SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-404
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THE CONNECTICUT LIGHT AND POWER COMPANY
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(Exact name of registrant as specified in its charter)
CONNECTICUT 06-0303850
----------- ------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
SELDEN STREET, BERLIN, CONNECTICUT 06037-1616
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(Address of principal executive offices) (Zip Code)
(203) 665-5000
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(Registrant's telephone number, including area code)
Not Applicable
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(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
such filing requirements for 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.
Class Outstanding at October 31, 1994
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Common Shares, $10.00 par value 12,222,930 shares
THE CONNECTICUT LIGHT AND POWER COMPANY
TABLE OF CONTENTS
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1994
and December 31, 1993 2
Statements of Income - Three and Nine
Months Ended September 30, 1994 and 1993 4
Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
PART I. FINANCIAL INFORMATION
THE CONNECTICUT LIGHT AND POWER COMPANY
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
- ------
Utility Plant, at original cost:
Electric................................................ $ 6,026,889 $ 5,936,344
Less: Accumulated provision for depreciation......... 2,152,805 2,010,962
------------- -------------
3,874,084 3,925,382
Construction work in progress........................... 102,441 121,177
Nuclear fuel, net....................................... 154,495 156,878
------------- -------------
Total net utility plant............................. 4,131,020 4,203,437
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market in 1994 and
at cost in 1993 (Note 2)<F2>........................... 170,779 147,657
Investments in regional nuclear generating
companies and subsidiary companies, at equity.......... 54,955 53,951
Other, at cost.......................................... 14,742 14,184
------------- -------------
240,476 215,792
------------- -------------
Current Assets:
Cash and special deposits............................... 809 2,283
Receivables, net........................................ 214,725 210,805
Accounts receivable from affiliated companies........... 4,125 29,687
Accrued utility revenues................................ 69,865 97,662
Fuel, materials, and supplies, at average cost.......... 62,641 60,247
Recoverable energy costs, net--current portion.......... 1,568 9,985
Prepayments and other................................... 45,166 33,697
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398,899 444,366
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Deferred Charges:
Regulatory asset--income taxes, net..................... 990,087 1,026,046
Deferred costs--nuclear plants.......................... 122,925 185,909
Unrecovered contract obligation--YAEC (Note 4)<F4>...... 74,539 84,526
Deferred conservation and load-management costs......... 106,453 111,442
Deferred DOE assessment................................. 37,226 39,279
Recoverable energy costs, net........................... 24,481 26,311
Unamortized debt expense................................ 8,094 8,971
Amortizable property investment......................... 4,360 6,228
Other................................................... 80,597 45,073
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1,448,762 1,533,785
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Total Assets........................................ $ 6,219,157 $ 6,397,380
============= =============
</TABLE>
See accompanying notes to financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock--$10 par value. Authorized
24,500,000 shares; outstanding 12,222,930
shares............................................... $ 122,229 $ 122,229
Capital surplus, paid in.............................. 631,685 630,271
Retained earnings..................................... 771,169 750,719
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Total common stockholder's equity............ 1,525,083 1,503,219
Preferred stock not subject to mandatory
redemption........................................... 166,200 166,200
Preferred stock subject to mandatory redemption....... 230,000 230,000
Long-term debt........................................ 1,677,811 1,743,260
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Total capitalization......................... 3,599,094 3,642,679
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Obligations Under Capital Leases........................ 118,274 121,892
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Current Liabilities:
Notes payable to banks................................ 60,000 95,000
Notes payable to affiliated company................... 82,500 1,250
Commercial paper...................................... 39,000 -
Long-term debt and preferred stock--current
portion.............................................. 177,546 314,020
Obligations under capital leases--current
portion.............................................. 59,038 55,526
Accounts payable...................................... 83,221 117,858
Accounts payable to affiliated companies.............. 19,801 52,179
Accrued taxes......................................... 46,065 36,114
Accrued interest...................................... 29,486 29,669
Other................................................. 29,382 32,287
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626,039 733,903
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Deferred Credits:
Accumulated deferred income taxes..................... 1,557,260 1,575,965
Accumulated deferred investment tax credits........... 149,346 154,701
Deferred contract obligation--YAEC (Note 4)<F4>....... 74,539 84,526
Deferred DOE obligation............................... 28,702 31,523
Other................................................. 65,903 52,191
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1,875,750 1,898,906
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Commitments and Contingencies (Note 5)<F5>
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Total Capitalization and Liabilities......... $ 6,219,157 $ 6,397,380
============= =============
</TABLE>
See accompanying notes to financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------------
1994 1993 1994 1993
--------- --------- ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues................................. $598,706 $604,343 $1,769,656 $1,791,371
--------- --------- ----------- -----------
Operating Expenses:
Operation --
Fuel, purchased and net interchange power..... 148,118 157,217 436,496 516,387
Other......................................... 158,826 180,202 442,261 482,463
Maintenance...................................... 52,013 44,746 143,933 134,719
Depreciation..................................... 58,801 54,853 171,392 164,561
Amortization of regulatory assets, net........... 9,017 29,461 68,839 84,037
Federal and state income taxes................... 53,458 38,989 152,862 104,603
Taxes other than income taxes.................... 44,833 40,554 133,247 131,304
--------- --------- ----------- -----------
Total operating expenses................... 525,066 546,022 1,549,030 1,618,074
--------- --------- ----------- -----------
Operating Income................................... 73,640 58,321 220,626 173,297
--------- --------- ----------- -----------
Other Income:
Deferred nuclear plants return--other funds...... 3,338 5,400 10,276 18,606
Equity in earnings of regional nuclear
generating companies........................... 1,905 1,544 5,556 4,378
Other, net....................................... (3,278) 6,437 2,173 (3,161)
Income taxes--credit............................. 4,128 716 7,443 3,651
--------- --------- ----------- -----------
Other income, net.......................... 6,093 14,097 25,448 23,474
--------- --------- ----------- -----------
Income before interest charges............. 79,733 72,418 246,074 196,771
--------- --------- ----------- -----------
Interest Charges:
Interest on long-term debt....................... 29,170 33,474 89,586 101,784
Other interest................................... 2,121 3,258 4,377 9,254
Deferred nuclear plants return--borrowed funds... (1,749) (3,382) (5,832) (10,959)
--------- --------- ----------- -----------
Interest charges, net...................... 29,542 33,350 88,131 100,079
--------- --------- ----------- -----------
Income before cumulative effect of
accounting change................................ 50,191 39,068 157,943 96,692
Cumulative effect of accounting change............. - - - 47,747
--------- --------- ----------- -----------
Net Income......................................... $ 50,191 $ 39,068 $ 157,943 $ 144,439
========= ========= =========== ===========
</TABLE>
See accompanying notes to financial statements.
THE CONNECTICUT LIGHT and POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE> Nine Months Ended
<CAPTION> September 30,
----------------------
1994 1993
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Cash Flows From Operations:
Net Income ................................................. $ 157,943 $ 144,439
Adjusted for the following:
Depreciation ............................................. 171,392 164,561
Deferred income taxes and investment tax credits, net..... 8,332 (33,484)
Deferred nuclear plants return, net of amortization....... 61,538 52,550
Deferred energy costs, net of amortization................ 10,247 113,571
Deferred conservation and load-management costs,
net of amortization..................................... 4,989 (5,774)
Other sources of cash..................................... 26,350 59,232
Other uses of cash........................................ (36,772) (16,033)
Changes in working capital:
Receivables and accrued utility revenues................ 49,439 (21,429)
Fuel, materials, and supplies........................... (2,394) 14,633
Accounts payable........................................ (67,015) 9,569
Accrued taxes........................................... 9,951 (47,239)
Other working capital (excludes cash)................... (14,557) (1,864)
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Net cash flows from operations................................ 379,443 432,732
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Cash Flows Used For Financing Activities:
Issuance of long-term debt.................................. 395,000 615,500
Net increase (decrease) in short-term debt.................. 85,250 (16,740)
Reacquisitions and retirements of long-term debt
and preferred stock....................................... (600,389) (458,314)
Cash dividends on preferred stock........................... (18,075) (22,032)
Cash dividends on common stock.............................. (119,418) (120,275)
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Net cash flows used for financing activities.................. (257,632) (1,861)
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Investment Activities:
Investment in plant:
Electric utility plant.................................... (101,292) (99,985)
Nuclear fuel.............................................. 837 (6,799)
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Net cash flows used for investments in plant................ (100,455) (106,784)
Other investment activities, net............................ (22,830) (18,680)
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Net cash flows used for investments........................... (123,285) (125,464)
---------- ----------
Net Increase (Decrease) In Cash for the Period................ (1,474) 305,407
Cash and special deposits - beginning of period............... 2,283 12,104
---------- ----------
Cash and special deposits - end of period..................... $ 809 $ 317,511
========== ==========
</TABLE>
See accompanying notes to financial statements.
THE CONNECTICUT LIGHT AND POWER COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
<F1>1. General
The accompanying unaudited financial statements should be read in
conjunction with the Annual Report of The Connecticut Light and Power
Company (the company or CL&P), a wholly-owned subsidiary of Northeast
Utilities (NU) on Form 10-K for the year ended December 31, 1993 (1993 Form
10-K). In the opinion of the company, the accompanying financial
statements contain all adjustments necessary to present fairly the
financial position as of September 30, 1994, the results of operations for
the three and nine months ended September 30, 1994 and 1993, and the
statements of cash flows for the nine months ended September 30, 1994 and
1993. The results of operations for the three and nine months ended
September 30, 1994 and 1993 are not necessarily indicative of the results
expected for a full year.
Certain amounts in the accompanying financial statements of the company for
the period ended September 30, 1993 have been reclassified to conform with
the September 30, 1994 presentation.
<F2>2. Changes in Accounting Principles
Statement of Financial Accounting Standards No. 115 (SFAS 115): In May
1993, the Financial Accounting Standards Board (FASB) issued SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities." SFAS
115 addresses the accounting and reporting for certain investments in debt
and equity securities, and expands the use of fair value accounting for
these securities. SFAS 115 is applicable to CL&P with respect to its
investments in nuclear decommissioning trusts.
SFAS 115 requires investments in decommissioning trusts to be presented at
fair value and was adopted by CL&P on a prospective basis in the first
quarter of 1994.
As a result of the adoption of SFAS 115, CL&P's investment in nuclear
decommissioning trusts increased by approximately $1.9 million as of
September 30, 1994, with a corresponding offset to the accumulated
provision for depreciation. The $1.9 million increase represents
cumulative gross unrealized holding gains of $4.1 million offset by
cumulative gross unrealized holding losses of $2.2 million. There was no
change in funding requirements of the trusts, nor any impact on earnings as
a result of the adoption of SFAS 115.
Statement of Financial Accounting Standards No. 119 (SFAS 119): In October
1994, the FASB issued SFAS 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments." SFAS 119 requires
disclosures about derivative financial instruments - futures, forward,
swap, and option contracts, and other financial instruments with similar
characteristics.
CL&P has entered into fossil fuel hedging contracts to minimize its
exposure under certain fixed rate contracts. Currently, the differential
between the market value of fossil fuel and the fossil fuel prices included
in these contracts is not considered to be material.
<F3>3. Capitalization
On October 12, 1994, CL&P issued $140 million of First and Refunding
Mortgage Bonds, 1994 Series D (the Bonds). The Bonds bear interest at an
annual rate of 7.875 percent, and will mature on October 1, 2024. The
Bonds have a one-time put feature which allows bondholders to put the Bonds
back to CL&P for repayment at par on October 1, 2001.
The net proceeds from the issue and sale of the Bonds were used to repay a
portion of the short-term debt which was incurred to repay the CL&P
4.25 percent Series WW Bonds ($170 million) on their maturity date of
October 1, 1994.
<F4>4. Yankee Atomic Electric Company (YAEC)
YAEC owns a 185-MW nuclear power plant in Rowe, Massachusetts. CL&P has a
24.5 percent equity investment approximating $6.3 million in YAEC. CL&P
had relied on YAEC for less than one percent of its capacity. YAEC's
owners voted to permanently shut down the YAEC unit in February 1992.
Under the terms of the contracts with YAEC, the shareholders-sponsors are
responsible for their proportionate share of the operating costs of
the unit, including decommissioning. The nuclear decommissioning costs of
YAEC are included as part of CL&P's cost of power.
YAEC has begun decommissioning its nuclear facility. On June 1, 1992, YAEC
filed a rate filing to obtain Federal Energy Regulatory Commission (FERC)
authorization to collect the closing and decommissioning costs and to
recover the remaining investment in the YAEC nuclear power plant over the
remaining period of the plant's Nuclear Regulatory Commission (NRC)
operating license. The bulk of these costs has been agreed to by the YAEC
joint owners and approved, as a settlement, by the FERC. At September 30,
1994, CL&P's share of the estimated remaining costs is approximately
$74.5 million. Management expects that CL&P will continue to be allowed to
recover such FERC-approved costs from its customers. Accordingly, CL&P has
recognized these costs as a regulatory asset, with a corresponding
obligation, on its Balance Sheets.
On October 26, 1994, YAEC submitted a revised decommissioning cost estimate
as part of its decommissioning plan with the NRC. Following the receipt of
NRC approval, this estimate will be filed with the FERC. This revised cost
estimate is expected to increase CL&P's share of estimated remaining costs
by $32.9 million over the $74.5 million that is currently recorded.
For additional information regarding YAEC, see the Notes to Financial
Statements in CL&P's 1993 Form 10-K.
<F5>5. Commitments and Contingencies
Construction Program: For information regarding CL&P's construction
program, see the Notes to Financial Statements in CL&P's 1993 Form 10-K.
Nuclear Performance: For information regarding the termination of the
Connecticut Department of Public Utility Control's (DPUC) prudence review
of the 1992 Millstone 2 steam generator replacement project, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) in CL&P's June 1994 and March 1994 Form 10-Qs.
For further information regarding the performance of CL&P's nuclear units,
see the Notes to Financial Statements in CL&P's 1993 Form 10-K.
Environmental Matters: On a periodic basis, CL&P reviews known waste
disposal sites, and related reserves, for which the company expects to bear
legal liability. As a result of its latest review, CL&P increased the
liability recorded for its estimated environmental remediation costs,
excluding any insurance recoveries or recoveries from third parties, from
$2.9 million to $7.4 million. In the event that it becomes necessary to
effect remedies that are not currently considered probable, it is
reasonably possible that the upper limit of the company's environmental
liability range could be approximately $10.1 million.
For additional information regarding environmental matters, see "Part II.
Other Information - Item 5. Other Information" in CL&P's June 1994
Form 10-Q and the Notes to Financial Statements in CL&P's 1993 Form 10-K.
Nuclear Insurance Contingencies: The Price-Anderson Act currently limits
public liability from a single incident at a nuclear power plant to $8.8
billion. The first $200 million of liability would be provided by
purchasing the maximum amount of commercially available insurance.
Additional coverage of up to a total of $8.4 billion would be provided by
an assessment of $75.5 million per incident, levied on each of the 111
nuclear units that are currently subject to the Secondary Financial
Protection Program in the United States, subject to a maximum assessment of
$10 million per incident per nuclear unit in any year. In addition, if the
sum of all public liability claims and legal costs arising from any nuclear
incident exceeds the maximum amount of financial protection, each reactor
operator can be assessed an additional five percent, up to $3.8 million, or
$419.0 million in total, for all 111 nuclear units. The maximum assessment
is to be adjusted at least every five years to reflect inflationary
changes. Based on the ownership interests in Millstone 1, 2, and 3 and in
Seabrook 1, CL&P's maximum liability would be $173.6 million per incident.
In addition, through contracts with the three Yankee regional nuclear
generating companies with operating plants, CL&P would be responsible for
up to an additional $44.4 million per incident. Payments for CL&P's
ownership interest in nuclear generating facilities would be limited to a
maximum of $27.5 million per incident per year.
For additional information regarding nuclear insurance contingencies, see
the Notes to Financial Statements in CL&P's 1993 Form 10-K.
Financing Arrangements for the Regional Nuclear Generating Companies: For
information regarding financing arrangements for the regional nuclear
generating companies, see the Notes to Financial Statements in CL&P's 1993
Form 10-K.
Purchased Power Arrangements: For information regarding purchased power
arrangements, see the Notes to Financial Statements in CL&P's 1993 Form 10-
K.
Hydro-Quebec: For information regarding Hydro-Quebec, see the Notes to
Financial Statements in CL&P's 1993 Form 10-K.
Great Bay Power Corporation (GBPC): For information regarding GBPC's
bankruptcy proceedings, see the MD&A in this Form 10-Q, "Part II. Other
Information - Item 1. Legal Proceedings" in CL&P's June 1994 Form 10-Q and
the Notes to Financial Statements in CL&P's 1993 Form 10-K.
Property Taxes: For information on property taxes, see the Notes to
Financial Statements in CL&P's 1993 Form 10-K.
THE CONNECTICUT LIGHT AND POWER COMPANY
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This section contains management's assessment of The Connecticut Light
and Power Company s (CL&P or the company) financial condition and the
principal factors having an impact on the results of operations. The
company is a wholly-owned subsidiary of Northeast Utilities (NU).
This discussion should be read in conjunction with the company's
financial statements and footnotes and the 1993 Form 10-K and the
First and Second Quarter 1994 Form 10-Qs.
FINANCIAL CONDITION
Overview
The company's net income increased to approximately $140 million for
the nine months ended September 30, 1994, from approximately $122
million for the same period in 1993. The 1993 earnings reflect the
cumulative effect of a change in the method of accounting for
Connecticut municipal property tax expense adopted by the company in
the first quarter of 1993. This change resulted in a one-time
contribution to 1993 net income of approximately $48 million. Net
income increased to approximately $44 million for three months ended
September 30, 1994, from approximately $32 million for the same period
in 1993.
The increases in net income from 1993 for the three- and nine-month
periods, before the effect of the one-time accounting change, are
primarily attributable to the costs of a work force reduction program
in the third quarter of 1993 which reduced 1993 net income by
approximately $10 million. In addition, earnings for the three- and
nine- month periods were impacted by higher retail sales resulting
from a colder winter and an unusually hot June in 1994 and an
improvement in the Connecticut economy, increased revenues from the
July 1993 retail rate increases, lower operation expenses, lower
interest costs and the deferral of cogeneration expenses in
Connecticut. These increases were partially offset by lower 1994
revenues from sales to other utilities, higher maintenance expenses,
and additional amounts reserved for the environmental exposures. The
nine-month earnings in 1993 were also reduced by disallowances in 1993
resulting from the company s rate decision.
Retail Wheeling and Utility Restructuring
See Part II. Other Information - Item 5. Legal Proceedings. for
information concerning retail wheeling and utility restructuring.
Regulatory Matters
Connecticut
CL&P has a mechanism that has been in operation since 1979 designed to
recover or refund certain non-nuclear fuel costs if the nuclear units
do not operate at a predetermined capacity factor (the Generation
Utilization Adjustment Clause or GUAC).
On August 31, 1994, the DPUC delayed inclusion of CL&P s GUAC recovery
for the 1993-1994 period, amounting to $23.7 million, until CL&P had
revised the calculation to true up for actual booked fuel expense
for the same period. The true up, which reduces the GUAC recovery
by $7.9 million, was filed on September 13, 1994. A final decision
ordering the true-up is expected in late November 1994. If the DPUC
orders this offset, CL&P plans to appeal.
For additional information on this matter, see CL&P s 1993 Form 10-K,
under the caption Item 1. Business - CL&P Adjustment Clauses and
CL&P s Quarterly Report on Form 10-Q for the quarter ended June 30,
1994.
Unrecovered conservation and load management (C&LM) costs at
September 30, 1994, were approximately $106 million. These costs are
being recovered over periods ranging from 3.85 to 8 years.
On October 31, 1994, CL&P filed its 1995 recovery mechanism (CAM) for
1995 C&LM costs and programs. The filing proposes 1995 C&LM
expenditures of $36.7 million to be recovered over 3.93 years and a
zero CAM rate.
Nuclear Matters
The composite capacity factor of the five nuclear generating units
that the NU System operates (including the Connecticut Yankee nuclear
unit (CY)) was 64.3 percent for the nine months ended September 30,
1994, as compared with 81.0 percent for the same period in 1993. The
lower 1994 capacity factor was primarily the result of extended
refueling and maintenance outages for Millstone 1 and Seabrook. CY,
Seabrook and Millstone 2 were also out of service for varying lengths
of time in the first nine months of 1994 because of some unexpected
technical and operating difficulties. These difficulties included a
manual shutdown of CY when both service water headers were declared
inoperable, an automatic trip from 100 percent power for Seabrook when
a main steam isolation valve closed during quarterly surveillance
testing and a Millstone Unit 2 shutdown to replace a degraded lower
seal on a reactor coolant pump.
On October 1, 1994, Millstone Unit 2 was shut down for a planned
refueling and maintenance outage that was originally scheduled for 63
days. The outage has encountered several unexpected difficulties
which will lengthen the duration of the outage. The magnitude of the
schedule impact is currently under review.
On November 4, 1994, the plan of reorganization of Great Bay Power
Corporation (GBPC)(formerly known as EUA Power Corporation), a joint
owner of Seabrook Station along with CL&P and North Atlantic Energy
Corporation, both wholly owned subsidiaries of NU, and other non-
System entities, was confirmed by the United States Bankruptcy Court.
The confirmation order will become final on November 11, 1994. The
closing of the plan of reorganization financing, which consists of the
purchase of 60 percent of the common stock of GBPC by Omega Advisors
and Elliott Associates is expected to close on November 15, 1994, if
all of the conditions precedent to closing have been satisfied. The
conditions include the absence of any material adverse change and a
requirement that Seabrook be operating at full reactor power on the
morning of the closing date. At the time of closing, CL&P will be
repaid by GBPC for the outstanding principal and accrued interest on
the debtor-in-possession loans made by CL&P during the bankruptcy
proceeding. At present, the outstanding principal amount of these
loans by CL&P total approximately $7.3 million.
For additional information on this matter, CL&P s Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 under the caption Part
II. Other Information - Item 1. Legal Proceedings.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operations decreased approximately $53 million for
the first nine months of 1994, as compared with the same period in
1993, primarily due to decreased revenues from replacement power costs
under the GUAC. Cash used for financing activities was approximately
$256 million higher in 1994, as compared with 1993, primarily due to
higher reacquisitions and retirements of long-term debt, partially
offset by an increase in short-term debt. The company has an ongoing
program to use excess cash to reduce long-term debt levels.
The company s construction program expenditures amounted to
approximately $101 million for the first nine months of 1994, as
compared to approximately $100 million during the same period in 1993.
The system companies have entered into interest-rate cap contracts to
reduce the potential impact of upward changes in interest rates on
certain variable-rate tax-exempt pollution control revenue bonds held
by the company, Public Service Company of New Hampshire (PSNH)and
Western Massachusetts Electric Company, as well as a portion of the
PSNH variable-rate term loan. A total of $567 million of outstanding
long-term variable-rate debt is hedged by these interest-rate caps.
The fair market value of outstanding interest-rate cap contracts as of
September 30, 1994 is approximately $2.3 million.
RESULTS OF OPERATIONS
Comparison of the Third Quarter of 1994 with the Third Quarter of
- -------------------------------------------------------------------
1993
- ----
Operating revenues decreased approximately $6 million in the third
quarter of 1994, as compared with 1993. The components of the change
in operating revenues are as follows:
Changes in Operating Revenues Increase/(Decrease)
- ----------------------------- -------------------
(Millions of Dollars)
Regulatory decisions $ 9
Fuel and purchased power cost recoveries 3
Retail sales volume 7
Sales to Other Utilities (22)
Other revenues (3)
____
Total revenue change $ (6)
====
Revenues related to regulatory decisions increased primarily because
of retail rate increases in July 1994 and July 1993, partially offset
by lower 1994 conservation revenues. Fuel and purchased power cost
recoveries increased primarily due to higher fuel expense. Sales
volume increased primarily as a result of higher retail sales due to
an unusually hot June in 1994. Sales to other utilities decreased
primarily because of the expiration of some capacity sales contracts.
Fuel, purchased, and net interchange power expense decreased
approximately $9 million in the third quarter of 1994, as compared
with 1993, primarily because of the timing in the recognition of fuel
expenses under the provisions of the company s GUAC mechanism
partially offset by a higher level of energy purchased from other
utilities.
Other operation and maintenance expenses decreased approximately $14
million in the third quarter of 1994, as compared with 1993, primarily
due to the one time charge associated with a work force reduction plan
in 1993, lower 1994 payroll and benefits costs and lower Yankee
capacity charges from the regional nuclear generating units, partially
offset by higher 1994 costs associated with the operation and
maintenance activities of the nuclear units, the establishment of a
reserve for excess/obsolete inventory in 1994, and 1994 charges
associated with a targeted early retirement program.
Amortization of regulatory assets, net decreased approximately $20
million in the third quarter of 1994, as compared with 1993, primarily
because of the deferral of cogeneration expenses beginning in July
1994 and the amortization in 1993 of costs paid to the developers of
two wood-to-energy plants.
Taxes other than income taxes increased approximately $4 million in
the third quarter of 1994, as compared to 1993, primarily due to an
adjustment in 1993 as a result of a favorable settlement with the
State of Connecticut over disputed sales taxes.
Federal and state income taxes increased approximately $11 million in
the third quarter of 1994, as compared with 1993, primarily because of
higher book taxable income.
Deferred nuclear plants return decreased approximately $4 million in
the third quarter of 1994, as compared with 1993, primarily because
additional Millstone 3 investment was phased into rates on January 1,
1994.
Other, income decreased approximately $10 million in the third quarter
of 1994 as compared with 1993, primarily because of an increase to the
environmental reserve in 1994 and a 1993 gain on the sale of property.
Interest charges decreased approximately $5 million in the third
quarter of 1994, as compared with 1993, primarily because of lower
average interest rates as a result of the company's refinancing
activities, lower 1994 debt levels and interest accrued in 1993
associated with a potential Connecticut sales tax assessment.
Comparison of the First Nine Months of 1994 with the First Nine Months
- --------------------------------------------------------------------
of 1993
- -------
Operating revenues decreased approximately $22 million in the first
nine months of 1994, as compared with 1993. The components of the
change in operating revenues are as follows:
Changes in Operating Revenues Increase/(Decrease)
- ----------------------------- -------------------
(Millions of Dollars)
Regulatory decisions $ 23
Fuel and purchased power cost recoveries (36)
Retail sales volume 44
Sales to Other Utilities (53)
____
Total revenue change $(22)
====
Revenues related to regulatory decisions increased primarily because
of retail rate increases in July 1994 and July 1993, partially offset
by lower 1994 Conservation revenues. Fuel and purchased power cost
recoveries decreased primarily due to lower GUAC recoveries. Retail
sales volume increased primarily as a result of higher retail sales
from a colder winter and an unusually hot June in 1994 and an
improvement in the Connecticut economy. Retail sales increased 4.6
percent for the first nine months of 1994, as compared with 1993 of
which approximately 3.8 percent is attributable to improvement in the
Connecticut economy. Sales to other utilities decreased primarily
because of the expiration of some capacity sales contracts.
Fuel, purchased, and net interchange power expense decreased
approximately $80 million in the first nine months of 1994, as
compared with 1993, primarily because of the timing in the recognition
of fuel expenses under the provisions of the company s GUAC mechanism
and previously deferred replacement power costs that were determined
not to be recoverable in 1993 as a result of nuclear outage prudence
regulatory reviews in Connecticut, partially offset by a higher level
of energy purchases from other utilities.
Other operation and maintenance expenses decreased approximately $31
million in the first nine months of 1994, as compared with 1993,
primarily due to the one time charge associated with a work force
reduction program in 1993, lower 1994 payroll and benefit costs, lower
fossil unit costs and lower capacity charges from the regional nuclear
generating units, partially offset by higher 1994 costs associated
with the operation and maintenance activities of the nuclear units, a
higher reserve for excess/obsolete inventory in 1994 and 1994 charges
associated with a targeted early retirement program.
Amortization of regulatory assets, net decreased approximately $15
million in the first nine months of 1994, as compared with 1993,
primarily because of the deferral of cogeneration expenses beginning
in July 1994, and lower 1994 expenses associated with the recovery of
Hydro-Quebec support payments, partially offset by the amortization
through June 1994 of costs paid by the company to the developers of
two wood-to-energy plants and higher 1994 amortization of Millstone 3
and Seabrook 1 phase-in costs.
Federal and state income taxes increased approximately $44 million in
the first nine months of 1994, as compared with 1993, primarily
because of higher book taxable income.
Deferred nuclear plants return decreased approximately $13 million in
the first nine months of 1994, as compared with 1993, primarily
because additional Millstone 3 investment was phased into rates on
January 1, 1994.
Interest charges decreased approximately $17 million in the first nine
months of 1994, as compared with 1993, primarily because of lower
average interest rates as a result of the company's refinancing
activities, lower 1994 debt levels and interest accrued in 1993
associated with a potential Connecticut sales tax assessment.
The cumulative effect of the accounting change of approximately $48
million in 1993 represents the one-time change in the method of
accounting for Connecticut municipal property tax expense recognized
in the first quarter of 1993.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
1. On October 18, 1994, the NRC responded to Northeast Nuclear
Energy Company's (NNEC0) response in the Millstone Unit 1 Feedwater
Coolant Injection System (FWCI) matter, stating that, upon
reconsideration by the NRC, the violation's severity level and
calculation of the civil penalty would not change. The NRC also
decided that further action against the NNECO manager was not
warranted. NNECO is a wholly-owned subsidiary of NU.
For additional information on this matter, see "Part II. Other
Information - Item 1. Legal Proceedings," in CL&P s June 1994
Form 10-Q.
2. With respect to proceedings at the FERC on the 30th Amendment
to the New England Power Pool Agreement and related issues concerning
transmission access and discounted rates for pool-planned units, on
August 3, 1994 FERC granted a motion filed by certain of the parties
seeking to suspend the procedural schedule pending the filing of terms
of a settlement reached by the parties. The parties have agreed to
file joint status reports of their progress.
For additional information on this matter, see "Part II. Other
Information - Item 1. Legal Proceedings," in CL&P s March 1994 and
June 1994 Form 10-Qs.
Item 5. Other Information
1. On September 9, 1994, the DPUC issued its final retail
wheeling decision. This concluded a proceeding initiated in October
1993 to investigate whether retail wheeling should be permitted in
Connecticut. The proceeding was intended as a follow-up and an update
to a 1987 report of the DPUC to the legislature concluding that retail
wheeling would be inadvisable for Connecticut. The September 1994
decision noted the potential for retail wheeling or other forms of
more intense competition in the future. However, it concluded that
because of the need to first deal with issues associated with a
transition to more intense competition for retail sales such as the
need to reallocate public policy and stranded costs, if retail
wheeling is authorized, it should not be introduced prior to
Connecticut's utilities' year of need, which for CL&P is 2007. The
DPUC also recommended that utilities continue to contain costs and
work with customers to keep Connecticut's electric rates competitive
in order to attract and retain business in the state.
For additional information on this matter, see "Item 1. Business -
Retail Wheeling," in CL&P's 1993 Form 10-K and the MD&As in CL&P s
March 1994 and June 1994 Form 10-Qs.
Item 6. Exhibits and Reports on Form 8-K
(a) Listing of Exhibits:
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during this reporting period.
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 hereunto duly authorized.
THE CONNECTICUT LIGHT AND POWER COMPANY
---------------------------------------
Registrant
Date November 9, 1994 By /s/ Bernard M. Fox
-------------------- ------------------------------
Bernard M. Fox
Vice Chairman and Director
Date November 9, 1994 By /s/ John W. Noyes
-------------------- -----------------------------
John W. Noyes
Vice President and
Controller
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