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): December 4, 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
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Item 1 through Item 4. Not applicable.
Item 5. Other Events.
(a) Maine Yankee response to Independent Safety Assessment. As previously
reported, Maine Yankee Atomic Power Company ("Maine Yankee"), in which Central
Maine Power Company (the "Company") holds a 38-percent equity interest, and
which owns and operates a nuclear generating plant in Wiscasset, Maine (the
"Plant"), underwent a comprehensive Independent Safety Assessment ("ISA")
conducted by the Nuclear Regulatory Commission ("NRC") in the summer of 1996. On
October 7, 1996, the NRC released its report on the ISA, which generally
concluded that overall performance at Maine Yankee was adequate for operation of
the Plant, and that the significant 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. For a more detailed description of the
ISA report and investigations of Maine Yankee by the NRC and the United States
Department of Justice, see the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1996.
On December 10, 1996, Maine Yankee filed its formal response to the ISA
report with the NRC. In its response Maine Yankee indicated that it would spend
an additional $27 million on improvements in 1997 to address the "root causes"
and associated deficiencies noted in the ISA report, and that the improvements
would include physical and operating changes at the Plant, as well as a
ten-percent increase in staffing, primarily in the engineering and maintenance
areas, and other changes.
In a release accompanying its response, Charles D. Frizzle, President
and Chief Executive Officer of Maine Yankee, emphasized that a "fundamental
shift in corporate culture" would accompany the changes "to enable Maine Yankee
to return to the ranks of superior performers in the industry." Mr. Frizzle also
stated that Maine Yankee would review the margins on all the key safety systems
at the Plant and would not seek to return to 100-percent power from its
currently-authorized 90-percent level until the margin review is completed.
Maine Yankee has previously reported that it was not likely to return to
full-power operation until after its next planned refueling outage, which is
scheduled for September 1997.
The Company is responsible for 38 percent of the $27 million in 1997
additional costs announced by Maine Yankee, or approximately $10 million. The
Company's indexed Alternative Rate Plan ("ARP") limits its price increases under
a formula based on the rate of inflation adjusted by other factors, and includes
provisions for additional cost recovery in extraordinary situations such as low
earnings or the incurring of extraordinary costs by the Company. To be eligible
for recovery, such extraordinary costs must be in excess of $3 million in annual
revenue requirements, have a disproportionate effect on the Company or the
electric utility industry, and must not be adequately accounted for in the ARP's
price index.
The Company is incurring replacement power costs of approximately
$300,000 to $500,000 each month the Plant operates at 90 percent of capacity and
cannot predict when or if the Plant will be allowed to return to maximum
capacity. The Company also cannot predict what enforcement actions will result
from the previously-reported investigations of Maine Yankee by the NRC and the
Department of Justice.
(b) Permanent shutdown of Connecticut Yankee plant. On December 4, 1996, the
Board of Directors of Connecticut Yankee Atomic Power Company ("Connecticut
Yankee") voted to permanently discontinue power operation at the Connecticut
Yankee plant at Haddam, Connecticut ("CY Plant"), and to decommission the CY
Plant, for reasons based on the economics of continuing to operate the unit. An
economic analysis conducted by Connecticut Yankee indicates that the early
closing of the CY Plant is estimated to save over $100 million (net present
value) over the period of its remaining license life to 2007, compared with the
costs of continued operation. The Company has a six-percent equity interest in
Connecticut Yankee, totaling approximately $6.3 million at September 30, 1996,
and has relied on the CY Plant for less than two percent of its system capacity.
The CY Plant has been out of service for safety-related reasons since July 22,
1996.
Connecticut Yankee has estimated the sum of the future payments for the
closing, decommissioning and recovery of the remaining investment in Connecticut
Yankee to be approximately $797 million, of which the Company's share would be
approximately $50 million. Based on regulatory precedent, the Company believes
that substantially all of its share of such costs will be recovered from its
customers.
The Company has been incurring approximately $300,000 to $500,000 per
month in incremental replacement power costs while the CY Plant has been shut
down, and will continue to incur incremental replacement power costs in the
future. Once the CY Plant's decommissioning plan is implemented, the Company
expects the cost reduction resulting from the shutdown to exceed the incremental
costs of its replacement power. While the amount and timing of the costs of both
the shutdown and replacement power are uncertain, a phased-in approach reducing
such costs decrementally over the decommissioning period is expected.
Item 6 through Item 8. Not applicable.
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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: December 11, 1996
