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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(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, 1994
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 2-30057
CANAL ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1733577
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
None
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 March 15, 1995
Common Stock, $25 par value 1,523,200 shares
The Company meets the conditions set forth in General Instruction J(1)(a) and
(b) of Form 10-K as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.
Documents Incorporated by Reference Part in Form 10-K
None Not Applicable
List of Exhibits begins on page 32 of this report.
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CANAL ELECTRIC COMPANY
FORM 10-K DECEMBER 31, 1994
TABLE OF CONTENTS
PART I
PAGE
Item 1. Business.......................................... 3
General......................................... 3
New England Power Pool.......................... 3
Regulation...................................... 4
Fuel Supply..................................... 4
Power Contracts................................. 5
Power Supply Commitments and
Support Agreements............................ 6
Construction and Financing...................... 6
Environmental Matters........................... 6
Employees....................................... 7
Item 2. Properties........................................ 7
Item 3. Legal Proceedings................................. 7
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters..................... 8
Item 7. Management's Discussion and Analysis of
Results of Operations........................... 9
Item 8. Financial Statements and Supplementary Data....... 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............. 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................. 32
Signatures................................................... 41
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CANAL ELECTRIC COMPANY
Part I.
Item 1. Business
General
Canal Electric Company (the Company) is a wholesale electric generating
company organized in 1902 under the laws of the Commonwealth of Massachu-
setts. The Company assumed its present corporate name in 1966 after the
sale to an affiliated company of its electric distribution and transmission
properties together with the right to do business in the territories served.
The Company is a wholly-owned subsidiary of Commonwealth Energy System
("System"), which together with its subsidiaries is collectively referred to
as "the system."
The Company's generating station is located in Sandwich, Massachusetts
at the eastern end of the Cape Cod Canal. The station consists of two oil-
fired steam electric generating units: Canal Unit 1, with a rated capacity
of 569 MW, wholly-owned by the Company; and Canal Unit 2, with a rated
capacity of 580 MW, jointly-owned by the Company and Montaup Electric
Company (Montaup) (an unaffiliated company). Canal Unit 2 is operated by
the Company under an agreement with Montaup which provides for the equal
sharing of output, fixed charges and operating expenses. Canal Units 1 and
2 commenced operation in 1968 and in 1976, respectively.
The Company also has a 3.52% interest in the Seabrook 1 nuclear power
plant located in Seabrook, New Hampshire, to provide for a portion of the
capacity and energy needs of Cambridge Electric Light Company (Cambridge)
and Commonwealth Electric Company (Commonwealth Electric), each of which are
retail distribution companies and wholly-owned subsidiaries of the System.
The plant has a rated capacity of 1,150 MW.
For additional information pertaining to the Company's relationship with
the system's retail distribution companies, together with more extensive
information on the Company's participation in the Seabrook plant and on
other sources of power procurement, refer to the "Power Contracts" and
"Power Supply Commitments and Support Agreements" sections of this Item 1.
New England Power Pool
The Company, together with other electric utility companies in the New
England area, is a member of the New England Power Pool (NEPOOL), which was
formed in 1971 to provide for the joint planning and operation of electric
systems throughout New England.
NEPOOL operates a centralized dispatching facility to ensure reliability
of service and to dispatch the most economically available generating units
of the member companies to fulfill the region's energy requirements. This
concept is accomplished by use of computers to monitor and forecast load
requirements. In the past, this has required that Canal Unit 1 operate
whenever possible since it is one of the most efficient oil-fired units in
the country. Canal Unit 2 is designed for cycling operation which provides
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CANAL ELECTRIC COMPANY
for economic changes in unit load permitting reduced generation during
nights and weekends when demand is lowest. It has performed as one of New
England's most efficient units in this type of service.
The Company and the System's other electric subsidiaries are also
members of the Northeast Power Coordinating Council (NPCC), an advisory
organization which includes the major power systems in New England and New
York plus the provinces of Ontario and New Brunswick in Canada. NPCC
establishes criteria and standards for reliability and serves as a vehicle
for coordination in the planning and operation of these systems.
Regulation
The Company is a "public utility" within the meaning of Part II of the
Federal Power Act and is subject to regulations thereunder by the FERC as to
rates, accounting and other matters. The Company is subject to regulation
by the DPU as to the issuance of securities.
Fuel Supply
(a) Oil
Effective July 1, 1993, the Company executed a twenty-two month contract
with Coastal Oil New England, Inc. (Coastal) for the purchase of residual
fuel oil. The contract provides for delivery of a set percentage of the
Company's fuel requirement, the balance (a maximum of 20%) to be met by spot
purchases or by Coastal at the discretion of the Company. Through December
1994, approximately 15.6% of the Company's total requirements have been met
by lower-cost spot purchases resulting in savings to its customers.
Energy Supply and Credit Corporation (ESCO Massachusetts, Inc.) operates
the Company's oil terminal and manages the purchase, receipt and payment of
oil under assignment of the Company's supply contracts to ESCO Massachu-
setts, Inc. Oil in the terminal's shore tanks is held in inventory by ESCO
Massachusetts, Inc. and delivered upon demand to the Company's day tanks.
Fuel oil storage facilities at the Canal site have a capacity of
1,199,000 barrels, representing approximately 60 days of normal operation of
the two units. During 1994, ESCO maintained an average daily inventory of
575,000 barrels of fuel oil which represents 30 days of normal operation of
the two units. This supply is maintained by tanker deliveries approximately
every ten to fifteen days.
For a discussion on the cost of fuel oil, refer to "Management's
Discussion and Analysis of Results of Operations" filed under Item 7 of this
report.
(b) Nuclear Fuel
The nuclear fuel contract and inventory information for Seabrook 1 has
been furnished to the Company by North Atlantic Energy Services Corporation
(NAESCO), the plant manager responsible for operation of the unit.
Seabrook's requirement for nuclear fuel components are 100% covered through
1999 by existing contracts.
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CANAL ELECTRIC COMPANY
There are no spent fuel reprocessing or disposal facilities currently
operating in the United States. Instead, commercial nuclear electric gener-
ating units operating in the United States are required to retain high level
wastes and spent fuel on-site. As required by the Nuclear Waste Policy Act
of 1982 (the Act), as amended, the joint-owners entered into a contract with
the Department of Energy for the transportation and disposal of spent fuel
and high level radioactive waste at a national nuclear waste repository or
Monitored Retrievable Storage (MRS) facility. Owners or generators of spent
nuclear fuel or its associated wastes are required to bear all of the costs
for such transportation and disposal through payment of a fee of
approximately 1 mill/KWH based on net electric generation to the Nuclear
Waste Fund. Under the Act, a temporary storage facility for nuclear waste
was anticipated to be in operation by 1998; a reassessment of the project's
schedule requires extending the completion date of the permanent facility
until at least 2010. Seabrook 1 is currently licensed for enough on-site
storage to accommodate all spent fuel expected to be accumulated through at
least the year 2010.
Power Contracts
The Company is a party to substantially identical life-of-the-unit power
contracts with Boston Edison Company, Montaup Electric Company and New
England Power Company (unaffiliated utilities), under which each is
severally obligated to purchase one-quarter of the capacity and energy of
Canal Unit 1. Commonwealth Electric and Cambridge are jointly obligated to
purchase the remaining one-quarter of the unit's capacity and energy.
Similar contracts are in effect between the Company and Commonwealth
Electric and Cambridge under which those companies are jointly obligated to
purchase the Company's entire share of the capacity and energy of Canal Unit
2. The price of power is based on a two-part rate consisting of a demand
charge and an energy charge. The demand charge covers all expenses except
fuel costs and includes recovery of the original investment. It also
provides for any adjustments to that investment over the economic lives of
the units. The energy charge is based on the cost of fuel and is billed to
each purchaser in proportion to its purchase of power. Purchasers are
billed monthly. The power contracts are on file with the FERC.
The Company acts as agent for Commonwealth Electric and/or Cambridge in
the procurement of additional capacity, or, to sell a portion of each
company's entitlement in Unit 2. Exchange agreements are in place with
several utilities whereby, in certain circumstances, it is possible to
exchange capacity so that the mix of power improves the pricing for dispatch
for both the seller and purchaser. Commonwealth Electric and Cambridge thus
secure cost savings for their respective customers by planning for bulk
power supply on a single system basis. A Capacity Acquisition and
Disposition Agreement, which has been accepted for filing as a rate schedule
by the FERC, enables the Company to recover costs incurred in connection
with any transaction covered by such Agreement. Commonwealth Electric and
Cambridge, in turn, bill charges to retail customers through rates subject
to DPU regulation. Currently, Agreements are in effect for Seabrook 1,
Phase I and Phase II of the Hydro-Quebec Project, varying amounts of power
acquired from Northeast Utilities (NU), a 50 MW exchange with Central
Vermont Public Service and a 50 MW exchange with New England Power Company
through April 1997.
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CANAL ELECTRIC COMPANY
Power Supply Commitments and Support Agreements
In response to solicitations by NU and other utilities, the Company, on
behalf of Commonwealth Electric and Cambridge, purchased entitlements
through short-term contracts in various selected generating units. The
contracts with NU covered the purchase of varying amounts of power through
October 1994. These and other bulk electric power purchases are necessary
in order to fulfill the system's NEPOOL obligation and for the Company to
acquire and deliver electric generating capacity to meet Commonwealth
Electric and Cambridge requirements. For additional information, refer to
"Transactions with Affiliates" in Note 1 of Notes to Financial Statements
and to "Management's Discussion and Analysis of Results of Operations" filed
under Items 8 and 7, respectively, of this report.
The Company is party to support agreements for Phase I and Phase II of
the Hydro-Quebec Project and is thereby obligated to pay its share of
operating and capital costs for Phase II over a 25 year period ending in
2015. Future minimum lease payments for Phase II have an estimated present
value of $13.8 million at December 31, 1994. In addition, the Company has
an equity interest in Phase II which amounted to $3.8 million in 1994 and
$3.9 million in 1993.
Construction and Financing
Information concerning the Company's financing and construction programs
is contained in Note 5 of Notes to Financial Statements filed under Item 8
of this report.
Environmental Matters
The Company is subject to laws and regulations administered by federal,
state and local authorities relating to the quality of the environment.
These laws and regulations affect, among other things, the siting and
operation of generating facilities, and will continue to impact future
operations, capital costs and construction schedules.
The federal Clean Air Act, as amended, and certain state laws and
regulations impose restrictions on air emissions. Some of these
restrictions will become effective in 1995, and others by the year 2000. As
part of its emission reduction program, the Company has been burning more
lower-sulphur content fuel oil. In addition, in October 1993, the Company
reached an agreement with Montaup Electric Company (50% owner of Unit 2) and
Algonquin Gas Transmission Company to build a natural gas pipeline that will
serve Unit 2, subject to regulatory approvals. Unit 2 will be modified to
burn gas in addition to oil. The project will improve air quality on Cape
Cod, enable the plant to exceed the stringent 1995 air quality standards
established by the Massachusetts Department of Environmental Protection and
will also strengthen the Company's bargaining position as it seeks to secure
the lowest-cost fuel for its customers. Plant conversion and pipeline
construction are expected to be completed in 1996.
Following the issuance of an environmental consent order in May 1993,
the plant was subject to an intensive 26 week review by the Massachusetts
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CANAL ELECTRIC COMPANY
Department of Environmental Protection. The on-site inspection of the plant
ended in December 1993, with the plant meeting all state requirements. The
plant will remain under state supervision and will be subject to unannounced
emissions checks in order to ensure that the highest standards of air
quality are maintained.
Employees
The Company has 125 regular employees, 88 (70%) are represented by the
Utility Workers' Union of America, A.F.L.-C.I.O. The existing collective
bargaining agreement expires on May 31, 1997. Employee relations have
generally been satisfactory.
Item 2. Properties
The Company operates a generating station located at the eastern end of
the Cape Cod Canal in Sandwich, Massachusetts. The station consists of two
oil-fired steam electric generating units: Canal Unit 1 with a rated
capacity of 569 MW, wholly-owned by the Company; and Canal Unit 2, with a
rated capacity of 580 MW, jointly-owned by the Company and Montaup Electric
Company, a wholly-owned subsidiary of Eastern Utilities Associates. In
addition, the Company has a 3.52% joint-ownership interest (40.5 MW of
capacity) in Seabrook 1. Refer to Note 3 of Notes to Financial Statements
filed under Item 8 of this report for encumbrances relative to the Company's
property.
Item 3. Legal Proceedings
The Company is subject to legal claims and matters arising from its
normal course of business, including its ownership interest in the Seabrook
plant.
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CANAL ELECTRIC COMPANY
PART II.
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
(a) Principal Market
Not applicable. The Company is a wholly-owned subsidiary of
Commonwealth Energy System.
(b) Number of Shareholders at December 31, 1994
One
(c) Frequency and Amount of Dividends Declared in 1994 and 1993
1994 1993
Per Share Per Share
Declaration Date Amount Declaration Date Amount
April 25, 1994 $ 2.00 January 28, 1993 $ 4.35
July 18, 1994 2.00 April 26, 1993 2.65
October 24, 1994 3.00 July 26, 1993 2.62
$ 7.00 October 18, 1993 2.50
December 29, 1993 8.54
$20.66
Reference is made to Note 6 of Notes to Financial Statements filed
under Item 8 of this report for restrictions against the payment of
cash dividends.
(d) Future dividends may vary depending upon the Company's earnings and
capital requirements as well as financial and other conditions
existing at that time.
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CANAL ELECTRIC COMPANY
Item 7. 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 statements of income and is presented to
facilitate an understanding of the results of operations. This discussion
should be read in conjunction with the Notes to Financial Statements filed
under Item 8 of this report.
A summary of the period to period changes in the principal items
included in the statements of income for the years ended December 31, 1994 and
1993 is shown below:
Years Ended Years Ended
December 31, December 31,
1994 and 1993 1993 and 1992
Increase (Decrease)
(Dollars in Thousands)
Electric Operating Revenues $( 4 674) (2.3)% $ (18 605) (8.4)%
Operating Expenses:
Fuel used in production (760) (0.9) (13 324) (13.9)
Electricity purchased for resale (350) (1.2) (870) (3.0)
Other operation and maintenance (1 998) (5.2) (1 561) (3.9)
Depreciation 178 1.3 (1 658) (11.0)
Taxes -
Federal and state income (503) (5.7) (2 856) (24.3)
Local property and other 12 0.3 (568) (13.9)
(3 421) (1.9) (20 837) (10.5)
Operating Income (1 253) (5.0) 2 232 9.8
Other Income (163) (54.3) (5 479) (94.8)
Income Before Interest Charges (1 416) (5.6) (3 247) (11.4)
Interest Charges (452) (4.4) 978 10.6
Net Income $ (964) (6.4) $ (4 225) (19.6)
Unit Sales Decrease (MWH) (85 345) (1.9) (1 076 059) (21.8)
The following is a summary of unit sales for the periods indicated:
Unit Sales (MWH)
Period Ended Seabrook Purchased
December 31, Unit 1 Unit 2 Unit 1 For Resale Total
1994 2 594 406 1 047 214 218 560 477 506 4 337 686
1993 2 382 716 1 275 305 318 694 446 316 4 423 031
1992 3 173 668 1 590 643 273 859 460 920 5 499 090
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CANAL ELECTRIC COMPANY
Revenue, Fuel and Purchased Power
Operating revenues for 1994 declined by approximately $4.7 million or
2.3% due to a 1.9% decrease in unit sales. The decrease in unit sales was
caused primarily by the reduced availability of Seabrook 1 due to the timing
of a scheduled refueling outage which began in early April and was extended
through early August 1994 for unscheduled maintenance. Somewhat offsetting
the decline was an increase in purchases made on behalf of affiliated retail
distribution companies. Also reflected in the change in unit sales was the
increased availability of Unit 1 that was offset by the decline in
generation from Unit 2 due to scheduled and unscheduled maintenance on the
both Units.
During 1993, operating revenues decreased by $18.6 million or 8.4% due
primarily to a 21.8% decrease in unit sales due to the timing of scheduled
maintenance on Units 1 and 2, the operation of the units at reduced capacity
during emissions testing and a decrease in the level of short-term purchases
on behalf of affiliated retail distribution companies. A contributing
factor to the decrease was the impact of the excess capacity situation which
exists in New England. Somewhat offsetting the decline in unit sales was an
increase in power available from Seabrook 1.
Fuel, purchased power and transmission costs (included in other
operation) represented approximately 57% of the total revenue dollar in
1994, 56% in 1993 and 58% in 1992 and averaged 2.68 cents per KWH in 1994 as
compared to 2.58 cents in 1993 and 2.33 cents in 1992. The per barrel cost
of oil averaged $14.33 in 1994, $14.02 in 1993 and $12.95 in 1992. In
conformance with restrictions on air emissions, the Commonwealth of
Massachusetts mandated a reduction in sulphur dioxide emissions requiring
the periodic use of more expensive lower-sulphur (1%) content oil. In 1994,
1% oil averaged $14.92 per barrel as compared to $15.16 per barrel in 1993
$17.25 per barrel in 1992. However, lower-sulphur oil displaced 70.4% of
the higher sulphur (2.2%) content oil in 1994, as compared to 57.5% and 24%
in 1993 and 1992, respectively.
Other Operating Expenses
Other operation includes the following:
Years Ended December 31,
1994 1993 1992
(Dollars in millions)
Other operation: $24.7 $23.7 $27.0
Less:
Seabrook 1 operations 4.3 4.6 5.7
Hydro-Quebec Phase II transmission 3.5 3.5 3.5
Power purchased from affiliates 1.3 0.8 2.6
$15.6 $14.8 $15.2
After excluding the items noted above, other operation, net, increased
approximately $800,000 or 5.4% in 1994 and decreased 2.6% in 1993. The
significant changes in power purchased from affiliates were due to a damaged
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CANAL ELECTRIC COMPANY
Unit 1 service station transformer from July 1991 through February 1992
which required the Company to buy power normally generated at the plant and
a refund ($594,000) received in 1993 reflecting an overbilling which had
occurred in December 1992. The refund was passed back to the Company's
customers in 1993 and produced a corresponding reduction to revenues.
The decrease in maintenance expense in 1994 was due primarily to the
timing of maintenance on Unit 1 and the major overhaul of Unit 2 which
occurred in 1993. The increase in maintenance expense in 1993 reflects the
timing of a scheduled inspection and overhaul of the Unit 2 boiler, turbine
and generator.
Depreciation and Taxes
The 1.3% increase in depreciation expense in 1994 was due to a higher
level of plant-in-service. Depreciation expense decreased 11%, or
approximately $1.7 million, during 1993 due to a revision to accrual rates
used in determining depreciation expense and an extension of the depreciable
life of Unit 1 from 1996 to 2002, resulting from a study conducted as of
December 31, 1992.
The 5.7% decrease in income tax expense (approximately $503,000) during
1994 was due to a lower level of pretax income. Income tax expense
decreased approximately $2.9 million or 24.3% in 1993 due to a significantly
lower level of pretax income offset, somewhat, by an increase in the federal
income tax rate to 35%, retroactive to January 1, 1993. Local property and
other taxes were virtually unchanged for 1994 reflecting the impact of
slightly higher property tax rates ($73,000) being offset by a decrease in
payroll-related taxes ($61,000). The decrease in local property and other
taxes during 1993 reflects lower rates and a refund (approximately $300,000)
associated with revisions to the nuclear station property tax assessed by
the state of New Hampshire to the joint-owners of Seabrook.
Other Income
During 1994 other income decreased due primarily to lower equity
earnings ($67,000) related to the Company's investment in Hydro-Quebec. The
significant decrease in other income during 1993 was due to the absence of:
1) an equity component of allowance for funds used during construction
(AFUDC) resulting from an adjustment to reflect the 1992 FERC settlement
which finalized recovery of the Company's investment in Seabrook 1; 2)
interest income related to contested tax issues; and 3) the reversal of a
reserve related to the Company's Seabrook investment which was determined to
be fully recoverable pursuant to the aforementioned FERC settlement.
Interest Charges
Total interest charges decreased 4.4% during 1994 reflecting a decrease
in long-term interest ($984,000) due to the early redemption of the
Company's Series D, 11.125% First Mortgage Bonds due in 2007. Somewhat
offsetting the decrease in long-term interest was an increase in other
interest charges ($427,000) caused by a higher average level of short-term
borrowings coupled with higher short-term interest rates. Interest rates on
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CANAL ELECTRIC COMPANY
bank borrowings averaged 4.3% during 1994 as compared to 3.4% for 1993.
Total interest charges increased 10.6% during 1993 due to a significantly
lower level of debt AFUDC reflecting the 1992 FERC Seabrook settlement,
lower levels of short-term debt and lower interest rates.
Early Retirement of Debt
On December 1, 1993, the Company redeemed its Series D, 11.125% First
Mortgage Bonds due December 1, 2007 totaling $9.3 million with short-term
borrowings. The Company paid a premium of $279,000 on this early redemption
and will amortize this amount to expense over the remaining original life of
the retired issue.
Item 8. Financial Statements and Supplementary Data
The Company's financial statements required by this item are filed
herewith on pages 13 through 31 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None
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CANAL ELECTRIC COMPANY
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Canal Electric Company:
We have audited the accompanying balance sheets of CANAL ELECTRIC
COMPANY, (a Massachusetts corporation and wholly-owned subsidiary of
Commonwealth Energy System) as of December 31, 1994 and 1993, and the related
statements of income, retained earnings and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements and
the schedule referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 Canal Electric
Company as of December 31, 1994 and 1993, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.
As discussed in Note 7 to the financial statements, effective January 1,
1993, the Company changed its method of accounting for costs associated with
postretirement benefits other than pensions.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
financial statements and schedules is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states, in all material respects, the financial data required
to be set forth therein in relation to the basic financial statements taken as
a whole.
ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Boston, Massachusetts
February 21, 1995
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CANAL ELECTRIC COMPANY
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
PART II.
FINANCIAL STATEMENTS
Balance Sheets at December 31, 1994 and 1993
Statements of Income for the Years Ended December 31, 1994, 1993 and 1992
Statements of Retained Earnings for the Years Ended December 31, 1994, 1993
and 1992
Statements of Cash Flows for the Years Ended December 31, 1994, 1993 and
1992
Notes to Financial Statements
PART IV.
SCHEDULES
I Investments In, Equity Earnings of, and Dividends Received From
Related Parties for the Years Ended December 31, 1994, 1993 and 1992
SCHEDULES OMITTED
All other schedules are not submitted because they are not applicable or
required or because the required information is included in the financial
statements or notes thereto.
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CANAL ELECTRIC COMPANY
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
ASSETS
1994 1993
(Dollars in Thousands)
PROPERTY, PLANT AND EQUIPMENT, at original cost $409 648 $404 768
Less - Accumulated depreciation
and amortization 150 337 137 720
259 311 267 048
Add - Construction work in progress 6 250 2 501
Nuclear fuel in process 139 1 641
265 700 271 190
LEASED PROPERTY, net 13 844 14 150
INVESTMENTS
Equity in corporate joint venture 3 802 3 861
CURRENT ASSETS
Cash 12 12
Accounts receivable -
Affiliated companies 7 935 12 215
Other 9 100 9 549
Unbilled revenues - 659
Inventories, at average cost -
Electric production fuel oil 736 663
Materials and supplies 1 408 1 471
Prepaid taxes -
Income 132 720
Property 932 891
Other 1 277 1 472
21 532 27 652
DEFERRED CHARGES
Seabrook 1 7 735 9 002
Seabrook 2 5 140 6 937
Other 12 195 11 509
25 070 27 448
$329 948 $344 301
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CANAL ELECTRIC COMPANY
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
CAPITALIZATION AND LIABILITIES
1994 1993
(Dollars in Thousands)
CAPITALIZATION
Common Equity -
Common stock, $25 par value -
Authorized - 2,328,200 shares
Outstanding - 1,523,200 shares, wholly-owned
by Commonwealth Energy System (Parent) $ 38 080 $ 38 080
Amounts paid in excess of par value 8 321 8 321
Retained earnings 51 647 48 151
98 048 94 552
Long-term debt, including premiums, less
current sinking fund requirements 87 713 88 446
185 761 182 998
CAPITAL LEASE OBLIGATIONS 13 258 13 575
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 11 325 28 000
Advances from affiliates 9 350 8 310
20 675 36 310
Other Current Liabilities -
Current sinking fund requirements 1 110 1 110
Accounts payable -
Affiliated companies 1 932 1 829
Other 14 857 15 244
Accrued taxes -
Local property and other 977 923
Income 71 460
Capital lease obligations 586 575
Accrued interest and other 4 120 3 547
23 653 23 688
44 328 59 998
DEFERRED CREDITS
Accumulated deferred income taxes 68 732 70 854
Unamortized investment tax credits 12 658 13 360
Other 5 211 3 516
86 601 87 730
COMMITMENTS AND CONTINGENCIES
$329 948 $344 301
The accompanying notes are an integral part of these financial statements.
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CANAL ELECTRIC COMPANY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
(Dollars in Thousands)
ELECTRIC OPERATING REVENUES
Sales to affiliated companies $122 310 $133 060 $144 214
Sales to non-affiliated companies 76 076 70 000 77 451
198 386 203 060 221 665
OPERATING EXPENSES
Fuel used in production 81 864 82 624 95 948
Electricity purchased for resale 27 627 27 977 28 847
Other operation 24 731 23 694 27 019
Maintenance 11 526 14 561 12 797
Depreciation 13 539 13 361 15 019
Amortization 3 423 3 423 3 423
Taxes -
Income 8 390 8 893 11 749
Local property 2 793 2 720 3 392
Payroll and other 729 790 686
174 622 178 043 198 880
OPERATING INCOME 23 764 25 017 22 785
OTHER INCOME
Allowance for equity funds used
during construction - - 1 827
Other, net 137 300 3 952
137 300 5 779
INCOME BEFORE INTEREST CHARGES 23 901 25 317 28 564
INTEREST CHARGES
Long-term debt 8 283 9 267 9 403
Other interest charges 1 546 989 1 791
Allowance for borrowed funds used
during construction (86) (61) (1 977)
9 743 10 195 9 217
NET INCOME $ 14 158 $ 15 122 $ 19 347
The accompanying notes are an integral part of these financial statements.
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CANAL ELECTRIC COMPANY
STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
(Dollars in Thousands)
Balance at beginning of year $48 151 $64 498 $62 668
Add (Deduct)
Net income 14 158 15 122 19 347
Cash dividends on common stock (10 662) (31 469) (17 517)
Balance at end of year $51 647 $48 151 $64 498
The accompanying notes are an integral part of these financial statements.
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CANAL ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
(Dollars in Thousands)
OPERATING ACTIVITIES
Net income $ 14 158 $ 15 122 $ 19 347
Effects of noncash items -
Depreciation and amortization 18 668 20 333 22 138
Deferred income taxes 1 815 1 445 3 950
Investment tax credits (702) (715) (744)
Allowance for equity funds used
during construction - - (1 827)
Earnings from corporate joint venture (507) (573) (620)
Dividends from corporate joint venture 566 882 822
Change in working capital, exclusive
of cash and interim financing -
Accounts receivable 4 729 (513) 1 304
Unbilled revenues 659 224 (193)
Prepaid (accrued) income taxes, net 199 (990) 1 313
Local property and other taxes, net 13 (30) (526)
Accounts payable and other 485 1 603 (2 491)
All other operating items, net (3 571) (2 326) (2 988)
Net cash provided by operating activities 36 512 34 462 39 485
INVESTING ACTIVITIES
Additions to property, plant and
equipment (exclusive of AFUDC) (9 396) (6 574) (5 474)
Allowance for borrowed funds used
during construction (86) (61) (1 977)
Net cash used for investing activities (9 482) (6 635) (7 451)
FINANCING ACTIVITIES
Proceeds from (payment of)
short-term borrowings (16 675) 8 650 (13 850)
Proceeds from affiliate borrowings 1 040 4 590 215
Payment of dividends (10 662) (31 469) (17 517)
Long-term debt issue refunded - (9 300) -
Retirement of long-term debt through
sinking funds (733) (732) (436)
Net cash used for financing activities (27 030) (28 261) (31 588)
Net increase (decrease) in cash - (434) 446
Cash at beginning of period 12 446 -
Cash at end of period $ 12 $ 12 $ 446
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE 20>
CANAL ELECTRIC COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) Significant Accounting Policies
(a) General and Regulatory
Canal Electric Company (the Company) is a wholly-owned subsidiary of
Commonwealth Energy System. The parent company is referred to in this
report as the "System" and together with its subsidiaries is referred to as
"the system." 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 Public Utilities
(DPU). The System is an exempt 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 companies and
several non-regulated companies.
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. The principal regulatory assets included in
deferred charges at December 31, 1994 and 1993 were as follows:
1994 1993
(Dollars in Thousands)
Seabrook related costs $12 648 $15 774
Deferred income taxes 5 537 7 345
Postretirement benefit costs 1 242 639
Total regulatory assets $19 427 $23 758
Regulatory assets as a percent of total assets 5.9% 6.9%
(b) Reclassifications
Certain prior year amounts are reclassified from time to time to con-
form with the presentation used in the current year's financial statements.
(c) Transactions with Affiliates
Transactions between the Company and other system companies include
purchases and sales of electricity, including the Company's acquisition and
resale of capacity entitlements and related energy generated by certain
units of other New England utilities. The Company functions as the
principal supplier of electric generation capacity for and on behalf of
affiliates Cambridge Electric Light Company (Cambridge) and Commonwealth
Electric Company (Commonwealth Electric), including abandonment and
nonconstruction costs related to the Seabrook project. In addition,
payments for management, accounting, data processing and other services are
made to affiliate COM/Energy Services Company. Transactions with other
system companies are subject to review by the FERC and the DPU.
The Company's operating revenues included the following intercompany
<PAGE>
<PAGE 21>
CANAL ELECTRIC COMPANY
amounts for the periods indicated:
Period Ended Electricity Sales Seabrook Units
December 31, (Canal Units) Purchased Power and Other
(Dollars in Thousands)
1994 $45 906 $31 288 $45 116
1993 53 174 31 777 48 109
1992 60 440 32 592 51 182
(d) Other Major Customers
The Company is a wholesale electric generating company that sells
power under life-of-the-unit contracts, approved by FERC to Boston Edison
Company, Montaup Electric Company and New England Power Company,
(unaffiliated utilities). Each utility is obligated to purchase one-quarter
of the capacity and energy of Canal Unit 1.
(e) Equity Method of Accounting
The Company uses the equity method of accounting for its 3.8% invest-
ment in the New England/Hydro-Quebec Phase II transmission facilities due in
part to its ability to exercise significant influence over operating and
financial policies of the entity. Under this method, it records as income
the proportionate share of the net earnings of this project with a corre-
sponding increase in the carrying value of the investment. The investment
amount is reduced as cash dividends are received. For further information
on this investment, refer to Schedule I in Part IV of this report.
(f) Depreciation and Nuclear Fuel Amortization
Depreciation is provided using the straight-line method at rates
intended to amortize the original cost and the estimated cost of removal
less salvage of properties over their estimated economic lives. The
Company's composite depreciation rate, based on average depreciable property
in service, was 3.49% in 1994, 3.47% in 1993 and 3.92% in 1992. In 1993,
the depreciable life of Unit 1 was extended from 1996 to 2002 and resulted
in a decrease in depreciation expense of approximately $1.7 million in that
period.
The cost of nuclear fuel is amortized to fuel expense based on the
quantity of energy produced. Nuclear fuel expense also includes a provision
for the costs associated with the ultimate disposal of the spent nuclear
fuel.
(g) Maintenance
Expenditures for repairs of property and replacement and renewal of
items determined to be less than units of property are charged to
maintenance expense. Additions, replacements and renewals of property
considered to be units of property, are charged to the appropriate plant
accounts. Upon retirement, accumulated depreciation is charged with the
original cost of property units and the cost of removal net of salvage.
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<PAGE 22>
CANAL ELECTRIC COMPANY
(h) Allowance for Funds Used During Construction
Under applicable rate-making practices, the Company is permitted to
include an allowance for funds used during construction (AFUDC) as an
element of its depreciable property costs. This allowance is based on the
amount of construction work in progress that is not included in the rate
base on which the Company earns a return. An amount equal to the AFUDC
capitalized in the current period is reflected in the accompanying
statements of income.
While AFUDC does not provide funds currently, these amounts are
recoverable in revenues over the service life of the constructed property.
The Company develops rates based upon its current cost of capital and used a
compound rate of 5.25% in 1994, 3.75% in 1993 and 4.75% in 1992.
(2) Income Taxes
For financial reporting purposes, the Company provides federal and
state income taxes on a separate return basis. However, for federal income
tax purposes, the Company's taxable income and deductions are included in
the consolidated income tax return of the System and it makes tax payments
or receives refunds on the basis of its tax attributes in the tax return in
accordance with applicable regulations.
The following is a summary of the provisions for income taxes for the
years ended December 31, 1994, 1993 and 1992:
1994 1993 1992
(Dollars in Thousands)
Federal:
Current $ 6 321 $ 7 192 $ 7 636
Deferred 1 460 1 476 3 506
Investment tax credits (702) (715) (744)
7 079 7 953 10 398
State:
Current 1 138 1 181 1 147
Deferred 355 (31) 1 048
1 493 1 150 2 195
8 572 9 103 12 593
Amortization of regulatory liability
relating to deferred income taxes - - (604)
Total $ 8 572 $ 9 103 $11 989
Federal and state income taxes
charged to:
Operating expense $ 8 390 $ 8 893 $11 749
Other income 182 210 240
$ 8 572 $ 9 103 $11 989
Effective January 1, 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). SFAS No. 109 requires recognition of deferred tax
<PAGE>
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CANAL ELECTRIC COMPANY
liabilities and assets for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement basis and tax basis of assets and
liabilities using enacted tax rates in effect in the year in which the
differences are expected to reverse.
Accumulated deferred income taxes consisted of the following in 1994 and
1993:
1994 1993
(Dollars in Thousands)
Liabilities
Property-related $77 587 $78 571
Seabrook nonconstruction 4 504 6 017
All other 1 291 1 497
83 382 86 085
Assets
Investment tax credit 8 170 8 623
Regulatory liability 5 189 5 189
All other 1 247 2 047
14 606 15 859
Accumulated deferred income taxes, net $68 776 $70 226
The net year-end deferred income tax liability above includes a current
deferred tax liability of $44,000 and a current deferred tax asset of
$628,000 in 1994 and 1993, respectively, which are included in accrued
income taxes and prepaid income taxes, respectively, in the accompanying
balance sheets.
The total income tax provision set forth on the previous page
represents 38% of income before such taxes in each year. The following
table reconciles the statutory federal income tax rate to these percentages:
1994 1993 1992
Federal statutory rate 35% 35% 34%
Federal income tax expense at statutory levels $7 956 $8 479 $10 654
Increase (Decrease) from statutory rate:
Tax versus book depreciation 1 311 1 318 1 302
State tax, net of federal tax benefit 970 748 1 449
Amortization of investment tax credits (689) (671) (671)
Allowance for equity funds used during
construction - - (621)
Reversals of capitalized expenses (555) (555) -
Other (421) (216) (124)
$8 572 $9 103 $11 989
Effective federal tax rate 38% 38% 38%
As a result of the Revenue Reconciliation Act of 1993, the Company's
federal income tax rate increased to 35% effective January 1, 1993.
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<PAGE 24>
CANAL ELECTRIC COMPANY
(3) Long-Term Debt and Interim Financing
(a) Long-Term Debt
Long-term debt outstanding, exclusive of current sinking fund
requirements and related premiums, collateralized by substantially all of
the Company's property, is as follows:
Original Balance December 31,
Issue 1994 1993
(Dollars in Thousands)
First Mortgage Bonds -
Series A, 7%, due 1996 $19 000 $ 3 800 $ 4 560
Series B, 8.85%, due 2006 35 000 34 650 34 650
Series E, 7 3/8%, due 2020 10 000 10 000 10 000
Series F, 9 7/8%, due 2020 40 000 40 000 40 000
$88 450 $89 210
The Series A First Mortgage Bonds require an annual sinking fund
payment of $760,000 with an option to retire an additional $95,000 per
quarter.
The Series B First and General Mortgage Bonds require an annual
sinking fund payment of $350,000. The requirement may be met by payment,
repurchase of bonds or certification of an amount of property additions
equal to 60% of bondable property (as that term is defined in the
indenture). The Company expects to certify additional bondable property in
lieu of making sinking fund payments on these bonds.
The Series E and Series F First and General Mortgage Bonds were issued
in conjunction with The Industrial Development Authority of the State of New
Hampshire issuing Solid Waste Disposal Bonds and Pollution Control Bonds,
respectively. The bonds were issued pursuant to a Loan and Trust Agreement
dated December 1, 1990 among the Authority, the Company and the First
National Bank of Boston, the Trustee.
(b) Notes Payable to Banks
The Company and other system companies maintain both committed and
uncommitted lines of credit for the financing of their construction
programs, on a short-term basis, and for other corporate purposes. As of
December 31, 1994, system companies had $90 million of committed lines that
will expire at varying intervals in 1995. These lines are normally renewed
upon expiration and require annual fees of up to .1875% of the individual
line. At December 31, 1994, the uncommitted lines of credit totaled $90
million. Interest rates on the outstanding borrowings generally are at an
adjusted money market rate and averaged 4.3% and 3.4% in 1994 and 1993,
respectively. The Company's notes payable to banks totaled $11,325,000 and
$28,000,000 at December 31, 1994 and 1993, respectively.
(c) Advances from Affiliates
At December 31, 1994 the Company had short-term notes payable to the
System totaling $9,350,000. The Company had no notes payable to the System
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CANAL ELECTRIC COMPANY
at December 31, 1993. These notes are written for a term of up to 11 months
and 29 days. Interest is at the prime rate and is adjusted for changes in
that rate during the terms of the notes. This rate averaged 7.3% and 6% in
1994 and 1993, respectively.
The Company is a member of the COM/Energy Money Pool (the Pool), an
arrangement among the subsidiaries of the System, whereby short-term cash
surpluses are used to help meet the short-term borrowing needs of the
utility subsidiaries. In general, lenders to the Pool receive a higher rate
of return than they otherwise would on such investments, while borrowers pay
a lower interest rate than that available from banks. Interest rates on the
outstanding borrowings are based on the monthly average rate the Company
would otherwise have to pay banks, less one-half the difference between that
rate and the monthly average U.S. Treasury Bill weekly auction rate. The
borrowings are for a period of less than one year and are payable upon
demand. Rates on these borrowings averaged 4.3% and 3.2% in 1994 and 1993,
respectively. The Company had no notes payable to the Pool at December 31,
1994 and had $8,310,000 of notes payable to the Pool at December 31, 1993.
(d) Disclosures About Fair Value of Financial Instruments
The fair value of certain financial instruments included in the
accompanying balance sheets as of December 31, 1994 and 1993 are as follows:
1994 1993
(Dollars in Thousands)
Carrying Fair Carrying Fair
Value Value Value Value
Long-term Debt $88 823 $91 020 $89 556 $104 325
The carrying amount of cash, notes payable to banks and advances from
affiliates approximates the fair value because of the short maturity of
these financial instruments.
The estimated fair value of long-term debt is based on quoted market
prices of the same or similar issues or on the current rates offered for
debt with the same remaining maturity. The fair values shown above do not
purport to represent the amounts at which those obligations would be
settled.
(4) Supplemental Disclosures of Cash Flow Information
The Company's supplemental information concerning cash flow activities is
as follows:
1994 1993 1992
(Dollars in Thousands)
Interest paid (net of
capitalized amounts) $9 224 $9 704 $8 464
Income taxes paid 9 055 9 467 8 123
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<PAGE 26>
CANAL ELECTRIC COMPANY
(5) Commitments and Contingencies
(a) Construction
The Company is engaged in a continuous construction program presently
estimated at $69.8 million for the five-year period 1995 through 1999. Of
that amount, $27.4 million is estimated for 1995. 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 factors. The Company
expects to finance these expenditures on an interim basis with internally
generated funds and short-term borrowings that are ultimately expected to be
repaid with proceeds from sales of long-term debt and equity securities.
(b) Seabrook Nuclear Power Plant
The system's 3.52% interest in the Seabrook nuclear power plant is
owned by the Company to provide for a portion of the capacity and energy
needs of Cambridge and Commonwealth Electric. The Company is recovering
100% of its Seabrook 1 investment through power contracts pursuant to FERC
approval.
Pertinent information with respect to the Company's joint-ownership
interest in Seabrook 1 and information relating to operating expenses which
are included in the accompanying financial statements, are as follows:
1994 1993
(Dollars in Thousands)
Utility plant-in-service $232 374 $233 140
Nuclear fuel 18 500 18 514
Accumulated depreciation
and amortization (41 654) (34 771)
Construction work in progress 651 881
$209 871 $217 764
1994 1993 1992
(Dollars in Thousands)
Operating expenses:
Fuel $ 1 939 $ 3 853 $ 3 952
Other operation 4 340 4 580 5 705
Maintenance 1 688 893 1 508
Depreciation 6 531 6 522 6 426
Amortization 1 320 1 319 1 320
$15 818 $17 167 $18 911
Plant capacity (MW) 1,150 In-service date 1990
Canal's share: Operating license
Percent interest 3.52% expiration date 2026
Entitlement (MW) 40.5
The Company and the other joint-owners have established a Seabrook
Nuclear Decommissioning Financing Fund to cover post operation
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<PAGE 27>
CANAL ELECTRIC COMPANY
decommissioning costs. For the years 1994, 1993 and 1992, the Company paid
$271,000, $259,000 and $235,000, respectively, as its share of the cost of
this fund. The estimated cost to decommission the plant is $382 million in
1994 dollars, through December 31, 1994. The Company's share of this
liability (approximately $13.4 million), less its share of the market value
of the decommissioning trust ($1 million), is approximately $12.4 million.
(c) Environmental Matters
The Company is subject to laws and regulations administered by
federal, state and local authorities relating to the quality of the
environment. These laws and regulations affect, among other things, the
siting and operation of electric generating and transmission facilities and
can require the installation of expensive air and water pollution control
equipment. These regulations have had an impact on the Company's operations
in the past and will continue to have an impact on future operations,
capital costs and construction schedules of major facilities.
(6) Dividend Restriction
At December 31, 1994, approximately $42,414,000 of retained earnings
was restricted against the payment of cash dividends by terms of the
Indenture of Trust securing long-term debt.
(7) Employee Benefit Plans
(a) Pension
The Company has a noncontributory pension plan covering substantially
all regular employees who have attained the age of 21 and have completed one
year of service. Pension benefits are based on an employee's years of
service and compensation. The Company makes monthly contributions to the
plan consistent with the funding requirements of the Employee Retirement
Income Security Act of 1974.
Components of pension expense and related assumptions to develop
pension expense were as follows:
1994 1993 1992
(Dollars in Thousands)
Service cost $ 457 $ 384 $ 319
Interest cost 995 960 799
Return on plan assets - (gain)/loss 220 (1 741) (1 138)
Net amortization and deferral (1 139) 913 386
Total pension expense 533 516 366
Transfers from affiliates, net 279 270 317
Less: Amounts capitalized and other 181 160 150
Net pension expense $ 631 $ 626 $ 533
Discount rate 7.25% 8.50% 8.50%
Assumed rate of return 8.50 8.50 8.50
Rate of increase in future
compensation 4.50 5.50 5.50
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CANAL ELECTRIC COMPANY
Pension expense reflects the use of the projected unit credit method which
is also the actuarial cost method used in determining future funding of the
plan. The funded status of the Company's pension plan (using a measurement
date of December 31) is as follows:
1994 1993
(Dollars in Thousands)
Accumulated benefit obligation:
Vested $ (8 698) $ (9 333)
Nonvested (1 641) (1 614)
$(10 339) $(10 947)
Projected benefit obligation $(12 579) $(13 668)
Plan assets at fair market value 12 479 12 906
Projected benefit obligation
greater than plan assets (100) (762)
Unamortized transition obligation 120 138
Unrecognized prior service cost 588 532
Unrecognized gain (1 057) (248)
Accrued pension liability $ (449) $ (340)
The following actuarial assumptions were used in determining the
plan's year-end funded status:
1994 1993
Discount rate 8.50% 7.25%
Rate of increase in future compensation 5.00 4.50
Plan assets consist primarily of fixed-income and equity securities.
Fluctuations in the fair market value of plan assets will affect pension
expense in future years.
(b) Other Postretirement Benefits
Through December 31, 1992, the Company provided postretirement health
care and life insurance benefits to eligible retired employees. Employees
became eligible for these benefits if their age plus years of service at
retirement equaled 75 or more, provided, however, that such service was
performed for the Company or another subsidiary of the System. As of
January 1, 1993, the Company eliminated postretirement health care benefits
for those non-bargaining employees who were less than 40 years of age or had
less than 12 years of service at that date. Under certain circumstances,
eligible employees are now required to make contributions for postretirement
benefits.
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions" (SFAS No. 106). This new
standard requires the accrual of the expected cost of such benefits during
the employees' years of service and the recognition of an actuarially
determined postretirement benefit obligation earned by existing retirees.
The assumptions and calculations involved in determining the accrual and the
accumulated postretirement benefit obligation (APBO) closely parallel
pension accounting requirements. The cumulative effect of implementation of
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<PAGE 29>
CANAL ELECTRIC COMPANY
SFAS No. 106 as of January 1, 1993 was approximately $5 million, which is
being amortized over twenty years. Prior to 1993, the cost of postretirement
benefits was recognized as the benefits were paid. The cost of retiree
medical care and life insurance benefits totaled $131,000 in 1992.
In 1993, the Company began making contributions to various voluntary
employees' beneficiary association (VEBA) trusts that were established
pursuant to section 501(c)9 of the Internal Revenue Code (the Code). The
Company also makes contributions to a subaccount of its pension plan
pursuant to section 401(h) of the Code to satisfy a portion of its
postretirement benefit obligation. The Company contributed approximately
$740,000 and $684,000 to these trusts during 1994 and 1993, respectively.
The net periodic postretirement benefit cost for the years ended
December 31, 1994 and 1993 include the following components:
1994 1993
(Dollars in Thousands)
Service cost $ 164 $ 169
Interest cost 409 428
Return on plan assets (11) (35)
Amortization of transition obligation
over 20 years 248 249
Net amortization and deferral (66) 1
Total postretirement benefit cost 744 812
Transfers from affiliates, net 426 374
Less: Amounts capitalized and other 892 857
Net postretirement benefit cost $ 278 $ 329
The funded status of the Company's postretirement benefit plan using a
measurement date of December 31, 1994 and 1993 is as follows:
1994 1993
(Dollars in Thousands)
Accumulated postretirement benefit obligation:
Retirees $(2 710) $(2 596)
Fully eligible active plan participants (553) (559)
Other active plan participants (2 250) (2 176)
(5 513) (5 331)
Plan assets at fair market value 1 187 636
Projected postretirement benefit obligation
greater than plan assets (4 326) (4 695)
Unamortized transition obligation 4 474 4 722
Unrecognized gain (148) (27)
$ - $ -
The following actuarial assumptions were used in determining the plan's
year-end funded status:
1994 1993
Discount rate 8.50% 7.25%
Rate of increase in future compensation 5.00 4.50
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<PAGE 30>
CANAL ELECTRIC COMPANY
In determining its estimated APBO and the funded status of the plan for
1994 and 1993, the Company assumed estimated health care trend rates as
follows:
1994 1993
Medicare part B premiums 12.3% 14.9%
Medical care 8.5 9.0
Dental care 5.0 5.0
The above rates, with the exception of the dental rate, which remains
constant, decrease to five percent in the year 2007 and remain at that level
thereafter. A one percent change in the medical trend rate would have a
$93,000 impact on the Company's annual expense (interest component-$56,000;
service cost-$37,000) and would change the transition obligation by
approximately $724,000.
Plan assets consist primarily of fixed-income and equity securities.
Fluctuations in the fair market value of plan assets will affect
postretirement benefit expense in future years.
(c) Savings Plan
The Company has an Employees Savings Plan that provides for Company
contributions equal to contributions by eligible employees up to four
percent of each employee's compensation rate. Effective January 1, 1993,
the rate was increased to five percent for those employees no longer
eligible for postretirement health benefits. The Company's contribution was
$250,000 in 1994, $234,000 in 1993 and $197,000 in 1992.
(8) Lease Obligations
The Company leases equipment and office space under arrangements that are
classified as operating leases. These lease agreements are for terms of one
year or longer. Leases currently in effect contain no provisions that
prohibit the Company from entering into future lease agreements or
obligations.
The Company has entered into support agreements with other participating
New England utilities for 3.8% of the Hydro-Quebec Phase II transmission
facilities and makes monthly support payments to cover depreciation and
interest costs.
<PAGE>
<PAGE 31>
CANAL ELECTRIC COMPANY
Future minimum lease payments, by period and in the aggregate, of capital
leases and non cancelable operating leases consisted of the following at
December 31, 1994:
Operating Leases Capital Leases
(Dollars in Thousands)
1995 $ 330 $ 2 080
1996 311 2 014
1997 310 1 951
1998 309 1 888
1999 309 1 825
Beyond 1999 929 22 640
Total future minimum lease payments $2 498 32 398
Less:Estimated interest element
included therein 18 554
Estimated present value of future
minimum lease payments $13 844
Total rent expense for all operating leases, except those with terms
of a month or less, amounted to $421,000 in 1994, $438,000 in 1993 and
$452,000 in 1992. There were no contingent rentals and no sublease rentals
for the years 1994, 1993 and 1992.
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<PAGE 32>
CANAL ELECTRIC COMPANY
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Index to Financial Statements
Financial statements and notes thereto of the Company together with the
Report of Independent Public Accountants, are filed under Item 8 of this
report and listed on the Index to Financial Statements and Schedules
(page 14).
(a) 2. Index to Financial Statement Schedules
Filed herewith at page indicated are financial statement schedules of
the Company:
Schedule I - Investments in, Equity Earnings of, and Dividends Received
from Related Parties - Years Ended December 31, 1994, 1993 and 1992
(page 40).
(a) 3. Exhibits:
Notes to Exhibits -
a. Unless otherwise designated, the exhibits listed below are
incorporated by reference to the appropriate exhibit numbers and the
Securities and Exchange Commission file numbers indicated in
parentheses.
b. The following is a glossary of Commonwealth Energy System and
subsidiary companies' acronyms that are used throughout the following
Exhibit Index:
CES.................... Commonwealth Energy System
CE..................... Commonwealth Electric Company
CEL.................... Cambridge Electric Light Company
CEC.................... Canal Electric Company
NBGEL.................. New Bedford Gas and Edison Light Company
Exhibit Index
Exhibit 3. Articles of incorporation and by-laws.
3.1. Articles of incorporation of CEC (Exhibit 1 to CEC's 1990 Form 10-
K, File No. 2-30057).
3.2. By-laws of CEC, as amended (Exhibit 2 to the CEC 1990 Form 10-K,
File No. 2-30057).
<PAGE>
<PAGE 33>
CANAL ELECTRIC COMPANY
Exhibit 4. Instruments defining the rights of security holders, including
indentures
4.2.1 Indenture of Trust and First Mortgage between CEC and State Street
Bank and Trust Company, Trustee, dated October 1, 1968 (Exhibit
4(b) to the CEC Form S-1, File No. 2-30057).
4.2.2 First and General Mortgage Indenture between CEC and Citibank,
N.A., Trustee, dated September 1, 1976 (Exhibit 4(b)(2) to the CEC
Form S-1, File No. 2-56915).
4.2.3 First Supplemental dated October 1, 1968 with State Street Bank
and Trust Company, Trustee, dated September 1, 1976 (Exhibit
4(b)(3) to the CEC Form S-1, File No. 2-56915).
4.2.4 Third Supplemental dated September 1, 1976 with Citibank, N.A.,
New York, NY, Trustee, dated December 1, 1990 (Exhibit 3 to the
CEC 1990 Form 10-K, File No. 2-30057).
4.2.5 Fourth Supplemental dated September 1, 1976 with Citibank, N.A.,
New York, NY, Trustee, dated December 1, 1990 (Exhibit 4 to the
CEC 1990 Form 10-K, File No. 2-30057).
Exhibit 10. Material Contracts
10.1 Power contracts.
10.1.1 Power contracts between CEC and NBGEL and CEL dated December 1,
1965 (Exhibit 13(a)(1-4) to the CEC Form S-1, File No. 2-30057).
10.1.2.1 Agreement between CEC and Montaup Electric Company (MEC) for use of
common facilities by Canal Units I and II and for allocation of
related costs, executed October 14, 1975 (Exhibit 1 to the CEC 1985
Form 10-K, File No. 2-30057).
10.1.2.2 Agreement between CEC and MEC for joint-ownership of Canal Unit II,
executed October 14, 1975 (Exhibit 2 to the CEC 1985 Form 10-K,
File No. 2-30057).
10.1.2.3 Agreement between CEC and MEC for lease relating to Canal Unit II,
executed October 14, 1975 (Exhibit 3 to the CEC 1985 Form 10-K,
File No. 2-30057).
10.1.3 Contract between CEC, NBGEL and CEL, affiliated companies, for the
sale of specified amounts of electricity from Canal Unit 2 dated
January 12, 1976 (Exhibit 7 to the CES Form 10-K for 1985, File No.
1-7316).
10.1.4 Power contract, as amended to February 28, 1990, superseding the
Power Contract dated September 1, 1986 and amendment dated June 1,
1988, between CEC (seller) and CE and CEL (purchasers) for seller's
entire share of the Net Unit Capability of Seabrook 1 and related
energy (Exhibit 1 to the CEC Form 10-Q (March 1990), File No. 2-
30057).
<PAGE>
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CANAL ELECTRIC COMPANY
10.1.5 Purchase and Sale Agreement together with an implementing Addendum
dated December 31, 1981 between CEC and CE for the purchase and
sale of the CE 3.52% joint-ownership interest in the Seabrook
units, dated January 2, 1981 (Exhibit 1 to the Company's Form 8-K
(January 13, 1982), File No. 2-30057).
10.1.6 Agreement for Joint-Ownership, Construction and Operation of the
New Hampshire Nuclear Units (Seabrook) dated May 1, 1973 and filed
by NBGEL as Exhibit 13(N) on Form S-1 dated October 1973, File No.
2-49013, and as amended below:
10.1.6.1 First through Fifth Amendments to 10.1.6 dated May 24, 1974,
June 21, 1974, September 25, 1974, October 25, 1974, and January
31, 1975, respectively (Exhibit 13(m) to the NBGEL Form S-1
(November 7, 1975), File No. 2-54995).
10.1.6.2 Sixth through Eleventh Amendments to 10.1.6 dated April 18, 1979,
April 18, 1979, April 25, 1979, June 8, 1979, October 11, 1979 and
December 15, 1979, respectively (Exhibit 1 to the CEC 1989 Form 10-
K, File No. 2-30057).
10.1.6.3 Twelfth and Thirteenth Amendments to 10.1.6 dated May 16, 1980 and
December 31, 1980, respectively ((Exhibit 1 and 2 to the CE Form
10-Q (June 1982), File No. 2-7749).
10.1.6.4 Fourteenth Amendment to 10.1.6 dated June 1, 1982 (Exhibit 3 to the
CE Form 10-Q (June 1982), File No. 2-7749).
10.1.6.5 Fifteenth and Sixteenth Amendments to 10.1.6 dated April 27, 1984
and June 15, 1984, respectively (Exhibit 1 to the CEC Form 10-Q
(June 1984), File No. 2-30057).
10.1.6.6 Seventeenth Amendment to 10.1.6 dated March 8, 1985 (Exhibit 1 to
the CEC Form 10-Q (March 1985), File No. 2-30057).
10.1.6.7 Eighteenth Amendment to 10.1.6 dated March 14, 1986 (Exhibit 1 to
the CEC Form 10-Q (March 1986), File No. 2-30057).
10.1.6.8 Nineteenth Amendment to 10.1.6 dated May 1, 1986 (Exhibit 1 to the
CEC Form 10-Q (June 1986), File No. 2-30057).
10.1.6.9 Twentieth Amendment to 10.1.6 dated September 19, 1986 (Exhibit 1
to the CEC Form 10-K for 1986, File No. 2-30057).
10.1.6.10 Twenty-First Amendment to 10.1.6 dated November 12, 1987 (Exhibit 1
to the CEC Form 10-K for 1987, File No. 2-30057).
10.1.6.11 Twenty-Second Amendment and Settlement Agreement to 10.1.6 dated
January 13, 1989 (Exhibit 4 to the CEC 1988 Form 10-K, File No. 2-
30057).
10.1.7 Resolutions proposed by Merrill Lynch Capital Markets and adopted
by the Joint-Owners of the Seabrook Nuclear Project regarding
Project financing, dated May 14, 1984 (Exhibit 1 to the CEC Form
10-Q (March 1984), File No. 2-30057).
<PAGE>
<PAGE 35>
CANAL ELECTRIC COMPANY
10.1.8 Interim Agreement to Preserve and Protect the Assets of and
Investment in the New Hampshire Nuclear Units by and between CEC,
PSNH and other Participants dated April 27, 1984 (Exhibit 2 to the
CEC Form 10-Q (June 1984), File No.2-30057).
10.1.9 Agreement for Seabrook Project Disbursing Agent establishing Yankee
Atomic Electric Company as the disbursing agent under the Joint-
Ownership Agreement, dated May 23, 1984 (Exhibit 4 to the CEC Form
10-Q (June 1984), File No. 2-30057).
10.1.9.1 First Amendment to 10.1.9 dated March 8, 1985 (Exhibit 2 to the CEC
Form 10-Q (March 1985),File No.2-30057).
10.1.9.2 Second through Fifth Amendments to 10.1.9 dated May 20, 1985, June
18, 1985, January 2, 1986 and November 12, 1987, respectively,
(Exhibit 4 to the CEC 1987 Form 10-K, File No. 2-30057).
10.1.10 Capacity Acquisition Agreement between CEC, CEL and CE dated
September 25, 1980 (Exhibit 1 to the CEC 1991 Form 10-K, File No.
2-30057).
10.1.10.1 Supplement to 10.1.10 consisting of three Capacity Acquisition
Commitments each dated May 7, 1987, concerning Phases I and II of
the Hydro-Quebec Project and electricity acquired from Connecticut
Light and Power Company (CL&P) (Exhibit 1 to the CEC Form 10-Q
(September 1987), File No. 2-30057).
10.1.10.2 Supplements to 10.1.10 consisting of two Capacity Acquisition
Commitments each dated October 31, 1988, concerning electricity
acquired from Western Massachusetts Electric Company and/or CL&P
for periods ranging from November 1, 1988 to October 31, 1994
(Exhibit 2 to the CEC Form 10-Q (September 1989), File No. 2-
30057).
10.1.10.3 Amendment to 10.1.10 as amended, and restated, June 1, 1993,
henceforth referred to as the Capacity Acquisition and Disposition
Agreement, whereby CEC, as agent, in addition to acquiring power
may also sell bulk electric power which CEL and/or CE owns or
otherwise has the right to sell (Exhibit 1 to the CEC Form 10-Q
(September 1993), File No. 2-30057).
10.1.10.4 Capacity Disposition Commitment dated June 25, 1993 by and between
CEC (Unit 2) and CE for the sale of a portion of CE's entitlement
in Unit 2 to Green Mountain Power Corporation (Exhibit 1 to the CEC
Form 10-Q (September 1993), File No. 2-30057).
10.1.11 Termination Supplement between CEC, CE and CEL for Seabrook Unit 2,
dated December 8, 1986 (Exhibit 3 to the CEC Form 10-K for 1986,
File No. 2-30057).
10.1.12 Agreement, dated September 1, 1985, With Respect To Amendment of
Agreement With Respect To Use Of Quebec Interconnection, dated
December 1, 1981, among certain NEPOOL utilities to include Phase
II facilities in the definition of "Project" (Exhibit 1 to the CEC
Form 10-Q (September 1985), File No. 2-30057).
<PAGE>
<PAGE 36>
CANAL ELECTRIC COMPANY
10.1.12.1 Amendatory Agreement No.3 with Respect to Use of Quebec
Interconnection dated December 1, 1981, as amended to June 1, 1990,
among certain NEPOOL utilities (Exhibit 1 to the CEC Form 10-Q
(September 1990), File No. 2-30057).
10.1.13 Preliminary Quebec Interconnection Support Agreement - Phase II
among certain New England electric utilities dated June 1, 1984
(Exhibit 6 to the CE Form 10-Q (June 1984), File No. 2-7749).
10.1.13.1 First through Third Amendments to 10.1.13 as amended March 1, 1985,
January 1, 1986 and March 1, 1987, respectively (Exhibit 1 to the
CEC Form 10-Q (March 1987), File No. 2-30057).
10.1.13.2 Fifth through Seventh Amendments to 10.1.13 as amended October 15,
1987, December 15, 1987 and March 1, 1988, respectively (Exhibit 1
to the CEC Form 10-Q (June 1988), File No. 2-30057).
10.1.13.3 Fourth and Eighth Amendments to 10.1.13 as amended July 1, 1987 and
August 1, 1988, respectively (Exhibit 3 to the CEC Form 10-Q
(September 1988), File No. 2-30057).
10.1.13.4 Ninth and Tenth Amendments to 10.1.13 as amended November 1, 1988
and January 15, 1989, respectively (Exhibit 2 to the CEC 1988 Form
10-K, File No. 2-30057).
10.1.13.5 Eleventh Amendment to 10.1.13 as amended November 1, 1989 (Exhibit
4 to the CEC 1989 Form 10-K, File No. 2-30057).
10.1.13.6 Twelfth Amendment to 10.1.13 as amended April 1, 1990 (Exhibit 1 to
the CEC Form 10-Q (June 1990) File No. 2-30057).
10.1.14 Agreement to Preliminary Quebec Interconnection Support Agreement -
Phase II among Public Service Company of New Hampshire (PSNH), New
England Power Co. (NEP), Boston Edison Co. (BECO), and CEC whereby
PSNH assigns a portion of its interests under the original
Agreement to the other three parties, dated October 1, 1987
(Exhibit 2 to the CEC 1987 Form 10-K, File No. 2-30057).
10.1.15 Phase II Equity Funding Agreement for New England Hydro
Transmission Electric Company, Inc. (New England Hydro)
(Massachusetts), dated June 1, 1985, between New England Hydro and
certain NEPOOL utilities (Exhibit 2 to the CEC Form 10-Q (September
1985), File No. 2-30057).
10.1.16 Phase II Equity Funding Agreement for New England Hydro
Transmission Corporation (New Hampshire Hydro), dated June 1, 1985,
between New Hampshire Hydro and certain NEPOOL utilities (Exhibit 3
to the CEC Form 10-Q (September 1985), File No. 2-30057).
10.1.16.1 Amendment No. 1 to 10.1.16 as amended May 1, 1986 (Exhibit 6 to the
CEC Form 10-Q (March 1987), File No. 2-30057).
10.1.16.2 Amendment No. 2 to 10.1.16 as amended September 1, 1987 (Exhibit 3
to the CEC Form 10-Q (September 1987), File No. 2-30057).
<PAGE>
<PAGE 37>
CANAL ELECTRIC COMPANY
10.1.17 Phase II Massachusetts Transmission Facilities Support Agreement,
dated June 1, 1985, refiled as a single agreement incorporating
Amendments 1 through 7 dated May 1, 1986 through January 1, 1989,
respectively, between New England Hydro and certain NEPOOL
utilities (Exhibit 2 to the CEC Form 10-Q (September 1990), File
No. 2-30057).
10.1.18 Phase II New Hampshire Transmission Facilities Support Agreement,
dated June 1, 1985, refiled as a single agreement incorporating
Amendments 1 through 8 dated May 1, 1986 through January 1, 1989,
respectively, between New Hampshire Hydro and certain NEPOOL
utilities (Exhibit 3 to the CEC Form 10-Q (September 1990), File
No. 2-30057).
10.1.19 Phase II New England Power AC Facilities Support Agreement dated
June 1, 1985, between New England Power and certain NEPOOL
utilities (Exhibit 6 to the CEC Form 10-Q (September 1985), File
No. 2-30057).
10.1.19.1 Amendments Nos. 1 and 2 to 10.1.19 as amended May 1, 1986 and
February 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q
(March 1987), File No. 2-30057).
10.1.19.2 Amendments Nos. 3 and 4 to 10.1.19 as amended June 1, 1987 and
September 1, 1987, respectively (Exhibit 5 to the CEC Form 10-Q
(September 1987), File No. 2-30057).
10.1.20 Phase II BECO AC Facilities Support Agreement, dated June 1, 1985,
between BECO and certain NEPOOL utilities (Exhibit 7 to the CEC
Form 10-Q (September 1985), File No. 2-30057).
10.1.20.1 Amendments Nos. 1 and 2 to 10.1.20 as amended May 1, 1986 and
February 1, 1987, respectively (Exhibit 2 to the CEC Form 10-Q
(March 1987), File No. 2-30057).
10.1.20.2 Amendments Nos. 3 and 4 to 10.1.20 as amended June 1, 1987 and
September 1, 1987, respectively (Exhibit 4 to the CEC Form 10-Q
(September 1987), File No. 2-30057).
10.1.21 Agreement Authorizing Execution of Phase II Firm Energy Contract,
dated September 1, 1985, among certain NEPOOL utilities in regard
to the purchase of power from Hydro Quebec (Exhibit 8 to the CEC
Form 10-Q (September 1985), File No. 2-30057).
10.1.22 Agreement to Share Certain Costs Associated with the Tewksbury-
Seabrook Transmission Line, by and among certain NEPOOL utilities,
amending participants, dated May 8, 1986 (Exhibit 2 to the CEC 1986
Form 10-K, File No. 2-30057).
10.1.23 Purchase Agreement dated March 1, 1991, by and between CEC (seller)
and Central Vermont Public Service Corporation (CVPS) whereby CVPS
will purchase 50 MW of capacity from CEC Unit 2 for the term of
March 1, 1991 to October 31, 1995 (Exhibit 1 to the CEC Form 10-Q
(June 1991), File No. 2-30057).
<PAGE>
<PAGE 38>
CANAL ELECTRIC COMPANY
10.1.24 Power Sale Agreement dated March 1, 1991, by and between CEC
(purchaser) and CVPS (seller) whereby buyer will purchase 50 MW of
capacity from seller's units (25 MW from Vermont Yankee and 25 MW
from Merrimack 2) for the term of March 1, 1991 to October 31, 1995
(Exhibit 2 to the CEC Form 10-Q (June 1991), File No. 2-30057).
10.1.25 Power Exchange Contract, dated March 24, 1993, between New England
Power Company (NEP) and CEC for an exchange of unit capacity in
which NEP will purchase 20 MW of CEC's Unit 2 capacity in exchange
for CEC's purchase of 20 MW of NEP's Bear Swamp Units 1 and 2 (10
MW per unit) commencing May 31, 1993 through April 28, 1997 and NEP
will purchase 50 MW of CEC's Unit 2 capacity in exchange for CEC's
purchase of 50 MW of NEP's Bear Swamp Units 1 and 2 (25 MW per
unit) commencing November 1, 1993 through April 28, 1997 (Exhibit 1
to the CEC Form 10-Q (March 1993), File No. 2-30057).
10.2 Other agreements.
10.2.1 Employees Savings Plan of Commonwealth Energy System and Subsidiary
Companies as amended and restated as of January 1, 1993 (Exhibit 2
to the CES Form 10-Q (September 1993), File No. 1-7316).
10.2.2 Pension Plan for Employees of Commonwealth Energy System and
Subsidiary Companies as amended and restated January 1, 1993
(Exhibit 1 to the CES Form 10-Q (September 1993), File No.1-7316).
10.2.3 New England Power Pool Agreement (NEPOOL) dated September 1, 1971
as amended through August 1, 1977, between NEGEA Service Corp. as
agent for CEL, CEC, NBGEL, and various other electric utilities
operating in New England, together with amendments dated August 15,
1978 and January 31, 1979 and February 1, 1980 (Exhibit 5(c)(13) to
the CES Form S-16 (April 1980), File No. 2-64731).
10.2.3.1 Thirteenth Amendment to 10.2.3 as amended September 1, 1981
(Exhibit 5 to the CES Form 10-K for 1981, File No. 1-7316).
10.2.3.2 Fourteenth through Twentieth Amendments to 10.2.3 as amended
December 1, 1981, June 1, 1982, June 15, 1983, October 1, 1983,
August 1, 1985, August 15, 1985 and September 1, 1985, respectively
(Exhibit 4 to the CES Form 10-Q (September 1985), File No. 1-7316).
10.2.3.3 Twenty-first Amendment to the New England Power Pool Agreement
dated September 1, 1971, as amended January 1, 1986 (Exhibit 1 to
the CES Form 10-Q (March 1986), File No. 1-7316).
10.2.3.4 Twenty-second Amendment to 10.2.3 as amended to September 1, 1986
(Exhibit 1 to the CES Form 10-Q (September 1986), File No. 1-7316).
10.2.3.5 Twenty-third Amendment to 10.2.3 as amended to April 30, 1987
(Exhibit 1 to the CES Form 10-Q (June 1987), File No. 1-7316).
10.2.3.6 Twenty-fourth Amendment to 10.2.3 as amended to March 1, 1988
(Exhibit 1 to the CES Form 10-K for 1987, File No. 1-7316).
<PAGE>
<PAGE 39>
CANAL ELECTRIC COMPANY
10.2.3.7 Twenty-fifth Amendment to 10.2.3 as amended to May 1, 1988 (Exhibit
1 to the CES Form 10-Q (March 1988), File No. 1-7316).
10.2.3.8 Twenty-sixth Amendment to 10.2.3 as amended to March 15, 1989
(Exhibit 1 to the CES Form 10-Q (March 1989), File No. 1-7316).
10.2.3.9 Twenty-seventh Amendment to 10.2.3 as amended to October 1, 1990
(Exhibit 3 to the CES 1990 Form 10-K, File No. 1-7316).
10.2.3.10 Twenty-eighth Amendment to 10.2.3 as amended September 15, 1992
(Exhibit 1 to the CES Form 10-Q (September 1994), File No. 1-7316).
10.2.3.11 Twenty-ninth Amendment to 10.2.3 as amended May 1, 1993 (Exhibit 2
to the CES Form 10-Q (September 1994), File No. 1-7316).
10.2.4 Fuel Supply, Facilities Lease and Operating Contract by and between
on the one side, ESCO (Massachusetts), Inc. and Energy Supply &
Credit Corporation on the other side and CEC dated February 1, 1985
(Exhibit 1 to the CEC Form 10-K for 1984, File No. 2-30057).
10.2.4.1 Amendments Nos. 1 and 2 to 10.2.4 as amended July 1, 1986 and
November 15, 1989, respectively (Exhibit 3 to the CEC 1989 Form
10-K, File No. 2-30057).
10.2.5 Oil Supply Contract by and between CEC (buyer) and Carey Energy
Fuels Corporation (seller) for a portion of CEC's requirements of
No. 6 residual fuel oil, dated July 1, 1991 (Exhibit 3 to the CEC
Form 10-Q (June 1991), File No. 2-30057).
10.2.6 Assignment Agreement between CEC and ESCO (Massachusetts), Inc.
(ESCO-Mass) and Energy Supply and Credit Corporation whereby CEC
assigns to ESCO-Mass rights and obligations under the Supply
Contract with Carey Energy Fuels Corporation, dated July 1, 1991
(Exhibit 4 to the CEC Form 10-Q (June 1991), File No. 2-30057).
10.2.7 Assignment and Sublease Agreement and CEC's Consent of Assignment
thereto whereby ESCO-Mass assigns its rights and obligations under
Part II of the Resupply Agreement dated February 1, 1985 to ESCO
Terminals Inc., dated June 4, 1985 (Exhibit 4 to the CEC Form 10-Q
(June 1985), File No. 2-30057).
Filed herewith:
Exhibit 27.
Financial Data Schedule for the year ended December 31, 1994
(Filed herewith as Exhibit 1)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
December 31, 1994.
<PAGE>
<PAGE 40>
<TABLE> SCHEDULE I
CANAL ELECTRIC COMPANY
INVESTMENTS IN, EQUITY EARNINGS OF,
AND DIVIDENDS RECEIVED FROM RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in Thousands)
<CAPTION>
Investment Investment
Balance Balance
Description of Investment and Beginning of Equity Dividends End of
Name of Issuer Year Shares Earnings Received Year
New England/Hydro-Quebec Phase II
HVDC Transmission Project -
YEAR ENDED DECEMBER 31, 1994
<S> <C> <C> <C> <C> <C>
New England Hydro-Transmission
Electric Company, Inc. $ 2 408 136 656 $ 314 $ 409 $2 313
New England Hydro-Transmission
Corporation 1 453 785.772 193 157 1 489
Total $ 3 861 $ 507 $ 566 $3 802
YEAR ENDED DECEMBER 31, 1993
<S> <C> <C> <C> <C> <C>
New England Hydro-Transmission
Electric Company, Inc. $ 2 580 136 656 $ 361 $ 533 $2 408
New England Hydro-Transmission
Corporation 1 590 785.772 212 349 1 453
Total $ 4 170 $ 573 $ 882 $3 861
YEAR ENDED DECEMBER 31, 1992
<S> <C> <C> <C> <C> <C>
New England Hydro-Transmission
Electric Company, Inc. $ 2 753 136 656 $ 316 $ 489 $2 580
New England Hydro-Transmission
Corporation 1 619 785.772 304 333 1 590
Total $ 4 372 $ 620 $ 822 $4 170
</TABLE>
<PAGE>
<PAGE 41>
CANAL ELECTRIC COMPANY
FORM 10-K DECEMBER 31, 1994
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.
CANAL ELECTRIC COMPANY
(Registrant)
By: WILLIAM G. POIST
William G. Poist,
Chairman of the Board and
Chief Executive 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.
Principal Executive Officers:
WILLIAM G. POIST March 29, 1995
William G. Poist,
Chairman of the Board and
Chief Executive Officer
R. D. WRIGHT March 29, 1995
Russell D. Wright,
President and Chief Operating Officer
Principal Financial Officer:
JAMES D. RAPPOLI March 29, 1995
James D. Rappoli
Financial Vice President and Treasurer
Principal Accounting Officer:
JOHN A. WHALEN March 29, 1995
John A. Whalen,
Comptroller
A majority of the Board of Directors:
WILLIAM G. POIST March 29, 1995
William G. Poist, Director
R. D. WRIGHT March 29, 1995
Russell D. Wright, Director
JAMES D. RAPPOLI March 29, 1995
James D. Rappoli, Director
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet, statement of income, statement of retained earnings and
statement of cash flows contained in Form 10-K of Canal Electric Company for
fiscal year ended December 31, 1994 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000016906
<NAME> CANAL ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 265,700
<OTHER-PROPERTY-AND-INVEST> 3,802
<TOTAL-CURRENT-ASSETS> 21,532
<TOTAL-DEFERRED-CHARGES> 25,070
<OTHER-ASSETS> 13,844
<TOTAL-ASSETS> 329,948
<COMMON> 38,080
<CAPITAL-SURPLUS-PAID-IN> 8,321
<RETAINED-EARNINGS> 51,647
<TOTAL-COMMON-STOCKHOLDERS-EQ> 98,048
0
0
<LONG-TERM-DEBT-NET> 87,713
<SHORT-TERM-NOTES> 20,675
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,110
0
<CAPITAL-LEASE-OBLIGATIONS> 13,258
<LEASES-CURRENT> 586
<OTHER-ITEMS-CAPITAL-AND-LIAB> 108,558
<TOT-CAPITALIZATION-AND-LIAB> 329,948
<GROSS-OPERATING-REVENUE> 198,386
<INCOME-TAX-EXPENSE> 8,390
<OTHER-OPERATING-EXPENSES> 166,232
<TOTAL-OPERATING-EXPENSES> 174,622
<OPERATING-INCOME-LOSS> 23,764
<OTHER-INCOME-NET> 137
<INCOME-BEFORE-INTEREST-EXPEN> 23,901
<TOTAL-INTEREST-EXPENSE> 9,743
<NET-INCOME> 14,158
0
<EARNINGS-AVAILABLE-FOR-COMM> 14,158
<COMMON-STOCK-DIVIDENDS> 10,662
<TOTAL-INTEREST-ON-BONDS> 8,283
<CASH-FLOW-OPERATIONS> 36,512
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
