable
letter of credit which expires on January 21, 1997. The letter of credit
permits an extension of one year upon mutual agreement of the bank and
Blackstone.
Newport's Variable Rate Electric Energy Facilities Revenue Refunding Bonds are
collateralized by an irrevocable Letter of Credit which expires on January 6,
1997, and permits an extension of one year upon mutual agreement of the Bank
and Newport. EUA Service Corporation's (EUA Service) 10.2% Secured Notes due
2008 are collateralized by certain real estate and property of the company.
In December, Eastern Edison used available cash to redeem $25 million of 9-
91/4% Unsecured Medium Term Notes at maturity, and $10 million of 8.90% First
Mortgage and Collateral Trust Bonds at maturity.
The EUA System'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 1995 are:
$19.5 million in 1996, $27.5 million in 1997, $72.5 million in 1998, $21.9
million in 1999, and $62.5 million in 2000.
(F) Fair Value Of Financial Instruments:
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate:
Cash and Temporary Cash Investments: The carrying amount approximates fair
value because of the short-term maturity of these instruments.
Long Term Notes Receivable and Net Investment in Sales-Type Leases: The
carrying amounts approximate fair value due to the nature of the asset.
Preferred Stock and Long-Term Debt of Subsidiaries: The fair value
of the System's redeemable preferred stock and long-term debt were based on
quoted market prices for such securities at December 31, 1995.
The estimated fair values of the System's financial instruments at December 31,
1995, are as follows:
Carrying Fair
($ in thousands) Amount Value
Cash and Temporary Cash Investments $ 4,060 $ 4,060
Long-Term Notes Receivable 38,635 38,635
Net Investment in Sales-Type Leases 9,565 9,565
Redeemable Preferred Stock 30,090 31,890
Long-Term Debt 455,064 479,242
(G) Lines Of Credit:
EUA System companies maintain short-term lines of credit with various banks
aggregating approximately $150 million. At December 31, 1995, unused short-
term lines of credit were approximately $111 million. In accordance with
informal agreements with the various banks, commitment fees are required
to maintain certain lines of credit. During 1995, the weighted average
interest rate for short-term borrowings was 6.2%.
(H) Jointly Owned Facilities:
At December 31, 1995, in addition to the stock ownership interests discussed in
Note A, Nature of Operations and Summary of Significant Accounting Policies -
Jointly Owned Companies, Montaup and Newport had direct ownership interests in
the following electric generating facilities:
Accumulated
Provision For Net Construc-
Utility Depreciation Utility tion
Percent Plant in and Plant in Work in
($ in thousands) Owned Service Amortization Service Progress
Montaup:
Canal Unit 2 50.00% $ 71,715 $42,657 $ 29,058 $2,085
Wyman Unit 4 1.96% 4,050 2,020 2,030
Seabrook Unit 1 2.90% 194,735 23,993 170,742 454
Millstone Unit 3 4.01% 178,231 40,482 137,749 42
Newport:
Wyman Unit 4 0.67% 1,314 684 630
The foregoing amounts represent Montaup's and Newport'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, 1995,
Montaup's total net investment in nuclear fuel of the Seabrook and Millstone
Units amounted to $3.0 million and $2.2 million, respectively.
Montaup's and Newport's shares of related operating and maintenance expenses
with respect to units reflected in the table above are included in the
corresponding operating expenses.
(I) Financial Information By Business Segments:
The Core Electric Business includes results of the electric utility operations
of Blackstone, Eastern Edison, Newport and Montaup.
Energy Related Business includes results of our diversified energy related
subsidiaries, EUA Cogenex, EUA Ocean State and EUA Energy Investment
Corporation (EUA Energy).
Corporate results include the operations of EUA Service and EUA
Parent.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Pre-Tax Depreciation Cash Equity in
Operating Operating Income and Construction Subsidiary
($ in thousands) Revenues Income Taxes Amortization Expenditures Earnings
Year Ended
December 31, 1995
Core Electric $ 483,864 $ 86,505 $ 20,312 $ 34,218 $ 31,466 $ 1,646
Energy Related 79,499 3,377 (3,318) 11,265 44,684 10,417
Corporate (1,139) 21 9 1,773
Total $ 563,363 $ 88,743 $ 17,015 $ 45,492 $ 77,923 $ 12,063
Year Ended
December 31, 1994
Core Electric $ 489,798 $ 83,966 $ 18,879 $ 33,409 $ 32,978 $ 1,700
Energy Related 74,480 9,905 (1,149) 12,491 17,231 10,785
Corporate (2,533) (187) 555 310
Total $ 564,278 $ 91,338 $ 17,543 $ 46,455 $ 50,519 $ 12,485
Year Ended
December 31, 1993
Core Electric $ 499,565 $ 84,654 $ 18,443 $ 34,035 $ 32,407 $ 1,750
Energy Related 66,912 6,690 (3,766) 10,031 43,604 12,390
Corporate (919) 99 656 380
Total $ 566,477 $ 90,425 $ 14,776 $ 44,722 $ 76,391 $ 14,140
</TABLE>
December 31,
($ in thousands) 1995 1994
Total Plant and Other Investments
Core Electric $ 716,828 $ 721,840
Energy Related 203,670 217,584
Corporate 20,302 19,684
Total Plant and Other Investments 940,800 959,108
Other Assets
Core Electric 188,087 204,982
Energy Related 57,083 55,554
Corporate 14,303 14,405
Total Other Assets 259,473 274,941
Total Assets $1,200,273 $1,234,049
(J) Commitments And Contingencies:
Nuclear Fuel Disposal and Nuclear Plant Decommissioning Costs:
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 Department of Energy (DOE) for disposal of spent nuclear fuel in
accordance with the Nuclear Waste Policy Act of 1982 (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 a prescribed fee for the disposal of such
wastes and nuclear 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 now estimates that
a permanent disposal site for spent fuel will not be ready to accept fuel for
storage or disposal until as late as 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 which, with rack additions, can
accommodate its spent fuel for the projected life of the unit. At the Seabrook
Project, there is on-site storage capacity which, with rack additions, will be
sufficient to at least the year 2011.
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, 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 $19.2 million in 1995 dollars, and Seabrook Unit 1 is $12.5 million in 1995
dollars. These figures are based on studies performed for the lead owners of
the plants. Montaup also pays into decommissioning reserves pursuant to
contractual arrangements with other nuclear generating facilities in which it
has an equity ownership interest or life of the unit entitlement. Such
expenses are currently recoverable through rates.
Pensions: EUA maintains a non-contributory defined benefit pension plan
covering substantially all employees of the EUA System (Retirement Plan).
Retirement Plan benefits are based on years of service and average compensation
over the four years prior to retirement. It is the EUA System's policy to fund
the Retirement Plan on a current basis in amounts determined to meet the
funding standards established by the Employee Retirement Income Security Act of
1974.
Net pension expense for the Retirement Plan, including amounts related to the
1995 voluntary retirement incentive offer, for 1995, 1994 and 1993 included the
following components:
($ in thousands) 1995 1994 1993
Service cost-benefits earned
during the period $ 2,776 $ 3,281 $ 2,567
Interest cost on projected
benefit obligations 9,391 8,848 8,761
Actual loss (return) on assets (36,220) 1,523 (18,005)
Net amortization and deferrals 24,392 (12,494) 6,795
Net periodic pension expense 339 1,158 118
Voluntary Retirement Incentive 1,653
Total periodic pension expense $ 1,992 $ 1,158 $ 118
Assumptions used to determine pension costs:
Discount Rate 8.25% 7.25% 8.75%
Compensation
Increase Rate 4.75% 4.75% 6.00%
Long-Term
Return on Assets 9.50% 9.50% 10.00%
The following table sets forth the actuarial present value of benefit
obligations and funded status at December 31, 1995, 1994 and 1993:
($ in thousands) 1995 1994 1993
Accumulated benefit obligations
Vested $ (117,060) $ (96,045) $(101,279)
Non-vested (271) (315) (358)
Total $ (117,331) $ (96,360) $(101,637)
Projected benefit obligations $ (135,415) $ (112,483) $(121,082)
Plan assets at fair value,
primarily stocks and bonds 152,308 122,816 130,040
Less: Unrecognized net gain
on assets (21,769) (13,643) (11,689)
Unamortized net
assets at January 1 4,939 5,365 5,944
Net pension assets $ 63 $ 2,055 $ 3,213
The discount rate and compensation increase rate used to determine post-
retirement benefit costs were changed effective January 1, 1996 to 7.25% and
4.25% respectively, and were used to calculate the plan's funded status at
December 31, 1995.
The one-time voluntary retirement incentive also resulted in $1.6 million of
non-qualified pension benefits which were expensed in 1995. At December 31,
1995, approximately $1.5 million was included in other liabilities for these
unfunded benefits.
EUA also maintains non-qualified supplemental retirement plans for certain
officers of the EUA System (Supplemental Plans). Benefits provided under the
Supplemental Plans are based primarily on compensation at retirement date. EUA
maintains life insurance on certain participants of the Supplemental Plans to
fund in whole, or in part, its future liabilities under the Supplemental Plans.
As of December 31, 1995, approximately $3.4 million was included in accrued
expenses and other liabilities for these plans. For the years ended December
31, 1995, 1994 and 1993 expenses related to the Supplemental Plans were $1.5
million, $516,000 and $2.3 million 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.
The EUA System adopted Statement of Financial Accounting Standard No. 106,
"Accounting for Post-Retirement Benefits Other Than Pensions," (FAS 106) as of
January 1, 1993. This standard establishes accounting and reporting standards
for such post-retirement benefits as health care and life insurance. Under FAS
106 the present value of future benefits is recorded as a periodic expense over
employee service periods through the date they become fully eligible for
benefits. With respect to periods prior to adopting FAS 106, EUA elected to
recognize accrued costs (the Transition Obligation) over a period of 20 years,
as permitted by FAS 106. The resultant annual expense, including amortization
of the Transition Obligation and net of capitalized and deferred amounts, was
approximately $6.3 million in 1995, $5.8 million in 1994 and $5.3 million in
1993.
The total cost of post-retirement benefits other than pensions for 1995, 1994
and 1993 includes the following components:
($ in thousands) 1995 1994 1993
Service cost $ 996 $ 1,537 $ 1,337
Interest cost 4,822 5,381 5,983
Actual return on plan assets (671) (126) (68)
Amortization of transition obligation 3,312 3,429 3,429
Other amortizations & deferrals - net (970) (85) (60)
Net periodic post-retirement benefit cost 7,489 10,136 10,621
Voluntary Retirement Incentive 832
Total periodic post-retirement
benefit costs $ 8,321 $ 10,136 $ 10,621
Assumptions used to determine post-retirement benefit costs
Discount rate 8.25% 7.25% 8.75%
Health care cost trend rate
- near-term 11.00% 13.00% 13.00%
- long-term 5.00% 5.00% 6.25%
Salary increase rate 4.75% 4.75% 6.00%
Rate of return on plan assets
- union 8.50% 8.50% 8.50%
- non-union 5.50% 5.50% 5.50%
Reconciliation of funded status:
($ in thousands) 1995 1994 1993
Accumulated post-retirement benefit
obligation (APBO):
Retirees $(40,817) $(35,386) $(38,008)
Active employees fully eligible
for benefits (9,760) (9,778) (15,324)
Other active employees (20,115) (23,306) $(25,357)
Total $(70,692) $(68,470) $(78,689)
Fair value of assets, primarily notes
and bonds 12,614 7,722 3,522
Unrecognized transition obligation 56,314 61,718 65,147
Unrecognized net loss (gain) (7,575) (9,098) 5,368
(Accrued)/prepaid post-retirement
benefit cost $ (9,339) $ (8,128) $ (4,652)
The discount rate and compensation increase rate used to determine post-
retirement benefit costs were changed effective January 1, 1996 to 7.25% and
4.25%, respectively, and were used to calculate the funded status of post-
retirement benefits at December 31, 1995.
Increasing the assumed health care cost trend rate by 1% each year would
increase the total post-retirement benefit cost for 1995 by $0.8 million and
increase the total accumulated post-retirement benefit obligation by $8.1
million.
The EUA System has also established separate irrevocable external Voluntary
Employees' Beneficiary Association Trust Funds for union and non-union
retirees. Contributions to the funds commenced in March 1993 and totaled
approximately $7.1 million during 1995, $6.7 million in 1994 and $6.0 million
in 1993. Long-Term Purchased Power Contracts: The EUA System 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, 1995, the aggregate annual minimum commitments
for such contracts are approximately $129 million in 1996 and 1997, $128
million in 1998, $127 million in 1999, $123 million in 2000 and will aggregate
$1.4 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 currently recoverable through rates.
Environmental Matters: The Comprehensive Environmental Response, Compensation
and 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 EUA System's business,
various by-products and substances are produced or handled which are classified
as hazardous under the rules and regulations promulgated by the United States
Environmental Protection Agency (EPA) as well as state and local authorities.
The EUA System 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. Subsidiaries of EUA 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 the EUA System companies to notify liability insurers and to initiate
claims. EUA is unable to predict whether liability, if any, will be assumed
by, or can be enforced against, the insurance carrier in these matters.
On December 13, 1994, the United States District Court for the District of
Massachusetts (District Court) issued a judgment against Blackstone, finding
Blackstone liable to the Commonwealth of Massachusetts (Commonwealth) for the
full amount of response costs incurred by the Commonwealth in the cleanup of a
by-product of manufactured gas at a site at Mendon Road in Attleboro,
Massachusetts. The judgment also found Blackstone liable for interest and
litigation expenses calculated to the date of judgment. The total liability is
approximately $5.9 million, including approximately $3.6 million in interest
which has accumulated since 1985. Due to the uncertainty of the ultimate
outcome of this proceeding and anticipated recoverability, Blackstone recorded
the $5.9 million District Court judgment as a deferred debit. This amount is
included with Other Assets at December 31, 1995 and 1994.
Blackstone filed a Notice of Appeal of the District Court's judgment and filed
its brief with the United States Court of Appeals for the First Circuit (First
Circuit) on February 24, 1995. On October 6, 1995 the First Circuit vacated
the District Court's judgment and ordered the District Court to refer the
matter to the EPA to determine whether the chemical substance, ferric
ferrocyanide (FFC), contained within the by-product is a hazardous substance.
On January 20, 1995, Blackstone entered into an escrow agreement with the
Commonwealth whereby Blackstone deposited $5.9 million with an escrow agent who
transferred the funds into an interest bearing money market account. The
distribution of the proceeds of the escrow account will be determined upon the
final resolution of the judgment. No additional interest expense will accrue
on the judgment amount.
On January 28, 1994, Blackstone filed a complaint in the District Court,
seeking, among other relief, contribution and reimbursement from Stone &
Webster Inc., of New York City and several of its affiliated companies (Stone &
Webster), and Valley Gas Company of Cumberland, Rhode Island (Valley) for any
damages incurred by Blackstone regarding the Mendon Road site. On November 7,
1994, the court denied motions to dismiss the complaint which were filed by
Stone & Webster and Valley. This proceeding was stayed in December 1995
pending final EPA determination as to whether FFC is hazardous.
In addition, Blackstone has notified certain liability insurers and has filed
claims with respect to the Mendon Road site, as well as other sites.
Blackstone reached settlement with one carrier for reimbursement of legal costs
related to the Mendon Road case. In January 1996, Blackstone received $1.2
million in connection with this settlement.
As of December 31, 1995, the EUA System had incurred costs of approximately
$4.6 million (excluding the $5.9 million Mendon Road judgment) in connection
with these sites, substantially all of which relate to Blackstone. These
amounts have been financed primarily by internally generated cash. Blackstone
is currently amortizing all of its incurred costs over a five-year period
consistent with prior regulatory recovery periods and is recovering certain of
those costs in rates.
EUA estimates that additional costs of up to $3.0 million (excluding the $5.9
million Mendon Road judgment) may be incurred at these sites through 1997 by
its subsidiaries and the other responsible parties. Of this amount,
approximately $2.5 million relates to sites at which Blackstone is a
potentially responsible party. Estimates beyond 1997 cannot be made since site
studies, which are the basis of these estimates, have not been completed.
As a result of the recoverability of cleanup costs in rates and the uncertainty
regarding both its estimated liability, as well as its potential contributions
from insurance carriers and other responsible parties, EUA does not believe
that the ultimate impact of the environmental costs will be material to the
financial position of the EUA System or to any individual subsidiary and thus
no loss provision is required at this time.
The 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 EPA regarding emissions from electric generating
facilities and a host of other sources. EUA System generating facilities were
first affected in 1995, when EPA regulations took effect for facilities owned
by the EUA System. Montaup's coal-fired Somerset Unit #6 is utilizing lower
sulfur content coal to meet the 1995 air standards. EUA does not anticipate
the impact from the Amendments to be material to the financial position of the
EUA System.
In April 1992, the Northeast States for Coordinated Air Use Management
(NESCAUM), an environmental advisory group for eight northeast states including
Massachusetts and Rhode Island, issued recommendations for nitrogen oxide (NOx)
controls for existing utility boilers required to meet the ozone non-attainment
requirements of the Clean Air Act. The NESCAUM recommendations are more
restrictive than the Clean Air Act requirements. The Massachusetts Department
of Environmental Management has amended its regulations to require that
Reasonably Available Control Technology (RACT) be implemented at all stationary
sources potentially emitting 50 tons or more per year of NOx. Similar
regulations have been issued in Rhode Island. 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 electric and magnetic fields (EMF) that are
found everywhere there is electricity. While some of the studies have
indicated there may be some association between exposure to EMF and health
effects, other studies have indicated no direct association. In addition,
the research to date has not conclusively established a direct causal
relationship between EMF exposure and human health. Additional studies, which
are intended to provide a better understanding of the subject, are continuing.
Some states have enacted regulations to limit the strength of magnetic fields
at the edge of transmission line rights-of-way. Rhode Island has enacted a
statute which authorizes and directs the Energy Facility Siting Board to
establish rules and 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 Massachusetts Department of
Public Utilities to examine the potential health effects of EMF. Management
cannot predict the ultimate outcome of the EMF issue.
Guarantee of Financial Obligations: EUA has guaranteed or entered into equity
maintenance agreements in connection with certain obligations of its
subsidiaries. EUA has guaranteed the repayment of EUA Cogenex's $35 million,
10.56% unsecured long-term notes due 2005 and EUA Ocean State's $33.5 million,
9.59% unsecured long-term notes due 2011. In addition, EUA has entered into
equity maintenance agreements in connection with the issuance of EUA Service's
10.2% Secured Notes and EUA Cogenex's 7.22% and 9.6% Unsecured Notes.
Under the December 1992 settlement agreement with EUA Power, EUA reaffirmed its
guarantee of up to $10 million of EUA Power's share of the decommissioning
costs of Seabrook Unit 1 and any costs of cancellation of Unit 1 or Unit 2. EUA
guaranteed this obligation in 1990 in order to secure the release to EUA Power
of a $10 million fund established by EUA Power at the time EUA Power acquired
its Seabrook interest. EUA has not provided a reserve for this guarantee
because management believes it unlikely that EUA will ever be required to honor
the guarantee.
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 $5.2 million of the
outstanding debt of these two companies. In addition, Montaup and Newport have
minimum rental commitments which total approximately $13.5 million and $1.7
million, respectively under a noncancelable transmission facilities support
agreement for years subsequent to 1995.
Other: 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. In April 1995 Montaup filed a motion for summary judgement and in
June 1995 the court granted Montaup's motion. In July, Aquidneck filed for
appeal of the court's decision.
Montaup, EUA and EUA Service intend to vigorously contest the appeal and
continue to believe that Aquidneck's claims have no basis in law.
EUA Cogenex, through its EUA WestCoast (WestCoast) L.P., had under development
a cogeneration facility of approximately 1.5 MW. The cogeneration facility
experienced numerous start-up delays and cost overruns. The host of the
facility has taken the position that the energy services agreement between
WestCoast and itself is terminated due to, among other things, failure to
complete the project. WestCoast disagrees with the host's right to terminate,
but has decided not to contest the host's purported termination.
In June 1993, WestCoast filed a lawsuit against the contractors responsible for
the design and construction of the facility, as well as the surety which issued
a performance bond guaranteeing construction. Certain defendants in that
action have filed cross-complaints against WestCoast and EUA Cogenex, seeking,
among other things, approximately $300,000 for payments withheld by WestCoast
due to the contractor's deficient performance, contribution and indemnity. A
contractor has also filed a cross-complaint against the host. Additionally,
the host has filed a cross-complaint against Cogenex and the other parties in
the litigation, seeking approximately $7 million in damages arising principally
from lost economic advantage. EUA WestCoast filed its own cross complaint
against the host, affirmatively seeking damages. EUA WestCoast has secured
defense from insurance carriers for the claims made by the host.
EUA Cogenex intends to vigorously prosecute its claims against the contractors,
surety and host, and defend itself against any cross-complaints. EUA Cogenex
cannot predict the ultimate resolution of this matter. As a result of EUA
Cogenex's decision to discontinue cogeneration operations effective as of July
1, 1995, EUA Cogenex has recorded a reserve for its total investment in this
project which is included in the one-time after-tax charge to earnings of
approximately $10.5 million.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of Eastern Utilities Associates
We have audited the accompanying consolidated balance sheets and consolidated
statements of equity capital and preferred stock and indebtedness of Eastern
Utilities Associates and subsidiaries (the Company) as of December 31, 1995 and
1994, and the related consolidated statements of income, retained earnings and
cash flows for each of the three years in the period ended December 31, 1995.
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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 5, 1996
REPORT OF MANAGEMENT
The management of Eastern Utilities Associates is responsible for the
consolidated financial statements and related information included in this
annual report. The financial statements are prepared in accordance with
generally accepted accounting principles and include amounts based on the best
estimates and judgments of management, giving appropriate consideration to
materiality. Financial information included elsewhere in this annual report is
consistent with the financial statements.
The EUA System maintains an accounting system and related internal controls
which are designed to provide reasonable assurances as to the reliability of
financial records and the protection of assets. The System's staff of internal
auditors conducts reviews to maintain the effectiveness of internal control
procedures.
Coopers & Lybrand L.L.P., an independent accounting firm, is engaged by EUA to
audit and express an opinion on our financial statements. Their audit includes
a review of internal controls to the extent required by generally accepted
auditing standards for such audit.
The Audit Committee of the Board of Trustees, which consists solely of outside
Trustees, meets with management, internal auditors and Coopers & Lybrand L.L.P.
to discuss auditing, internal controls and financial reporting matters. The
internal auditors and Coopers & Lybrand L.L.P. have free access to the Audit
Committee without management present.
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL AND COMMON SHARE INFORMATION (UNAUDITED)
(Thousands of Dollars, Except Per Share and Share Price Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings
per Dividends Common Share
Consolidated Average Paid Per Market Price
Operating Operating Net Net Common Common
Revenues Income Income Earnings Share Share High Low
FOR THE QUARTERS
ENDED 1995:
December 31 $ 135,327 $ 17,274 $ 10,989 $ 10,411 $ 0.51 $ 0.40 25 22 1/2
September 30 143,950 20,687 3,666 3,084 0.15 0.40 24 1/8 21 1/2
June 30 146,119 14,956 8,405 7,825 0.38 0.40 24 7/8 21 5/8
March 31 137,967 18,811 11,887 11,306 0.57 0.385 24 1/8 21 3/4
FOR THE QUARTERS
ENDED 1994:
December 31 $ 132,953 $ 15,408 $ 8,858 $ 8,277 $ 0.42 $ 0.385 23 1/8 21 3/8
September 30 143,859 18,482 13,900 13,316 0.67 0.385 25 1/8 22
June 30 137,269 18,304 10,770 10,187 0.52 0.385 25 5/8 22
March 31 150,197 21,601 16,173 15,590 0.80 0.36 27 3/8 24 5/8
</TABLE>
<TABLE>
<CAPTION>
Consolidated Operating and Financial Statistics (1)
Years Ended December 31, 1995 1994 1993 1992 1991 1990 1985
<S> <C> <C> <C> <C> <C> <C> <C>
ENERGY GENERATED
AND PURCHASED (millions of KWH):
Generated
- by Somerset Station 679 658 319 936 957 985 1,316
- by Nuclear Units 752 1,008 1,033 1,050 1,109 1,635 1,065
- by Jointly-Owned Units 1,410 1,615 1,809 2,105 2,053 1,793 1,595
- by Life of the Unit Contracts 236 648 602 793 863 753 697
- by Newport 1 1 1 7
Interchange with NEPOOL 573 295 360 157 191 298 (387)
Purchased Power - Unit Power 1,463 1,526 1,396 1,489 1,006 380 223
Total Generated and Purchased 5,113 5,750 5,520 6,531 6,180 5,851 4,509
OPERATING REVENUES
($ in thousands):
Residential $193,233 $ 190,662 $ 189,470 $ 176,538 $178,812 $ 156,883 $110,682
Commercial 169,841 169,241 179,145 170,034 171,732 149,514 98,826
Industrial 83,061 81,500 81,445 76,946 78,273 69,885 66,707
Other Electric Utilities 5,447 4,900 5,098 5,103 4,828 4,317 15,779
Other 17,482 17,282 21,790 21,314 17,984 22,748 8,990
Total Primary Sales Revenues 469,064 463,585 476,948 449,935 451,629 403,347 330,984
Unit Contracts 14,800 26,213 22,617 47,875 41,225 43,670 32,526
Non-Electric 79,499 74,480 66,912 44,154 29,729 18,668
Total Operating Revenues $563,363 $ 564,278 $ 566,477 $ 541,964 $522,583 $ 465,685 $ 333,510
ENERGY SALES (millions of KWH):
Residential 1,697 1,678 1,624 1,575 1,579 1,531 1,212
Commercial 1,674 1,671 1,704 1,704 1,689 1,623 1,169
Industrial 867 850 816 785 777 834 833
Other Electric Utilities 75 74 61 68 66 130 382
Other 128 137 147 147 154 121 29
Total Primary Sales 4,441 4,410 4,352 4,279 4,265 4,239 3,625
Losses and Company Use 227 233 247 241 280 249 197
Total System Requirements 4,668 4,643 4,599 4,520 4,545 4,488 3,822
Unit Contracts 445 1,107 921 2,011 1,635 1,363 687
Total Energy Sales 5,113 5,750 5,520 6,531 6,180 5,851 4,509
NUMBER OF CUSTOMERS:
Residential 268,203 263,054 259,654 257,026 255,620 254,928 214,454
Commercial 27,401 29,004 30,805 32,851 32,745 32,836 23,161
Industrial 1,685 1,603 1,294 1,197 1,172 1,175 1,238
Other Electric Utilities 8 12 12 15 15 12 15
Other 34 34 34 34 34 34 30
Total Customers 297,331 293,707 291,799 291,123 289,586 288,985 238,898
Average Annual Revenue
per Residential Customer ($) 720 725 730 687 699 636 516
Average Annual Use per Residential
Customer (KWH) 6,327 6,379 6,254 6,128 6,177 6,221 5,652
AVERAGE REVENUE
PER KWH (cents):
Residential 11.39 11.36 11.67 11.21 11.32 10.25 9.13
Commercial 10.15 10.13 10.51 9.98 10.17 9.21 8.45
Industrial 9.58 9.59 9.98 9.80 10.07 8.38 8.01
</TABLE>
(1) Includes financial and operating statistics for Newport Electric
Corporation from April 1, 1990 and EUA Power Corporation through December
31, 1990 at which time EUA Power Corporation was deconsolidated for
financial reporting purposes.
<TABLE>
<CAPTION>
CONSOLIDATED OPERATING AND FINANCIAL STATISTICS<F1>
Years Ended December 31, 1995 1994 1993 1992 1991 1990 1985
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITALIZATION ($ in thousands):
Bonds - Net $ 279,374 $ 288,449 $ 300,389 $ 306,898 $ 346,146 $ 363,566 $ 263,500
Other Long-Term Debt - Net 155,497 166,963 196,427 156,060 142,306 80,029 21,991
Total Long-Term Debt - Net 434,871 455,412 496,816 462,958 488,452 443,595 285,491
Preferred Stock - Net 33,155 32,290 31,953 44,346 45,830 50,380 46,536
Common Equity 375,229 365,443 333,165 266,855 248,598 237,393 208,211
Total Capitalization $ 843,255 $ 853,145 $ 861,934 $ 774,159 $ 782,880 $ 731,368 $ 540,238
CAPITALIZATION RATIOS (%)
Long-Term Debt 52 53 57 60 62 61 53
Preferred Stock 4 4 4 6 6 7 9
Common Equity 44 43 39 34 32 32 38
COMMON SHARE DATA:
Earnings (Loss) per Average
Common Share ($) 1.61 2.41 2.44 2.00 1.58 (8.18)<F2> 2.67
Dividends per Share ($) 1.585 1.515 1.42 1.36 1.45 2.575 2.03
Payout (%) 98.4 62.9 58.2 68.0 91.8 (31.5) 76.0
Average Common
Shares Outstanding 20,238,961 19,671,970 18,391,147 17,039,224 16,608,090 15,917,255 11,156,941
Total Common Shares
Outstanding 20,436,764 19,936,980 19,032,598 17,237,788 16,831,062 16,352,708 11,376,471
Book Value per Share ($) 18.36 18.33 17.50 15.48 14.77 14.52 18.30
Percent Earned On Average
Common Equity 8.8 13.6 15.0 13.2 10.8 (42.5) 14.9
Market Price ($):
High 25 27 3/8 29 7/8 25 1/4 25 41 1/2 26 7/8
Low 21 1/2 21 3/8 23 7/8 20 3/8 15 3/4 20 3/4 16 3/8
Year End 23 5/8 22 28 24 3/4 20 5/8 23 7/8 25 7/8
Miscellaneous ($ in thousands):
Total Construction
Expenditures ($) 78,461 50,870 76,770 71,914 60,174 133,629 78,192
Cash Construction
Expenditures ($) 77,923 50,519 76,391 71,365 57,570 59,929 54,406
Internally Generated
Funds ($) 90,883 79,274 79,691 48,933 63,681 35,024<F3> 27,501
Internally Generated Funds as
a % of Cash Construction (%) 116.6 156.9 104.3 68.6 110.6 58.4<F3> 50.5
Installed Capability - MW 1,191 1,212 1,256<F4> 1,325 1,349 1,359 987
Less: Unit Contract Sales - MW 35 85 85 85 216 86 110
System Capability - MW 1,156 1,127 1,171 1,240 1,133 1,273 877
System Peak Demand - MW 931 921 854 849 879 850 738
Reserve Margin (%) 24.2 22.4 37.1 46.1 28.9 49.8 18.9
System Load Factor (%) 57.2 57.5 61.5 57.5 59.0 60.3 59.1
Sources of Energy (%):
Nuclear 28.2 33.8 34.0 34.1 31.3 37.8 26.2
Coal 14.7 11.7 5.4 18.6 21.0 22.6 34.1
Oil 25.5 20.0 28.3 12.7 26.9 37.9 39.7
Gas 26.5 28.4 26.0 29.3 17.2 1.7
Other 5.1 6.1 6.3 5.3 3.6
Cost of Fuel (Mills per KWH):
Nuclear 6.3 6.1 7.5 7.7 8.7 8.3 7.0
Coal 20.3 20.9 24.1 21.2 21.4 21.2 23.7
Oil 30.2 27.1 25.5 26.0 18.9 26.3 41.2
Gas 14.3 14.1 15.1 13.0 16.2 30.6
All Fuels Combined 16.7 14.5 15.5 14.8 15.7 18.4 26.3
<FN>
<F1> Includes financial and operating statistics for Newport Electric Corporation from April 1, 1990
and EUA Power Corporation through December 31, 1990 at which time EUA Power Corporation was
deconsolidated for financial reporting purposes.
<F2> After additional charges to 1990 earnings.
<F3> Excludes EUA Power Corporation's cash interest payments.
<F4> Excludes the 69 MW Somerset Station Unit #5 which was placed in deactivated reserve on January
25, 1994.
</FN>
</TABLE>
SHAREHOLDER INFORMATION
Shares of Eastern Utilities Associates are listed on the New York and Pacific
Stock Exchanges, under the ticker symbol EUA. As of February 1, 1996, there
were 12,161 common shareholders of record.
Form 10-K
A copy of EUA's 1995 Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available to shareholders without charge by writing to
us.
Annual Meeting
The 1996 Annual Meeting of Shareholders will be held on
Monday, May 20, 1996, at 9:30 a.m., in the
Enterprise Room, 5th Floor
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts
Registrar, Transfer Agent and Dividend Disbursing Agent for Common and
Preferred Shares
Investor Relations
Mail Stop 450264
Boston EquiServe, L.P.
Post Office Box 644
Boston, MA 02102-0644
1-800-736-3001 (Toll-Free)
Lost or Stolen Stock Certificates
If your stock certificate is lost, destroyed or stolen, you should notify the
transfer agent immediately so a "stop transfer" order can be placed on the
missing certificate. The transfer agent then will send you the required
documents to obtain a replacement certificate.
Dividends
Schedule of anticipated record and payment dates for 1996 dividends on EUA
Common Shares:
Record Payment
February 1 February 15
May 1 May 15
August 1 August 15
November 1 November 15
Direct Deposit Plan
EUA Shareholders have the option of having their EUA Dividends deposited
directly into their bank accounts. If you wish to participate, contact EUA
investor relations at 1-800-736-3001 (Toll-Free).
Replacement of Dividend Checks
If you do not receive your dividend check within ten business days after the
dividend payment date, or if your check is lost, destroyed or stolen, you
should notify the disbursing agent in writing for a replacement.
Dividend Reinvestment and Common Share Purchase Plan
A Dividend Reinvestment and Common Share Purchase Plan is available to all
registered shareholders and EUA System company employees. It is a simple and
convenient method of purchasing additional shares of EUA common stock.
Participants also may make cash payments to purchase additional shares. You
may obtain complete details by writing to Clifford J. Hebert Jr.,
Treasurer/Secretary at the address shown below under "Financial Community
Inquiries."
Duplicate Mailings
Duplicate mailings are costly. Shareholders may be receiving duplicate copies
of annual and quarterly reports due to multiple stock accounts in the same
household. To eliminate additional mailings of these reports, please write to
us and enclose label(s) or label information from the duplicate reports.
Dividend checks and proxy material will continue to be sent for each account on
record.
EUA is required by law to create a separate account for each name when stock
is held in similar but different names (e.g., John A. Smith, J. A. Smith, John
A. and Mary K. Smith, etc.). Please contact the Company for instructions if
you wish to consolidate multiple accounts.
Financial Community Inquiries
Institutional investors and securities analysts should direct
inquiries to:
Clifford J. Hebert, Jr., Treasurer/Secretary
Eastern Utilities Associates
Post Office Box 2333
Boston, MA 02107
(617) 357-9590
The name Eastern Utilities Associates is the designation of the Trustees for
the time being under a Declaration of Trust dated April 2, 1928, as amended.
All persons dealing with Eastern Utilities Associates must look solely to the
trust property for the enforcement of any claims against Eastern Utilities
Associates, as neither the Trustees, Officers nor Shareholders assume any
personal liability for obligations entered into on behalf of Eastern Utilities
Associates.
Trustees
Russell A. Boss (A, P)
President and Chief Executive Officer, A. T. Cross Company
Lincoln, Rhode Island
Paul J. Choquette, Jr. (C, P)
President, Gilbane Building Company
Providence, Rhode Island
Peter S. Damon (A, P)
President and Chief Executive Officer, Bank of Newport
Newport, Rhode Island
Peter B. Freeman (A, F)
Corporate Director and Trustee
Providence, Rhode Island
Larry A. Liebenow (A, F)
President and Chief Executive Officer, Quaker Fabric Corporation
Fall River, Massachusetts
Jacek Makowski (F, P)
Investor
Boston, Massachusetts
Wesley W. Marple, Jr. (A, C)
Professor of Business Administration, Northeastern University
Boston, Massachusetts
Donald G. Pardus
Chairman of the Board of Trustees and
Chief Executive Officer of the Association
Margaret M. Stapleton (C, F)
Vice President, John Hancock Mutual Life Insurance Company
Boston, Massachusetts
John R. Stevens
President and Chief Operating Officer of the Association
W. Nicholas Thorndike (C, F)
Corporate Director and Trustee
Brookline, Massachusetts
A- Indicates member of Audit Committee
C- Indicates member of Compensation and Nominating Committee
F- Indicates member of Finance Committee
P- Indicates member of Pension Trust Committee
EUA Officers
Donald G. Pardus
Chairman of the Board of Trustees
and Chief Executive Officer
John R. Stevens
President
and Chief Operating Officer
John D. Carney
Executive Vice President
Robert G. Powderly
Executive Vice President
Richard M. Burns
Comptroller
Clifford J. Hebert, Jr.
Treasurer and Secretary
"Picture of EUA Officers as Follows:"
Left to Right (seated):
Donald G. Pardus, Chairman and Chief Executive Officer; John R.
Stevens, President and Chief Operating Officer.
Left to Right (standing):
Clifford J. Hebert, Jr., Treasurer and Secretary; Robert G.
Powderly, Executive Vice President; John D. Carney, Executive
Vice President.
Not pictured: Richard M. Burns, Comptroller
Company Profile
Blackstone Valley Electric Company (Blackstone or the Company) is a retail
electric utility company. Blackstone supplies retail electric service to
approximately 84,000 customers in the cities of Central Falls, Pawtucket and
Woonsocket, and four surrounding towns in northern Rhode Island. Blackstone is
a wholly owned subsidiary of Eastern Utilities Associates (EUA). EUA owns
directly all of the shares of common stock of Blackstone, Eastern Edison
Company (Eastern Edison) and Newport Electric Corporation (Newport). Eastern
Edison and Newport are retail electric utility companies operating in
southeastern Massachusetts and south coastal Rhode Island, respectively.
Eastern Edison owns all of the permanent securities of Montaup Electric Company
(Montaup), a generation and transmission company, which supplies electricity to
Blackstone, to Eastern Edison, to Newport and to two unaffiliated utilities for
resale. EUA also owns directly all of the shares of common stock of EUA
Cogenex Corporation (EUA Cogenex), EUA Energy Investment Corporation (EUA
Energy), EUA Ocean State Corporation (EUA Ocean State) and EUA Service
Corporation (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 services 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. The holding company system
of EUA, the three retail subsidiaries, Montaup, EUA Service, EUA Cogenex, EUA
Energy and EUA Ocean State is referred to as the EUA System.
MARKET FOR BLACKSTONE'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of Blackstone's common stock is owned beneficially and of record by
EUA.
The dividends paid on common stock during the past two years are as
follows:
Dividends Paid Dividends Paid
1995 Per Share 1994 Per Share
First Quarter $5.35 First Quarter $4.17
Second Quarter 5.69 Second Quarter 4.88
Third Quarter 5.74 Third Quarter 4.93
Fourth Quarter 5.74 Fourth Quarter 5.44
No dividends may be paid on the common stock unless full dividends on the
outstanding preferred stock for all past and the current quarterly dividend
periods have been paid or declared and set apart for payment. Blackstone's
First Mortgage Indenture and Deed of Trust securing its First Mortgage Bonds
contains provisions which restrict the payment by Blackstone of cash dividends
on its common stock. See Notes C and D of Notes to Financial Statements and
Management's Discussion and Analysis of Financial Condition and Review of
Operations under Financial Condition and Liquidity.
SELECTED FINANCIAL DATA
For the Years Ended December 31,
(In Thousands) 1995 1994 1993 1992 1991
_______________________________________________________________________
Operating Revenues $140,861 $140,611 $143,666 $138,604 $142,276
Net Earnings 4,009 3,438 4,069 2,583 3,192
Total Assets 123,978 121,413 114,552 115,698 117,936
Capitalization:
Long-Term Debt 36,500 38,000 39,500 39,500 39,500
Non-Redeemable
Preferred Stock 6,130 6,130 6,130 6,130 6,130
Common Equity 37,045 37,180 35,378 34,551 34,755
Total Capitalization $ 79,675 $ 81,310 $ 81,008 $ 80,181 $ 80,385
======== ======== ======== ======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REVIEW OF
OPERATIONS
Overview
Blackstone's net earnings for 1995 increased $600,000 to $4.0 million
compared to 1994 net earnings despite a one-time charge of approximately
$550,000, on an after-tax basis, related to the voluntary retirement incentive
(VRI) offer effective June 1, 1995 (See below). Kilowatthour (KWH) sales of
electricity increased by 1.1% for 1995. Sales to residential customers
increased by 2.6% and sales to industrial customers were up 1.0% for 1995
largely due to colder weather in the fourth quarter as compared to 1994.
Blackstone's net earnings for 1994 decreased by $600,000 to $3.4 million
and reflect the impacts of increases in other operating and maintenance
expenses, and an increase in interest expense related to audits by the Internal
Revenue Service on prior year tax returns. Through the third quarter of 1994,
KWH sales were showing modest gains, but as a result of a poor fourth quarter
in which KWH sales dropped by 1.1%, due to unusually mild weather, overall 1994
KWH sales were flat.
Voluntary Retirement Incentive Offer
On March 15, 1995, EUA announced a corporate reorganization which, among
other things, consolidated management of Eastern Edison, Blackstone and
Newport. As part of the reorganization, a voluntary retirement incentive (VRI)
was offered to sixty-six professionals of the EUA System, including nine
employees of Blackstone. Forty-nine of those eligible for the program,
including five Blackstone employees, accepted the incentive and retired
effective June 1, 1995. The cost of this incentive program amounted to a
one-time $900,000 pre-tax ($550,000 after-tax) charge to Blackstone's second
quarter 1995 earnings. The estimated payback period is approximately 18
months.
Comparison of Financial Results
Operating Revenues - 1995 vs 1994
Operating Revenues for 1995 increased by approximately $0.3 million as
compared to those in 1994 primarily due to an increase in base revenues,
attributable to a 1.1% increase in KWH sales. Purchased power recoveries
increased by approximately $800,000 (see Operating Expenses below) offset by a
$700,000 decrease in transmission rental revenue.
Operating Revenues - 1994 vs 1993
Operating Revenues for 1994 declined by approximately $3.1 million or
2.1%. Base revenues, attributable to changes in KWH sales, did not
significantly change as compared to 1993, while the level of purchased power
expense recoveries decreased approximately $2.8 million. Stagnant base
revenues were the result of flat KWH sales in 1994 and the reduction in
purchased power expense recoveries is the result of the decrease in the
underlying expense, discussed below.
Expenses - 1995 vs 1994
Purchased Power expense, which is recovered through Blackstone's purchased
power adjustment clause and represented 72% of total 1995 operating expense,
increased approximately $800,000 or less than 1.0% as compared to 1994. The
average cost of fuel increased 14.1% in 1995 compared to 1994. This increase
was partially offset by a wholesale rate decrease by the company's supplier,
Montaup effective May 21, 1994.
Other Operation and Maintenance expenses are comprised of two components,
Direct Controllable and Indirect. Direct Controllable expenses include expense
items such as salaries, fringe benefits, insurance, maintenance, etc. Indirect
expenses include items over which the Company has limited short-term control
including expenses related to accounting standards such as Statement of
Financial Accounting Standard No. 106, "Employers' Accounting for Post-
Retirement Benefits Other Than Pensions" (FAS106).
Other Operation and Maintenance expenses for 1995 decreased by
approximately $2.0 million or 9.3% when compared to 1994. This decrease is
primarily due to the Company's continued strict attention to cost control
including on-going savings related to the VRI, lower rent expense related to
the March 1995 purchase of the Company's general office and operations
buildings which were previously leased and decreased FAS106 expenses.
Net interest charges for 1995 decreased by approximately $400,000 or 8.7%.
This decrease was primarily due to decreased customer deposits interest and
Internal Revenue Service (IRS) audits of prior years' consolidated income tax
returns, which together aggregate over $300,000.
Taxes Other than Income for 1995 decreased by $400,000 or 4.0% compared to
1994 due primarily to a 1% decrease in Rhode Island Gross Receipts Tax to
industrial customers.
Expenses - 1994 vs 1993
Purchased Power expense, decreased approximately $2.8 million or 2.9% from
1993. This decrease was due primarily to a wholesale rate reduction
implemented May 21, 1994 by Montaup, Blackstone's supplier.
Other Operation and Maintenance expenses in 1994 increased by
approximately $300,000 or 2.9% as compared to 1993. Increased controllable
expenses primarily consisting of distribution costs caused this increase.
Net Interest Charges for 1994 increased by approximately $500,000 or
11.8%. Approximately $200,000 of the increase was as a result of interest
incurred related to an IRS audit of prior years' consolidated income tax
returns. The remaining $200,000 was primarily due to an increase in EUA
Service allocated interest expense. Prior to July 1, 1993, allocated EUA
Service interest expense was recorded as other operating expenses by
Blackstone.
Effective Income Tax Rate
Blackstone's 1995 effective income tax rate increased from approximately
34.1% to 35.4% when compared to 1994 due primarily to decreased consolidated
tax benefits.
Financial Condition and Liquidity
The Company is required to make capital expenditures in order to meet the
needs of its existing and future customers. For 1995, 1994 and 1993, the
Company's cash construction expenditures were $5.1 million, $5.7 million and
$5.3 million, respectively. In 1995 and 1994, internally generated funds
provided over 100% of cash construction requirements.
Cash Construction expenditures are expected to be $4.3 million in 1996,
$4.5 million in 1997 and $4.6 million in 1998 and are expected to be financed
with internally generated funds. Traditionally, construction requirements in
excess of internally generated funds are obtained through short-term borrowings
which are ultimately funded with permanent capital.
EUA System companies, including Blackstone, maintain short-term lines of
credit with various banks aggregating approximately $150 million. At December
31, 1995, unused short-term lines of credit amounted to approximately $111
million. These credit lines are available to other EUA System companies under
joint credit line arrangements. Blackstone had $1.3 million of short-term
borrowings outstanding at year end 1995, and zero at year-end 1994.
Blackstone's requirements for sinking fund payments and redemption of
securities for each of the five years following 1995 is $1.5 million.
Electric Utility Industry Restructuring
The electric industry is in a period of transition from a traditional rate
regulated environment to a competitive marketplace. While competition in the
wholesale electric market is not new, electric utilities are facing impending
competition in the retail sector.
In 1995, Eastern Edison, Blackstone and Newport participated with
collaborative groups in their respective states consisting of other utilities,
industrial users, environmental groups and consumer advocates in submitting
similar sets of interdependent principles with their respective state
regulatory commissions addressing electric utility industry restructuring.
These filings were intended to be statements of the consensus position by the
signatories of the principles that should underlie any electric industry
restructuring proposal and include but are not limited to principles addressing
stranded cost recovery, unbundling of services and demand side management
programs. Each set of principles was submitted on the condition they be
approved in full by the respective Commissions.
The Rhode Island Public Utilities Commission (RIPUC) accepted all but one
of the principles submitted by the Rhode Island Collaborative with minor
modifications to certain language in others and added a new principle which
supports negotiation (as opposed to litigation) to resolve conflicts as
restructuring moves forward and directed the Rhode Island Collaborative to
proceed with negotiations on the issues presented in the principles and to
submit a progress report, which was submitted in February 1996. The one
principle that was not accepted provided for subsidization of renewable energy
sources.
In February 1996 a bill was introduced in the Rhode Island legislature
that, if enacted, would allow customer choice of electricity supplier
commencing January 1, 1998 for large industrial customers and phasing in all
customers by January 1, 2001. The proposed legislation also provides for
recovery of "stranded investments" through a transition charge initially set at
three cents per KWH.
EUA believes that the development of the proposed legislation should have
been conducted in a public forum so that all interested stakeholders could have
participated. EUA believes that competition, if done right, can benefit
customers, however, there are substantial issues about the proposed legislation
which EUA is currently reviewing.
The Massachusetts Department of Public Utilities (MDPU) issued an order
enumerating principles, similar to those submitted by the Massachusetts
Collaborative, that describe the key characteristics of a restructured electric
industry and provides for, among other things, customer choice of electric
service providers, services, pricing options and payment terms, an opportunity
for customers to share in the benefits of increased competition, full and fair
competition in the generation markets and incentive regulation for distribution
services where competition cannot exist. This order sets out principles for
the transition from a regulated to a competitive industry structure and
identifies conditions for the transition process which will require investor-
owned utilities to unbundle rates, provide consumers with accurate price
signals and allow customers choice of generation services. The order also
provides for the principle of recovery of net, non-mitigable stranded costs by
investor-owned utilities resulting from the industry restructuring.
Each Massachusetts investor-owned utility is required to file
restructuring proposals for moving from the current regulated industry
structure to a competitive generation market. The schedule for the filing
requirement is staggered. The initial group of utilities was required to file
their proposals in February 1996. The second group is required to file within
three months of the MDPU's orders on the first group of submissions. Eastern
Edison Company filed its proposal, "Choice and Competition" (see below) with the
first group of proposals and is awaiting MDPU review.
In January 1996, EUA unveiled its preliminary proposal for a restructured
electric utility industry called "Choice and Competition" and began discussions
with the Rhode Island and Massachusetts Collaboratives. The plan proposes,
among other things: choice of power supplier by all customers as early as
January 1998; open access transmission services; performance based rates for
electric distribution services; all utility generation competing for power
sales and; a transition charge allowing regional utilities the opportunity to
recover, among other things, the costs of past commitments to nuclear and
independent power. The company believes the plan, which requires participation
by all New England parties, satisfies the principles adopted in both Rhode
Island and Massachusetts, and provides a fair and equitable transition to a
competitive electric utility marketplace for all parties.
Historically, electric rates have been designed to recover a utility's
full costs of providing electric service including recovery of investment in
plant assets. Also, in a regulated environment, electric utilities are subject
to certain accounting rules that are not applicable to other industries. These
accounting rules allow regulated companies, in appropriate circumstances, to
establish regulatory assets and liabilities, which defer the current financial
impact of certain costs that are expected to be recovered in future rates. EUA
believes that its Core Electric operations continue to meet the criteria
established in these accounting standards. Effects of legislation and/or
regulatory initiatives or EUA's own initiatives such as "Choice and
Competition" could ultimately cause EUA's Core Electric companies to no longer
follow these accounting rules. In such an event, a non-cash write-off of
regulatory assets and liabilities could be required at that time.
In addition, if legislative or regulatory changes and/or competition result in
electric rates which do not fully recover the company's costs, a write-down of
plant assets could be required pursuant to Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (FAS121) issued in March 1995, effective for fiscal
year 1996. See "Notes to Consolidated Financial Statements", Note A for
further discussion of FAS121.
Environmental Matters
Blackstone and other companies owning generating units from which power is
obtained are subject, like other electric utilities, to environmental and land
use regulations at the federal, state and local levels. The federal
Environmental Protection Agency (EPA), and certain state and local authorities,
have jurisdiction over releases of pollutants, contaminants and hazardous
substances into the environment and have broad authority to set rules and
regulations in connection therewith, such as the Clean Air Act Amendments of
1990, which could require installation of pollution control devices and
remedial actions. In 1994, an environmental audit program designed to ensure
compliance with environmental laws and regulations and to identify and reduce
liability was instituted by EUA.
Because of the nature of Blackstone's business, various by-products and
substances are produced or handled which are classified as hazardous under the
rules and regulations promulgated by such authorities. Blackstone 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. Blackstone
has 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 the EUA
System companies to notify liability insurers and to initiate claims, however,
Blackstone is unable to predict whether liability, if any, will be assumed by,
or can be enforced against, the insurance carriers in these matters.
As of December 31, 1995, Blackstone had incurred costs of approximately
$4.1 million, in connection with these sites. These amounts have been financed
primarily by internally generated cash. Blackstone is currently recovering
certain of its incurred environmental costs in rates. As a result of the
recoverability in current rates of environmental costs, and the uncertainty
regarding both its estimated liability, as well as potential contributions from
insurance carriers, Blackstone does not believe that the ultimate impact of
environmental costs will be material to their financial position and thus, no
loss provision is required at this time.
Blackstone estimates that additional costs of up to $2.5 million may be
incurred at these sites through 1997 by it and the other responsible parties.
Estimates beyond 1997 cannot be made since site studies, which are the basis of
these estimates, have not been completed.
In addition to the previously discussed costs, Blackstone is currently
litigating responsibility for clean-up costs and related interest aggregating
$5.9 million incurred by the Commonwealth of Massachusetts at a site in which
Blackstone has been named as the responsible party. See Note H of "Notes to
Consolidated Financial Statements" for further discussion.
A number of scientific studies in the past several years have examined the
possibility of health effects from electric and magnetic fields (EMF) that are
found everywhere there is electricity. Research to date has not conclusively
established a direct causal relationship between EMF exposure and human health.
Additional studies, which are intended to provide a better understanding of the
subject, are continuing. Management cannot predict the ultimate outcome of the
EMF issue.
The Company occasionally makes forward-looking projections of expected
future performance or statements of our plans and objectives. These forward-
looking statements may be contained in filings with the Securities and Exchange
Commission, press releases and oral statements. Actual results could differ
materially from these statements, therefore, no assurances can be given that
such forward-looking statements and estimates will be achieved.
Managements' Discussion and Analysis of Financial Condition and Review of
Operations provides a summary of information regarding the Company's financial
condition and results of operation and should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements in arriving at a complete understanding of such matters.
<TABLE>
Blackstone Valley Electric Company
Statement of Income
Years Ended December 31,
(In Thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating Revenues $ 140,861 $ 140,611 $ 143,666
Operating Expenses:
Purchased Power (princ. from an affiliate) 95,725 94,970 97,804
Other Operation and Maintenance 10,938 13,405 12,712
Voluntary Retirement Incentive 912
Affiliated Company Transactions 8,280 7,787 8,220
Depreciation 5,501 5,303 5,122
Taxes - Other than Income 8,821 9,202 9,508
Income and Deferred Taxes 2,347 1,885 1,988
Total Operating Expenses 132,524 132,552 135,354
Operating Income 8,337 8,059 8,312
Allowance for Other Funds Used During
Construction 33 39 43
Other Income (Deductions) - Net (38) 78 (18)
Income Before Interest Charges 8,332 8,176 8,337
Interest Charges:
Interest on Long-Term Debt 3,481 3,476 3,449
Other Interest Expense 612 1,009 568
Allowance for Borrowed Funds Used
During Construction (Credit) (59) (36) (38)
Net Interest Charges 4,034 4,449 3,979
Net Income 4,298 3,727 4,358
Preferred Dividend Requirements 289 289 289
Net Earnings Applicable to Common Stock $ 4,009 $ 3,438 $ 4,069
Statement of Retained Earnings
1994 1993
1995 (Restated) (Restated)
Retained Earnings - Beginning of Year $ 10,069 $ 10,204 $ 9,378
Net Income 4,298 3,727 4,358
Total 14,367 13,931 13,736
Dividends Paid:
Preferred 289 289 289
Common 4,144 3,573 3,243
Retained Earnings - End of Year $ 9,934 $ 10,069 $ 10,204
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Blackstone Valley Electric Company
Statement of Cash Flows
Years Ended December 31,
(In Thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 4,298 $ 3,727 $ 4,358
Adjustments to Reconcile Net Income
to Net Cash Provided from Operating Activities:
Depreciation and Amortization 5,953 6,157 5,918
Deferred Taxes 1,200 176 397
Investment Tax Credit, Net (183) 253 (176)
Allowance for Funds Used During Construction (34) (39) (43)
Other - Net 643 (6,072) (30)
Net Changes in Operating Assets and Liabilities:
Accounts Receivable (2,324) (603) 372
Materials and Supplies (172) (27) 124
Accounts Payable 7,540 1,484 (2,399)
Accrued Taxes 337 (1,280) (83)
Other - Net (7,239) 5,454 436
Net Cash Provided from Operating Activities 10,019 9,230 8,874
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (5,064) (5,653) (5,344)
Net Cash (Used in) Investing Activities (5,064) (5,653) (5,344)
CASH FLOW FROM FINANCING ACTIVITIES:
Redemptions:
Long-Term Debt (1,500)
Premium on Reacquisition
and Financing Expenses (100)
Common Share Dividends Paid (4,144) (3,573) (3,243)
Preferred Dividends Paid (289) (289) (289)
Net Increase in Short-Term Debt 1,259
Net Cash (Used in) Financing Activities (4,674) (3,862) (3,632)
Net Increase (Decrease) in Cash 281 (285) (102)
Cash and Temporary Cash Investments at
Beginning of Year 472 757 859
Cash and Temporary Cash Investments at
End of Year $ 753 $ 472 $ 757
Cash paid during the year for:
Interest (Net of Amounts Capitalized) $ 3,565 $ 3,506 $ 3,480
Income Taxes $ 690 $ 1,836 $ 2,430
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Blackstone Valley Electric Company
Balance Sheet
December 31,
(In Thousands)
<CAPTION>
ASSETS
1994
1995 (Restated)
<S> <C> <C> <C>
Utility Plant and Other Investments:
Utility Plant $ 136,503 $ 133,415
Less Accumulated Provision for Depreciation 48,023 44,112
Net Utility Plant 88,480 89,303
Non-Utility Property - Net 47 48
Total Utility Plant and Other Investments 88,527 89,351
Current Assets:
Cash and Temporary Cash Investments 753 472
Accounts Receivable:
Customers, Net 11,254 11,002
Accrued Unbilled Revenue 1,339 1,217
Others 4,726 2,736
Associated Companies 429 470
Plant Materials and Operating Supplies (at average cost) 939 767
Other Current Assets 393 422
Total Current Assets 19,833 17,086
Other Assets (Note A) 15,618 14,976
Total Assets $ 123,978 $ 121,413
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Equity $ 37,045 $ 37,180
Non-Redeemable Preferred Stock 6,130 6,130
Long-Term Debt 36,500 38,000
Total Capitalization 79,675 81,310
Current Liabilities:
Long-Term Debt Due Within One Year 1,500 1,500
Notes Payable 1,259
Accounts Payable:
Public 282 603
Associated Companies 17,371 9,509
Customer Deposits 992 1,210
Taxes Accrued 1,777 1,441
Dividends Accrued 72 72
Interest Accrued 981 1,070
Other Current Liabilities 431 7,391
Total Current Liabilities 24,665 22,796
Deferred Credits:
Unamortized Investment Credit 2,743 2,927
Other Deferred Credits 7,979 6,814
Total Deferred Credits 10,722 9,741
Accumulated Deferred Taxes 8,916 7,566
Commitments and Contingencies (Note H)
Total Liabilities and Capitalization $ 123,978 $ 121,413
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Blackstone Valley Electric Company
Statement of Capitalization
December 31,
(In Thousands)
<CAPTION>
1994
1995 (Restated)
<S> <C> <C>
Common Stock, $50 par value, authorized 233,000
shares, issued and outstanding 184,062 shares $ 9,203 $ 9,203
Other Paid-in Capital 17,908 17,908
Retained Earnings 9,934 10,069
Total Common Equity 37,045 37,180
Non-Redeemable Cumulative Preferred Stock:
4.25%, $100 par value, 35,000 shares <F1> 3,500 3,500
5.60%, $100 par value, 25,000 shares <F1> 2,500 2,500
Premium 130 130
Total Non-Redeemable Cumulative Preferred Stock 6,130 6,130
Long-Term Debt:
First Mortgage Bonds:
9 1/2% due 2004 (Series B) 13,500 15,000
10.35% due 2010 (Series C) 18,000 18,000
Variable Rate Demand Bonds Due 2014 <F2> 6,500 6,500
38,000 39,500
Less Portion Due Within One Year 1,500 1,500
Total Long-Term Debt 36,500 38,000
Total Capitalization $ 79,675 $ 81,310
<FN>
<F1> Authorized and Outstanding.
<F2> Weighted average interest rate was 3.9% for 1995 and 2.9% for 1994.
</FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
BLACKSTONE VALLEY ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
(A) Nature of Operations and Summary of Significant Accounting
Policies:
General: Blackstone Valley Electric Company (Blackstone or the Company) is
principally engaged in the distribution and sale of electric energy.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The accounting policies and practices of Blackstone are subject to
regulation by FERC and RIPUC with respect to its rates and accounting.
Blackstone conforms with generally accepted accounting principles, as applied
in the case of regulated public utilities, and conforms with the accounting
requirements and ratemaking practices of the RIPUC. A description of the
significant accounting policies follows.
Restatement: The Company has restated prior period balance sheets to
correct an error in the accrual of property tax expense. The Company had
previously over-accrued property tax expense. This correction increased
retained earnings by $1.9 million, lowered taxes accrued by $3.0 million and
increased accumulated deferred taxes by $1.1 million.
Reclassifications: Certain prior period amounts on the financial
statements have been reclassified to conform with current
presentation.
Transactions with Affiliates: The Company is a wholly-owned
subsidiary of EUA. In addition to its investment in the Company, EUA
has interests in other retail and wholesale utility companies, a
service corporation, and three other non-utility companies.
Transactions between Blackstone and other affiliated companies
include the following: purchased power costs billed by Montaup of
approximately $95,683,000 in 1995, $94,944,000 in 1994 and
$97,774,000 in 1993; accounting, engineering and other services
rendered by EUA Service of approximately $10,448,000 in 1995,
$9,524,000 in 1994 and $9,335,000 in 1993; and operating revenue from
the rental of transmission facilities to Montaup of approximately
$3,047,000 in 1995, $2,665,000 in 1994 and $2,884,000 in 1993.
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 were equivalent to a composite rate of
approximately 3.9% in 1995, 1994, and 1993 based on the average
depreciable property balances at the beginning and end of each year.
Other Assets: The components of Other Assets at December 31,
1995 and 1994 are detailed as follows (in thousands):
1995 1994
Regulatory Assets:
Unamortized losses on reacquired debt $ 455 $ 486
Deferred SFAS 109 costs (Note B) 1,996 2,164
Deferred SFAS 106 costs (Note H) 1,017 1,017
Mendon Road Judgment (Note H) 6,591 5,857
Other regulatory assets 959 1,590
Total regulatory assets 11,018 11,114
Other deferred charges and assets:
Unamortized debt expenses 710 795
Other 3,890 3,067
Total Other Assets $15,618 $14,976
Regulatory Accounting: Blackstone is subject to certain
accounting rules that are not applicable to other industries. These
accounting rules allow regulated companies, in appropriate
circumstances, to establish regulatory assets and liabilities, which
defer the current financial impact of certain costs that are expected
to be recovered in future rates. Blackstone believes that its
operations continue to meet the criteria established in these
accounting standards. Effects of legislation and/or regulatory
initiatives or EUA's own initiatives such as "Choice and Competition"
could ultimately cause Blackstone to no longer follow these
accounting rules. In such an event, a non-cash write-off of
regulatory assets and liabilities could be required at that time.
Allowance for Funds Used During Construction (AFUDC): AFUDC
represents the estimated cost of borrowed and equity funds used to
finance the Company'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 rate used
in calculating AFUDC was 8.6% in 1995, 10.0% in 1994 and 9.8% in
1993.
Operating Revenues: Revenues are based on billing rates
authorized by the RIPUC. The Company 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. In addition the Company also accrues the difference
between fuel and purchased power costs incurred and fuel and
purchased power costs billed to its customers.
Federal Income Taxes: The general policy of Blackstone 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 regulatory commissions.
Blackstone has provided deferred income taxes on certain income
and expense items that are accounted for in different periods for
financial accounting purposes than for income tax purposes. Prior
to 1987, AFUDC and certain costs for pensions, employee benefits and
payroll-related insurances and payroll taxes applicable to
construction activity, which were included in utility plant, were
deducted currently for income tax purposes. Deferred taxes on these
amounts and on certain differences created by the use of different
depreciation methods in the years prior to 1981 have not been
provided. The tax benefits on these items have been flowed through
in accordance with approved rate orders of the RIPUC.
As permitted by the regulatory commissions, it is the policy of
the Company to defer recognition of annual investment tax credits and
to amortize these credits over the productive lives of the related
assets.
Cash and Temporary Cash Investments: Blackstone considers all
highly liquid investments and temporary cash investments with a
maturity of three months or less when acquired to be cash
equivalents.
New Accounting Standard: In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" (FAS 121), effective for fiscal
year 1996. FAS 121 requires all regulatory assets, assets which were
established as a result of high probability of recovery in a
regulated environment, to continue to meet that high probability of
recovery at each balance sheet date. Based on the current regulatory
framework, management does not expect that adoption of this standard
will have a material effect on Blackstone's financial position or
results of operation. However, this assumption may change in the
future as changes are made in the current regulatory framework or as
competitive factors influence wholesale and retail pricing in the
electric utility industry.
(B) Income Taxes:
Components of income and deferred tax expense for the years 1995,
1994, and 1993 are as follows:
_________________________________________________________________
(In Thousands) 1995 1994 1993
Federal:
Current $1,329 $1,436 $1,751
Deferred 1,133 176 409
Investment Tax Credit, Net (184) 253 (176)
$2,278 1,865 1,984
State:
Current 1 20 15
Deferred 68 (11)
69 20 4
Charged to Operations 2,347 1,885 1,988
Charged to Other Income:
Current 3 46 (9)
Total $2,350 $1,931 $1,979
====== ====== ======
Total income tax expense was different than the amounts computed
by applying federal income tax statutory rates to book income subject
to tax for the following reasons:
__________________________________________________________________
(In Thousands) 1995 1994 1993
Federal Income Tax Computed
at Statutory Rates $2,327 $1,980 $2,217
(Decreases) Increases in Tax from:
Equity Component of AFUDC (12) (14) (15)
Consolidated Tax Savings (15) (125) (51)
Depreciation Differences 262 260 358
Amortization of ITC (184) (194) (176)
State Taxes, Net of Federal
Income Tax Benefit 45 13 3
Cost of Removal (67) (110) (245)
Other (6) 121 (113)
Total Income Tax Expense $2,350 $1,931 $1,978
====== ====== ======
Blackstone adopted Statement of Financial Accounting Standard
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 the 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, 1995 and 1994 no valuation allowance was deemed necessary for
total deferred tax assets. Total deferred tax assets and liabilities
for 1995 and 1994 are comprised as follows:
Deferred Tax Deferred Tax
Assets Liabilities
($000) ($000)
1995 1994 1995 1994
Plant Related Plant Related
Differences $1,730 $1,980 Differences $ 8,540 $8,192
Alternative Refinancing
Minimum Tax 0 69 Costs 155 165
Revenue Clauses 0 203 Pensions 556 536
Pensions 501 201
Other 609 642 Other 2,496 712
Total $2,840 $3,095 Total $11,747 $9,605
====== ====== ======= ======
Blackstone has recorded on its Balance Sheets as of December 31,
1995 and 1994 a regulatory liability to ratepayers of approximately
$3.4 million and $3.7 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, 1995 and
1994, a regulatory asset of approximately $2.0 million and $2.2
million, respectively, has been recorded, representing the cumulative
amount of federal income taxes on temporary depreciation differences
which were previously flowed through to ratepayers.
(C) Capital Stock:
There were no changes in the number of shares of common or
preferred stock during the years ended December 31, 1995 and 1994.
In the event of involuntary liquidation, the holders of non-redeemable
preferred stock of Blackstone are entitled to $100 per share plus accrued
dividends. In the event of voluntary liquidation,
or if redeemed at the option of the Company, each share of the non-redeemable
preferred stock is entitled to accrued dividends and to: 4.25% issue, $104.40;
5.60% issue, $103.82.
Under the terms and provisions of the First Mortgage Indenture
and of the issues of preferred stock of Blackstone, certain
restrictions are placed upon the payment of dividends on common stock
by the Company. At the years ended December 31, 1995 and 1994, the
respective capitalization ratios were in excess of the minimum which
would make these restrictions effective.
(D) Retained Earnings:
Under the provisions of Blackstone's First Mortgage Indenture,
retained earnings in the amount of $4,937,576 were unrestricted as
to the payment of cash dividends on its common stock at December 31,
1995.
(E) Long-Term Debt:
Blackstone's First Mortgage Bonds are collateralized by
substantially all of its utility plant.
Blackstone's Variable Rate Demand Bonds are collateralized by an
irrevocable letter of credit which expires on January 21, 1997. The
letter of credit permits extensions on an annual basis upon mutual
agreement of the bank and Blackstone.
The aggregate amount of Blackstone's cash sinking fund
requirements and maturities for long-term debt for each of the five
years following 1995 is $1.5 million.
(F) Lines of Credit:
The EUA System Companies, which include Blackstone, maintain
short-term lines of credit with various banks aggregating
approximately $150 million. At December 31, 1995, unused short-term
lines of credit amounted to approximately $111 million. These credit
lines are available to other EUA System companies under joint credit
line arrangements. In accordance with informal agreements with
various banks, commitment fees are required to maintain certain lines
of credit. Blackstone had $1.3 million of short-term borrowings
outstanding at year end. During 1995, Blackstone's weighted average
interest rate for short-term borrowings was 6.1%.
(G) Fair Value of Financial Instruments:
The following methods 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.
Long-Term Debt: The fair value of the Company's long-term debt
was based on quoted market prices for such securities.
The estimated fair values of the Company's financial instruments
at December 31, 1995 are as follows (dollars in thousands):
Carrying Fair
Amount Value
Cash and Temporary
Cash Investments $ 753 $ 753
Long-Term Debt $38,000 $39,366
(H) Commitments and Contingencies:
Pensions: Blackstone participates with other EUA System
companies in retirement plans which are non-contributory, defined
benefit plans covering substantially all of their employees
(Retirement Plan). Retirement Plan benefits are based on years of
service and average compensation over the four years prior to
retirement. It is the EUA System's policy to fund the Retirement
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 the Retirement Plan, including
amounts related to the 1995 voluntary retirement incentive, was
$271,682 in 1995, $38,487 in 1994 and $(175,796) in 1993 and included
the following components:
1995 1994 1993
Service cost - benefits earned
during the period $ 605,703 $ 696,133 $ 567,204
Interest cost on projected
benefit obligation 2,346,136 2,186,115 2,186,619
Act. loss (return) on assets (9,560,143) 396,900 (4,710,888)
Net amortization and deferrals 6,470,282 (3,240,661) 1,781,269
Net periodic pension
expense (income) $ (138,022) $ 38,487 $ (175,796)
Voluntary retirement incentive 409,704
Total periodic pension
expense (income) $ 271,682 $ 38,487 $ (175,796)
========== =========== ===========
Assumptions used to determine pension cost:
Discount Rate 8.25% 7.25% 8.75%
Compensation Increase Rate 4.75% 4.75% 6.00%
Long-Term Return on Assets 9.50% 9.50% 10.00%
The discount rate and compensation increase rate used to
determine pension costs were changed effective January 1, 1996 to
7.25% and 4.25%, respectively. The funded status of the Retirement
Plan cannot be presented separately for Blackstone as it participates
in the Retirement Plan with other subsidiaries of EUA.
The one-time voluntary retirement incentive also resulted in
approximately $310,000 of non-qualified pension benefits which were
expensed in 1995. At December 31, 1995, approximately $185,000 is
included in other liabilities for the unfunded benefits.
EUA also maintains non-qualified supplemental retirement plans
for certain officers of the EUA System (Supplemental Plans).
Benefits provided under the Supplemental Plans are based primarily
on compensation at retirement date. EUA maintains life insurance on
the participants of the Supplemental Plans to fund in whole, or in
part, its future liabilities under the Supplemental Plans. For the
years ended December 31, 1995, 1994 and 1993 expenses related to the
Supplemental Plans were approximately $306,000, $147,000 and
$568,000, 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
Blackstone for all qualified employees.
Blackstone adopted FAS106, "Employers' 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. Under
FAS106 the present value of future benefits is recorded as a periodic
expense over employee service periods through the date they become
fully eligible for benefits. With respect to periods prior to
adopting FAS106, EUA elected to recognize accrued costs (the
Transition Obligation) over a period of 20 years, as permitted by
FAS106. The resultant annual expense, including amortization of the
Transition Obligation and net of capitalized and deferred amounts,
was approximately $1.3 million in 1995, $1.5 million in 1994 and $1.3
million in 1993. The total cost of Post-Retirement Benefits other
than Pensions for 1995, 1994 and 1993 includes the following
components (in thousands):
1995 1994 1993
Service cost $ 191 $ 299 $ 266
Interest cost 1,170 1,323 1,504
Actual return on plan assets (111) (20) (10)
Amortization of transition obligation 829 866 866
Net other amortization & deferrals (239) (10) (3)
Net periodic post-retirement benefit costs 1,840 2,458 2,623
Voluntary Retirement Incentive 90
Total periodic post-retirement benefit costs $1,930 $2,458 $2,623
Assumptions:
Discount rate 8.25% 7.25% 8.75%
Health care cost trend rate-near-term 11.00% 13.00% 13.00%
Health care cost trend rate-long-term 5.00% 5.00% 6.25%
Compensation increase rate 4.75% 4.75% 6.00%
Rate of return on plan assets 5.50% 5.50% 5.50%
Reconciliation of funded status:
1995 1994 1993
Accumulated post-retirement benefit obligation (APBO):
Retirees $(8,235) $ (7,498) $ (8,783)
Active employees fully eligible for benefits (2,825) (2,589) (3,327)
Other active employees (3,052) (4,093) (4,622)
Total $(14,112) $(14,180) (16,732)
Fair Value of assets (primarily
notes and bonds) 924 364 84
Unrecognized transition obligation 12,083 13,328 14,068
Unrecognized net (gain) loss (2,217) (2,358) 956
(Accrued) prepaid post-retirement
benefit cost $ (3,322) $(2,846) $ (1,624)
The discount rate and compensation increase rate used to determine post-
retirement benefit costs were changed effective January 1, 1996 to 7.25% and
4.25%, respectively and were used to calculate the funded status of Post-
Retirement benefits at December 31, 1995.
Increasing the assumed health care cost trend rate by 1% each year would
increase the total post-retirement benefit cost for 1995 by approximately
$177,000 and increase the total accumulated post-retirement benefit obligation
by $1.5 million.
Blackstone has also established an irrevocable external Voluntary
Employee's Beneficiary Association (VEBA) Trust Fund as required by the
aforementioned regulatory decisions. Contributions to the VEBA fund commenced
in March 1993 and totaled approximately $1.1 million during 1995, $800,000
during 1994 and $600,000 during 1993.
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 Blackstone's 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.
Blackstone 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. Blackstone has 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 Blackstone 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 carriers in these
matters.
On December 13, 1994, the United States District Court for the District of
Massachusetts (District Court) issued a judgment against Blackstone, finding
Blackstone liable to the Commonwealth of Massachusetts (Commonwealth) for the
full amount of response costs incurred by the Commonwealth in the cleanup of a
by-product of manufactured gas at a site at Mendon Road in Attleboro,
Massachusetts. The judgment also found Blackstone liable for interest and
litigation expenses calculated to the date of judgment. The total liability is
approximately $5.9 million, including approximately $3.6 million in interest
which has accumulated since 1985. Due to the uncertainty of the ultimate
outcome of this proceeding and anticipated recoverability, Blackstone recorded
the $5.9 million District Court judgment as a deferred debit. This amount is
included with Other Assets at December 31, 1995 and 1994.
Blackstone filed a Notice of Appeal of the District Court's judgment and
filed its brief with the United States Court of Appeals for the First Circuit
(First Circuit) on February 24, 1995. On October 6, 1995 the First Circuit
vacated the District Court's judgment and ordered the District Court to refer
the matter to the EPA to determine whether the chemical substance, ferric
ferrocyanide (FFC), contained within the by-product is a hazardous substance.
On January 20, 1995, Blackstone entered into an escrow agreement with the
Commonwealth whereby Blackstone deposited $5.9 million with an escrow agent who
transferred the funds into an interest bearing money market account. The
distribution of the proceeds of the escrow account will be determined upon the
final resolution of the judgment. No additional interest expense will accrue
on the judgment amount.
On January 28, 1994, Blackstone filed a complaint in the District Court,
seeking, among other relief, contribution and reimbursement from Stone &
Webster Inc., of New York City and several of its affiliated companies (Stone &
Webster), and Valley Gas Company of Cumberland, Rhode Island (Valley) for any
damages incurred by Blackstone regarding the Mendon Road site. On November 7,
1994, the court denied motions to dismiss the complaint which were filed by
Stone & Webster and Valley. This proceeding was stayed in December 1995
pending final EPA determination as to whether FFC is hazardous.
In addition, Blackstone has notified certain liability insurers and has
filed claims with respect to the Mendon Road site, as well as other sites.
Blackstone reached settlement with one carrier for reimbursement of legal costs
related to the Mendon Road case. In January 1996, Blackstone received $1.2
million in connection with
this settlement.
As of December 31, 1995, Blackstone had incurred costs of approximately
$4.1 million (excluding the $5.9 million Mendon Road judgment) in connection
with these sites. These amounts have been financed primarily by internally
generated cash. Blackstone is currently amortizing all of its incurred costs
over a five-year period and is recovering certain of those costs in rates.
As a general matter, Blackstone will seek to recover costs relating to
environmental proceedings in its rates. Blackstone applied for and received
authority to recover in rates certain of the incurred costs over a five-year
period. The Company estimates that additional costs (excluding the Mendon Road
judgment) may be incurred at these sites through 1997 of up to approximately
$2.5 million by it and the other responsible parties. Estimated amounts after
1997 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, Blackstone does not believe
that the ultimate impact of the environmental costs will be material to its
financial position and thus, no loss provision is required at this time.
A number of scientific studies in the past several years have examined the
possibility of health effects from electric and magnetic fields (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 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. Management cannot predict the impact, if
any, which legislation or other developments concerning EMF may have on
Blackstone.
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 or more tons per year of oxides of nitrogen. Rhode
Island has also issued similar regulations requiring that RACT be implemented
at all stationary sources potentially emitting 50 or more tons per year of
oxides of nitrogen. Montaup has initiated compliance through, among other
things, selective, noncatalytic reduction processes.
Report of Independent Accountants
To the Directors and Shareholder of
Blackstone Valley Electric Company:
We have audited the accompanying balance sheets and statement of capitalization
of Blackstone Valley Electric Company (the Company) as of December 31, 1995 and
1994, and the related statements of income, retained earnings and cash flows
for each of the three years in the period ended December 31, 1995. 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,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 5, 1996
Company Profile
Eastern Edison Company (Eastern Edison or the Company) is a retail
electric utility company. Eastern Edison supplies retail electric service to
approximately 178,000 customers in 22 cities and towns in southeastern
Massachusetts. The largest communities served are the cities of Brockton and
Fall River, Massachusetts. Eastern Edison is a wholly owned subsidiary of
Eastern Utilities Associates (EUA). EUA owns directly all of the shares of
common stock of Eastern Edison, Blackstone Valley Electric Company (Blackstone)
and Newport Electric Corporation (Newport). Blackstone and Newport are retail
electric utility companies operating in northern Rhode Island and south coastal
Rhode Island, respectively. Eastern Edison owns all of the permanent
securities of Montaup Electric Company (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 Corporation (EUA
Cogenex), EUA Energy Investment Corporation (EUA Energy), EUA Ocean State
Corporation (EUA Ocean State) and EUA Service Corporation (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 services 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. The holding company system of EUA, the three retail
subsidiaries, Montaup, EUA Service, EUA Cogenex, EUA Energy and EUA Ocean State
is referred to as the EUA System.
MARKET FOR EASTERN EDISON'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of Eastern Edison's common stock is owned beneficially and of record
by Eastern Utilities Associates (EUA).
The dividends paid on Eastern Edison's common stock during the past two
years are as follows:
Dividends Paid Dividends Paid
1995 Per Share 1994 Per Share
First Quarter $2.53 First Quarter $2.22
Second Quarter 0.43 Second Quarter 2.46
Third Quarter 0.46 Third Quarter 2.49
Fourth Quarter 0.45 Fourth Quarter 2.77
No dividends may be paid on Eastern Edison's common stock unless full
dividends on Eastern Edison's outstanding Preferred Stock for all past and the
current quarterly dividend periods have been paid or declared and set apart for
payment, nor may any dividends be paid on Eastern Edison's common stock if
Eastern Edison is in default on any sinking fund obligation provided for its
Preferred Stock. See also Notes C, D and E of Notes to Consolidated Financial
Statements.
SELECTED CONSOLIDATED FINANCIAL DATA
For the Years Ended December 31,
(In Thousands) 1995 1994 1993 1992 1991
_______________________________________________________________________
Operating Revenues $420,069 $418,424 $417,021 $420,188 $414,609
Net Earnings 31,455 31,395 28,145 29,231 23,763
Total Assets 739,198 756,045 742,273 776,510 785,365
Capitalization:
Long-Term Debt 222,313 229,224 264,134 269,995 304,991
Redeemable Preferred
Stock-Net 26,218 25,257 24,824 28,171 29,558
Non-Redeemable
Preferred Stock 8,949 8,949
Common Equity 244,368 225,064 223,005 220,257 211,126
Total Capitalization $492,899 $479,545 $511,963 $527,372 $554,624
======== ======== ======== ======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND REVIEW OF
OPERATIONS
Overview
Consolidated Net Earnings for 1995 of $31.5 million were slightly higher
than 1994 net earnings of $31.4 million. The 1995 net earnings include a one-
time charge of approximately $1.5 million, on an after tax basis, related to
the voluntary retirement incentive offer. Also impacting 1995 earnings was
Montaup's $13.9 million annual wholesale rate reduction effective May 21, 1994.
Offsetting these impacts somewhat were lower litigation expenses resulting from
favorable court decisions rendered in 1995, lower interest expense and
successful cost control efforts including ongoing savings of the voluntary
retirement incentive (See below).
1994 Consolidated Net Earnings represented a $3.3 million increase over
the prior year. Growth of 1.8% in primary kilowatthour (KWH) sales and lower
long-term debt interest and preferred dividend requirements in 1994 as compared
to 1993 were the major factors contributing to this increase. Early KWH sales
gains in the year were offset somewhat by unusually mild weather in the fourth
quarter.
Voluntary Retirement Incentive Offer
On March 15, 1995, EUA announced a corporate reorganization which, among
other things, consolidated management of Eastern Edison, Blackstone and
Newport. As part of the reorganization, a voluntary retirement incentive (VRI)
was offered to 66 professionals of the EUA System including 22 employees of
Eastern Edison and Montaup. Forty-nine of those eligible for the program,
including 16 employees of Eastern Edison and Montaup, accepted the incentive
and retired effective June 1, 1995. The cost to Eastern Edison of this
incentive program amounted to a one-time $2.4 million pre-tax ($1.5 million
after-tax) charge to second quarter 1995 earnings. The estimated payback
period is approximately 18 months.
Comparison of Financial Results
Operating Revenues - 1995 vs 1994
Operating Revenues for 1995 increased by approximately $1.6 million as
compared to 1994. This change is primarily due to increased purchased power
and fuel expense recoveries aggregating $5.8 million and additional revenues
related to the full year impact of Newport becoming an all-requirements
customer of Montaup on May 21, 1994. Offsetting these increases somewhat were
decreased conservation and load management (C&LM) expense recoveries of $3.9
million and the full year impact of Montaup's wholesale rate reduction
implemented on May 21, 1994 which lowered 1995 revenues by approximately $4.9
million.
Operating Revenues - 1994 vs 1993
Operating Revenues for 1994 increased by approximately $1.4 million from
those of 1993. Contributing to this increase were the recoveries of increased
fuel expense of approximately $2.9 million and higher primary KWH sales of 1.8%
resulting in approximately $2.7 million of growth in base revenues. Offsetting
these positive impacts somewhat was a decrease in revenues of approximately
$3.2 million resulting from the net impact of Montaup's 1994 rate decrease.
Expenses - 1995 vs 1994
The Company's most significant expense items continue to be fuel and
purchased power expenses which together comprised about 58.9% of total
operating expenses for 1995.
Fuel expense increased by $3.4 million or 3.8% in 1995 as compared to
1994. This change was caused by an increase of 14.1% in the average cost of
fuel offset by decreases in total energy generated and purchased of 11.1%.
Purchased Power demand expense for 1995 increased $2.6 million to $125.6
million from 1994 amounts. This increase was due primarily to the impact of
Newport's purchased power contracts assumed by Montaup effective May 21, 1994,
coincident with Newport becoming an all-requirements customer of Montaup,
aggregating approximately $4.8 million and increased billings from the Ocean
State Power project and the Yankee nuclear units aggregating $5.2 million.
These increases were offset somewhat by decreases of approximately $6.7 million
resulting from purchase power contracts totaling 41 MW which expired in October
1994, and a net $700,000 reduction in purchases from other power suppliers.
Other Operation and Maintenance expenses are comprised of two components,
Direct Controllable and Indirect. Direct Controllable expenses include expense
items such as salaries, fringe benefits, insurance, maintenance, etc. Indirect
expenses include items over which the Company has limited short-term control
and include such expense items as Montaup's joint ownership interests in
generating facilities such as Seabrook Unit 1 and Millstone Unit 3, power
contracts where transmission rental fees are fixed, conservation and load
management expenses that are fully recovered in revenues and expenses related
to accounting standards such as Statement of Financial Accounting Standard No.
106, "Employers' Accounting for Post Retirement Benefits-Retirement Benefits
Other Than Pensions" (FAS106).
Other Operation and Maintenance expenses for 1995 decreased by
approximately $5.7 million or 5.6% from 1994 levels. This decrease is due
primarily to lower C&LM expense totaling $4.3 million, decreased legal costs of
approximately $2.1 million and successful cost control efforts. Offsetting
these year-to date decreases somewhat were increases in Montaup power contract
expenses and FAS106 expenses aggregating $1.4 million.
Net interest charges decreased by $1.4 million in 1995 versus 1994. Other
Interest expense provisions recorded in June 1994 aggregating $1.0 million
related to Internal Revenue Service audits of prior years' consolidated income
tax returns were primarily responsible for this change.
Expenses - 1994 vs 1993
Fuel expense for 1994 increased $2.4 million from 1993. Approximately
$2.1 million of 1994's increase in fuel expense relates to the assumed Newport
contracts. A 4.8% decrease in the average cost of fuel in 1994 essentially
offset the Company's 6.6% increase in total energy requirements.
Purchased Power expense increased from 1993 by $1.6 million or 1.3%. This
increase was primarily due to the impact of Montaup's assumption of Newport's
purchased power contracts aggregating approximately $9.8 million. Offsetting
this increase somewhat were expired purchased power contracts totaling
approximately 41 MW and lower billings by Montaup suppliers aggregating
approximately $8.6 million.
Total Other Operating and Maintenance expenses decreased by approximately
$1.7 million or 1.7% in 1994 due primarily to decreases in indirect expenses
including approximately $2.3 million in maintenance expense of Montaup's
jointly owned units and an additional $2.3 million reduction related to
allocated charges from EUA Service Corporation recorded as other operating and
maintenance expenses by the company. Partially offsetting these reductions
were increases of $2.4 million in conservation and load management expenses and
$400,000 of increased transmission and distribution expenses.
Depreciation and Amortization expense decreased by $900,000 or 3.4% in
1994. The decrease was due primarily to Montaup's Seabrook Unit II loss
amortization which was completed in 1993.
Other Income & (Deductions) - Net increased $1.2 million or over 100% in
1994. The increase is due primarily to the recognition of approximately
$900,000 of capitalized costs on nuclear fuel contract buy-out costs that had
previously been deferred.
Interest Expense on Long-Term Debt decreased by $4.1 million or 18.1% for
1994 as compared to 1993 primarily due to Eastern Edison's 1993 refinancing of
$195 million of long-term debt at lower rates.
Other Interest Expense increased $1.7 million or 58.1% in 1994 compared to
1993. The increase was a result of the recognition of approximately $1.0
million in interest related to Internal Revenue Service audits and the
allocation methodology adopted in mid 1993 by EUA Service Corporation. Under
this new methodology, EUA Service Corporation interest expenses are being
allocated to other interest expense. They had previously been recorded as
other operating expenses.
Preferred Dividend Requirements decreased $1.0 million or 32.7% in 1994
due to a full-year impact of Eastern Edison's 1993 Preferred Stock financing
activity.
Electric Utility Industry Restructuring
The electric industry is in a period of transition from a traditional rate
regulated environment to a competitive marketplace. While competition in the
wholesale electric market is not new, electric utilities are facing impending
competition in the retail sector.
In 1995, Eastern Edison, Blackstone and Newport participated with
collaborative groups in their respective states consisting of other utilities,
industrial users, environmental groups and consumer advocates in submitting
similar sets of interdependent principles with their respective state
regulatory commissions addressing electric utility industry restructuring.
These filings were intended to be statements of the consensus position by the
signatories of the principles that should underlie any electric industry
restructuring proposal and include but are not limited to principles addressing
stranded cost recovery, unbundling of services and demand side management
programs. Each set of principles was submitted on the condition they be
approved in full by the respective Commissions.
The Rhode Island Public Utilities Commission (RIPUC) accepted all but one
of the principles submitted by the Rhode Island Collaborative with minor
modifications to certain language in others and added a new principle which
supports negotiation (as opposed to litigation) to resolve conflicts as
restructuring moves forward and directed the Rhode Island Collaborative to
proceed with negotiations on the issues presented in the principles and to
submit a progress report, which was submitted in February 1996. The one
principle that was not accepted provided for subsidization of renewable energy
sources.
In February 1996 a bill was introduced in the Rhode Island legislature
that, if enacted, would allow customer choice of electricity supplier
commencing January 1, 1998 for large industrial customers and phasing in all
customers by January 1, 2001. The proposed legislation also provides for
recovery of "stranded investments" through a transition charge initially set at
three cents per KWH.
EUA believes that the development of the proposed legislation should have
been conducted in a public forum so that all interested stakeholders could have
participated. EUA believes that competition, if done right, can benefit
customers, however, there are substantial issues about the proposed legislation
which EUA is currently reviewing.
The Massachusetts Department of Public Utilities (MDPU) issued an order
enumerating principles, similar to those submitted by the Massachusetts
Collaborative, that describe the key characteristics of a restructured electric
industry and provides for, among other things, customer choice of electric
service providers, services, pricing options and payment terms, an opportunity
for customers to share in the benefits of increased competition, full and fair
competition in the generation markets and incentive regulation for distribution
services where competition cannot exist. This order sets out principles for
the transition from a regulated to a competitive industry structure and
identifies conditions for the transition process which will require investor-
owned utilities to unbundle rates, provide consumers with accurate price
signals and allow customers choice of generation services. The order also
provides for the principle of recovery of net, non-mitigable stranded costs by
investor-owned utilities resulting from the industry restructuring.
Each Massachusetts investor-owned utility is required to file
restructuring proposals for moving from the current regulated industry
structure to a competitive generation market. The schedule for the filing
requirement is staggered. The initial group of utilities was required to file
their proposals in February 1996. The second group is required to file within
three months of the MDPU's orders on the first group of submissions. Eastern
Edison Company filed its proposal, "Choice and Competition" (see below) with the
first group of proposals and is awaiting MDPU review.
In January 1996, EUA unveiled its preliminary proposal for a restructured
electric utility industry called "Choice and Competition" and began discussions
with the Rhode Island and Massachusetts Collaboratives. The plan proposes,
among other things: choice of power supplier by all customers as early as
January 1998; open access transmission services; performance based rates for
electric distribution services; all utility generation competing for power
sales and; a transition charge allowing regional utilities the opportunity to
recover, among other things, the costs of past commitments to nuclear and
independent power. The company believes the plan, which requires participation
by all New England parties, satisfies the principles adopted in both Rhode
Island and Massachusetts, and provides a fair and equitable transition to a
competitive electric utility marketplace for all parties.
Historically, electric rates have been designed to recover a utility's
full costs of providing electric service including recovery of investment in
plant assets. Also, in a regulated environment, electric utilities are subject
to certain accounting rules that are not applicable to other industries. These
accounting rules allow regulated companies, in appropriate circumstances, to
establish regulatory assets and liabilities, which defer the current financial
impact of certain costs that are expected to be recovered in future rates.
Eastern Edison believes that its operations continue to meet the criteria
established in these accounting standards. Effects of legislation and/or
regulatory initiatives or EUA's own initiatives such as "Choice and
Competition" could ultimately cause Eastern Edison to no longer follow these
accounting rules. In such an event, a non-cash write-off of regulatory assets
and liabilities could be required at that time.
In addition, if legislative or regulatory changes and/or competition
result in electric rates which do not fully recover the Company's costs, a
write-down of plant assets could be required pursuant to Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (FAS121) issued in March 1995, effective
for fiscal year 1996. See "Notes to Consolidated Financial Statements", Note A
for further discussion of FAS121.
Rate Activity
On March 21, 1994, Montaup filed an application with the Federal Energy
Regulatory Commission (FERC) for authorization to reduce its wholesale rates by
$10.1 million, or three percent. Montaup supplies electricity at wholesale to
EUA's retail electric utilities - Eastern Edison, Blackstone and Newport - and
to two non-affiliated municipal utilities. This application was designed to
match more closely Montaup's revenues with its decreasing cost of doing
business resulting from, among other things, a reduced rate base, lower
interest costs and successful cost control efforts.
On May 21, 1994, Montaup began billing the reduced rates, and on April 14,
1995, FERC approved a settlement agreement between Montaup and the intervenors
in the case calling for an annual reduction of approximately $13.9 million
(inclusive of the filed $10.1 million reduction).
Montaup refunded to its customers the difference collected between the
$10.1 million filed reduction and the $13.9 million settled reduction in April
1995. Montaup had previously reserved for that refund.
Financial Condition and Liquidity
Eastern Edison's and Montaup's need for permanent capital is primarily
related to the construction of facilities required to meet the needs of
existing and future customers. For 1995, 1994 and 1993, Eastern Edison's and
Montaup's combined cash construction expenditures were $23.4 million, $23.6
million and $23.0 million, respectively. Internally generated funds provided
approximately 236% of Eastern Edison's and Montaup's combined cash construction
requirements in 1995.
Cash construction expenditures are expected to be approximately $28.1
million, $25.9 million and $17.9 million in 1996, 1997 and 1998, respectively,
and will be financed with internally generated funds.
In the utility industry, cash construction requirements not met with
internally generated funds are obtained through short-term borrowings which are
ultimately funded with permanent capital. EUA System companies, including
Eastern Edison and Montaup, maintain short-term lines of credit with various
banks aggregating approximately $150 million. These credit lines are available
to other affiliated companies under joint credit line arrangements. At
December 31, 1995, unused short-term lines of credit amounted to approximately
$111 million. At December 31, 1995, Eastern Edison had $4.2 million of
outstanding short-term debt and Montaup had no outstanding short-term debt.
In addition to construction expenditures, projected requirements for
maturing long-term debt securities through 2000 are: $7 million in 1996 and $60
million in 1998. The Company has no sinking fund requirements until the year
2003.
Environmental Matters
Eastern Edison, Montaup and other companies owning generating units from
which power is obtained are subject, like other electric utilities, to
environmental and land use regulations at the federal, state and local levels.
The United States Environmental Protection Agency (EPA), and certain state and
local authorities, have jurisdiction over releases of pollutants, contaminants
and hazardous substances into the environment and have broad authority to set
rules and regulations in connection therewith, such as the Clean Air Act
Amendments of 1990, which could require installation of pollution control
devices and remedial actions. In 1994, an environmental audit program designed
to ensure compliance with environmental laws and regulations and to identify
and reduce liability was instituted by EUA.
Because of the nature of Eastern Edison's and Montaup's business, various
by-products and substances are produced or handled which are classified as
hazardous under the rules and regulations promulgated by such authorities.
Eastern Edison and Montaup generally provide 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 the EUA System companies to notify
liability insurers and to initiate claims, however, Eastern Edison and Montaup
are unable to predict whether liability, if any, will be assumed by, or can be
enforced against, the insurance carriers in these matters.
As of December 31, 1995, Eastern Edison and Montaup had incurred costs of
approximately $500,000, in connection with these sites. These amounts have
been financed primarily by internally generated cash. Montaup is currently
recovering certain of its incurred environmental costs in rates.
Eastern Edison and Montaup estimate that additional costs of up to
$500,000 may be incurred at these sites through 1997 by themselves and the
other responsible parties. Estimates beyond 1997 cannot be made since site
studies, which are the basis of these estimates, have not been completed.
As a result of the recoverability in current rates of environmental costs,
and the uncertainty regarding both its estimated liability, as well as
potential contributions from insurance carriers, Eastern Edison and Montaup do
not believe that the ultimate impact of environmental costs will be material to
their financial position and thus, no loss provision is required at this time.
A number of scientific studies in the past several years have examined the
possibility of health effects from electric and magnetic fields (EMF) that are
found everywhere there is electricity. Research to date has not conclusively
established a direct causal relationship between EMF exposure and human health.
Additional studies, which are intended to provide a better understanding of the
subject, are continuing. Management cannot predict the ultimate outcome of the
EMF issue.
Other
Montaup is recovering through rates its share of estimated decommissioning
costs for the Millstone Unit 3 and Seabrook Unit 1 nuclear generating units.
Montaup's share of the currently allowed estimated total costs to decommission
Millstone Unit 3 is approximately $19.2 million in 1995 dollars and Seabrook
Unit 1 is approximately $12.5 million in 1995 dollars. These figures are based
on studies performed for the lead owners of the units. Montaup also pays into
decommissioning reserves, pursuant to contractual arrangements, at other
nuclear generating facilities in which it has an equity ownership interest or
life-of-unit entitlement. Such expenses are currently recovered through rates.
The Company occasionally makes forward-looking projections of expected
future performance or statements of our plans and objectives. These forward-
looking statements may be contained in filings with the Securities and Exchange
Commission, press releases and oral statements. Actual results could differ
materially from these statements, therefore, no assurances can be given that
such forward-looking statements and estimates will be achieved.
Managements' Discussion and Analysis of Financial Condition and Review of
Operations provides a summary of information regarding the Company's financial
condition and results of operation and should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements in arriving at a complete understanding of such matters.
<TABLE>
Eastern Edison Company and Subsidiary
Consolidated Statement of Income
Years Ended December 31,
(In Thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating Revenues:
From Affiliated Companies $ 133,388 $ 126,481 $ 121,934
Other 286,681 291,943 295,087
Total Operating Revenues 420,069 418,424 417,021
Operating Expenses:
Fuel 90,881 87,522 85,066
Purchased Power - Demand 125,594 122,995 121,379
Other Operation and Maintenance 73,638 80,300 80,781
Voluntary Retirement Incentive 2,413
Affiliated Company Transactions 23,386 22,446 23,700
Depreciation and Amortization 26,039 25,546 26,450
Taxes - Other than Income 10,233 10,543 9,287
- Income 15,653 15,830 15,945
Total Operating Expenses 367,837 365,182 362,608
Operating Income 52,232 53,242 54,413
Equity in Earn. of Jointly Owned Companies 1,646 1,700 1,750
Allowance for Other Funds Used During
Construction 473 263 289
Other Income (Deductions) - Net 407 897 (289)
Income Before Interest Charges 54,758 56,102 56,163
Interest Charges:
Interest on Long-Term Debt 18,277 18,488 22,584
Other Interest Expense 3,541 4,525 2,863
Allowance for Borrowed Funds Used During
Construction (Credit) (503) (294) (385)
Net Interest Charges 21,315 22,719 25,062
Net Income 33,443 33,383 31,101
Preferred Dividend Requirements 1,988 1,988 2,956
Consolidated Net Earnings
Applicable to Common Stock $ 31,455 $ 31,395 $ 28,145
Consolidated Statement of Retained Earnings
Years Ended December 31,
(In Thousands)
1995 1994 1993
Retained Earnings - Beginning of Year $ 105,574 $ 103,515 $ 100,767
Net Income 33,443 33,383 31,101
Amort. of Preferred Stock Redemption Premium (961) (596) (597)
Total 138,056 136,302 131,271
Dividends Paid:
Preferred 1,988 1,988 2,977
Common 11,190 28,740 24,779
Retained Earnings - End of Year $ 124,878 $ 105,574 $ 103,515
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Eastern Edison Company and Subsidiary
Consolidated Statements of Cash Flows
Years Ended December 31,
(In Thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 33,443 $ 33,383 $ 31,101
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating Activities:
Depreciation and Amortization 29,852 28,981 29,477
Amortization of Nuclear Fuel 3,647 3,310 5,136
Deferred Taxes 2,694 5,500 2,981
Investment Tax Credit, Net (942) (348) (1,016)
All. for Funds Used During Construction (473) (263) (289)
Other - Net 1,219 (3,285) (3,331)
Changes to Operating Assets and Liabilities:
Accounts Receivable (7,055) (7,667) (7)
Fuel, Materials and Supplies (1,678) 194 899
Accounts Payable 827 3,495 (792)
Accrued Taxes 1,807 (2,814) 835
Other - Net (6,630) 4,485 (5,063)
Net Cash Provided from Operating Activities 56,711 64,971 59,931
CASH FLOW FROM INVESTING ACTIVITIES:
Construction Expenditures (23,423) (23,613) (22,967)
Net Cash (Used in) Investing Activities (23,423) (23,613) (22,967)
CASH FLOW FROM FINANCING ACTIVITIES:
Issuances:
Long-Term Debt 0 195,000
Preferred Stock 0 30,000
Long-Term Debt (35,000) 0 (205,000
Preferred Stock 0 (41,600)
Premium on Reacquisition
and Financing Expenses (62) (12,430)
Common Stock Dividends Paid (11,190) (28,740) (24,779)
Preferred Dividends Paid (1,988) (1,988) (2,977)
Net Increase in Short Term Debt 4,158
Net Cash (Used in) Financing Activities (44,020) (30,790) (61,786)
Net (Decrease) Increase in Cash
and Temporary Cash Investments (10,732) 10,568 (24,822)
Cash and Temporary Cash Investments at
Beginning of Year 11,265 697 25,519
Cash and Temporary Cash Investments at
End of Year $ 533 $ 11,265 $ 697
Cash paid during the year for:
Interest (Net of Amts. Capitalized) $ 18,343 $ 18,406 $ 27,200
Income Taxes $ 9,044 $ 15,877 $ 13,372
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Eastern Edison Company and Subsidiary
Consolidated Balance Sheets
December 31,
(In Thousands)
<CAPTION>
ASSETS
1995 1994
<S> <C> <C>
Utility Plant and Other Investments:
Utility Plant $ 798,706 $ 789,596
Less Accumulated Provision for Depreciation 241,673 228,241
Net Utility Plant 557,033 561,355
Non-Utility Property - Net 2,705 2,705
Investment in Jointly Owned Companies 13,223 13,488
Other Investments (at cost) 50 50
Total Utility Plant and Other Investments 573,011 577,598
Current Assets:
Cash and Temporary Cash Investments 533 11,265
Accounts Receivable:
Customers 25,730 25,896
Others 2,348 3,800
Accrued Unbilled Revenue 9,158 8,283
Associated Companies 25,861 18,061
Fuel (at average cost) 7,385 6,344
Plant Materials and Operating Supplies (at avg. cost) 3,937 3,300
Prepayments and Other Current Assets 4,170 5,952
Total Current Assets 79,122 82,901
Other Assets (Note A) 87,065 95,546
Total Assets $ 739,198 $ 756,045
LIABILITIES AND CAPITALIZATION
Capitalization:
Common Equity $ 244,368 $ 225,064
Redeemable Preferred Stock - Net 29,665 29,665
Preferred Stock Redemption Cost (3,447) (4,408)
Long-term Debt - Net 222,313 229,224
Total Capitalization 492,899 479,545
Current Liabilities:
Long-term Debt Due Within One Year 7,000 35,000
Notes Payable 4,158
Accounts Payable:
Public 27,242 24,578
Associated Companies 3,913 5,749
Customer Deposits 1,103 1,101
Taxes Accrued 3,219 1,411
Interest Accrued 4,999 5,486
Other Current Liabilities 7,332 15,259
Total Current Liabilities 58,966 88,584
Deferred Credits:
Unamortized Investment Credit 17,842 18,784
Other Deferred Credits 40,725 49,476
Total Deferred Credits 58,567 68,260
Accumulated Deferred Taxes 128,766 119,656
Commitments and Contingencies (Note J)
Total Liabilities and Capitalization $ 739,198 $ 756,045
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Eastern Edison Company and Subsidiary
Consolidated Statement of Capitalization
December 31,
(In Thousands)
<CAPTION>
1995 1994
<S> <C> <C>
Common Stock:
$25 par value, authorized and outstanding
2,891,357 shares $ 72,284 $ 72,284
Other Paid-In Capital 47,249 47,249
Common Stock Expense (43) (43)
Retained Earnings 124,878 105,574
Total Common Equity 244,368 225,064
Redeemable Preferred Stock:
6 5/8%, $100 par value, 300,000 shares <F1> 30,000 30,000
Expense, Net of Premium (335) (335)
Preferred Stock Redemption Cost (3,447) (4,408)
Total Redeemable Preferred Stock 26,218 25,257
Long-Term Debt:
First Mortgage and Collateral Trust Bonds:
5 7/8% due 1998 20,000 20,000
6 7/8% due 2003 40,000 40,000
8% due 2023 40,000 40,000
5 3/4% due 1998 40,000 40,000
6.35% due 2003 8,000 8,000
4.875% due 1996 7,000 7,000
8.90% Secured Medium-Term Notes due 1995 10,000
7.78% Secured Medium-Term Notes due 2002 35,000 35,000
Pollution Control Revenue Bond:
5 7/8% due 2008 40,000 40,000
Unsecured Medium-Term Notes:
9-9 1/4% due 1995 - Series A 25,000
Unamortized (Discount) - Net (687) (776)
229,313 264,224
Less Portion Due Within One Year 7,000 35,000
Total Long-Term Debt 222,313 229,224
Total Capitalization $ 492,899 $ 479,545
<FN>
<F1> Authorized and Outstanding.
</FN>
The accompanying notes are an integral part of the financial statements.
</TABLE>
EASTERN EDISON COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994, and 1993
(A) Nature of Operations and Summary of Significant Accounting
Policies:
General: Eastern Edison Company (Eastern Edison or the Company) and its
wholly owned subsidiary, Montaup Electric Company (Montaup) are principally
engaged in the generation, transmission, distribution and sale of electric
energy.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 $10.1
million at December 31, 1995 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
Eastern Utilities Associates (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 Valley Electric
Company (Blackstone) and Newport Electric Corporation (Newport) aggregating
approximately $133,841,000 in 1995, $126,237,000 in 1994, and $121,447,000 in
1993; accounting, engineering and other services rendered by EUA Service
Corporation to Eastern Edison and Montaup of approximately $29,264,000,
$27,365,000, and $27,418,000 in 1995, 1994 and 1993, respectively; and
operating expense from the rental of transmission and generation facilities by
Blackstone and Newport to Montaup aggregating approximately $4,351,000 in 1995,
$3,627,000 in 1994, and $2,884,000 in 1993. Montaup rental of transmission
facilities to Newport for the years 1995, 1994 and 1993 amounted to zero,
$149,000 and $487,000, 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 1995, 1994 and 1993 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, Montaup continues
to earn a return on the net investment of the unit.
Other Assets: The components of Other Assets at December 31, 1995 and 1994
are detailed as follows:
(in Thousands) 1995 1994
Regulatory Assets:
Unamortized losses on
reacquired debt $14,981 $16,693
Unrecovered plant and
decommissioning cost 10,100 18,400
Deferred SFAS 109 costs (Note B) 44,387 39,506
Deferred SFAS 106 costs (Note J) 2,365 2,723
Other regulatory assets 4,790 7,280
Total regulatory assets 76,623 84,602
Other deferred charges and assets:
Unamortized debt expenses 2,847 3,345
Other 7,595 7,599
Total Other Assets $87,065 $95,546
Regulatory Accounting: Eastern Edison and Montaup are subject to certain
accounting rules that are not applicable to other industries. These accounting
rules allow regulated companies, in appropriate circumstances, to establish
regulatory assets and liabilities, which defer the current financial impact of
certain costs that are expected to be recovered in future rates. Eastern
Edison and Montaup believe that their operations continue to meet the criteria
established in these accounting standards. Effects of legislation and/or
regulatory initiatives or EUA's own initiatives such as "Choice and
Competition" could ultimately cause Eastern Edison and Montaup to no longer
follow these accounting rules. In such an event, a non-cash write-off of
regulatory assets and liabilities could be required at that time.
Allowance for Funds Used During Construction (AFUDC): 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 9.4% in 1995, 9.6% in 1994 and 9.3%
in 1993.
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.
New Accounting Standard: In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standard No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (FAS 121), effective for fiscal year 1996. FAS 121 requires all
regulatory assets, assets which were established as a result of high
probability of recovery in a regulated environment, to continue to meet that
high probability of recovery at each balance sheet date. Based on the
current regulatory framework, management does not expect that adoption of this
standard will have a material effect on Eastern Edison's financial position or
results of operation. However, this assumption may change in the future as
changes are made in the current regulatory framework or as competitive factors
influence wholesale and retail pricing in the electric utility industry.
(B) Income Taxes:
Components of income tax expense for the years 1995, 1994, and
1993 are as follows:
_________________________________________________________________
(In Thousands) 1995 1994 1993
Federal:
Current $11,387 $ 9,143 $11,554
Deferred 3,679 4,697 2,841
Investment Tax Credit, Net (942) (348) (1,016)
$14,124 13,492 13,379
State:
Current 2,447 1,468 2,359
Deferred (918) 870 207
1,529 2,338 2,566
Charged to Operations 15,653 15,830 15,945
Charged to Other Income:
Current 522 617 392
Deferred (67) (67) (67)
Total $16,108 $16,380 $16,270
Total income tax expense was different than the amounts computed by applying
federal income tax statutory rates to book income subject to tax for the
following reasons:
________________________________________________________________
(In Thousands) 1995 1994 1993
Federal Income Tax Computed
at Statutory Rates $17,343 $17,417 $16,580
(Decreases) Increases in Tax from:
Equity Component of AFUDC (165) (92) (101)
Consolidated Tax Savings (108) (651) (314)
Depreciation Differences (264) (321) 851
Amortization and Utilization
of ITC (942) (945) (1,066)
State Taxes, Net of Federal
Income Tax Benefit (2,625) 1,614 1,735
Cost of Removal 58 (226) (273)
Other 2,811 (416) (1,142)
Total Income Tax Expense $16,108 $16,380 $16,270
(B) Income Taxes -- Continued
Eastern Edison and Montaup adopted Statement of Financial Accounting
Standard 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,
1995 and 1994 no valuation allowance was deemed necessary for total deferred
tax assets. The total deferred tax assets and liabilities at December 31, 1995
and 1994 are comprised as follows:
Deferred Tax Deferred Tax
Assets Liabilities
($000) ($000)
1995 1994 1995 1994
Plant Related Plant Related
Differences $16,181 $16,221 Differences $146,632 $137,072
Alternative Refinancing
Minimum Tax 4,470 4,479 Costs 1,691 1,772
Litigation Provisions 0 795 Pensions 940 1,233
Pensions 1,070 514
Other 1,060 1,866 Other 1,901 3,024
Total $22,781 $23,875 Total $151,164 $143,101
As of December 31, 1995 and 1994, the Company had recorded on its
Consolidated Balance Sheet a regulatory liability to ratepayers of
approximately $23.6 million and $25.2 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, 1995 and 1994, a regulatory asset
of approximately $44.4 million and $39.5 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 $92,000 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, 1995 and 1994, 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 an annual
mandatory sinking fund sufficient to redeem 15,000 shares 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
Mortgage and Collateral Trust Bonds, retained earnings in the amount of
$120,723,852 as of December 31, 1995 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 $236 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 1995 are: $7
million in 1996, none in 1997, $60 million in 1998 and none in 1999 and 2000.
(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, 1995, unused short-term lines of credit were approximately $111
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 1995, the weighted average interest rate for short-term
borrowings by the Company was 6.1%.
(H) Jointly Owned Facilities:
At December 31, 1995, in addition to the stock ownership interests
discussed in Note A, Summary of Significant Accounting Policies - Jointly Owned
Companies, Montaup had direct ownership interests in the following electric
generating facilities (dollars in thousands):
Accumulated
Provision For Net Construc-
Utility Depreciation Utility tion
Percent Plant in and Plant in Work in
Owned Service Amortization Service Progress
Montaup:
Canal Unit 2 50.00% $ 71,715 $42,657 $29,058 $2,085
Wyman Unit 4 1.96% 4,050 2,020 2,030
Seabrook Unit 1 2.90% 194,735 23,993 170,742 454
Millstone Unit 3 4.01% 178,231 40,482 137,749 42
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, 1995,
Montaup's total net investment in nuclear fuel of the Seabrook and Millstone
Units amounted to $3.0 million and $2.2 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 on the Consolidated Statement of Income.
(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, 1995 are as follows (dollars in thousands):
Carrying Fair
Amount Value
Cash and Temporary Cash Investments $ 11,265 $ 11,265
Redeemable Preferred Stock 30,000 31,800
Long-Term Debt $ 230,000 $233,292
(J) Commitments and Contingencies:
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 Department of Energy (DOE) for disposal of spent nuclear
fuel in accordance with the Nuclear Waste Policy Act (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 a prescribed fee for the disposal of
such wastes and nuclear 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 now estimates that
a permanent disposal site for spent fuel will not be ready to accept
fuel for storage or disposal until as late as 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 which with rack additions can
accommodate its spent fuel for the projected life of the unit. At the
Seabrook Project, there is on-site storage capacity which, with rack
additions, will be sufficient to at least the year 2011.
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, 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 $19.2 million in 1995 dollars, and Seabrook Unit 1 is $12.5 million in 1995
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 (Retirement Plan). Retirement Plan
benefits are based on years of service and average compensation over the four
years prior to retirement. It is the EUA System's policy to fund the
Retirement 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 the Retirement Plan, including amounts
related to the 1995 voluntary retirement incentive, was $632,566 in 1995,
$249,858 in 1994 and $(326,517) in 1993 and included the following components:
1995 1994 1993
Service cost - benefits earned during
the period $ 1,503,804 $ 1,783,085 $ 1,414,382
Interest cost on projected benefit
obligation 5,574,660 5,217,393 5,133,080
Actual loss (return) on assets (22,158,215) 926,980 (10,891,951)
Net amortization and deferrals 14,855,399 (7,677,600) 4,017,972
Net periodic pension (income) expense $ (224,352) $ 249,858 $ ( 326,517)
Voluntary retirement incentive 856,918
Total periodic pension
expense (income) $ 632,566 $ 249,858 $ (326,517)
========= ======== =========
Assumptions used to determine pension cost:
1995 1994 1993
Discount Rate 8.25% 7.25% 8.75%
Compensation Increase Rate 4.75% 4.75% 6.00%
Long-Term Return on Assets 9.50% 9.50% 10.00%
The discount rate and compensation increase rate used to determine pension
costs were changed effective January 1, 1996 to 7.25% and 4.25%, respectively.
The funded status of the Retirement Plan cannot be presented separately for
Eastern Edison and Montaup as they participate in the Retirement Plan with
other subsidiaries of EUA.
The one-time voluntary retirement incentive also resulted in approximately
$800,000 of non-qualified pension benefits which were expensed in 1995. At
December 31, 1995, approximately $449,000 is included in other liabilities for
these unfunded benefits.
EUA also maintains non-qualified supplemental retirement plans for certain
officers of the EUA System (Supplemental Plans). Benefits provided under the
Supplemental Plans are based primarily on compensation at retirement date. EUA
maintains life insurance on the participants of the Supplemental Plans to fund
in whole, or in part, its future liabilities under the Supplemental Plans. For
the three years ended December 31, 1995, 1994 and 1993 expenses related to the
supplemental plan were approximately $825,000, $266,000, and $1.3 million,
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, "Employers' 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. Under FAS106 the
present value of future benefits is recorded as a periodic expense over
employee service periods through the date they become fully eligible for
benefits. With respect to periods prior to adopting FAS106, EUA elected to
recognize accrued costs (the Transition Obligation) over a period of 20 years,
as permitted by FAS106. The resultant annual expense, including amortization
of the Transition Obligation and net of amounts capitalized and deferred, was
approximately $4.0 million in 1995, $3.4 million in 1994 and $3.4 million in
1993. The total cost of Post-Retirement Benefits other than Pensions for 1995,
1994 and 1993 includes the following components (in thousands):
1995 1994 1993
Service cost $ 565 $ 880 $ 767
Interest cost 2,926 3,252 3,556
Actual return on plan assets (388) (75) (41)
Amortization of transition obligation 1,965 2,026 2,040
Net other amortization & deferrals (632) (50) (40)
Net periodic post-retirement benefit costs 4,436 6,033 6,282
Voluntary retirement incentive 470
Total post-retirement benefit costs $ 4,906 $6,033 $6,282
Assumptions
Discount rate 8.25% 7.25% 8.75%
Health care cost trend rate-near-term 11.00% 13.00% 13.00%
-long-term 5.00% 5.00% 6.25%
Compensation increase rate 4.75% 4.75% 6.00%
Rate of return on plan assets-union 8.50% 8.50% 8.50%
- non-union 5.50% 5.50% 5.50%
Reconciliation of funded status:
1995 1994 1993
Accumulated post-retirement benefit obligation (APBO):
Retirees $(23,223) $(20,227) $(20,556)
Active employee fully eligible for benefits (3,649) (4,116) (7,669)
Other active employees (7,711) (9,255) (9,488)
Total (34,583) (33,598) (37,713)
Fair Value of assets (primarily notes
and bonds) 3,830 2,169 747
Unrecognized transition obligation 27,726 30,007 31,674
Unrecognized net (gain) loss (2,142) (3,158) 2,597
(Accrued)/prepaid post-retirement
benefit cost $ (5,169) $ (4,580) $ (2,695)
The discount rate and compensation increase rate used to determine post-
retirement benefit costs were changed effective January 1, 1996, to 7.25% and
4.25%, respectively and were used to calculate the funded status of Post-
Retirement Benefits at December 31, 1995.
Increasing the assumed health care cost trend rate by 1% each year would
increase the total post-retirement benefit cost for 1995 by approximately
$478,000 and increase the total accumulated post-retirement benefit obligation
by approximately $3.7 million.
Eastern Edison and Montaup have also established an irrevocable external
Voluntary Employees' Beneficiary Association (VEBA) Trust Fund as required by
the aforementioned regulatory decisions. Contributions to the VEBA fund
commenced in March 1993 and contributions totaling approximately $3.2 million
and $2.9 million were made during 1995 and 1994, respectively.
Long-Term Purchased Power Contracts: Montaup 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, 1995, the aggregate annual minimum commitments for such contracts
are approximately $129 million in 1996 and 1997, $128 million in 1998, $127
million in 1999, $123 million in 2000 and will aggregate $1.4 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 currently
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
United States Environmental Protection Agency (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, 1995, Eastern Edison and Montaup have incurred costs of
approximately $500,000 in connection with the foregoing environmental matters
and estimate that additional expenditures may be incurred through 1997 up to
$500,000.
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
1997 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 EPA
regarding emissions from electric generating facilities and a host of other
sources. Montaup generating facilities were first affected in 1995, when EPA
regulations took effect for facilities owned by Montaup. Montaup's coal-fired
Somerset Unit No. 6 is utilizing lower sulfur coal to meet the 1995 air
standards. Eastern Edison does not anticipate the impact from the Amendments
to be material to its financial position.
In April 1992, the Northeast States for Coordinated Air Use Management
(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 electric and magnetic fields (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 $5.2 million of the outstanding debt of these two companies. In
addition, Montaup has a minimum rental commitment which totals approximately
$13.5 million under a noncancellable transmission facilities support
agreement for years subsequent to 1995.
Other
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).
In April 1995, Montaup filed a motion for summary judgement, and in June
1995, the court granted Montaup's motion. In July, Aquidneck filed for appeal
of the court's decision.
Montaup, EUA and EUA Service intend to vigorously contest the appeal and
continue to 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 accompanying consolidated balance sheets and consolidated
statement of capitalization of Eastern Edison Company and its subsidiary (the
Company) as of December 31, 1995 and 1994, and the related consolidated
statements of income, retained earnings and cash flows for each of the three
years in the period ended December 31, 1995. 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,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 5, 1996
Exhibit 23-1.03
Consent of Independent Accountants
To the Trustees and Shareholders of
Eastern Utilities Associates:
We consent to the incorporation by reference in the registration statements of
Eastern Utilities Associates on Forms S-4 and S-8 (File No. 33-50099 and 33-
49897, respectively) of our reports dated March 5, 1996, on our audits of the
consolidated financial statements and financial statement schedule of Eastern
Utilities Associates and subsidiaries as of December 31, 1995 and 1994, and for
the years ended December 31, 1995, 1994 and 1993, which reports are
incorporated by reference or included in this Annual Report on Form 10-K.
/s/Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 19, 1996
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