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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: February 10, 1998
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(Date of earliest event reported)
BOSTON EDISON COMPANY
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(Exact name of registrant as specified in its charter)
Massachusetts 1-2301 04-1278810
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation File Number) Identification No.)
800 Boylston Street, Boston, Massachusetts 02199
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(Address of principal executive offices) (Zip Code)
617-424-2000
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(Registrant's telephone number, including area code)
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Item 5. Other Events
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Electric Utility Industry Restructuring
On January 28, 1998, the Massachusetts Department of Telecommunications and
Energy (DTE), formerly the Department of Public Utilities (DPU), approved
Boston Edison Company's (the Company's) restructuring settlement agreement
that was filed in July 1997. The DTE found that the settlement agreement
substantially complied or was consistent with key provisions of a
Massachusetts law enacted in November 1997 establishing a comprehensive
framework for the restructuring of the electric utility industry. Major
provisions of the settlement agreement include the ability for retail electric
customers to choose their electricity supplier (referred to as retail access)
as of March 1, 1998 (the retail access date). Customers who choose not to
participate in retail access will have the option of continuing to buy power
from the Company's electric delivery business at "Standard Offer" prices.
Upon the retail access date, customers that continue to buy electricity under
the Standard Offer will realize a combined 10% savings from the rates in
effect during 1997. Under the new legislation, Standard Offer customers will
realize another 5% savings in electricity rates, after an adjustment for
inflation, by September 1, 1999. The Company expects to be able to meet this
additional rate reduction as a result of the divestiture of its fossil
generating assets which is discussed below. As part of the settlement
agreement, retail delivery rates of the Company's retained distribution
business include a non-bypassable transition charge designed to recover costs
incurred under the traditional electric ratemaking structure which cannot be
otherwise recovered in a competitive environment. The rates of the Company's
distribution business will continue to be regulated by the DTE based on the
cost of providing distribution service.
In 1997 the Emerging Issues Task Force (EITF) reached consensus on specific
issues raised related to the application of Statement of Financial Accounting
Standards No. 71, Accounting for the Effects of Certain Types of Regulation
(SFAS 71). As part of its consensus, the EITF determined that when
deregulation legislation is passed and regulatory actions have taken place
providing sufficient detail for an enterprise to reasonably determine how the
transition plan will affect the separable portion of its business being
deregulated, the enterprise should stop applying SFAS 71 to that portion of
its business. As a result of the recently passed Massachusetts deregulation
legislation and the DTE order regarding the Company's related settlement
agreement, the Company has determined that, as of December 31, 1997, the
provisions of SFAS 71 no longer apply to the generation portion of its
business. The EITF further determined that book values of assets and
liabilities originating in the separable portion of the business no longer
subject to rate-regulation should be evaluated on the basis of where the
regulated cash flows to realize and settle them will be derived. Net
generating assets recoverable from the proceeds of the fossil divestiture (see
below) and through the non-bypassable transition charge of the Company's
distribution business which continues to be subject to rate-regulation,
therefore, remain on the Company's consolidated balance sheet at December 31,
1997. In addition, approximately 25 percent of the operations and capital
costs, including a return of investment, of Pilgrim Nuclear Power Station will
continue to be collected under wholesale life of the unit contracts. These
contracts continue to be regulated by the Federal Energy Regulatory Commission
and are not impacted by the Company's settlement agreement.
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Divestiture of Fossil Generating Assets
The Company's restructuring settlement agreement includes a provision for the
divestiture of its fossil generating assets no later than six months after the
retail access date. On December 10, 1997, the Company entered into a purchase
and sale agreement with Sithe Energies, Inc., a privately held company
headquartered in New York, to purchase its non-nuclear generating assets. The
proceeds from the sale of these assets will be $536 million. The net book
value of these assets at December 31, 1997 is approximately $450 million. In
addition to the purchase price, Sithe Energies will pay $121 million to the
Company in connection with a six-month transitional power sales agreement
under which the Company will buy power from the generating plants. Sithe
Energies will also be responsible for obligations resulting from the recently
enacted utility restructuring legislation for property tax payments to
communities with non-nuclear power plants. Net proceeds from the divestiture
will be used to reduce the distribution transition charge.
Implementation of the divestiture plan is subject to certain regulatory
approvals including those of the DTE and Federal Energy Regulatory Commission.
The Company anticipates finalization of the divestiture in May 1998.
Under the settlement agreement, severance and employee retraining costs
related to the divestiture are recoverable through the distribution business
transition charge.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOSTON EDISON COMPANY
By: /s/ Robert J. Weafer, Jr.
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Robert J. Weafer, Jr.
Vice President-Finance,
Controller and Chief
Accounting Officer
Date: February 10, 1998
