SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
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) September 3, 1996
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Commission File Number 1-6392
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PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
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(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 02-018150
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 ELM STREET, MANCHESTER, NEW HAMPSHIRE 03105
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(Address of principal executive offices) (Zip Code)
(603) 669-4000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events
1. Property Tax Litigation
On September 5, 1996, a Connecticut Superior Court judge ruled that the
Town of Haddam had over-assessed the Connecticut Yankee nuclear plant (CY) at
three and a half times its proper assessment. The decision sets the plant's
fair market value at $235 million. A consultant hired by the town had valued
the plant at $840 million in 1991. Connecticut Yankee Atomic Power
Company (CYAPC), which operates CY, estimates that the town owes it
approximately $12.9 million in refunds, including accrued interest, for taxes
that were overpaid from July 31, 1992 through July 31, 1996. Northeast
Utilities (NU) system companies (collectively, with NU, the System) own a 49
percent interest in CYAPC (34.5 percent for The Connecticut Light and Power
Company (CL&P), 9.5 percent for Western Massachusetts Electric Company
(WMECO) and 5.0 percent for Public Service Company of New Hampshire (PSNH)).
The Superior Court's decision is subject to appeal.
For more information regarding this proceeding, see "Item 3. Legal
Proceedings" in PSNH's 1995 Form 10-K.
2. Nuclear Matters
Nuclear Management Reorganization
On August 15, 1996, NU announced the appointment of Bruce Kenyon as
President and Chief Executive Officer of Northeast Utilities' nuclear
operations, effective September 3, 1996. Mr. Kenyon replaced Robert E.
Busch, former president of NU's energy resources group, who has left NU.
Since 1990, Mr. Kenyon had been president and chief operating officer of
South Carolina Electric & Gas Company, operator of the V. C. Summer nuclear
plant. Prior to that position, Mr. Kenyon was senior vice president of the
nuclear division at Pennsylvania Power & Light Company, which operates the
two Susquehanna nuclear units.
On September 18, 1996, Mr. Kenyon unveiled a reorganization of the NU
senior management that is intended to establish direct accountability for
performance at each of NU's five nuclear power units. He also announced that
three executives loaned from unaffiliated utility companies--all with
experience at companies with excellent nuclear operations, including some
which have shown marked improvement during their tenure--would lead the
recovery of NU's three Millstone Station units. A recovery officer for CY
will be named if the plant passes an economic viability review, which is now
underway.
Each of the outside utilities has agreed to lend the recovery officer
and their respective teams for six months, which can be extended by mutual
agreement. The search for executives to lead those units for the longer term
has already begun. The recovery officers have full authority to take
whatever action is necessary to move their units expeditiously toward
restart.
Mr. Kenyon also announced that retired Admiral David Goebel was selected
to serve as Vice President for Nuclear Oversight. Mr. Goebel has more than
25 years of nuclear management experience, including service as Director of
Plans and Policy of the U.S. Strategic Command and Commander of Submarine
Group Two in Groton, Connecticut.
Nuclear Operations
NU system companies have a 100 percent ownership interest in Millstone 1
and 2 (81 percent for CL&P and 19 percent for WMECO), an approximately 68
percent interest in Millstone 3 (52.93 percent for CL&P, 12.24 percent for
WMECO and 2.85 percent for PSNH) and a 49 percent interest in CYAPC (34.5
percent for CL&P, 9.5 percent for WMECO and 5.0 percent for PSNH). These
units have been out of service since November 4, 1995, February 22, 1996,
March 30, 1996 and July 22, 1996, respectively.
The management reorganization of NU's nuclear organization described
above may impact the actions currently being taken by NU to improve
operations, regulatory compliance and safety at the Millstone units and CY.
Mr. Kenyon has made it the first priority of the loaned recovery officers to
reassess these actions and related scheduling issues for the Millstone units.
That effort will begin in early October after these officers arrive at
Millstone and begin to work full-time. New estimates and plans will be
developed following this reassessment.
In addition to events previously reported, the actions may also be
impacted by the currently ongoing analysis of CY's economics, an August 14,
1996 order of the Nuclear Regulatory Commission (NRC) requiring the creation
of an independent corrective action verification program for each of the
Millstone units, and the NRC's ongoing and planned inspection activities at
each of the units.
Management estimates the System's combined cost of replacement power for
the three Millstone units and CY to range from $25 to $33 million per month.
NU, however, cannot estimate how the events discussed above may otherwise
affect operation and maintenance expense and other costs associated with the
outages or the timing for restart of any of the units.
For additional information regarding nuclear performance matters, see
PSNH's Forms 8-K dated January 31, 1996, March 30, 1996,, June 3, 1996, June
28, 1996, and July 22, 1996, Forms 10-Q for the quarters ended March 31, 1996
and June 30, 1996 and "Item 1. Business - Electric Operations - Nuclear
Generation" in PSNH's 1995 Form 10-K.
3. System Companies' Ratings
On September 5, 1996, Moody's Investors Service Inc. placed all of the
securities of NU, CL&P, WMECO, CYAPC and Niantic Bay Fuel Trust under review
for possible downgrades as a result of the ongoing outages at Millstone and
CY.
4. New Hampshire Rate Matters
Preliminary Restructuring Plan
On September 10, 1996, pursuant to legislation enacted in May 1996, the
New Hampshire Public Utilities Commission (NHPUC) issued a preliminary plan
(Plan) to restructure the state's electric industry, including PSNH.
The legislation requires generation to be functionally separated or
legally disaggregated from transmission and distribution, with the
distribution and customer-related services remaining subject to regulation by
the NHPUC for at least the near-term. To prevent anti-competitive activities,
the Plan encourages all New Hampshire electric utilities to divest themselves
of retail marketing functions and implement non-discriminatory, open access
distribution tariffs. Alternatively, such companies could be encouraged to
sever any corporate connection to generation and retail marketing entities
(through sale or spin-off), leaving separate independent distribution
companies providing service to all competitors for a uniform distribution
charge.
At a minimum, the Plan calls for utilities to unbundle their electric
rates and services into generation, transmission, distribution and
conservation and load management services. Furthermore, the Plan provides
for an interim stranded cost charge, effective for two years following the
implementation of the utility's compliance filings, which allows utilities
with rates at or below the New England regional average to recover a higher
percentage of prudently incurred stranded costs. Utilities with above
average rates would be subject to investigation to determine whether their
higher rates were the result of government mandate or management discretion.
Imprudent costs would be immediately written off. The NHPUC recommends
divestiture of generation assets as the most accurate and straightforward way
to determine their worth. Utilities are further required to undertake all
practical steps to mitigate stranded costs.
The NHPUC intends to issue its final plan by February 28, 1997 after
reviewing written comments, including responses to 82 specific questions set
forth in the Plan, and conducting public hearings this year. Each
jurisdictional utility then would be required to file compliance plans by
June 30, 1997. The NHPUC plans to implement retail choice for all customers
by January 1, 1998, unless circumstances require delay, but in no event later
than June 30, 1998.
PSNH's rates are well above the regional average because of the terms of
the Rate Agreement that was entered into by PSNH and the State of New
Hampshire (State) dated November 22, 1989 (Rate Agreement) to resolve PSNH's
bankruptcy (see below). If the Plan is adopted in substantially its current
form and is upheld as valid, it would expose PSNH to a potential for
substantial non-recoveries of stranded costs, which could have a substantial
adverse impact on the financial position and results of operations of PSNH
and NU.
For further information on New Hampshire restructuring issues, see "Item
1. Business - Rates - New Hampshire Retail Rates - Electric Industry
Restructuring in New Hampshire" in PSNH's 1995 Form 10-K and PSNH's Forms
10-Q for the quarters ended March 31, 1996 and June 30, 1996.
1989 Rate Agreement
On September 17, 1996, PSNH sent a notice to the New Hampshire Attorney
General informing him that the State is in breach of its obligations under
the Rate Agreement and providing the State with an opportunity to cure.
Specifically, the notice asserts that: (i) the Plan, as proposed, will result
in violations of many provisions of the Rate Agreement by potentially denying
NU and PSNH recovery of substantial assets created or recognized under the
Rate Agreement; (ii) the Plan calls into question the recovery of assets
included in the Rate Agreement that were approved as part of the PSNH
reorganization proceedings in the United States Bankruptcy Court; and (iii)
the State has breached its contractual obligation under the Rate Agreement to
support NU's efforts to renegotiate six settlements with certain woodburning
nonutility generators (NUGs) and to cooperate with PSNH in two related
proceedings before the NHPUC.
For further information on the Rate Agreement and the negotiations with
certain NUGs, see "Item 1. Business - Rates - New Hampshire Retail Rates" in
PSNH's 1995 Form 10-K and PSNH's Forms 10-Q for the quarters ended March 31,
1996 and June 30, 1996.
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 hereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
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Registrant
Date September 27, 1996 By /s/John H. Forsgren
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John H. Forsgren
Executive Vice President and
Chief Financial Officer
