UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-5139
CENTRAL MAINE POWER COMPANY
(Exact name of registrant as specified in its charter)
Incorporated in Maine 01-0042740
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Edison Drive, Augusta, Maine 04336
(Address of principal executive offices) (Zip Code)
207-623-3521
(Registrant's telephone number including area code)
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least 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. Shares Outstanding Class as
of November 12, 1996
Common Stock, $5 Par Value 32,442,752
Central Maine Power Company
INDEX
Page No.
Part I. Financial Information
Consolidated Statement of Earnings for the Three Months
Ended September 30, 1996 and 1995 1
Consolidated Statement of Earnings for the Nine Months
Ended September 30, 1996 and 1995 2
Consolidated Balance Sheet - September 30, 1996 and
December 31, 1995:
Assets 3
Stockholders' Investment and Liabilities 4
Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Part II. Other Information 21
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Central Maine Power Company
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
For the Three Months
Ended September 30,
1996 1995
ELECTRIC OPERATING REVENUES $228,987 $217,872
OPERATING EXPENSES
Fuel Used for Company Generation 5,177 5,887
Purchased Power
Energy 101,892 99,221
Capacity 28,471 18,631
Other Operation 49,073 41,750
Maintenance 9,760 7,021
Depreciation and Amortization 13,287 13,315
Federal and State Income Taxes 1,790 4,260
Taxes Other Than Income Taxes 6,910 7,390
Total Operating Expenses 216,360 197,475
EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 2,040 1,772
OPERATING INCOME 14,667 22,169
OTHER INCOME (EXPENSE)
Allowance for Equity Funds Used During Construction 232 173
Other, Net 1,218 1,802
Income Taxes Applicable to Other Income (Expense) (446) (476)
Total Other Income (Expense) 1,004 1,499
INCOME BEFORE INTEREST CHARGES 15,671 23,668
INTEREST CHARGES
Long-Term Debt 11,530 12,371
Other Interest 926 1,040
Allowance for Borrowed Funds Used During Construction (177) (143)
Total Interest Charges 12,279 13,268
NET INCOME 3,392 10,400
DIVIDENDS ON PREFERRED STOCK 2,207 2,518
EARNINGS APPLICABLE TO COMMON STOCK $ 1,185 $ 7,882
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 32,442,752 32,442,752
EARNINGS PER SHARE OF COMMON STOCK $0.04 $0.24
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.225 $0.225
The accompanying notes are an integral part of these financial statements.
Central Maine Power Company
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
For the Nine Months
Ended September 30,
1996 1995
ELECTRIC OPERATING REVENUES $719,484 $683,768
OPERATING EXPENSES
Fuel Used for Company Generation 12,657 15,441
Purchased Power
Energy 314,873 305,925
Capacity 77,524 73,799
Other Operation 131,767 131,227
Maintenance 25,282 21,960
Depreciation and Amortization 41,306 41,629
Federal and State Income Taxes 25,726 12,695
Taxes Other Than Income Taxes 20,725 20,759
Total Operating Expenses 649,860 623,435
EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 5,139 5,249
OPERATING INCOME 74,763 65,582
OTHER INCOME (EXPENSE)
Allowance for Equity Funds Used During Construction 616 483
Other, Net 4,558 4,748
Income Taxes Applicable to Other Income (Expense) (1,651) (1,719)
Total Other Income (Expense) 3,523 3,512
INCOME BEFORE INTEREST CHARGES 78,286 69,094
INTEREST CHARGES
Long-Term Debt 35,544 37,988
Other Interest 2,874 3,348
Allowance for Borrowed Funds Used During Construction (477) (399)
Total Interest Charges 37,941 40,937
NET INCOME 40,345 28,157
DIVIDENDS ON PREFERRED STOCK 7,244 7,659
EARNINGS APPLICABLE TO COMMON STOCK $ 33,101 $ 20,498
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 32,442,752 32,442,752
EARNINGS PER SHARE OF COMMON STOCK $1.02 $0.63
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.675 $0.675
The accompanying notes are an integral part of these financial statements
Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
Sept. 30, Dec. 31,
1996 1995
(Unaudited)
ASSETS
ELECTRIC PROPERTY, at Original Cost $1,630,988 $1,611,941
Less: Accumulated Depreciation 589,388 560,078
Electric Property in Service 1,041,600 1,051,863
Construction Work in Progress 20,863 15,928
Net Nuclear Fuel 1,188 1,391
Net Electric Property and Nuclear Fuel 1,063,651 1,069,182
INVESTMENTS IN ASSOCIATED COMPANIES, at Equity 68,019 54,669
Net Electric Property, Nuclear Fuel and
Investments in Associated Companies 1,131,670 1,123,851
CURRENT ASSETS
Cash and Temporary Cash Investments 9,424 57,677
Accounts Receivable, Less Allowance for Uncollectible
Accounts of $3,260 in 1996 and $3,313 in 1995
Service - Billed 73,057 87,140
- Unbilled 32,566 41,798
Other Accounts Receivable 12,326 15,131
Prepaid Income Taxes 960
Inventories, at Average Cost
Fuel Oil 4,353 3,772
Materials and Supplies 12,426 12,772
Funds on Deposit With Trustee 59,588 29,919
Prepayments and Other Current Assets 13,723 9,192
Total Current Assets 218,423 257,401
DEFERRED CHARGES AND OTHER ASSETS
Recoverable Costs of Seabrook 1 and Abandoned
Projects, Net 90,945 95,127
Regulatory Assets-Deferred Taxes 233,768 235,081
Yankee Atomic Purchased Power Contract 17,843 21,396
Other Deferred Charges and Other Assets 240,905 260,063
Deferred Charges and Other Assets, Net 583,461 611,667
TOTAL ASSETS $1,933,554 $1,992,919
The accompanying notes are an integral part of these financial statements.
Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
Sept. 30, Dec. 31,
1996 1995
(Unaudited)
STOCKHOLDERS' INVESTMENT AND LIABILITIES
CAPITALIZATION
Common Stock Investment $ 501,201 $ 490,005
Preferred Stock 65,571 65,571
Redeemable Preferred Stock 53,528 67,528
Long-Term Obligations 565,611 622,251
Total Capitalization 1,185,911 1,245,355
CURRENT LIABILITIES AND INTERIM FINANCING
Interim Financing 59,870 34,000
Sinking-Fund Requirements 8,726 10,455
Accounts Payable 79,509 108,170
Dividends Payable 9,512 9,823
Accrued Interest 9,616 12,648
Accrued Income Taxes 3,668
Miscellaneous Current Liabilities 17,382 13,870
Total Current Liabilities
and Interim Financing 184,615 192,634
COMMITMENTS AND CONTINGENCIES
RESERVES AND DEFERRED CREDITS
Accumulated Deferred Income Taxes 355,408 351,868
Unamortized Investment Tax Credits 31,337 32,452
Regulatory Liabilities-Deferred Taxes 51,934 50,366
Yankee Atomic Purchased Power Contract 17,843 21,396
Other Reserves and Deferred Credits 106,506 98,848
Total Reserves and Deferred Credits 563,028 554,930
TOTAL STOCKHOLDERS' INVESTMENT
AND LIABILITIES $1,933,554 $1,992,919
The accompanying notes are an integral part of these financial statements.
Central Maine Power Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
(Note 1)
For the Nine Months
Ended Sept. 30,
1996 1995
CASH FROM OPERATIONS
Net Income $ 40,345 $ 28,157
Items Not Requiring (Not Providing) Cash:
Depreciation and Amortization 59,575 61,101
Deferred Income Taxes and Investment
Tax Credits, Net 4,524 4,177
Maine Yankee Sleeving Accrual, Net of
Amounts Billed 7,893
Allowance for Equity Funds Used During
Construction (616) (483)
Changes in Certain Assets and Liabilities:
Accounts Receivable 26,120 18,358
Other Current Assets (4,531) (136)
Inventories (235) 71
Accounts Payable (27,792) (24,685)
Accrued Interest (3,032) (4,181)
Accrued Income Taxes (4,628) 26,205
Miscellaneous Current Liabilities 3,512 8,387
Deferred Energy-Management Costs (3,497) (2,524)
Maine Yankee Outage Accrual 6,210 (6,780)
Purchased-Power Contracts (75) (10,675)
Other, Net 4,480 3,070
Net Cash Provided By
Operating Activities 100,360 107,955
INVESTING ACTIVITIES
Construction Expenditures (31,217) (32,673)
Changes in Accounts Payable -
Investing Activities (869) (2,083)
Investments in Associated
Companies (12,026) (600)
Net Cash Used by Investing
Activities (44,112) (35,356)
FINANCING ACTIVITIES
Issuances:
Medium-Term Notes 10,000 30,000
Redemptions:
Other Long Term Obligations, net (860) (860)
Short Term Obligations, net (8,000)
Preferred Stock (14,000) (5,472)
Medium-Term Notes (29,000) (55,000)
Mortgage Bonds (11,500)
Dividends:
Common Stock (21,916) (21,916)
Preferred Stock (7,556) (7,768)
Funds on Deposit With Trustee (29,669) -
Net Cash Used by Financing
Activities (104,501) (69,016)
Net (Decrease) Increase
In Cash (48,253) 3,583
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 57,677 58,112
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,424 $ 61,695
The accompanying notes are an integral part of these financial statements.
Central Maine Power Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Certain information in footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. However, the disclosures
herein should be read with the Annual Report on Form 10-K for the year ended
December 31, 1995 (Form 10-K), and are adequate to make the information
presented herein not misleading. Certain prior-year information has been
reclassified to be consistent with the 1996 presentation.
The consolidated financial statements include the accounts of Central Maine
Power Company (the Company) and its 78 percent-owned subsidiary, Maine Electric
Power Company, Inc. (MEPCO). The Company accounts for its investments in
associated companies not subject to consolidation using the equity method.
The Company's significant accounting policies are contained in Note 1 of
Notes to Consolidated Financial Statements in the Company's Form 10-K. For
interim accounting periods the policies are the same. The interim financial
statements reflect all adjustments that are, in the opinion of management,
necessary to a fair statement of results for the interim periods presented. All
such adjustments are of a normal recurring nature.
The adoption of the Alternative Rate Plan (ARP), effective January 1, 1995,
eliminated the reconcilable fuel clause used under traditional rate-of-return
regulation to account for and collect fuel and purchased-power energy costs.
Fuel revenues and expenses are now recorded as they are billed rather than
deferred.
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," effective January 1, 1996. This statement requires impairment
losses on long-lived assets to be recognized when an asset's book value exceeds
its fair value. This statement also imposes a stricter criterion for retention
of regulatory assets on the financial statements by requiring that such assets
be probable of recovery at each balance sheet date. As of September 30, 1996,
the amount of assets not subject to rate recovery was immaterial. However, this
may change in the future as changes are made in the current regulatory framework
or as competitive factors influence wholesale and retail pricing in the electric
utility industry.
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased having maturities of three months or less to
be cash equivalents.
Supplemental Cash Flow Disclosure - Cash paid for the nine months ended
September 30, 1996 and 1995 for interest, net of amounts capitalized, amounted
to $38.4 million and $41.9 million, respectively. Income taxes paid ($28.4
million), net of amounts reimbursed from subsidiaries, amounted to $27.5 million
for the nine months ended September 30, 1996. For the nine months ended
September 30, 1995 income tax refunded, net of amounts paid ($13.8 million),
amounted to $15.9 million. The Company incurred no new capital lease obligations
in either period.
2. Commitments and Contingencies
Maine Yankee Atomic Power Company (Maine Yankee). As previously reported,
on January 11, 1996, the Maine Yankee nuclear generating plant began start-up
operations after an extended outage and had attained a 90-percent generation
level by January 24, 1996. On April 25, 1996, Maine Yankee submitted an analysis
to the Nuclear Regulatory Commission (NRC) which Maine Yankee believes met all
federal regulatory requirements for operating the Plant at the 100-percent level
but, due to the events discussed below, the NRC has not yet taken final action
on the submittal.
Also as previously reported, in December 1995 the NRC's Office of the
Inspector General (OIG) and its Office of Investigations (OI) had initiated
separate investigations of certain anonymous allegations of wrongdoing by Maine
Yankee and Yankee Atomic Electric Company (Yankee) in 1988 and 1989 in
connection with Maine Yankee Plant operating-license amendments. On May 9, 1996,
the OIG, which was responsible for investigating only the actions of the NRC
Staff and not those of Maine Yankee or Yankee, issued its report on its
investigation. The report found deficiencies in the NRC Staff's review,
documentation, and communications practices in connection with the license
amendments, as well as "significant indications of possible licensee violations
of NRC requirements and regulations." Any such violations by Maine Yankee or
Yankee would be within the purview of the OI investigation, which is under
review by the U.S. Department of Justice. A separate internal investigation
commissioned by the boards of directors of Maine Yankee and Yankee and conducted
by an independent law firm noted several areas that could have been improved,
including regulatory communications, definition of responsibilities between
Maine Yankee and Yankee, and documentation and tracking of regulatory
compliance, but found no wrongdoing by Maine Yankee or Yankee or any of their
employees.
On June 7, 1996, the NRC formally notified Maine Yankee that it also
planned to conduct an "Independent Safety Assessment" (ISA) of the Maine Yankee
Plant to provide an independent evaluation of the safety performance of Maine
Yankee and as a "follow-on" to the OIG report. The NRC stated that the overall
goals and objectives of the ISA were: "(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." The NRC
further informed Maine Yankee that the ISA would be carried out by a team of NRC
personnel and contractors who were "independent of any recent or significant
involvement with the licensing, regulation or inspection of Maine Yankee".
The Maine Yankee Plant operated at essentially the 90-percent level until
July 20, 1996, when it was taken off-line after a comprehensive review by Maine
Yankee of the Plant's systems and equipment while the ISA was in progress
revealed a need to add pressure-relief capacity to the Plant's primary component
cooling system. The Plant returned to a 90-percent operating level on September
3, 1996.
On October 7, 1996, the NRC released the ISA report, which dealt with each
of its stated goals.
In evaluating the Maine Yankee Plant's conformance to its licensing basis,
the report concluded that the Plant was in general conformance with its
licensing basis although significant items of non-conformance were identified.
With respect to conformance to the Plant'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 (the 90-percent operating level). 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 (the 100-percent
operating level).
Addressing its operational-safety goal, 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 sleeving 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, and
indicated specific strengths and weaknesses in that 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
the root causes were: (1) that economic pressure to be a low-cost energy
provider had limited available resources to address corrective actions and some
improvements; and (2) that a questioning culture was lacking, 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 also identified certain deficiencies described in the report
and stated that they would be addressed as part of a separate NRC follow-up to
clarify NRC expectations for the nuclear power industry. On October 10, 1996,
Maine Yankee received from the NRC a generic letter that had been sent to
substantially all nuclear plant licensees in the United States requesting
information to be used to verify compliance with the terms and conditions of the
Plant's operating license and NRC regulations, and that the Plant's updated
final safety analysis report properly describes the facilities, as well as to
determine if other inspection activities or enforcement action should be taken.
The written response must be under oath or affirmation and must be submitted
within 120 days of receipt of the generic letter. Maine Yankee has stated that
it believes that it will submit a response satisfying the requirements of the
NRC's request within the allotted time period.
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 would result in violations. The letter
directed Maine Yankee to provide to the NRC its plans for addressing the root
causes of the deficiencies identified by the ISA and stated that the NRC's
Region I and Office of Nuclear Reactor Regulation would 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 in Wiscasset, Maine, at which it discussed
the conclusions in the ISA and responded to questions.
In addition to preparing its formal response to the ISA, Maine Yankee has
developed and commenced implementation of a comprehensive plan for improved
performance in several areas, including some areas cited as strengths as well as
others deemed deficient by the NRC in the ISA report or other investigations.
The primary elements of the plan involve allocation of resources, organizational
changes, program enhancements, and cultural and personnel changes.
The Company cannot predict when or if the Maine Yankee 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 is incurring replacement power
costs of approximately $300,000 to $500,000 each month Maine Yankee operates at
90-percent of capacity.
Connecticut Yankee and Millstone - On October 9, 1996, Connecticut Yankee
Atomic Power Company (CYAPC), which owns and operates the Connecticut Yankee
(CY) nuclear electric generating unit, announced that a permanent shutdown of
the unit seems likely based on an economic analysis of the costs of operating
the unit compared to the costs of closing the unit and incurring replacement
power for the same period. The final decision is pending a vote by CYAPC's board
of directors which is expected to occur in the fourth quarter of 1996. The
Company has a 6 percent equity investment, approximately $6.3 million at
September 30, 1996, and relies on CYAPC for less than 2 percent of its system
capacity.
The preliminary estimate of the sum of future payments for the closing,
decommissioning, and recovery of the remaining investment in CY, assuming
permanent shutdown, is approximately $797 million. The Company's share of these
remaining estimated costs and investment recovery is approximately $50 million.
The contracts under which the Company purchases their entitlement of CYAPC
power permit CYAPC to recover these costs from the Company. Should CYAPC board's
decision result in permanent closure of CY, CYAPC expects to file updated
decommissioning costs and certain amendments to its power contracts with the
Federal Energy Regulatory Commission. Based upon regulatory precedent, CYAPC
believes it will continue to collect from its power purchasers, including the
Company, its decommissioning costs, the owners' unrecovered investments in CYAPC
and other costs associated with the permanent closure of the unit over the
remaining period of the units NRC operating license, which expires in 2007.
Management expects that the Company will continue to be allowed to recover such
FERC-approved costs from their customers. The Company estimates that it will
incur approximately $300,000 to $500,000 in replacement power costs for each
month in 1996 that the Connecticut Yankee plant remains out of service. 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.
Another nuclear generating plant in which the Company has an interest,
Millstone Unit No. 3 (2.5 percent interest), which is operated by Northeast
Utilities, is currently out of service to provide assurances to the NRC
concerning operating license requirements. Two other plants, Millstone Units No.
1 and 2, in which the Company does not have ownership, are also shut down. The
Company estimates that it will incur approximately another $300,000 to $500,000
in replacement power costs each month Millstone Unit No. 3 remains out of
service. The Company will charge these costs against operations in 1996.
Allegations by "whistleblowers" of wrongdoing at the Millstone nuclear
units in Connecticut, along with the allegations relating to Yankee and Maine
Yankee discussed above, have contributed to heightened public and regulatory
attention to operating practices at nuclear generating plants throughout the
United States. The Company cannot predict whether such heightened attention will
further affect the operation of the nuclear units in which it has ownership
interests.
Legal and Environmental Matters - The Company is a party in legal and
administrative proceedings that arise in the normal course of business. As
discussed in Note 4 of Notes to Consolidated Financial Statements in the
Company's Form 10-K, in connection with one such proceeding, the Company was
named a potentially responsible party and has been incurring costs to determine
the best method of cleaning up an Augusta, Maine, site formerly owned by a
salvage company and identified by the Environmental Protection Agency (EPA) as
containing soil contaminated by polychlorinated biphenyls (PCBs) from equipment
originally owned by the Company.
On October 10, 1995, the EPA approved a remedy to adjust the soil cleanup
standard to 10 parts per million from the one part per million established in
the EPA's 1989 Record of Decision, on the part of the site where PCBs were found
in their highest concentration. The EPA stated that the purpose of adjusting the
standard of cleanup was to accommodate the selected technology's inability to
reduce PCBs and other chemical components on the site to the original standard.
This remedy involves transporting the contaminated soil to a secure off-site
landfill.
The Company believes that its share of the remaining costs of the cleanup
under the new method could total approximately $3.4 million to $5 million. This
estimate is net of an agreed partial insurance recovery and the 1993
court-ordered contribution of 41 percent from Westinghouse Electric Corp., but
does not reflect any possible contributions from other insurance carriers the
Company has sued, or from any other parties. The Company has recorded an
estimated liability of $3.0 million and an equal regulatory asset, reflecting an
accounting order to defer such costs and the anticipated ratemaking recovery of
such costs when ultimately paid. In addition, the Company has deferred, as a
regulatory asset, $4.7 million of costs incurred through September 30, 1996.
The Company cannot predict with certainty the level and timing of the
cleanup costs, the extent they will be covered by insurance, or their ratemaking
treatment, but believes it should recover substantially all of such costs
through insurance and rates. The Company also believes that the ultimate
resolution of current legal and environmental proceedings will not have a
material adverse effect on its financial condition.
3. Regulatory Matters
Alternative Rate Plan - The MPUC approved the Alternative Rate Plan (ARP)
effective January 1, 1995. See Note 3 to Consolidated Financial Statements
included in the Company's Form 10-K for a detailed description. The ARP was
established in response to an order by the MPUC to develop a five-year plan
containing price-cap, profit-sharing, and pricing-flexibility components.
Although the ARP is a major reform, the MPUC will continue to regulate the
Company's operations and prices, provide for continued recovery of deferred
costs, and specify a range for its rate of return.
The Company believes, as stated in the MPUC's order approving the ARP, that
operation under the ARP continues to meet the criteria of SFAS No. 71. In its
order, the MPUC reaffirmed the applicability of previous accounting orders
allowing the Company to reflect amounts as deferred charges and regulatory
assets. As a result, the Company will continue to apply the provisions of SFAS
No. 71 to its accounting transactions and in its future financial statements.
The ARP contains a mechanism that provides price-caps on the Company's
retail rates to increase annually on July 1, commencing July 1, 1995, by a
percentage combining (1) a price index, (2) a productivity offset, (3) a sharing
mechanism, and (4) flow-through items and mandated costs. The price cap applies
to all of the Company's retail rates, including the Company's fuel-and-purchased
power cost, which previously had been treated separately. Under the ARP, fuel
expense is no longer subject to reconciliation or specific rate recovery, but is
subject to the annual indexed price-cap changes.
The ARP also provides for partial flow-through to ratepayers of cost
savings from non-utility generator contract buy-outs and restructuring, recovery
of energy-management costs, penalties for failure to attain customer-service and
energy-efficiency targets, and specific recovery of half the costs of the
transition to the accounting method required by Statement of Financial
Accounting Standards No. 106, "Accounting for Postretirement Benefits Other Than
Pensions" (SFAS No. 106), the remaining 50 percent to be recovered through the
annual price-cap change. The ARP also generally defines mandated costs that
would be recoverable by the Company notwithstanding the index-based price cap.
To receive such treatment, a mandated cost's revenue requirement must exceed $3
million and have a disproportionate effect on the Company or the electric power
industry.
The ARP also contains provisions to protect the Company and ratepayers
against unforeseen adverse results from its operation. These include review by
the MPUC if the Company's actual return on equity falls outside the designated
range two years in a row, a mid-period review of the ARP by the MPUC in 1997
(including possible modification or termination), and a "final" review by the
MPUC in 1999 to determine whether or with what changes the ARP should continue
in effect after 1999.
Effective July 1, 1995, the MPUC approved a 2.43-percent increase pursuant
to the annual price-change provision in the ARP.
On June 28, 1996, the MPUC approved a 1.26-percent increase in rates and
rate-element caps under the ARP effective July 1, 1996. The components of the
increase included the inflation index of 2.55 percent and earnings sharing and
mandated cost items of 0.64 percent, reduced by the productivity offset of 1.0
percent and sharing of contract restructuring and buyout savings of 0.93
percent. As part of the 1996 ARP compliance filing, the Company sought
affirmation of the recoverability through rates of a pre-ARP regulatory asset.
The MPUC's Order provided for recovery of the pre-ARP regulatory asset in rates
satisfying the Company's request for affirmation and therefore allowed the
Company to remove an accounting reserve it had established in December 1995,
based on the fact that recovery had not specifically been provided for in rates
at that time. The removal of this reserve resulted in a one-time, after-tax,
addition of $3.8 million to income for the second quarter of 1996.
4. Non-Utility Generators
During the second quarter of 1996, the Company entered into agreements
restructuring its purchased power agreement with Maine Energy Recovery Company,
L.L.P. (Maine Energy), a waste-to-energy facility, and concurrently entered into
a capacity sales agreement with CL Power Sales One, L.L.C. (CL One). The amended
purchased power agreement provides for the Company to purchase energy at reduced
rates in exchange for the Company's consent to Maine Energy's sale of the
facility's capacity to CL One. The capacity sales agreement provides for resale
of the capacity from CL One to the Company. Combined, these agreements are
expected to reduce the Company's aggregate cost of purchased power by
approximately $24 million over the term of the agreement.
5. Ancillary Enterprises
As part of its competitive strategy, the Company is seeking to diversify by
expanding through developing ancillary enterprises. On April 26, 1996, the
Company invested $10 million in MaineCom Services (MaineCom), a wholly-owned
subsidiary. MaineCom will seek to develop opportunities in expanding markets by
arranging fiber-optic data service for bulk carriers, offering support for
cable-TV or "super-cellular" personal-communication vendors, and providing other
telecommunications consulting services. MaineCom has invested in FiveCom, a
Massachusetts company, to construct and operate a fiber optics system in New
England.
In July 1996, the Company entered into an option agreement with Maritimes &
Northeast Pipeline, L.L.C. (M&N), and PanEnergy Power Services, Inc.
(PanEnergy), and MEPCO with M&N, in which each of the Company and MEPCO agreed
to provide an exclusive option to M&N to acquire property interests in certain
of their transmission line rights of way for the location of sections of M&N's
proposed natural gas pipeline from the United States-Canada border at Woodland,
Maine, to Dracut, Massachusetts. The Company's option is contingent on, among
other things, the acquisition by PanEnergy of a portion of the Company's
approximately 60-percent interest in William F. Wyman Unit No. 4, a
jointly-owned oil-fired electric generating unit in Yarmouth, Maine, if the
economic feasibility of converting that unit to a natural gas-fired facility is
favorably determined. If PanEnergy acquires such an interest, the Company would
then have the option of acquiring an equity interest of up to 10 percent in M&N
and in the Canadian affiliate of M&N that would construct the pipeline from a
natural-gas processing plant in Nova Scotia to the Maine border. Consummation of
the plans contemplated by the option agreements are subject to a number of
uncertainties, including, among others, feasibility studies, valuation
agreements, regulatory approvals, development of the proposed Canadian source of
natural gas, the effect of competing pipeline proposals, and political
considerations in the United States and Canada. The Company cannot now predict
whether the pipeline will be built or, if it should be, its effects on the
Company's business or operations.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
This discussion contains forecast information items that are
"forward-looking statements" as defined in the federal Private Securities
Litigation Reform Act of 1995. All such forward-looking information is
necessarily only estimated. There can be no assurance that actual results will
not differ from expectations. Actual results have varied materially and
unpredictably from expectations.
Factors that could cause actual results to differ materially include, among
other matters, electric utility restructuring, including the ongoing state and
federal activities; future economic conditions; earnings-retention and
dividend-payout policies; developments in the legislative, regulatory, and
competitive environments in which the Company operates; and other circumstances
that could affect anticipated revenues and costs, such as unscheduled
maintenance or repair requirements and compliance with laws and regulations.
Operating Results
Net income was $3.4 million for the third quarter of 1996 compared to $10.4
million for the corresponding period in 1995. Year-to-date net income was $40.3
million versus $28.2 million for the 1995 period. Earnings applicable to common
stock were $1.2 million or $0.04 per share for the third quarter of 1996
compared to $7.9 million or $0.24 per share for the comparable period in 1995.
Year-to-date earnings applicable to Common Stock were $33.1 million or $1.02 per
share and $20.5 million or $0.63 per share in 1995. The third quarter of 1996
earnings reflect $6.7 million of replacement-power expenses for off-line nuclear
units, the Company's share of one-time charges for regulatory compliance work at
Maine Yankee of approximately $2 million, and increased maintenance expenditures
of $2.7 million. The year-to-date 1995 results were dominated by a one-time
charge of $8.8 million, net of tax, for the Company's share of steam generator
tube sleeving at the Maine Yankee Atomic Power Company (Maine Yankee Plant). Net
income year-to-date 1995 also reflected increased purchased-power expenses of
$15.0 million (after tax) related to replacement power costs for the Maine
Yankee Plant.
Operating revenues in the third quarter of 1996 totaled $229 million, up
5.1 percent from $218 million in the third quarter of 1995. Operating revenues
increased by $35.7 or 5.2 percent to $719 million in the nine month period ended
September 30, 1996. Revenues were affected by higher kilowatt-hour sales and by
a 1.26-percent July price increase for most customers.
Service-area sales for the third quarter of 1996 totaled approximately 2.4
billion kilowatt-hours, up 1.5 percent from the third quarter of 1995.
Service-area sales of electricity totaled approximately 7.0 billion
kilowatt-hours for the nine-month period ended September 30, 1996, an increase
of 2.3 percent compared to the first nine months of 1995.
Service Area Kilowatt-hour Sales (Millions of KWHs)
Period Ended September 30,
Three Months Nine Months
1996 1995 % Change 1996 1995 % Change
Residential 657.2 665.8 (1.3)% 2,139.8 2,117.1 1.1%
Commercial 652.4 664.9 (1.9) 1,886.8 1,873.9 0.7
Industrial 993.5 957.8 3.7 2,764.0 2,702.2 2.3
Other 54.1 34.5 56.5 161.4 102.3 57.7
2,357.2 2,323.0 1.5% 6,952.0 6,795.5 2.3%
The changes in service area kilowatt-hour sales reflect the following:
Kilowatt-hour sales to residential customers decreased by 1.3 percent in
the third quarter and increased by 1.1 percent for the nine months ended
September 30, 1996 compared to 1995; usage per customer decreased by 2.4 percent
in the third quarter and were flat on a year-to-date basis.
Commercial sales decreased by 1.9 percent in the third quarter and
increased by 0.7 percent for the nine months ended September 30, 1996 compared
to 1995. The services, retail and wholesale trade sectors experienced increases
in sales, while most other sectors had decreases.
Industrial kilowatt-hour sales increased by 3.7 percent in the third
quarter and by 2.3 percent for the nine months ended September 30, 1996 compared
to 1995. Pulp and paper sales, which comprise approximately 63 percent of
industrial sales, increased 3.7 percent for the quarter and 1.2 percent for the
nine month period ended September 30, 1996.
The increase in the "Other" category is due to the addition of a wholesale
customer.
MEPCO's electric sales and transmission revenues from New England utilities
other than the Company amounted to $4.3 million and $4.2 million in the third
quarter of 1996 and 1995, respectively. These same totals for the nine months
ended September 30, 1996 and 1995 were $8.4 million and $8.7 million,
respectively. Under a Participation Agreement that formally terminated July 1,
1996, all of MEPCO's costs, including a return on invested capital, were paid by
the participating utilities (Participants), which included the Company and most
of the larger New England electric companies. The level of MEPCO's revenues and
expenses changes depending upon the level of energy purchases by Participants.
MEPCO filed with the Federal Energy Regulatory Commission (FERC) on May 1, 1996,
for a six-month extension of its then-current rates, and offered an extension of
the terms of the Participation Agreement to all Participants.
Effective July 9, 1996, MEPCO filed with FERC under Order 888 for new pro
forma tariff rates. Refer to "Industry Restructuring and Strandable Costs" below
for further discussion of this matter.
Purchased power-capacity expense increased by $9.8 million compared to the
third quarter of 1995, reflecting the Maine Yankee outages and the Company's
share of costs associated with its Nuclear Regulatory Commission investigations.
Also in the 1996 third quarter are increased expenses for a contract
restructuring with a non-utility generator, and costs in connection with outages
at Connecticut Yankee and Millstone Unit No. 3. Purchased-power capacity costs
year to date are $3.7 million higher than last year which included $15 million
of sleeving costs for Maine Yankee in the second quarter of 1995.
Other operation and maintenance expenses increased by $10.1 million
compared to the third quarter of 1995 and $3.9 million year to date. Contractual
obligations under the Company's energy management programs account for a $0.5
million increase for the quarter and a $2.2 million increase year to date over
1995. Distribution operation and maintenance expenses also increased $1.2
million for the quarter and on a year to date basis by $4.8 million, due to a
planned increase for line clearance. Maintenance expense other than distribution
increased by $2.2 million for the quarter and $1.8 million year to date. The
year to date amounts also reflect a reversal of a reserve established in
December 1995. As discussed in Note 3 to Consolidated Financial Statements, in
response to the Company's request for affirmation of recovery through rates of a
pre-ARP regulatory asset the June 28, 1996 ARP order provided recovery in rates
of that pre-ARP regulatory asset, thereby resulting in a one-time pre-tax
addition to income of $6.4 million. This reserve was increased by $1.6 million
in the third quarter of 1996 based on a recent actuarial report. The third
quarter and year to date 1996 include an approximately $2 million increase over
1995 for the recovery under the ARP for Post Retirement Benefits other than
Pensions (Statement of Accounting Standards No. 106). A one-time pre-tax charge
of $4.8 million associated with the Company's Special Retirement Offer was
included in the second quarter of 1995.
Federal and state income taxes fluctuate with the level of pre-tax earnings
and the regulatory treatment of taxes by the MPUC. This expense increased year
to date as a result of higher pre-tax earnings in 1996, when compared to 1995.
Interest on long-term debt and other interest expense decreased during the
third quarter and year to date 1996 compared to 1995. The decrease reflects a
lower level of Medium-Term Notes and Mortgage Bonds outstanding than in 1995 and
the end of amortization of loss on reacquired debt for one issue.
Liquidity and Capital Resources
Approximately $103.8 million of cash was provided during the first nine
months of 1996 from net income before non-cash items, primarily depreciation and
amortization. During such period, a reduction of approximately $3.5 million of
cash resulted in fluctuations in certain assets and liabilities and from other
operating activities.
Investing activities utilized $44.1 million in cash during the first nine
months of 1996 for generating projects, transmission, distribution, and general
construction expenditures and includes $12.0 million the Company invested in
associated companies, $10.8 million of that in MaineCom Services, a
telecommunications services company.
In order to accommodate existing and future loads on its electric system
the Company is engaged in a continuing construction program. The Company's plans
for improvements and expansions, its load forecast and its power-supply sources
are under a process of continuing review. Actual construction expenditures will
depend upon the availability of capital and other resources, load forecasts,
customer growth and general business conditions.
The ultimate nature, timing and amount of financing for the Company's total
construction programs, refinancing and energy-management capital requirements
will be determined in light of market conditions, earnings and other relevant
factors.
During the first nine months of 1996, dividends paid on common stock were
$21.9 million, while preferred-stock dividends utilized $7.6 million of cash.
On June 12, 1996, the Company repurchased $11.5 million of the outstanding
Series N 8.50%, due 2001, General and Refunding Mortgage Bonds. On July 1, 1996,
the Company redeemed $14 million of its 8 7/8% Series Preferred Stock at par
pursuant to its sinking-fund requirements.
On April 29, 1996, the Company deposited approximately $29.1 million in
cash with the Trustee under the Company's General and Refunding Mortgage
Indenture in satisfaction of the renewal and replacement fund and other
obligations under the Indenture. The total of such cash on deposit with the
Trustee as of September 30, 1996, was approximately $59.6 million. Under the
Indenture such cash may be applied, at any time at the direction of the Company,
to the redemption of bonds outstanding under the Indenture at a price equal to
the principal amount of the bonds being redeemed, without premium, plus accrued
interest to the date fixed for redemption on the principal amount of the bonds
being redeemed.
On October 23, 1996 , the Company entered into new $125 million revolving
credit facility with several banks, with The First National Bank of Boston and
The Bank of New York acting as agents for the lenders. The credit facility has
two tranches: a $75 million 364-day revolving credit facility which matures on
October 22, 1997 and a $50-million 3-year revolving credit facility which
matures on October 23, 1999. Both credit facilities require annual fees on the
unused portion of the credit lines which are based on the Company's credit
ratings and allow for various borrowing options including LIBOR-priced,
base-rate-priced and competitive-bid priced loans.
On November 1, 1996, MEPCO refinanced $870,000 of its long-term debt
through Key Bank of Maine at a floating interest rate, due November 1, 2000.
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 Company's prospects for
financial strengthening."
Industry Restructuring and Strandable Costs
As discussed fully in the Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's 1995 Form 10-K,
the enactment by Congress of the Energy Policy Act of 1992 accelerated planning
by electric utilities, including the Company, for the transition to a more
competitive industry. The functional areas in which competition will take place,
the regulatory changes that will be implemented, and the resulting structure of
both the industry and the Company are all uncertain, but a transition to direct
competition to serve retail customers is increasingly widely anticipated. A
departure from traditional regulation, however, could have substantial impacts
on the value of utility assets and on the ability of electric utilities to
recover their costs through rates. In the absence of full recovery, utilities
would find their above-market costs to be "stranded," or unrecoverable, in the
new competitive setting. The Company estimates its potential strandable-cost
exposure to be as much as $2 billion, with above-market purchased-power
contracts with non-utility generators responsible for approximately 60 percent
of that amount and deferred regulatory assets approximately 25 percent.
On July 19, 1996, the MPUC released for comment its Draft Plan on Electric
Utility Industry Restructuring. The Draft Plan describes a market structure
which would fundamentally change the historical method of purchasing, delivering
and regulating electricity services. It embraces competition and consumer choice
and advocates cautious implementation.
The Draft Plan was prepared in response to Legislative Resolve 1995, ch. 48
"Resolve, to Require a Study of Retail Competition in the Electric Industry"
which became law on July 3, 1995. Through the Resolve, the Legislature directed
the Commission to begin to study restructuring Maine's electric utility industry
no later than January 1, 1996, and to submit a report to the Legislature by
January 1, 1997.
The Draft Plan calls for allowing all retail customers to choose their
generation supplier beginning January 2000. Customers would be allowed to
aggregate in any manner. Reciprocity based on retail access in other states or
Canada would not be required.
Investor-owned utilities would be required to structurally separate
generation by January 2000, and to divest all generation assets by January 2006.
These utilities would transfer the right to market output of all non-utility
contracts by January 2000. The contracts would be unaffected, and the legal
obligations would rest with the transmission and distribution companies, which
would remain regulated utilities. Standard offer service would be provided for
customers who do not choose an alternative generation provider, and that service
would be provided through periodic competitive bids. The requests for bids would
contain a cap so the retail price for generation service combined with regulated
rates of the transmission and distribution company would not exceed the bundled
rate for electricity prior to retail access.
Utilities would be provided a reasonable opportunity, comparable to that
existing under present regulation, to recover generation-related costs stranded
as a result of retail access, but would be required to take all reasonable steps
to mitigate stranded costs. The MPUC would determine generation-related stranded
costs existing as of January 2000. The amount would be reviewed and subject to
adjustment until 2006. In 2006, stranded costs associated with generation assets
would be fixed. Stranded costs associated with non-utility contracts would be
subject to adjustment on a periodic basis until contract termination. No
generation costs or obligations incurred after March 1995 would be recovered
through rates as stranded costs.
The MPUC is soliciting comments on the Draft Plan and will submit its final
plan to the Legislature in December 1996. The Company will actively participate
in this proceeding, but cannot predict what the final recommendations to the
Legislature dealing with these issues will contain.
The Company believes there is nothing in the draft plan as currently
written that causes it to believe that the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS No. 71), should be discontinued and will continue to apply its
provisions to current accounting transactions and its historical financial
statements. However, because the Company is unable to predict what form the
final requirements will take, it cannot predict if or to what extent SFAS No. 71
will continue to be applicable in the future.
On April 24, 1996, the Federal Energy Regulatory Commission (FERC) issued
Order No. 888, the Final Rule on Promoting Wholesale Competition Through
Open-Access Non-Discriminatory Transmission Services by Public Utilities and
Recovery of Stranded Costs by Public Utilities and Transmitting Utilities (Order
No. 888) and Order No. 889, Open Access Same-Time Information System (OASIS)
(Order No. 889).
Order No. 888 requires all public utilities that own, control or operate
facilities used for transmitting electric energy in interstate commerce to file
open access non-discriminatory transmission tariffs that offer both load-based,
network and contract-based, point-to-point service, including ancillary service
to eligible customers containing minimum terms and conditions of
non-discriminatory service. This service must be comparable to the service they
provide themselves at the wholesale level; in fact, these utilities must take
wholesale transmission service they provide themselves under the filed tariffs.
The order also permits public utilities and transmitting utilities the
opportunity to recover legitimate, prudent and verifiable wholesale stranded
costs associated with providing open access and certain transmission services.
It further requires public utilities to separate transmission from generation
marketing functions and communications. Order No. 888 also clarifies
Federal/state jurisdiction over transmission in interstate commerce and local
distribution and provides for deference to certain state recommendations.
On July 9, 1996, the Company and MEPCO submitted its compliance filings to
meet the new pro forma tariff non-price minimum terms and conditions of
non-discriminatory transmission. Effective July 9, 1996, the Company and MEPCO
have been transmitting energy pursuant to their filed tariffs, subject to
refund.
Order No. 889 requires public utilities to completely separate their
wholesale power marketing and transmission operation function and to obtain
information about their transmission system for their own wholesale power
transactions in the same way their competitors do through the Open Access
Same-time Information System ("OASIS"). The rule also prescribed standards of
conduct and protocols for obtaining the information. The standards of conduct
are designed to prevent employees of a public utility engaged in marketing
functions from obtaining preferential information. The Company is participating
in efforts to develop a regional OASIS and a New England Power Pool-wide Open
Access Tariff, and to revise the New England Power Pool Agreement.
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 has filed 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 MPUC granted the Motion for Withdrawal on September 30, 1996. 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of certain significant regulatory matters affecting the
Company, including, among others, (1) the release on July 19, 1996, by the Maine
Public Utilities Commission (MPUC) of its "Draft Plan on Electric Utility
Restructuring", and (2) an Independent Safety Assessment and other
investigations by the Nuclear Regulatory Commission of Maine Yankee Atomic Power
Company, see Management's Discussion and Analysis of Financial Condition and the
Results of Operations, "Industry Restructuring and Strandable Costs" and Note 2
"Commitments and Contingencies," "Maine Yankee Atomic Power Company",
respectively.
Environmental Matters. For a discussion of administrative and judicial
proceedings concerning cleanup of a site containing soil contaminated by PCB's
from equipment originally owned by the Company, see Note 2, "Commitments and
Contingencies," "Legal and Environmental Matters," which is incorporated herein
by reference.
Item 2. through Item 5. Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K. The Company filed the following reports
on Form 8-K during the third quarter of 1996 and thereafter
to date:
Date of Report Items Reported
August 18, 1996 Item 5
On August 18, 1996, the Company reported that Maine Yankee found a
deficiency in the electrical system during a review of its testing procedures.
Maine Yankee determined that before returning the Plant to service it would
conduct an intensified review of other safety-related circuits to immediately
resolve any questions as to the adequacy of related testing procedures.
August 29, 1996 Item 5
The Company reported the return of Maine Yankee Plant to service commencing
on August 29, 1996, and on September 3 the Plant attained the 90-percent level
at which it had been operating prior to the outage.
September 25, 1996 Item 5
The Company reported the release of the report of the team of NRC personnel
and contractors who had conducted an Independent Safety Assessment (ISA) at the
Maine Yankee Plant. The Company also reported the withdrawal of its Interim
Tariff request, rating agency action, and the Connecticut Yankee Atomic Power
Company Plant outage.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL MAINE POWER COMPANY
(Registrant)
Date: November 14, 1996
David E. Marsh, Vice President,
Corporate Services, Treasurer, and Chief
Financial Officer (Principal Financial
Officer and duly authorized officer)
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Central
Maine Power Company's Consolidated Statement of Earnings, Consolidated Balance
Sheet and Consolidated Statement of Cash Flows and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,063,651
<OTHER-PROPERTY-AND-INVEST> 68,019
<TOTAL-CURRENT-ASSETS> 218,423
<TOTAL-DEFERRED-CHARGES> 583,461
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,933,554
<COMMON> 162,214
<CAPITAL-SURPLUS-PAID-IN> 279,699
<RETAINED-EARNINGS> 62,288
<TOTAL-COMMON-STOCKHOLDERS-EQ> 501,201
65,571
53,528
<LONG-TERM-DEBT-NET> 528,786
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 59,930
7,000
<CAPITAL-LEASE-OBLIGATIONS> 36,825
<LEASES-CURRENT> 1,666
<OTHER-ITEMS-CAPITAL-AND-LIAB> 679,047
<TOT-CAPITALIZATION-AND-LIAB> 1,933,554
<GROSS-OPERATING-REVENUE> 719,484
<INCOME-TAX-EXPENSE> 25,726
<OTHER-OPERATING-EXPENSES> 624,134
<TOTAL-OPERATING-EXPENSES> 649,860
<OPERATING-INCOME-LOSS> 74,763
<OTHER-INCOME-NET> 3,523
<INCOME-BEFORE-INTEREST-EXPEN> 78,286
<TOTAL-INTEREST-EXPENSE> 37,941
<NET-INCOME> 40,345
7,244
<EARNINGS-AVAILABLE-FOR-COMM> 33,101
<COMMON-STOCK-DIVIDENDS> 21,916
<TOTAL-INTEREST-ON-BONDS> 22,774
<CASH-FLOW-OPERATIONS> 100,360
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
