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): August 1, 1997
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
Item 1 through Item 4. Not applicable.
Item 5. Other Events.
Maine Yankee nuclear generating plant. As previously reported, the Maine
Yankee Atomic Power Company ("Maine Yankee") nuclear generating plant at
Wiscasset, Maine (the "Plant") has been shut down since December 6, 1996, and
was expected to remain off-line at least until August 1997. Also as previously
reported, on May 27, 1997, the Board of Directors of Maine Yankee voted to
reduce maintenance-and-repair spending at the Plant and announced that Maine
Yankee was considering permanent closure based on economic concerns and
uncertainty about operation of the Plant; and on the same day the Maine Yankee
Board indicated that it had also been exploring a sale of the Plant to PECO
Energy Company ("PECO"). For a detailed discussion of the background of the
current shutdown, including events leading to the Plant's being placed on the
"watch list" by the Nuclear Regulatory Commission ("NRC") and other significant
regulatory and operational issues, management changes, and investigations of
Maine Yankee by the NRC and the United States Department of Justice, see the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, its
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997,
and its Current Report on Form 8-K dated May 15, 1997.
On August 6, 1997, the Board of Directors of Maine Yankee voted to permanently
cease power operations at the Plant and begin the process of decommissioning
the Plant. The formal vote followed an announcement by the Maine Yankee Board
on August 1, 1997, that Maine Yankee and PECO, after two months of intensive
negotiations, had been unable to arrive at "a mutually beneficial framework
for agreement" on a sale of the Plant to PECO. The decision to shut down the
Plant was based on an economic analysis of the costs, risks and uncertainties
associated with operating the Plant compared to those associated with closing
and decommissioning the Plant.
Prior to the shutdown vote the Company had been incurring substantial costs as
its 38-percent share of the costs incurred by Maine Yankee in Maine Yankee's
efforts to return the Plant to service, as well as additional costs for
replacement power while the Plant has been out of service. The Maine Yankee
Board's decision to close the Plant should mitigate the costs the Company
would otherwise incur in 1997 through a phasing down of Maine Yankee's
operations and maintenance costs, but will not reduce the need to buy
replacement energy and capacity. The amount of costs for replacement power
and energy will vary during the year based on the Company's power requirements
and market conditions, but the Company expects such costs to be within a range
of approximately $4.5 million to $6 million per month in 1997, based on
current conditions. Under the electric-utility restructuring legislation
enacted by the Maine Legislature in May 1997 the Company's obligation to
provide replacement power will terminate on March 1, 2000, with its other
power-supply obligations. In the interim, the previously reported termination
of a major non-utility generator contract should result in savings to the
Company at an annual rate of approximately $25 million commencing November 1,
1997.
The impact of the nuclear-related costs on the Company will be a major
obstacle to achieving satisfactory results in 1997, despite the approximately
$75 million in Maine Yankee-related costs imbedded in the current
determination of the Company's required revenues for ratemaking purposes and
despite success in controlling other operating costs. The higher costs
incurred to date associated with nuclear plant investments and the costs
anticipated to replace energy and capacity needs for the remainder of the
year, as a result of the permanent shutdown of Maine Yankee, will reduce
current year earnings to a level that will trigger the low-earnings bandwidth
provision of the Company's Alternative Rate Plan. That provision is activated
if actual earnings for 1997 are outside a bandwidth of 350 basis points above
or below a 10.68-percent rate-of-return allowance. A return below the low end
of the range provides for additional revenue through rates equal to one-half
the difference between the actual earned rate of return and the 7.18-percent
(10.68 minus 350 basis points) low end of the bandwidth. While the Company
believes the mechanism will be triggered in 1997, it cannot predict the
amount, if any, of additional revenues that may ultimately result.
The Company's 38-percent ownership interest in Maine Yankee's common equity
amounted to $28.3 million as of June 30, 1997, and under Maine Yankee's Power
Contracts and Additional Power Contracts the Company is responsible for 38
percent of the costs of decommissioning the Plant. Maine Yankee has been
collecting decommissioning costs in advance pursuant to a 1994 Federal Energy
Regulatory Commission ("FERC") rate order. Maine Yankee's most recent
estimate of the total costs of decommissioning was $316.6 million (in 1993
dollars), of which approximately $183 million had been collected as of June
30, 1997. Maine Yankee is in the process of developing an updated
decommissioning cost estimate, which the Company anticipates will be higher
than the 1993 estimate, and expects to file the revised decommissioning cost
study with the FERC in the fall of 1997 as part of a rate filing reflecting
the permanent shutdown of the Plant.
Item 6 through Item 8. Not applicable.
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
Chief Financial
Officer
Dated: August 7, 1997
