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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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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, 1998
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-Q 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, 1998 AND DECEMBER 31, 1997
ASSETS
(Dollars in thousands)
June 30, December 31,
1998 1997
(Unaudited)
PROPERTY, PLANT AND EQUIPMENT, at original cost $165,546 $163,914
Less - Accumulated depreciation 68,356 63,706
97,190 100,208
Add - Construction work in progress 2,244 757
99,434 100,965
INVESTMENTS
Equity in nuclear electric power companies 10,375 9,849
Other 5 5
10,380 9,854
CURRENT ASSETS
Cash 468 521
Accounts receivable
Affiliates 2,829 2,743
Customers 12,051 12,483
Unbilled revenues 1,085 3,047
Prepaid taxes -
Income 746 1,192
Property - 1,697
Inventories and other 2,122 1,977
19,301 23,660
DEFERRED CHARGES
Regulatory assets 72,126 70,466
Other 3,165 2,176
75,291 72,642
$204,406 $207,121
See accompanying notes.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
CAPITALIZATION AND LIABILITIES
(Dollars in thousands)
June 30, December 31,
1998 1997
(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 12,372 11,607
48,990 48,225
Long-term debt, including premiums, less
maturing debt and current sinking fund
requirements 7,302 17,402
56,292 65,627
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 29,750 19,000
Advances from affiliates 1,535 11,290
Maturing long-term debt 10,000 -
41,285 30,290
Other Current Liabilities -
Current sinking fund requirements 100 100
Accounts payable
Affiliates 3,921 4,144
Other 7,545 8,076
Accrued local property and other taxes 22 1,706
Accrued interest 430 460
Other 6,465 3,830
18,483 18,316
59,768 48,606
DEFERRED CREDITS
Accumulated deferred income taxes 15,399 15,135
Purchased power contracts 61,695 66,223
Unamortized investment tax credits and other 11,252 11,530
88,346 92,888
COMMITMENTS AND CONTINGENCIES
$204,406 $207,121
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, 1998 AND 1997
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
1998 1997 1998 1997
ELECTRIC OPERATING REVENUES $27,155 $30,048 $54,726 $63,113
OPERATING EXPENSES
Electricity purchased for resale,
transmission and fuel 15,755 19,655 30,781 42,862
Other operation and maintenance 6,272 8,548 11,400 14,611
Depreciation 2,129 1,119 3,630 2,238
Taxes -
Income 940 (283) 2,781 136
Local property 760 757 1,525 1,534
Payroll and other 181 202 384 464
26,037 29,998 50,501 61,845
OPERATING INCOME 1,118 50 4,225 1,268
OTHER INCOME 344 587 749 1,025
INCOME BEFORE INTEREST CHARGES 1,462 637 4,974 2,293
INTEREST CHARGES
Long-term debt 361 407 722 837
Other interest charges 446 477 888 854
807 884 1,610 1,691
NET INCOME 655 (247) 3,364 602
RETAINED EARNINGS -
Beginning of period 14,316 10,082 11,607 9,233
Dividends on common stock (2,599) (589) (2,599) (589)
RETAINED EARNINGS -
End of period $12,372 $ 9,246 $12,372 $ 9,246
See accompanying notes.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Dollars in thousands)
(Unaudited)
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,364 $ 602
Effects of noncash items -
Depreciation and amortization 3,882 2,238
Deferred income taxes and investment tax
credits, net 392 (808)
Earnings from corporate joint ventures (564) (644)
Dividends from corporate joint ventures 38 91
Change in working capital, exclusive of cash and
interim financing 4,473 (1,164)
Transition costs deferral (6,322) -
All other operating items 161 (180)
Net cash provided by operating activities 5,424 135
CASH FLOWS FOR INVESTING ACTIVITIES
Additions to property, plant and equipment (3,773) (1,886)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of dividends (2,599) (589)
Proceeds from short-term borrowings 10,750 8,875
Payments to affiliates (9,755) (2,200)
Long-term debt issue refunded - (4,260)
Sinking funds payments (100) (100)
Net cash provided by (used for)
financing activities (1,704) 1,726
Net decrease in cash (53) (25)
Cash at beginning of period 521 143
Cash at end of period $ 468 $ 118
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of capitalized amounts) $ 1,552 $ 1,738
Income taxes $ 1,277 $ 883
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 nonregulated companies.
The Company has 146 regular employees including 110 (75%) represented by
a collective bargaining unit. Upon expiration of the existing collective
bargaining agreement on September 1, 1998, a new agreement, which has
already been ratified, will become effective through March 1, 2001.
Employee relations have generally been satisfactory.
On May 27, 1998, the System announced that three of its subsidiary
companies (Commonwealth Electric Company, Canal Electric Company and the
Company) have selected affiliates of Southern Energy New England, L.L.C., an
affiliate of The Southern Company, to buy substantially all of their non-
nuclear electric generating assets in conjunction with electric industry
restructuring in Massachusetts.
(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 1997 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, 1998
and 1997 reflect, in the opinion of the Company, all adjustments (consisting
of only normal recurring accruals, except for a one-time charge recorded in
June 1997 as described in 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.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
(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
(FERC) and the Massachusetts Department of Telecommunications and Energy
(DTE).
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 DTE and/or the FERC have
permitted or are expected to permit recovery of specific costs over time.
Similarly, the regulatory liabilities established by the Company are
required to be refunded to customers over time. In the event the criteria
for applying SFAS No. 71 are no longer met, the accounting impact would be
an extraordinary, noncash charge to operations of an amount that could be
material. Criteria that give rise to the discontinuance of SFAS No. 71
include: 1) increasing competition that restricts 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 from cost-based
regulation to another form of regulation. These criteria are reviewed on a
regular basis to ensure the continuing application of SFAS No. 71 is
appropriate. 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 generation,
are probable of future recovery.
As a result of electric industry restructuring, the Company discontinued
application of accounting principles applied to its investment in electric
generation facilities effective March 1, 1998. The Company will not be
required to write off any of its generation-related assets, including
regulatory assets. These assets will be retained on the Company's Balance
Sheets because the legislation and DTE's plan for the restructured electric
industry specifically provide for their recovery through a non-bypassable
transition charge.
The principal regulatory assets included in deferred charges were as
follows:
June 30, December 31,
1998 1997
(Dollars in thousands)
Maine Yankee unrecovered plant
and decommissioning costs $32,595 $34,908
Connecticut Yankee unrecovered plant
and decommissioning costs 26,839 28,566
Yankee Atomic unrecovered plant
and decommissioning costs 2,261 2,749
Postretirement benefits costs 3,414 3,596
Transition costs 6,329 -
Other 688 647
$72,126 $70,466
The regulatory liabilities, reflected in the accompanying Balance Sheets
and related to deferred income taxes, were $2.9 million and $3 million at
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CAMBRIDGE ELECTRIC LIGHT COMPANY
June 30, 1998 and December 31, 1997, respectively.
In November 1997, the Commonwealth of Massachusetts enacted a comprehen-
sive electric utility industry restructuring bill. On November 19, 1997,
the Company, together with Commonwealth Electric Company (Commonwealth) and
Canal Electric Company (Canal), filed a restructuring plan with the DTE.
The plan, approved by the DTE on February 27, 1998, provides that the
Company and Commonwealth, beginning March 1, 1998, initiate a ten percent
rate reduction for all customer classes and allow customers to choose their
energy supplier. As part of the plan, the DTE authorized the recovery of
certain strandable costs and provides that certain future costs may be
deferred to achieve or maintain the rate reductions that the restructuring
bill mandates. The legislation gives the DTE the authority to determine the
amount of strandable costs that will be eligible for recovery. Costs that
will qualify as strandable costs and be eligible for recovery include, but
are not limited to, certain above market costs associated with generating
facilities, costs associated with long-term commitments to purchase power at
above market prices from independent power producers, and regulatory assets
and associated liabilities related to the generation portion of the electric
business.
The cost of transitioning to competition will be mitigated, in part, by
the sale of the system's non-nuclear generating assets. The sale is
expected to be completed by year-end 1998 pending receipt of the necessary
regulatory approvals. The net proceeds from the sale of these assets will
be used to mitigate transition costs.
The system's ability to recover its transition costs will depend on
several factors, including the aggregate amount of transition costs the
system will be allowed to recover and the market price of electricity.
Management believes that the system will recover its transition costs. A
change in any of the above listed factors or in the current legislation
could affect the recovery of transition costs and may result in a loss to
the system. For additional information relating to industry restructuring,
see the "Industry Restructuring" section under Management's Discussion and
Analysis of Results of Operations.
(2) Commitments and Contingencies
(a) Construction Program
The Company is engaged in a continuous construction program presently
estimated at $24.8 million for the five-year period 1998 through 2002. Of
that amount, $7 million is estimated for 1998. As of June 30, 1998 the
Company's actual construction expenditures amounted to approximately $3.8
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.
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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, 1998 and 1997 and unit sales for these periods is shown below:
Three Months Six Months
Ended June 30, Ended June 30,
1998 and 1997 1998 and 1997
Increase (Decrease)
(Dollars in thousands)
Electric Operating Revenues $(2,893) (9.6)% $(8,387) (13.3)%
Operating Expenses -
Electricity purchased for
resale, transmission and fuel (3,900) (19.8) (12,081) (28.2)
Other operation and maintenance (2,276) (26.6) (3,211) (22.0)
Depreciation 1,010 90.3 1,392 62.2
Taxes -
Federal and state income 1,223 432.2 2,645 1,944.9
Local property and other (18) (1.9) (89) (4.5)
(3,961) (13.2) (11,344) (18.3)
Operating Income 1 068 2,136.0 2,957 233.2
Other Income (243) (41.4) (276) (26.9)
Income Before Interest Charges 825 129.5 2,681 116.9
Interest Charges (77) (8.7) (81) (4.8)
Net Income $ 902 365.2 $ 2,762 458.8
Unit Sales (MWH)
Retail 13,222 4.3 18,355 2.9
Wholesale (6,101) (15.2) (29,350) (24.1)
Total unit sales 7,121 2.0 (10,995) (1.5)
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, 1998 357,159 323,209 33,950 736,056 643,513 92,543
June 30, 1997 350,038 309,987 40,051 747,051 625,158 121,893
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CAMBRIDGE ELECTRIC LIGHT COMPANY
Operating Revenues, Electricity Purchased For Resale, Transmission and Fuel
Operating revenues for the first six months of 1998 decreased
approximately $8.4 million or 13.3% due to decreases in electricity purchased
for resale, fuel ($889,000) and transmission charges ($386,000). The decrease
in electricity purchased for resale of $10.8 million reflects lower fuel costs
and a $6.3 million deferral of costs in conjunction with the Company's
restructuring plan as approved by the Massachusetts Department of
Telecommunications and Energy (DTE). The decrease in operating revenues for
the current quarter of $2.9 million or 9.6% reflects a $3.5 million deferral.
The decrease in operating revenues for both current periods was offset
somewhat by increases in retail unit sales. As a result of industry
restructuring, the Company has unbundled its rates, provided customers with a
ten percent rate reduction as of March 1, 1998 and has afforded customers the
opportunity to purchase generation supply in the competitive market consistent
with the electric industry restructuring legislation further discussed below.
Delivery rates are composed of a customer charge (to collect metering and
billing costs), a distribution charge, a transition charge (to collect
stranded costs), a transmission charge, an energy conservation charge (to
collect costs for demand-side management programs) and a renewable energy
charge. Electricity supply services provided by the Company include optional
standard offer service and default service. Amounts collected through these
various charges will be reconciled to actual expenditures on an on-going
basis.
The increase in retail sales for both current periods reflects increases
in sales to commercial and industrial customers, while for both periods the
decrease in wholesale sales was due primarily to a decrease in sales to ISO -
New England (formerly the New England Power Pool).
Operating Expenses
For the current quarter and first half of 1998, operation and maintenance
decreased $2.3 million (26.6%) and $3.2 million (22%), respectively, due
primarily to the absence of a one-time charge ($2.5 million) related to the
personnel reduction program initiated during the second quarter of 1997. Also
contributing to the decrease in both the current quarter and first half of
1998 were labor savings realized from the aforementioned personnel reduction
program (approximately $400,000 and $450,000, respectively) and lower
insurance and benefits costs. Depreciation expense increased reflecting the
treatment allowed for production plant pursuant to the electric industry
restructuring legislation. The increase in federal and state income taxes was
due to a higher level of pretax income.
Other Income and Interest Charges
The deceases in other income during the current quarter was primarily due
to a lower rate of return relative to steam production for an affiliated steam
company ($105,000).
The decrease in interest charges for the current three and six-month
periods reflects lower long-term interest costs ($46,000 and $115,000,
respectively) offset, in part, during the six-month period by an increase in
short-term interest costs ($53,000) that reflects a higher average level of
short-term borrowings.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
Industry Restructuring
On November 25, 1997, the Governor of Massachusetts signed into law the
Electric Industry Restructuring Act (the Act). This legislation provided,
among other things, that customers of retail electric utility companies who
take standard offer service receive a 10 percent rate reduction and be allowed
to choose their energy supplier, effective March 1, 1998. The Act also
provides that utilities be allowed full recovery of transition costs subject
to review and an audit process. The rate reduction mandated by the legisla-
tion increases to 15 percent effective September 1, 1999 for customers who
continue to take standard offer service.
It is likely that a statewide referendum will appear on the ballot in
November of this year that is seeking to repeal the legislation. Management
is unable to predict what the ultimate outcome of this challenge will be.
The Company, together with Canal and Commonwealth, filed a comprehensive
electric restructuring plan with the DTE in November 1997, that was
substantially approved by the DTE in February 1998. The divestiture of the
Company's non-nuclear generation assets and the entitlements associated with
its purchased power contracts is an integral part of the Company's
restructuring plan and is consistent with the Act. While the Company is
encouraged with the treatment afforded net non-mitigable transition costs
(which, for the Company, are primarily the result of above-market purchased
power contracts with non-utility generators) by the legislation and the DTE,
the mandated rate reduction has had a significant impact on cash flows of the
Company. However, the successful results of the generation auction, as
discussed below, could significantly reduce the impact that the rate
reductions will have on future cash flows.
In March 1997, the Company, together with Canal and Commonwealth, had
submitted a report to the DTE that detailed the proposed auction process for
selling their electric generation assets and the entitlements associated with
purchased power contracts. The auction process provided a market-based
approach to maximizing stranded cost mitigation and minimizing the transition
costs that retail customers will have to pay for stranded cost recovery. A
request for bids from interested parties was issued last August and an
Offering Memorandum followed in October. Potential bidders examined all
pertinent information related to the generating facilities and purchased power
contracts in order to prepare and submit their first round of bids in mid-
December. Final binding bids were submitted on May 8, 1998.
On May 27, 1998, the System announced that three of its subsidiary
companies (Commonwealth, Canal and the Company) had selected affiliates of
Southern Energy New England, L.L.C., an affiliate of The Southern Company of
Atlanta, Georgia, to buy substantially all of their non-nuclear electric
generating assets for approximately $462 million (subject to certain
adjustments at closing). These facilities represent 984 megawatts (mw) of
electric capacity and have an approximate book value of $79 million.
The plants being sold include: Canal Unit 1 (566 mw) and a one-half
interest in Canal Unit 2 (282.5 mw) located in Sandwich, MA and owned by Canal
Electric; the Kendall Station facility (67 mw) and the adjacent Kendall Jets
(46 mw), located in Cambridge, MA and owned by the Company; five diesel
generators (13.8 mw) in Oak Bluffs and West Tisbury on the island of Martha's
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CAMBRIDGE ELECTRIC LIGHT COMPANY
Vineyard that are owned by Commonwealth Electric, and a 1.4 percent joint-
ownership interest (8.9 mw) in Wyman Unit No. 4 located in Yarmouth, ME, also
owned by Commonwealth Electric.
The Company continues to evaluate bids related to the purchased power
contracts. Also, the Company is evaluating the disposition of the Blackstone
Station generating unit (15.3 mw) located in Cambridge, MA which is subject to
a right of first offer held by Harvard University on any divestiture of the
facility.
On July 31, 1998, a formal divestiture filing was submitted to the FERC
and the DTE that requests approval of the sale of the Company's generating
assets and further proposes (subject to completion of the sale) that the
current 10 percent rate reduction increase, effective January 1, 1999, to 15.2
percent. In addition, the Company proposes to increase the retail price of
standard offer service, starting January 1, 1999, from the present rate of 2.8
cents per kilowatthour (kwh) to 3.5 cents. At the same time that the price
for standard offer service is increased, the transition charge for the
Company's customers will decline from 2.73 cents per kwh to 1.56 cents. These
proposed changes are intended to further reduce the cost of electricity to
customers, to make the market increasingly more attractive for independent
power suppliers to sell electricity directly to consumers, and to reduce the
Company's cost deferrals associated with the pricing of standard offer
service. The required approvals of the sale and rate structure are expected
to be received by year-end 1998.
Year 2000
The Company has been involved in Year 2000 compliancy since 1996. A
complete inventory and review of software, information processing, delivery
systems and operational components for certain facilities has been completed,
and work continues on computer systems wherever necessary. While some
computer systems have already been updated, tested and placed in production,
the Company expects to complete the balance of the modifications by mid-1999.
Costs associated with Year 2000 compliancy are being expensed as incurred.
The total cost of this project is expected to be funded with internally
generated funds.
Management believes that with appropriate modifications, the Company will
be fully compliant regarding all Year 2000 issues and will continue to provide
its products and services uninterrupted through the millennium change.
Failure to become fully compliant could have a significant impact on the
Company's operations.
New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts possibly
including fixed-price power contracts) be recorded on the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently
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CAMBRIDGE ELECTRIC LIGHT COMPANY
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999
and may be implemented as of the beginning of any fiscal quarter after
issuance but cannot be applied retroactively. SFAS No. 133 must be applied to
derivative instruments and certain derivative instruments embedded in hybrid
contracts that were issued, acquired or substantively modified after December
31, 1997 and, at the Company's election, before January 1, 1998.
The Company has not yet quantified the impacts of adopting SFAS No. 133 on
its financial statements and has not determined the timing of its method of
adopting SFAS No. 133.
Forward-Looking Statements
This discussion contains statements which, to the extent it is not a
recitation of historical fact, constitute "forward-looking statements" and is
intended to be subject to the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995. A number of important factors
affecting the Company's business and financial results could cause actual
results to differ materially from those reflected in the forward-looking
statements or projected amounts. Those factors include developments in the
legislative, regulatory and competitive environment, certain environmental
matters, demands for capital and the availability of cash from various
sources.
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CAMBRIDGE ELECTRIC LIGHT COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company was an intervenor in an appeal at the Massachusetts
Supreme Judicial Court (SJC) filed by the Massachusetts Institute of
Technology (MIT) involving a DTE decision approving a customer
transition charge (CTC) for the recovery of stranded investment
costs. By its terms, the CTC was terminated on March 1, 1998,
coincident with the retail access date established by the
Massachusetts Legislature in the Electric Industry Restructuring
Act. On September 18, 1997, the SJC remanded the CTC matter to the
DTE for further consideration. The SJC stated that, although
recovery of prudent and verifiable stranded costs by utility
companies is in the public interest and consistent with the Public
Utility Regulatory Policies Act, the insufficiencies of the DTE's
subsidiary findings precluded the SJC from undertaking a meaningful
review of the DTE's calculations that formed the basis of the CTC.
The DTE is in the process of determining whether to hear additional
evidence in the remand or to rely on the record and pleadings
already filed. On January 16, 1998, the Company had submitted to
the DTE a customer exit charge rate tariff and sought a finding that
the tariff would apply to MIT. On July 23, 1998, the DTE issued a
ruling which rejected the form of customer exit charge rate tariff,
but opened a new investigation into whether MIT should be required
to pay an exit charge, and, if so, what the amount of the exit
charge should be. Also, the DTE's investigation includes whether
this case should be joined with the remand proceeding currently
before the DTE. This issue is discussed more fully in the Company's
1997 Annual Report on Form 10-K. At this time, management is unable
to predict the ultimate 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
three months ended June 30, 1998.
(b) Reports on Form 8-K
A report on Form 8-K was filed June 5, 1998 for an event first
reported May 27, 1998 regarding the sale of the Company's generating
assets.
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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, 1998
<TABLE> <S> <C>
<ARTICLE> UT
<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, 1998 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-31-1998
<PERIOD-END> JUN-30-1998
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 99,434
<OTHER-PROPERTY-AND-INVEST> 10,380
<TOTAL-CURRENT-ASSETS> 19,301
<TOTAL-DEFERRED-CHARGES> 75,291
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 204,406
<COMMON> 8,665
<CAPITAL-SURPLUS-PAID-IN> 27,953
<RETAINED-EARNINGS> 12,372
<TOTAL-COMMON-STOCKHOLDERS-EQ> 48,990
0
0
<LONG-TERM-DEBT-NET> 7,302
<SHORT-TERM-NOTES> 31,285
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 10,100
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 106,729
<TOT-CAPITALIZATION-AND-LIAB> 204,406
<GROSS-OPERATING-REVENUE> 54,726
<INCOME-TAX-EXPENSE> 2,781
<OTHER-OPERATING-EXPENSES> 47,720
<TOTAL-OPERATING-EXPENSES> 50,501
<OPERATING-INCOME-LOSS> 4,225
<OTHER-INCOME-NET> 749
<INCOME-BEFORE-INTEREST-EXPEN> 4,974
<TOTAL-INTEREST-EXPENSE> 1,610
<NET-INCOME> 3,364
0
<EARNINGS-AVAILABLE-FOR-COMM> 3,364
<COMMON-STOCK-DIVIDENDS> 2,599
<TOTAL-INTEREST-ON-BONDS> 722
<CASH-FLOW-OPERATIONS> 5,424
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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