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): September 25, 1996
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
<PAGE>
Item 1 through Item 4. Not applicable.
Item 5. Other Events.
Maine Yankee Independent Safety Assessment. As previously reported, Maine Yankee
Atomic Power Company ("Maine Yankee"), in which the Company holds a 38-percent
equity interest, took its nuclear generating plant at Wiscasset, Maine (the
"Plant") off-line on July 20, 1996, to add pressure-relief capacity to the
Plant's primary component cooling system, and returned the Plant to a 90-percent
operating level on September 2, 1996. The Plant has been limited to the
90-percent operating level pending the conclusion of the investigation into
several matters by the Nuclear Regulatory Commission ("NRC") and, in addition, a
comprehensive Independent Safety Assessment ("ISA") conducted by the NRC in the
summer of 1996.
On October 7, 1996, the NRC released the report of the team of NRC
personnel and contractors who conducted the ISA. As previously reported, the NRC
stated that the overall goals of the ISA were to "(a) provide an independent
assessment of conformance to the design and licensing basis; (b) provide an
independent assessment of operational safety performance; (c) evaluate the
effectiveness of licensee self-assessments, corrective actions and improvement
plans; and (d) determine root cause(s) of safety significant findings and
conclusions."
In evaluating the Plant's conformance to the licensing basis, the report
concluded that Maine Yankee was in general conformance with its licensing basis
although significant items of non-conformance were identified.
With respect to conformance to Maine Yankee's design basis, the ISA report
found that the quality and availability of design-basis information were good
overall. The report concluded that despite uncorrected and previously
undiscovered design problems specified in the report, the design basis and
compensatory measures adequately supported operation of the Plant at a power
level of 2440 megawatts thermal, which is approximately equal to the 90 percent
operating level to which the Plant has been limited. The ISA team further stated
in its report that because of issues relating to the containment spray pumps and
the component cooling water system, it could not conclude that the design basis
supported operation of the Plant at 2700 megawatts thermal, which is equivalent
to 100 percent of its maximum electrical capability.
Addressing operational safety, the ISA report stated that overall,
performance in the area of operations was very good. The report identified
specific operational strengths in operator performance during routine and
transient operating conditions, shift turnovers, use of risk information, and
the involvement of managers in day-to-day operations. Weaknesses noted involved
the need for operators to work around certain problems with Plant equipment
during shutdown and startup, manual actions under certain transient operating
conditions required by compensatory measures intended to address design
weaknesses, log-keeping, and reviews of events following a trip in one of the
Plant's instruments or systems. The report also concluded that Plant maintenance
was good overall, but that testing was weak. Particular maintenance strengths
were described. The report stated that although the condition of Plant material
was considered good overall, a decline in material condition following the 1995
outage for resleeving of the steam-generator tubes and other significant
material condition deficiencies were noted by the ISA team. With respect to
testing, the report stated that the team identified inadequacies in the scope
and rigor of testing and in the evaluation of test results. The ISA report also
addressed the quality of engineering work, concluding that it was mixed but good
overall. The report also indicated specific strengths and weaknesses in this
area.
After evaluating Maine Yankee's self-assessments, corrective actions and
improvement plans as part of the ISA, the ISA team identified weaknesses in the
areas of problem identification and resolution. The report noted that while
Maine Yankee self-assessments were generally good, they occasionally failed to
identify weaknesses or incorrectly characterized the significance of the
findings. Further, the report stated that some corrective actions were not
timely and others were ineffective, leading to repetitive problems. The report
recognized the general effectiveness of planning, but stated that some
weaknesses in implementing improvement plans existed due to resource
limitations.
The ISA team report concluded that overall performance at Maine Yankee was
adequate for operation of the Plant and that the deficiencies noted in the
report stemmed from two closely related root causes. The report indicated that
these root causes were (1) economic pressure to be a low-cost energy provider
has limited available resources to address corrective actions and some
improvements and (2) a lack of a questioning culture, which had resulted in a
failure to identify or promptly correct significant problems in areas perceived
by Maine Yankee to be of low safety significance.
The ISA report identified certain deficiencies described in the report and
stated that they will be addressed as part of a separate NRC follow-up to
clarify NRC expectations for the nuclear power industry.
A letter to Maine Yankee from Shirley Ann Jackson, the Chair of the NRC,
accompanying the ISA report noted that overall performance at Maine Yankee was
considered adequate for operation but that a number of significant weaknesses
and deficiencies identified in the report will result in violations. The letter
directs Maine Yankee to provide to the NRC its plans for addressing the root
causes of the deficiencies identified by the ISA and states that the NRC's
Region I and Office of Nuclear Reactor Regulation will be responsible for
overseeing corrective actions relating to issues identified in the ISA and for
taking any appropriate enforcement actions against Maine Yankee.
The NRC held a public meeting on October 10, 1996 at a location in
Wiscasset, Maine, at which it discussed the conclusions in the ISA and responded
to questions.
The Company cannot predict when the Plant will be allowed to return to
maximum capacity. Maine Yankee has informed the Company that while it cannot
predict when, or if, the Plant will be allowed to return to maximum capacity,
the Plant's operating level may be limited to 90 percent of capacity until
completion of the Plant's next planned refueling outage, which is now scheduled
for September 1997. The Company's current estimate of the costs of replacement
power during the Plant's operation at 90 percent of capacity is that they will
range from $300,000 to $400,000 per month. These additional costs are not
recoverable under a fuel-adjustment clause and will be charged against
operations in 1996.
Withdrawal of Interim Tariff request. As previously reported, on April 17, 1996,
in part in reaction to developments in its service territory, including the
immediacy of the threat of uneconomic bypass through the installation of new
self-generation, the Company requested that the Maine Public Utilities
Commission ("MPUC") approve a proposed "Interim Competitive Transition Charge
Tariff" ("Interim Tariff"). The Interim Tariff was intended to prevent the
shifting of strandable costs from one group of customers to another and to hold
departing customers responsible for their allocable share of such costs by
payment of the "uneconomic" portion of the cost of such self-generation by the
departing customers. The MPUC denied the Company's request for expeditious
treatment of the request. In June 1996, after the Company had entered into a
service contract covering all facilities in the Company's service territory of a
large customer that had threatened to install self-generation at approximately
thirty locations, the MPUC established a schedule calling for the MPUC's
decision by mid-November 1996.
The Company joined other parties in a September 25, 1996 motion for
voluntary withdrawal of the Interim Tariff, citing removal of the immediacy of a
significant risk of bypass and indications by the MPUC, in its July 19, 1996
draft plan for electric industry restructuring, that cost shifting and
uneconomic new generation were concerns that need to be addressed and also
noting that a more detailed report on restructuring by the MPUC is expected by
year end 1996. The Company will file additional comments in the pending MPUC
proceeding on Electric Utility Industry Restructuring further supporting the
need for non-bypassable transition charges, including charges to customers
exiting the system as a result of the installation of self-generation, and
policies that would discourage new uneconomic self-generation.
The withdrawal of the Interim Tariff does not resolve the issue of
transition charges for bypass through such means as self-generation nor does it
prevent the Company from proposing appropriate remedies if it deems it necessary
prior to finalization of restructuring and stranded cost issues by the MPUC or
the Maine Legislature.
The MPUC granted the Motion for Withdrawal on September 30, 1996.
Rating agency action. On September 25, 1996, Duff & Phelps Credit Rating
Co. ("DCR") placed the ratings of the Company's debt and preferred stock on
"Rating Watch--Down". DCR stated that its action was due to uncertainty
surrounding the Nuclear Regulatory Commission's previously reported
investigations into three nuclear generating facilities (Maine Yankee,
Connecticut Yankee Atomic Power Company and Millstone Unit No. 3) in which the
Company has ownership interests. DCR currently rates the Company's General and
Refunding Mortgage Bonds "BBB-", its unsecured notes "BB+", its preferred stock
"BB", and its commercial paper "D-3". The rating agency recognized "positive
strides" taken by the Company over the past few years in dealing with several
challenges, but found that the Company's "troubled nuclear facilities situation
casts a shadow on the [C]ompany's prospects for financial strengthening."
Connecticut Yankee Atomic Power Company Outage. As previously reported, the
nuclear generating plant owned by Connecticut Yankee Atomic Power Company
("Connecticut Yankee"), a corporation in which the Company holds a 6 percent
equity interest, has been out of service. The plant was taken off line on July
22 in connection with certain safety-related issues and refueling. While the
Connecticut Yankee plant has been out of service, Connecticut Yankee conducted
an economic analysis of plant operations over the next ten years. A press
release issued by Connecticut Yankee on October 9 reported that Connecticut
Yankee's owners stated that "an economic analysis of operations, expenses, and
the cost of replacement power indicates that a permanent shutdown of the plant
seems likely." The release also reported, "As a result of the analysis, work at
the plant has been slowed pending a final decision by the board of directors of
Connecticut Yankee Atomic Power Company." The Company estimates that it will
incur approximately $300,000 to $400,000 in replacement power costs for each
month in 1996 that the Connecticut Yankee plant remains out of service. The
Company will charge these costs against operations in 1996. The Company cannot
predict what action will be taken by the Board of Directors of Connecticut
Yankee or the costs that will ultimately be incurred by the Company relating to
any decision to cease operation of the Connecticut Yankee plant permanently.
Item 6 through 8. Not applicable.
<PAGE>
SIGNATURE
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.
CENTRAL MAINE POWER COMPANY
By: __________________________________
D. E. Marsh
Vice President, Corporate Services,
Treasurer, and Chief Financial
Officer
Dated: October 16, 1996
