SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 4, 1994
CENTRAL MAINE POWER COMPANY
(Exact name of registrant as specified in its charter)
Maine 1-5139 01-0042740
(State of Incorporation) (Commission (IRS Employer
File Number) Identification
Number)
83 Edison Drive, Augusta, Maine 04336
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (207)
623-3521
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Item 1 through Item 4. Not applicable.
Item 5. Other Events.
As previously reported, in October 1993 the Maine Public
Utilities Commission ("PUC") in an investigation of the
Company's administration of certain power contracts with non-
utility generators, found the Company to have been imprudent
with respect to the administration of two such contracts and
reduced the Company's allowed rate of return on equity by 0.5
percent (approximately $4 million, before income taxes, over a
12-month period). The Company appealed the decision to the
Maine Supreme Judicial Court (the "Law Court") and obtained a
stay of the return-on-equity penalty pending a decision on the
merits of the appeal.
On April 4, 1994, the PUC approved a stipulation supported
by the Company and other parties to the earlier investigation
and the Company's 1993 base-rate case. In the stipulation the
Company agreed to write off $5 million in purchased-power costs,
to be implemented through a one-time reduction in its deferred
fuel cost balances and further agreed not to seek recovery in
rates of the approximately $5.5 million (of which $4.5 million
was deferred) in costs incurred in pursuing the termination and
buy-out in January 1994 of its purchased-power contract with
Caithness King of Maine Limited Partnership. The Company also
agreed to withdraw its appeal to the Law Court of the PUC's
October 1993 order in its power-contract investigation, which
will have the effect of increasing the Company's annual base
revenues by the $4 million amount of the stayed return-on
-equity penalty, and its appeal to the Law Court of the PUC's
December 1993 decision in the Company's base-rate case.
In return, the stipulation provides that the Company will
be subject to no further prudence investigation, penalties or
disallowances resulting from any actions prior to March 1, 1994,
in any respect in connection with the two contracts that were
the subject of the PUC's imprudence finding and the Caithness
King contract. In the stipulation the parties also agreed that
any further prudence investigation by the PUC of the Company's
administration of purchased-power contracts prior to April 4,
1994, would conclude with the issuance of a final PUC order no
later than October 1, 1994. In addition, the stipulation
provides, in the event any such further investigation occurs and
the Company is found imprudent in the administration of
purchased-power contracts, in no event will the Company be
subject to a "disallowance or other financially adverse
consequence" if the Company's financial condition is impaired to
the extent such consequence, if imposed in 1994, would result in
the Company's earned rate of return on common equity for the
calendar year 1994 falling 325 basis points below the 10.05-
percent rate of return on common equity found reasonable by the
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PUC in its December 1993 base-rate decision, regardless of when
such disallowance or adverse financial consequence is determined
by the PUC. The stipulation also provides that the Company will
not be held imprudent for any action necessary to conform to a
standard of "commercial reasonableness" in contract
administration.
Finally, in addition to agreement on procedural matters,
the stipulation contains an agreement that the Company will be
subject to no further investigation, disallowance or other
financially adverse consequence with respect to its
administration of its "Capacity Deficiency Fund" and will not be
required to flow through to ratepayers any amounts previously
recorded to that fund. That provision will permit the Company
to reverse the $4.1 million reserve established in the third
quarter of 1993 as a result of the PUC's direction in its
October 1993 order that the Company charge that amount against
its deferred fuel-cost balance.
The Company believes that the approval of the stipulation
by the PUC resolves or limits a number of complex issues that
were posing significant risks to the Company and will permit it
to intensify its continuing efforts to restructure high-cost
power purchase contracts and work with the PUC and other parties
to formulate an appropriate rate-stability plan.
Item 6 through Item 8. Not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to be
signed on its behalf by the undersigned thereunto duly
authorized.
CENTRAL MAINE POWER COMPANY
By
David E. Marsh
Vice President, Corporate Services,
and Chief Financial Officer
Dated: April 6, 1994
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