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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________ to _______________
Commission file number 2-7909
CAMBRIDGE ELECTRIC LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1144610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
(617) 225-4000
(Registrant's telephone number, including area code)
(Former name, address and fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [ x ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock August 1, 1997
Common Stock, $25 par value 346,600 shares
The Company meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-K as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS
(Dollars in thousands)
June 30, December 31,
1997 1996
(Unaudited)
PROPERTY, PLANT AND EQUIPMENT, at original cost $161 684 $161 331
Less - Accumulated depreciation 62 458 61 499
99 226 99 832
Add - Construction work in progress 753 546
99 979 100 378
INVESTMENTS
Equity in nuclear electric power companies 9 956 9 403
Other 5 5
9 961 9 408
CURRENT ASSETS
Cash 118 143
Accounts receivable
Affiliates 729 1 452
Customers 11 408 11 285
Unbilled revenues 2 885 2 751
Prepaid taxes -
Income 2 362 968
Property - 1 704
Inventories and other 2 255 2 023
19 757 20 326
DEFERRED CHARGES
Regulatory Assets 38 574 42 781
Other 1 974 2 258
40 548 45 039
$170 245 $175 151
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CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
CAPITALIZATION AND LIABILITIES
(Dollars in thousands)
June 30, December 31,
1997 1996
(Unaudited)
CAPITALIZATION
Common Equity -
Common stock, $25 par value -
Authorized and outstanding -
346,600 shares, wholly-owned by
Commonwealth Energy System (Parent) $ 8 665 $ 8 665
Amounts paid in excess of par value 27 953 27 953
Retained earnings 9 246 9 233
45 864 45 851
Long-term debt, including premiums, less
maturing debt and current sinking fund
requirements 17 402 17 503
63 266 63 354
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 27 600 18 725
Advances from affiliates 2 865 5 065
Maturing long-term debt - 4 260
30 465 28 050
Other Current Liabilities -
Current sinking fund requirements 100 100
Accounts payable
Affiliates 4 164 4 429
Other 6 430 8 216
Accrued local property and other taxes 28 1 705
Accrued interest 446 475
Other 5 787 3 738
16 955 18 663
47 420 46 713
DEFERRED CREDITS
Accumulated deferred income taxes 14 691 14 355
Yankee Atomic purchased power contract 2 962 3 466
Connecticut Yankee purchased power contract 30 585 35 879
Unamortized investment tax credits and other 11 321 11 384
59 559 65 084
COMMITMENTS AND CONTINGENCIES
$170 245 $175 151
See accompanying notes.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
1997 1996 1997 1996
ELECTRIC OPERATING REVENUES $30 048 $28 368 $63 113 $57 755
OPERATING EXPENSES
Electricity purchased for resale,
transmission and fuel 19 655 18 192 42 862 37 511
Other operation and maintenance 8 548 6 055 14 611 11 961
Depreciation 1 119 1 086 2 238 2 172
Taxes -
Income (283) 859 136 1 271
Local property 757 744 1 534 1 501
Payroll and other 202 192 464 465
29 998 27 128 61 845 54 881
OPERATING INCOME 50 1 240 1 268 2 874
OTHER INCOME 587 1 257 1 025 1 612
INCOME BEFORE INTEREST CHARGES 637 2 497 2 293 4 486
INTEREST CHARGES
Long-term debt 407 435 837 1 378
Other interest charges 481 427 864 538
Allowance for borrowed funds
used during construction (4) (16) (10) (37)
884 846 1 691 1 879
NET INCOME (247) 1 651 602 2 607
RETAINED EARNINGS -
Beginning of period 10 082 7 131 9 233 7 561
Dividends on common stock (589) (260) (589) (1 646)
RETAINED EARNINGS -
End of period $ 9 246 $ 8 522 $ 9 246 $ 8 522
See accompanying notes.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 602 $ 2 607
Effects of noncash items -
Depreciation and amortization 2 238 2 172
Deferred income taxes and investment tax
credits, net (808) 91
Earnings from corporate joint ventures (644) (611)
Dividends from corporate joint ventures 91 333
Change in working capital, exclusive of cash and
interim financing (1 164) 4 291
All other operating items (180) (682)
Net cash provided by operating activities 135 8 201
CASH FLOWS FOR INVESTING ACTIVITIES
Additions to property, plant and equipment
(exclusive of AFUDC) (1 876) (1 658)
Allowance for borrowed funds used during
construction (10) (37)
Net cash used for investing activities (1 886) (1 695)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (589) (1 646)
Proceeds from short-term borrowings 8 875 10 300
Advances from (payments to) affiliates (2 200) 4 975
Long-term debt issues refunded (4 260) (20 000)
Sinking funds payments (100) (100)
Net cash provided by (used for)
financing activities 1 726 (6 471)
Net increase (decrease) in cash (25) 35
Cash at beginning of period 143 239
Cash at end of period $ 118 $ 274
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of capitalized amounts) $ 1 738 $ 2 201
Income taxes $ 883 $ 2 246
See accompanying notes.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) General Information
Cambridge Electric Light Company (the Company) is a wholly-owned subsid-
iary of Commonwealth Energy System. The parent company is referred to in
this report as the "System" and together with its subsidiaries is collec-
tively referred to as "the system." The System is an exempt public utility
holding company under the provisions of the Public Utility Holding Company
Act of 1935 and, in addition to its investment in the Company, has interests
in other utility and several non-regulated companies.
The Company has 150 regular employees including 111 (74%) represented by
a collective bargaining unit. The existing collective bargaining agreement
remains in effect until September 1, 1998. Employee relations have
generally been satisfactory.
During the second quarter of 1997, the system initiated a voluntary
personnel reduction program. For additional information, see the "Personnel
Reduction Program" section under Management's Discussion and Analysis of
Results of Operations.
(2) Significant Accounting Policies
(a) Principles of Accounting
The Company's significant accounting policies are described in Note 2 of
Notes to Financial Statements included in its 1996 Annual Report on
Form 10-K filed with the Securities and Exchange Commission. For interim
reporting purposes, the Company follows these same basic accounting policies
but considers each interim period as an integral part of an annual period
and makes allocations of certain expenses to interim periods based upon
estimates of such expenses for the year.
The unaudited financial statements for the periods ended June 30, 1997
and 1996 reflect, in the opinion of the Company, all adjustments (consisting
of only normal recurring accruals, except for those described in the
"Personnel Reduction Program" section under Management's Discussion and
Analysis of Results of Operations) necessary to summarize fairly the results
for such periods. In addition, certain prior period amounts are
reclassified from time to time to conform with the presentation used in the
current period's financial statements.
Income tax expense is recorded using the statutory rates in effect
applied to book income subject to tax recorded in the interim period.
The results for interim periods are not necessarily indicative of
results for the entire year because of seasonal variations in the consump-
tion of energy and the accrual of the costs associated with the Personnel
Reduction Program referred to above.
(b) Regulatory Assets and Liabilities
The Company is regulated as to rates, accounting and other matters by
various authorities including the Federal Energy Regulatory Commission
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CAMBRIDGE ELECTRIC LIGHT COMPANY
(FERC) and the Massachusetts Department of Public Utilities (DPU).
Based on the current regulatory framework, the Company accounts for the
economic effects of regulation in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
the Effects of Certain Types of Regulation." The Company has established
various regulatory assets in cases where the DPU and/or the FERC have
permitted or are expected to permit recovery of specific costs over time.
Similarly, regulatory liabilities established by the Company are required to
be refunded to customers over time. Effective January 1, 1996, the Company
adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." SFAS No. 121 imposes stricter
criteria for regulatory assets by requiring that such assets be probable of
future recovery at each balance sheet date. SFAS No. 121 did not have an
impact on the Company's financial position upon adoption. This result may
change as modifications are made to the current regulatory framework due to
ongoing electric industry restructuring efforts in Massachusetts. If all or
a separable portion of the Company's operations becomes no longer subject to
the provisions of SFAS No. 71, a write-off of related regulatory assets and
liabilities would be required, unless some form of transition cost recovery
continues through rates established and collected for the Company's
remaining regulated operations. In addition, the Company would be required
to determine any impairment to the carrying costs of deregulated plant and
inventory assets. However, on December 30, 1996, the DPU issued an order
containing "Model Rules" for industry restructuring that management believes
would essentially allow full recovery of stranded costs. For additional
information relating to industry restructuring, see the "Electric Industry
Restructuring" section under Management's Discussion and Analysis of Results
of Operations.
The principal regulatory assets included in deferred charges were as
follows:
June 30, December 31,
1997 1996
(Dollars in thousands)
Connecticut Yankee unrecovered plant
and decommissioning costs $30 585 $35 879
Yankee Atomic unrecovered plant
and decommissioning costs 2 962 3 466
Postretirement benefits costs
including pensions 2 906 2 988
Other 2 121 448
$38 574 $42 781
The regulatory liabilities, reflected in the accompanying Balance
Sheets and related to deferred income taxes, were $3.2 million at June 30,
1997 and December 31, 1996.
(2) Commitments and Contingencies
(a) Construction Program
The Company is engaged in a continuous construction program presently
estimated at $27 million for the five-year period 1997 through 2001. Of
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CAMBRIDGE ELECTRIC LIGHT COMPANY
that amount, $5.9 million is estimated for 1997. As of June 30, 1997 the
Company's actual construction expenditures amounted to approximately $1.9
million including an allowance for funds used during construction. The
Company expects to finance these expenditures on an interim basis with
internally-generated funds and short-term borrowings which are ultimately
expected to be repaid with the proceeds from sales of long-term debt
securities.
The program is subject to periodic review and revision because of
factors such as changes in business conditions, rates of customer growth,
effects of inflation, maintenance of reliable and safe service, equipment
delivery schedules, licensing delays, availability and cost of capital and
environmental regulations.
(b) Maine Yankee Nuclear Power Plant
The Company has a 4% equity ownership interest (approximately $3
million at June 30, 1997), with a power entitlement of 31.2 MW, in a
nuclear power plant located in Wiscasset, Maine. The plant, operated by
Maine Yankee Atomic Power Company (Maine Yankee), experienced two outages
during 1996 and has remained out of service since the second outage which
began in December of 1996. On August 6, 1997, the Board of Directors of
Maine Yankee voted to permanently cease power operations and begin the
process of decommissioning the plant. The decision to shut down the plant
was based on an economic analysis of the costs, risks and uncertainties
associated with operating the plant compared to those associated with
closing and decommissioning the plant. Maine Yankee is in the process of
developing an updated decommissioning cost estimate and expects to file a
revised decommissioning cost study with FERC in the fall of 1997 as part
of a rate filing reflecting the permanent shutdown of the plant. As a
result, the Company is unable to estimate its obligation to Maine Yankee
at this time. Based upon regulatory precedent, Maine Yankee believes that
it would continue to collect from its power purchasers (including the
Company) decommissioning costs, unrecovered plant investment and other
costs associated with the permanent closure of the plant over the remain-
ing period of the plant's operating license that expires in 2008. The
Company does not believe the ultimate outcome of the early closing of this
plant would have a material adverse effect on its operations and believes
that recovery of these FERC-approved costs would continue to be allowed in
its rates at the retail level. Therefore, the Company will record a
liability for its estimated share of decommissioning costs and a
corresponding regulatory asset in the third quarter.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
Item 2. Management's Discussion and Analysis of Results of Operations
The following is a discussion of certain significant factors which have
affected operating revenues, expenses and net income during the periods
included in the accompanying condensed statements of income. This discussion
should be read in conjunction with the Notes to Condensed Financial Statements
appearing elsewhere in this report.
A summary of the period to period changes in the principal items included
in the condensed statements of income for the three and six months ended June
30, 1997 and 1996 and unit sales for these periods is shown below:
Three Months Six Months
Ended June 30, Ended June 30,
1997 and 1996 1997 and 1996
Increase (Decrease)
(Dollars in thousands)
Electric Operating Revenues $ 1 680 5.9 % $ 5 358 9.3 %
Operating Expenses -
Electricity purchased for
resale, transmission and fuel 1 463 8.0 5 351 14.3
Other operation and maintenance 2 493 41.2 2 650 22.2
Depreciation 33 3.0 66 3.0
Taxes -
Federal and state income (1 142) (132.9) (1 135) (89.3)
Local property and other 23 2.5 32 1.6
2 870 10.6 6 964 12.7
Operating Income (1 190) (96.0) (1 606) (55.9)
Other Income (670) (53.3) (587) (36.4)
Income Before Interest Charges (1 860) (74.5) (2 193) (48.9)
Interest Charges 38 4.5 (188) (10.0)
Net Income $(1 898) (115.0) $(2 005) (76.9)
Unit Sales (MWH)
Retail 8 396 2.8 7 137 1.2
Wholesale 2 091 5.5 17 554 16.8
Total unit sales 10 487 3.1 24 691 3.4
The following is a summary of unit sales for the periods indicated:
Unit Sales (MWH)
Three Months Six Months
Period Ended Total Retail Wholesale Total Retail Wholesale
June 30, 1997 350 038 309 987 40 051 747 051 625 158 121 893
June 30, 1996 339 551 301 591 37 960 722 360 618 021 104 339
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CAMBRIDGE ELECTRIC LIGHT COMPANY
Operating Revenues, Electricity Purchased For Resale, Transmission and Fuel
Operating revenues for the first half of 1997 increased approximately $5.4
million or 9.3% due primarily to the increases in electricity purchased for
resale ($6.3 million) and fuel ($727,000), offset, in part by a decrease in
transmission ($1.7 million).
The Company's total unit sales for the current six-month period increased
3.4% due to higher retail sales (1.2%), reflecting increases in sales to
residential and commercial customers, offset in part by lower sales to
industrial customers. Also affecting the increase in unit sales were higher
wholesale sales to the New England Power Pool.
During the current quarter and first six months of 1997, purchased power
costs increased approximately $3 million (19.4%) and $6.3 million (19.6%) due
to higher fuel costs and higher costs for replacement power reflecting the
permanent shutdown of Connecticut Yankee during 1996 and the absence of power
from Maine Yankee which remained out of service during the first half of 1997.
Also included in purchased power is an increase in purchases from affiliate
Canal Electric Company's Unit 1 and 2 reflecting the increased availability of
these units.
Operating Expenses
For the current quarter and first half of 1997, operation and maintenance
increased $2,493,000 or 41.2% and $2,650,000 or 22.2%, respectively due
primarily to the recognition of one-time costs ($2.5 million) related to a
Personnel Reduction Program (PRP) initiated during the current quarter (as
further discussed below). The significant decreases in federal and state
income taxes for the current quarter and six-month period were due to a lower
level of pretax income.
Other Income and Interest Charges
The decrease in other income for the current quarter and first six months
of 1997 was primarily due to the absence of a gain relating to the 1996 sale
of parcels of land.
Interest charges for the current six-month period declined by 10% due to
lower long term interest reflecting the repayment of a $20 million (9.97%)
long-term debt issue during the second quarter of 1996, the effect of which
was partially offset by a higher average level of short-term borrowings. The
increase in interest charges during the quarter reflects the higher average
level of short-term borrowings.
Personnel Reduction Program
As initially discussed in the Company's 1996 Annual Report on Form 10-K
filed with the Securities and Exchange Commission, the Company announced the
details of a system-wide voluntary Personnel Reduction Program (PRP) in May
1997. The goal of the PRP is to achieve a reduced, more efficient and more
productive workforce in response to the significant regulatory changes facing
the System's companies. This action follows the recent management
consolidation of the system's electric and gas operations. The expectation is
that the workforce will be reduced by 15% to 20%.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
The PRP is offered to substantially all regular and part-time employees of
the system. Eligibility for employees covered by collective bargaining
agreements is subject to negotiation. The election period is from May 13
through August 29, 1997. The system reserves the right to limit the number of
participants in the program to 300; however, the system expects the final
participation level to exceed this amount.
The program provides severance based on years of service, the continuation
of certain health and dental insurance for specified periods and limited
reimbursement for certain educational and/or outplacement services.
Currently, approximately 14% of the Company's employees have applied for
the PRP. The Company estimates that the cost of termination benefits as
described above, excluding generation-related costs that are being addressed
separately as part of the industry restructuring process, will approximate
$2.5 million which was recorded in the second quarter and had an after-tax
income impact of $1.5 million. The payback period is expected to be less than
one year.
Electric Industry Restructuring
On December 30, 1996, the DPU issued a final order announcing its "Model
Rules and Legislative Proposal" as a guide in the creation of a competitive
market for electric generation in Massachusetts. Legislative proposals
concerning electric industry restructuring were filed by the former Governor
of the Commonwealth of Massachusetts on February 24, 1997, and by the
Massachusetts Legislature's own Joint Committee on Electric Utility
Restructuring (the Committee) on March 20, 1997. Each of the plans proposed
by the DPU, the Governor and the Committee is intended to provide customers
with the opportunity to achieve lower electric bills beginning on the target
date of January 1, 1998.
In its "Model Rules," the DPU has proposed that the minimum structural
reorganization needed to create a competitive market is the functional
separation of generation, transmission and distribution within one integrated
company, and the establishment of a separate marketing affiliate if a company
retains generation assets. Other elements of the DPU's Model Rules provide
that electric customers will be able to buy their power on the open market;
distribution services will remain a service that continues to be provided
exclusively by the existing local distribution companies in clearly defined
service territories; and customers will have three types of electric
generation choices. First, customers may enter into unregulated agreements
with a competitive supplier for the provision of generation. Second,
customers may continue to buy power directly from their electric distribution
company at a price regulated by the DPU, which is known as standard offer
service. Third, customers who have received generation from a competitive
supplier but who, for any reason, have stopped receiving such generation will
be able to receive default generation service provided by distribution
companies at spot market price.
In some regulatory jurisdictions, changes in the electric industry could
reduce the opportunity that currently exists for electric companies to recover
their investment in generating plant and other costs previously approved by
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CAMBRIDGE ELECTRIC LIGHT COMPANY
regulators and included in current rates. These potential losses, which may
result from subjecting electric company generation to the pressures of a
competitive market, are typically referred to as "stranded costs." The single
largest component of stranded costs, which are significant to the system,
relates to above-market purchased power contracts that the Company and
Commonwealth Electric have with non-utility generators. However, the DPU has
concluded that it is in the public interest to provide electric companies a
reasonable opportunity to collect net, non-mitigable stranded costs. The DPU
has proposed that stranded costs associated with owned generation facilities,
regulatory assets, and purchased power obligations be collected over the
expected economic life of the generating facility, the current amortization
schedule of the regulatory asset, or the contractual term of the purchased
power obligation, respectively. The DPU's proposal requires that any stranded
cost recovery for an electric utility be subject to mitigation efforts to
reduce embedded costs over time. The Model Rules specify that mitigation
should include such measures as sales of capacity and energy from owned
generation, renegotiation or buy-out of purchased power contracts, and sales
and voluntary writedowns of assets.
The former Governor's restructuring proposal includes: a standard offer
generation service option for residential and small business customers for a
five-year period; recovery by electric utilities of net, non-mitigable
stranded costs over a 12-year period; the recovery of reasonable employee
transition costs for utility workers directly affected by electric industry
restructuring; and, at a minimum, the functional separation of generation,
transmission and distribution services. The former Governor's legislation
also provides a mechanism for electric utilities to reduce their stranded
costs by financing the renegotiation or buy-out of above-market purchased
power contracts. The bill authorizes the Massachusetts Industrial Finance
Agency to issue electric rate reduction bonds to electric utilities that
receive a financing order from the DPU. The criteria for eligibility to apply
for the financing order include: (1) DPU approval of a plan to provide retail
access and divestiture of non-nuclear generating assets; and (2) demonstration
that such contract buy-out or purchase, including the cost of financing, will
substantially reduce costs to ratepayers.
The Committee issued both a comprehensive report, which outlines options
for the Legislature's consideration as debate on restructuring continues, and
a set of recommendations and a legislative package that is designed to
implement electric industry restructuring in Massachusetts. Elements of the
Committee's legislative proposal include the functional separation of utility
companies into generation, transmission and distribution companies.
Transmission and distribution companies would remain regulated while
generation companies would be unregulated with pricing determined by the
market. The Committee's proposal establishes a retail access date of January
1, 1998 or later, as determined by the DPU, calls for a 10% rate reduction for
all customers and allows for the recovery of certain net, non-mitigable
stranded costs over a ten-year period. The proposal also encourages
divestiture as a mitigation measure by authorizing companies to securitize
stranded costs through the issuance of rate reduction bonds only where the
company has divested itself of non-nuclear generation assets. On May 6, 1997,
the Company and Commonwealth Electric submitted comments on the Committee's
legislative proposal making specific recommendations for changes with respect
to increasing the time frame for recovery of stranded costs including power
contracts, the increased use of securitization and other issues. The
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CAMBRIDGE ELECTRIC LIGHT COMPANY
Massachusetts Legislature, which will render the final passage of any
restructuring law, is now considering the legislative proposals of the DPU,
the former Governor and the Committee.
During the last several months, three Massachusetts electric utilities
announced negotiated settlement agreements with the Massachusetts Attorney
General's Office (Attorney General) that include divestiture of generating
assets, provision for a 10% reduction in customers' bills and recovery of
stranded costs through a non-bypassable access charge. One settlement
agreement has been approved by the DPU. Implementation of any restructuring
settlement may be affected by actions of the Massachusetts Legislature.
The Company and Commonwealth Electric have recently engaged in formal
settlement discussions with the Attorney General and have provided the
Attorney General with information to further the development of a
comprehensive settlement. In the unlikely event that the parties are unable
to complete a settlement, the companies would file a full restructuring plan
with the DPU.
On March 31, 1997, the Company and Commonwealth Electric submitted a
report to the DPU which detailed the proposed auction process for selling
their electric generation assets and entitlements. The process will include a
standard, sealed-bid auction for generation assets and for power contracts
with the securitization of remaining obligations. The auction process would
provide a market-based approach to maximizing stranded cost mitigation and
minimizing the access charges that ratepayers will have to pay for stranded
cost recovery. The Company anticipates that the bidding process will begin
shortly after Labor Day.
As described in Note 2(b) of the Notes to Condensed Financial Statements,
the Company complies with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation." In the event the Company is somehow unable to meet the criteria
for following SFAS No. 71, the accounting impact would be an extraordinary,
non-cash charge to operations in an amount that could be material. Criteria
that could give rise to the discontinuance of SFAS No. 71 include: 1) in-
creasing competition restricting the Company's ability to establish prices to
recover specific costs, and 2) a significant change in the current manner in
which rates are set by regulators. The Company periodically reviews these
criteria to ensure that the continuing application of SFAS No. 71 is
appropriate. Recently, the Securities and Exchange Commission has questioned
the ability of certain utilities continuing the application of SFAS No. 71
where legislation provided for the transition to retail competition. The
issue of when and how to discontinue the application of SFAS No. 71 by
utilities during transition to competition has been referred to the FASB's
Emerging Issues Task Force and guidance on this issue is expected in the near
future. Based on the current evaluation of the various factors and conditions
that are expected to impact future cost recovery, the Company believes that
its regulatory assets, including those related to electric generation, are
probable of future recovery.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is an intervenor in a pending appeal at the
Massachusetts Supreme Judicial Court (SJC) filed by the
Massachusetts Institute of Technology involving a DPU decision
approving a customer transition charge for the recovery of stranded
investment costs. No schedule has been set for a decision from the
SJC. This issue is discussed more fully in the Company's 1996
Annual Report on Form 10-K. At this time, management is unable to
predict the outcome of this proceeding.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule.
Filed herewith as Exhibit 1 is the Financial Data Schedule for the
six months ended June 30, 1997.
Filed herewith as Exhibit 2 is the restated Financial Data Schedule
for the six months ended June 30, 1996.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 1997.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMBRIDGE ELECTRIC LIGHT COMPANY
(Registrant)
Principal Financial and
Accounting Officer:
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: August 14, 1997
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<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, statement of income and statement of cash flows contained in
Form 10-Q of Cambridge Electric Light Company for the six months ended June
30, 1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000016573
<NAME> CAMBRIDGE ELECTRIC LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 99,979
<OTHER-PROPERTY-AND-INVEST> 9,961
<TOTAL-CURRENT-ASSETS> 19,757
<TOTAL-DEFERRED-CHARGES> 40,548
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 170,245
<COMMON> 8,665
<CAPITAL-SURPLUS-PAID-IN> 27,953
<RETAINED-EARNINGS> 9,246
<TOTAL-COMMON-STOCKHOLDERS-EQ> 45,864
0
0
<LONG-TERM-DEBT-NET> 17,402
<SHORT-TERM-NOTES> 30,465
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 100
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 76,414
<TOT-CAPITALIZATION-AND-LIAB> 170,245
<GROSS-OPERATING-REVENUE> 63,113
<INCOME-TAX-EXPENSE> 136
<OTHER-OPERATING-EXPENSES> 61,709
<TOTAL-OPERATING-EXPENSES> 61,845
<OPERATING-INCOME-LOSS> 1,268
<OTHER-INCOME-NET> 1,025
<INCOME-BEFORE-INTEREST-EXPEN> 2,293
<TOTAL-INTEREST-EXPENSE> 1,691
<NET-INCOME> 602
0
<EARNINGS-AVAILABLE-FOR-COMM> 602
<COMMON-STOCK-DIVIDENDS> 589
<TOTAL-INTEREST-ON-BONDS> 837
<CASH-FLOW-OPERATIONS> 135
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains restated summary financial information extracted from
the balance sheet, statement of income and statement of cash flows contained
in Form 10-Q of Cambridge Electric Light Company for the six months ended June
30, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<CIK> 0000016573
<NAME> CAMBRIDGE ELECTRIC LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 98,925
<OTHER-PROPERTY-AND-INVEST> 9,507
<TOTAL-CURRENT-ASSETS> 18,094
<TOTAL-DEFERRED-CHARGES> 10,269
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 136,795
<COMMON> 8,665
<CAPITAL-SURPLUS-PAID-IN> 27,953
<RETAINED-EARNINGS> 8,522
<TOTAL-COMMON-STOCKHOLDERS-EQ> 45,140
0
0
<LONG-TERM-DEBT-NET> 21,764
<SHORT-TERM-NOTES> 20,375
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 100
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 49,416
<TOT-CAPITALIZATION-AND-LIAB> 136,795
<GROSS-OPERATING-REVENUE> 57,755
<INCOME-TAX-EXPENSE> 1,271
<OTHER-OPERATING-EXPENSES> 53,610
<TOTAL-OPERATING-EXPENSES> 54,881
<OPERATING-INCOME-LOSS> 2,874
<OTHER-INCOME-NET> 1,612
<INCOME-BEFORE-INTEREST-EXPEN> 4,486
<TOTAL-INTEREST-EXPENSE> 1,879
<NET-INCOME> 2,607
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,607
<COMMON-STOCK-DIVIDENDS> 1,646
<TOTAL-INTEREST-ON-BONDS> 1,378
<CASH-FLOW-OPERATIONS> 8,201
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
