FORM 10-Q
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, 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 1-6392
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 02-018150
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 ELM STREET, MANCHESTER, NEW HAMPSHIRE 03105
(Address of principal executive offices (Zip Code)
(603) 669-4000
(Registrant's telephone number, including area code)
Not Applicable
(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, 1996
Common Shares, $10.00 par value 1,000 shares
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1. Financial Statements
Balance Sheets - September 30, 1996 and
December 31, 1995 2
Statements of Income - Three and Nine
Months Ended September 30, 1996 and 1995 4
Statements of Cash Flows - Nine Months
Ended September 30, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 17
PART I. FINANCIAL INFORMATION
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
ASSETS
- ------
Utility Plant, at cost:
Electric................................................ $ 2,127,868 $ 2,109,590
Less: Accumulated provision for depreciation......... 542,065 513,244
------------- -------------
1,585,803 1,596,346
Unamortized acquisition costs........................... 514,065 588,910
Construction work in progress........................... 18,939 15,975
Nuclear fuel, net....................................... 1,309 1,585
------------- -------------
Total net utility plant............................. 2,120,116 2,202,816
------------- -------------
Other Property and Investments:
Nuclear decommissioning trusts, at market............... 2,789 2,436
Investments in regional nuclear generating
companies and subsidiary company, at equity............ 19,600 19,300
Other, at cost.......................................... 1,772 1,103
------------- -------------
24,161 22,839
------------- -------------
Current Assets:
Cash.................................................... 61 117
Notes receivable from affiliated companies.............. 2,850 19,100
Receivables, net........................................ 87,066 91,535
Accounts receivable from affiliated companies........... 6,039 1,486
Accrued utility revenues................................ 36,159 33,984
Fuel, materials, and supplies, at average cost.......... 34,102 41,717
Accumulated deferred income taxes--current portion...... 23,783 494
Prepayments and other................................... 18,697 10,702
------------- -------------
208,757 199,135
------------- -------------
Deferred Charges:
Regulatory assets:
Income taxes, net...................................... 146,090 192,690
Unrecovered contractual obligation..................... 13,151 18,814
Recoverable energy costs............................... 266,946 220,093
Other.................................................. 2,333 2,404
Unamortized debt expense................................ 12,926 14,165
Deferred receivable from affiliated company............. 33,284 33,284
Other................................................... 10,106 3,396
------------- -------------
484,836 484,846
------------- -------------
Total Assets........................................ $ 2,837,870 $ 2,909,636
============= =============
</TABLE>
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock--$1 par value.
Authorized and outstanding 1,000 shares................ $ 1 $ 1
Capital surplus, paid in................................ 422,885 422,385
Retained earnings....................................... 164,278 143,039
------------- -------------
Total common stockholder's equity.............. 587,164 565,425
Preferred stock subject to mandatory redemption......... 100,000 125,000
Long-term debt.......................................... 686,485 686,485
------------- -------------
Total capitalization........................... 1,373,649 1,376,910
------------- -------------
Obligations Under Seabrook Power Contracts
and Other Capital Leases................................. 871,413 874,292
------------- -------------
Current Liabilities:
Long-term debt--current portion......................... 25,000 172,500
Obligations under Seabrook Power Contracts and other
capital leases--current portion........................ 39,882 40,996
Accounts payable........................................ 17,171 39,012
Accounts payable to affiliated companies................ 22,622 26,656
Accrued taxes........................................... 18,015 798
Accrued interest........................................ 17,346 9,648
Accrued pension benefits................................ 41,806 38,606
Refundable energy costs................................. 66,344 1,403
Other................................................... 11,470 17,674
------------- -------------
259,656 347,293
------------- -------------
Deferred Credits:
Accumulated deferred income taxes....................... 259,915 229,057
Accumulated deferred investment tax credits............. 4,649 5,060
Deferred contractual obligation......................... 13,151 18,814
Deferred revenue from affiliated company................ 33,284 33,284
Other................................................... 22,153 24,926
------------- -------------
333,152 311,141
------------- -------------
Commitments and Contingencies (Note 4)<F4>
------------- -------------
Total Capitalization and Liabilities........... $ 2,837,870 $ 2,909,636
============= =============
</TABLE>
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues................................. $ 296,719 $ 249,626 $ 828,156 $ 734,812
---------- ---------- ---------- ----------
Operating Expenses:
Operation --
Fuel, purchased and net interchange power..... 97,538 64,613 256,903 202,922
Other......................................... 83,154 80,737 236,238 226,269
Maintenance...................................... 11,123 8,722 26,546 29,595
Depreciation..................................... 10,808 11,837 32,174 32,883
Amortization of regulatory assets, net........... 14,141 13,212 42,743 41,323
Federal and state income taxes................... 21,687 20,470 64,912 57,291
Taxes other than income taxes.................... 11,334 9,702 34,882 30,858
---------- ---------- ---------- ----------
Total operating expenses................... 249,785 209,293 694,398 621,141
---------- ---------- ---------- ----------
Operating Income................................... 46,934 40,333 133,758 113,671
---------- ---------- ---------- ----------
Other Income:
Equity in earnings of regional nuclear
generating companies and subsidary company..... 617 453 1,648 1,228
Other, net....................................... 29 1,664 6,432 1,711
Income taxes..................................... (5,105) (262) (8,044) 480
---------- ---------- ---------- ----------
Other income, net.......................... (4,459) 1,855 36 3,419
---------- ---------- ---------- ----------
Income before interest charges............. 42,475 42,188 133,794 117,090
---------- ---------- ---------- ----------
Interest Charges:
Interest on long-term debt....................... 12,681 18,994 44,795 58,367
Other interest................................... (852) (1) 5,822 (187)
---------- ---------- ---------- ----------
Interest charges, net...................... 11,829 18,993 50,617 58,180
---------- ---------- ---------- ----------
Net Income......................................... $ 30,646 $ 23,195 $ 83,177 $ 58,910
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1996 1995
----------- -----------
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net Income................................................ $ 83,177 $ 58,910
Adjustments to reconcile to net cash
from operating activities:
Depreciation............................................ 32,174 32,883
Deferred income taxes and investment tax credits, net... 73,614 52,946
Recoverable energy costs, net........................... 18,088 (903)
Amortization of acquisition costs....................... 42,743 41,323
Other sources of cash................................... 37,530 20,230
Other uses of cash...................................... (9,517) -
Changes in working capital:
Receivables and accrued utility revenues................ (2,259) 7,682
Fuel, materials, and supplies........................... 7,615 (7,001)
Accounts payable........................................ (25,875) (12,959)
Accrued taxes........................................... 17,217 15,274
Other working capital (excludes cash)................... (26,590) 4,602
----------- -----------
Net cash flows from operating activities.................... 247,917 212,987
----------- -----------
Financing Activities:
Reacquisitions and retirements of long-term debt.......... (172,500) (70,500)
Cash dividends on preferred stock......................... (9,938) (9,938)
Cash dividends on common stock............................ (52,000) (26,000)
----------- -----------
Net cash flows used for financing activities................ (234,438) (106,438)
----------- -----------
Investment Activities:
Investment in plant:
Electric utility plant.................................. (28,554) (35,113)
Nuclear fuel............................................ 133 (186)
----------- -----------
Net cash flows used for investments in plant.............. (28,421) (35,299)
NU System Money Pool...................................... 16,250 (70,500)
Other investment activities, net.......................... (1,364) (774)
----------- -----------
Net cash flows used for investments......................... (13,535) (106,573)
----------- -----------
Net Decrease In Cash For The Period......................... (56) (24)
Cash - beginning of period.................................. 117 296
----------- -----------
Cash - end of period........................................ $ 61 $ 272
=========== ===========
</TABLE>
See accompanying notes to financial statements.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Presentation
The accompanying unaudited financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations (MD&A) in this Form 10-Q, the
Annual Report of Public Service Company of New Hampshire (the company
or PSNH) on Form 10-K for the year ended December 31, 1995 (1995 Form
10-K), the company's Form 10-Qs for the quarters ended March 31, 1996
and June 30, 1996, and the company's Form 8-Ks dated January 31, 1996,
March 30, 1996, June 3, 1996, June 28, 1996, July 22, 1996, and
September 3, 1996. In the opinion of the company, the accompanying
financial statements contain all adjustments necessary to present
fairly the financial position as of September 30, 1996, the results of
operations for the three-month and nine-month periods ended
September 30, 1996 and 1995, and the statements of cash flows for the
nine-month periods ended September 30, 1996 and 1995. All adjustments
are of a normal, recurring, nature. The results of operations for the
three-month and nine-month periods ended September 30, 1996 and 1995
are not necessarily indicative of the results expected for a full
year.
Certain reclassifications of prior period data have been made to
conform with the current period presentation.
Northeast Utilities (NU) is the parent company of the Northeast
Utilities system (the system). The system furnishes retail electric
service in Connecticut, New Hampshire, and western Massachusetts
through four wholly owned subsidiaries, The Connecticut Light and
Power Company (CL&P), PSNH, Western Massachusetts Electric Company
(WMECO), and Holyoke Water Power Company. A fifth wholly owned
subsidiary, North Atlantic Energy Corporation (NAEC), sells all of its
entitlement to the capacity and output of the Seabrook nuclear power
plant to PSNH. In addition to its retail electric service, the system
furnishes firm and other wholesale electric services to various
municipalities and other utilities. The system serves about 30
percent of New England's electric needs and is one of the 20 largest
electric utility systems in the country as measured by revenues.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
2. NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," which
establishes accounting standards for evaluating and recording asset
impairment. The company adopted SFAS 121 as of January 1, 1996. SFAS 121
requires the evaluation of long-lived assets for impairment when certain
events occur or when conditions exist that indicate the carrying amounts of
assets may not be recoverable.
Based on the current regulatory environment in the system's service areas,
as of September 30, 1996, SFAS 121 did not have a material impact on the
company's financial position or results of operations. This conclusion may
change in the future as competitive factors influence wholesale and retail
pricing in the electric utility industry or if the cost-of-service based
regulatory structure were to change. For further information, see the MD&A
in this Form 10-Q, PSNH's Form 8-K dated September 3, 1996, PSNH's Form 10-
Qs for the quarters ended March 31, 1996 and June 30, 1996, and PSNH's 1995
Form 10-K.
3. NUCLEAR DECOMMISSIONING
For information regarding nuclear decommissioning, see the company's Form
10-Q for the quarter ended March 31, 1996 the company's 1995 Form 10-K.
For information regarding the possible closure and decommissioning of
Connecticut Yankee (CY), see Note 4B in this Form 10-Q.
4. COMMITMENTS AND CONTINGENCIES
A. Construction Program: For information regarding PSNH's construction
program, see PSNH's 1995 Form 10-K.
B. Nuclear Performance:
Millstone: PSNH owns a 2.85 percent joint ownership interest in the
Millstone 3 nuclear generating unit. PSNH has previously disclosed in
its 1995 Form 10-K, its Form 10-Qs for the quarters ended March 31,
1996 and June 30, 1996, and in Form 8-K's dated January 31, 1996,
March 30, 1996, June 3, 1996, June 28, 1996, July 22, 1996, and
September 3, 1996 that: (i) the Millstone nuclear units have been
placed on the Nuclear Regulatory Commission's (NRC) watch list, (ii)
the three Millstone units are currently out of service, (iii) NU is
currently restructuring its nuclear organization and developing
operational readiness plans, and (iv) the NU system is currently
incurring substantial costs, including replacement power costs, while
the three Millstone units are not operating. For additional
information on Millstone, see the Securities and Exchange Commission
filings referenced above and the MD&A in this Form 10-Q.
Connecticut Yankee: On October 9, 1996, Connecticut Yankee Atomic
Power Company (CYAPC), which owns and operates the CY nuclear
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 costs over the remaining period of the unit's NRC
operating license. The final decision is pending a vote by CYAPC's
board of directors which is expected to occur in the fourth quarter of
1996. PSNH has a 5 percent equity investment, approximating
$6 million, in CYAPC. The NU system relies on CYAPC for approximately
3.5 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 shut down, is approximately $797 million.
PSNH's share of these remaining estimated costs is approximately $40
million.
The contract under which PSNH purchases its entitlement of CYAPC power
permits CYAPC to recover these costs from PSNH. 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 (FERC). Based
upon regulatory precedent, CYAPC believes it will continue to collect
from its power purchasers, including PSNH, 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 unit's NRC operating license, which expires in 2007.
Management expects that PSNH will continue to be allowed to recover
such FERC-approved costs from its customers.
For further information regarding CY, see the MD&A in this Form 10-Q,
PSNH's Form 10-Qs for the quarters ended March 31, 1996 and June 30,
1996, and PSNH's Form 8-Ks dated June 3, 1996, July 22, 1996, and
September 3, 1996.
C. Environmental Matters: For information regarding environmental
matters, see PSNH's 1995 Form 10-K.
D. Nuclear Insurance Contingencies: For information regarding nuclear
insurance contingencies, see PSNH's 1995 Form 10-K.
E. Long-Term Contractual Arrangements: For information regarding long-
term contractual arrangements, see PSNH's 1995 Form 10-K.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This section contains management's assessment of Public Service Company of New
Hampshire's (PSNH 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 PSNH's consolidated financial statements and footnotes in this
Form 10-Q, the 1995 Form 10-K, the First and Second Quarter 1996 Form 10-Qs,
and the Form 8-Ks dated January 31, 1996, March 30, 1996, June 3, 1996, June 28,
1996, July 22, 1996 and September 3, 1996.
FINANCIAL CONDITION
Overview
Net income was approximately $31 million for the three months ended September
30, 1996, an increase of approximately $7 million from the same period in 1995.
Net income was approximately $83 million for the nine months ended September 30,
1996, an increase of approximately $24 million from the same period in 1995. The
increase in net income for the three-month period was primarily due to the June
1, 1996 retail-rate increase, higher retail sales, and lower interest on long-
term debt. The increase in net income for the nine-month period was primarily
due to the June 1, 1995 and 1996 retail-rate increases, higher retail sales, and
lower interest on long-term debt.
Rate Matters
The New Hampshire legislature has enacted legislation calling for restructuring
of the electric utility industry to provide customer choice of retail energy
supplier not later than July 1, 1998. On September 10, 1996, the New Hampshire
Public Utilities Commission (NHPUC) issued its Preliminary Plan (the Plan) to
implement this law. Under the Plan, utilities with rates above the regional
average would be allowed to recover a smaller amount of stranded costs than
other utilities. PSNH's rates are well above the regional average as a result of
mandated purchases from qualifying facilities under the Public Utilities
Regulatory Policies Act and state law, and also as a result of the resolution of
PSNH's bankruptcy and assets created by the Rate Agreement that was entered into
by NU and the State of New Hampshire (Rate Agreement).
On October 18, 1996, PSNH filed its initial comments on the Plan, stating, in
part, that the Plan failed to take into consideration the contractual
commitments of the State of New Hampshire under the Rate Agreement. If the Plan
is implemented in substantially its present form by the NHPUC on February 28,
1997 (the date established by the restructuring legislation), the State would be
in breach of its Rate Agreement obligations by failing to authorize a
compensatory interim stranded cost recovery charge for PSNH. In the event of
such final action on the Plan by the NHPUC and if the State is able to avoid its
obligations under the Rate Agreement, PSNH would be exposed to the risk that it
would not recover a substantial amount of its potentially strandable investments
associated with the resolution of PSNH's bankruptcy, which could have a material
adverse impact on its financial position and results of operations.
Management has evaluated the potential effects of the Plan in accordance with
Statement of Financial Accounting Standards 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Management
believes that the recovery of PSNH's potentially strandable assets through
future revenues remains probable based on the Rate Agreement.
For further information on New Hampshire rate and restructuring issues, see the
1995 Form 10-K, Second Quarter 1996 Form 10-Q and Form 8-Ks dated June 3, 1996
and September 3, 1996.
Millstone Outage
PSNH has a 2.85-percent ownership interest in Millstone 3.
Millstone units 1, 2, and 3 (Millstone) have been out-of-service since November
4, 1995, February 21, 1996, and March 30, 1996, respectively.
For further information on the current Millstone outages see PSNH's 1995 Form
10-K, Form 8-Ks dated January 31, 1996, March 30, 1996, June 3, 1996,
June 28, 1996, July 22, 1996, and September 3, 1996, and the First and
Second Quarter 1996 Form 10-Qs.
On October 18, 1996, the Nuclear Regulatory Commission (NRC) announced that it
will establish a Special Projects Office to oversee inspection and licensing
activities at Millstone. The Special Projects Office will be responsible for
(1) licensing and inspection activities at NU's Connecticut plants; (2)
oversight of the Independent Corrective Action Verification Program; (3)
oversight of NU's corrective actions related to safety issues involving employee
concerns; and (4) inspections necessary to implement NRC oversight of the
plants' restart activities. Management believes that this development should
provide dedicated NRC resources and clearer lines of communication between NU
and the NRC during the recovery process.
On October 24, 1996, the NRC issued an order to Northeast Nuclear Energy Company
(NNECO), a wholly-owned subsidiary of NU that operates Millstone, that
requires NNECO to devise and implement a comprehensive plan within 60 days of
this order for handling safety concerns raised by Millstone employees and for
assuring an environment free from retaliation and discrimination. The NRC also
ordered NNECO to contract for an independent third party to oversee this
corrective action plan within 30 days of the date of this order. The members of
the independent third-party organization must not have had any direct previous
involvement with activities at Millstone and must be approved by the NRC.
Oversight by the third-party group will continue until NNECO demonstrates, by
performance, that the conditions leading to this order have been corrected.
Management cannot presently estimate the effect these efforts will have on the
timing of unit restarts or what additional costs, if any, these developments may
cause.
Seabrook
PSNH is obligated to purchase North Atlantic Energy Corporation's (NAEC) 35.98-
percent share of the capacity and output generated by Seabrook 1.
Seabrook 1 operated at a capacity factor of 95.7 percent through September 1996,
as compared to 92.8 percent for the same period in 1995.
On October 9, 1996, the NRC issued a request for information concerning all
nuclear plants in the United States, except the three Millstone units, which had
previously received such requests. Such information will be used to verify that
these facilities are being operated and maintained in accordance with NRC
regulations and the units' specific licenses. The NRC has indicated that the
information, which must be submitted within 120 days of the date of the request,
will be used to determine whether future inspection or enforcement activities
are warranted for any plant. North Atlantic Energy Service Corporation is
currently preparing its response to the NRC's request, with respect to Seabrook.
Seabrook's operations were not restricted by the request. The NRC's April 1996
inspection found Seabrook to be a well-operated facility and found no major
safety issues or weaknesses and noted that it would reduce its future
inspections in a number of areas as a result of its findings.
Connecticut Yankee
PSNH has a 5-percent ownership interest in the Connecticut Yankee Atomic Power
Company (CYAPC) which owns and operates the Connecticut Yankee nuclear power
plant (CY or the plant).
CY has been out of service since July 22, 1996. For further information on CY,
see PSNH's Form 8-Ks dated June 3, 1996, July 22, 1996, and August 19, 1996, and
the First and Second Quarter 1996 Form 10-Qs, and Note 4b - Commitments and
Contingencies - Nuclear Performance - Connecticut Yankee - and the Notes to
Financial Statements in this Form 10-Q.
On October 9, 1996, CYAPC announced that a permanent shutdown of the plant seems
likely based on an economic analysis of the costs of operating the plant
compared to the costs of closing the plant and incurring replacement power costs
over the remaining period of the plant's NRC operating license. The final
decision is pending a vote by CYAPC's Board of Directors (Board) which is
expected to occur in the fourth quarter of 1996. The NU system relies on its
entitlements in CY for approximately 3.5 percent of its system capacity.
The contract under which PSNH purchases its entitlement of CYAPC power permits
CYAPC to recover these costs from PSNH. Should the 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 (FERC). Based upon regulatory precedent, CYAPC believes it will
continue to collect from its power purchasers, including PSNH, its
decommissioning costs, the owners' unrecovered investments in CYAPC and other
costs associated with the permanent closure of the plant over the remaining
period of the plant's NRC operating license, which expires in 2007. Management
expects that PSNH will continue to be allowed to recover such FERC-approved
costs from its customers.
Liquidity And Capital Resources
Cash provided from operations increased approximately $35 million in the first
nine months of 1996, from 1995, primarily due to higher retail sales, the retail
rate increases and lower interest on long- term debt, partially offset by lower
funds from working capital. Cash used for financing activities increased
approximately $128 million in the first nine months of 1996, from 1995,
primarily due to the repayment of the $172.5 million Series A first-mortgage
bond and the higher payment of common stock dividends. Cash used for investments
decreased approximately $93 million in the first nine months of 1996, from 1995,
primarily due to PSNH's withdrawal of funds invested in the NU system Money Pool
to assist in funding the repayment of the $172.5 million Series A first mortgage
bond.
On October 8, 1996, Moody's Investors Service downgraded the senior securities
of CYAPC for the second time since May 1996. All PSNH securities remain on
Standard & Poor's Rating Group CreditWatch.
NAEC has entered into interest-rate swap agreements to reduce interest-rate
risk associated with its $225 million variable-rate bank note. These swaps
are not used for trading purposes. The differential paid or received as
interest rates change is recognized in income when realized. As of
September 30, 1996, NAEC had outstanding swap agreements with a total
notional value of approximately $225 million. The settlement amount
associated with the swap agreements increased interest expense by approximately
$0.8 million for NAEC during the first nine months of 1996. NAEC's interest-rate
swap agreements effectively fix its variable-rate bank note at 7.05 percent.
RESULTS OF OPERATIONS
Income Statement Variances
Millions of Dollars Increase/(Decrease)
Third Year-
Quarter Percent to-Date Percent
Operating revenues $47 19% $ 93 13%
Fuel, purchased and net
interchange power 33 51 54 27
Other operation 2 3 10 4
Maintenance 2 28 (3) (10)
Federal and state income taxes 6 29 16 29
Other income, net (1) (a) 5 (a)
Taxes other than income taxes 2 17 4 13
Interest on long-term debt (7) (34) (14) (23)
Other interest (1) (a) 6 (a)
Net income 7 32 24 41
(a) Percentage greater than 100
Comparison of the Third Quarter of 1996 with the Third Quarter of 1995
Total operating revenues increased due to higher fuel recoveries, regulatory
decisions and higher retail sales. Fuel recoveries increased $36 million,
primarily due to higher energy sales to NU affiliated companies, partially
offset by lower Fuel and Purchased Power Adjustment Clause (FPPAC) revenue as a
result of a customer refund ordered by the NHPUC. Revenues related to regulatory
decisions increased $3 million, primarily due to the June 1, 1996 retail-rate
increase for PSNH. Retail sales increased 2.4 percent ($4 million), primarily
due to modest economic growth in 1996, partially offset by milder weather in
1996.
Fuel, purchased, and net interchange power expense increased primarily due to
the timing in the recognition of fuel expenses under the FPPAC and higher
purchased power costs.
Other operation and maintenance expense increased primarily due to higher fossil
costs, higher Seabrook operating expenses, and higher marketing costs.
Federal and state income taxes increased primarily due to higher book taxable
income.
Interest on long-term debt decreased primarily due to the repayment of the
$172.5 million Series A first mortgage bond.
Comparison of the First Nine Months of 1996 with the First Nine Months of 1995
Total operating revenues increased due to higher fuel recoveries, regulatory
decisions and higher retail sales. Fuel recoveries increased $72 million,
primarily due to higher energy sales to NU affiliated companies and higher base
fuel revenues as a result of higher sales, partially offset by lower FPPAC
revenues as a result of a customer refund ordered by the NHPUC. Revenues
related to regulatory decisions increased $7 million, primarily due to the
June 1, 1995 and 1996 retail-rate increases for PSNH. Retail sales increased
2.5 percent ($9 million), primarily due to economic growth in 1996, partially
offset by milder weather in 1996.
Fuel, purchased, and net interchange power expense increased primarily due to
the timing in the recognition of fuel expenses under the FPPAC and higher
purchased power costs.
Other operation and maintenance expense increased primarily due to higher
Seabrook operating expenses, increased transmission and distribution expenses
and higher marketing costs, partially offset by lower fossil maintenance
expenses.
Federal and state income taxes increased primarily due to higher book taxable
income.
Other income, net increased primarily due to the deferral of interest expense
associated with the FPPAC refund.
Interest on long-term debt decreased primarily due to the repayment of the
$172.5 million Series A first-mortgage bond.
Other interest expense increased primarily due to interest expense associated
with the FPPAC refund.
PART II. OTHER INFORMATION
ITEM 5.OTHER INFORMATION
1. The NRC's Office of Investigations (OI) has been examining various matters
at Millstone and CY, including but not limited to procedural and technical
compliance matters and employee concerns. One of these matters has been
referred, and others may be referred, to the Office of the U.S. Attorney for the
District of Connecticut (U.S. Attorney) for possible criminal prosecution. The
referred matter concerns full core off-load procedures and related matters at
Millstone. The U.S. Attorney is also reviewing possible criminal violations
arising out of certain of NU's other activities at Millstone and CY, including
the 1996 nuclear workforce reduction.
The U. S. Attorney, together with the U. S. Environmental Protection Agency
and the Connecticut Attorney General, is also investigating possible criminal
violations of federal and state environmental laws at certain NU facilities,
including Millstone.
Management does not believe that any system company or officer has engaged
in conduct that would warrant a federal criminal prosecution. NU intends to
fully cooperate with the OI and the U.S. Attorney in their ongoing
investigations.
For more information regarding the full core off-load matter, see "Part II.
Other Information" in PSNH's Form 10-Q for the quarter ended March 31, 1996. For
more information regarding NU's 1996 nuclear workforce reduction and the NRC's
review thereof, see PSNH's 1995 Form 10-K. For more information regarding the
investigation of environmental matters at Millstone, see "Part II. Other
Information" in PSNH's Form 10-Q for the quarter ended June 30, 1996.
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:
1. PSNH filed a Form 8-K dated September 3, 1996 disclosing:
* A Connecticut court ruled that the Town of Haddam had over-assessed
the CY nuclear power plant.
* NU appointed Bruce Kenyon as President and CEO of NU's nuclear
operations and Mr. Kenyon is in the process of implementing a nuclear
management reorganization.
NU's three Millstone units continue to be out of service and
management is continuing its efforts to bring the units on-line.
* Moody's Investor Service has placed all of PSNH's securities under
review for possible downgrades.
* The NHPUC has issued a preliminary plan to restructure the state's
electric industry, including PSNH.
* PSNH has notified the State of New Hampshire that the state is in
breach of its obligations under the Rate Agreement.
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.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
Registrant
Date: November 12, 1996 By: /s/ Bernard M. Fox
Bernard M. Fox
Chairman, Chief Executive
Officer and Director
Date: November 12, 1996 By: /s/ John J. Roman
John J. Roman
Vice President and Controller
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